Net Income Increases 4.5% and Adjusted EBITDA
Increases Four-fold from the Prior Quarter
Adult-Use
Cannabis Revenue Increases 8% from Prior
Quarter
Maintains Strong Balance Sheet and Cash Position
to Support Future Growth
Reiterates Fiscal Year 2020
Outlook
LEAMINGTON, ON, Oct. 15, 2019 /CNW/ - Aphria Inc.
("Aphria" or the "Company") (TSX: APHA and NYSE:
APHA) today reported its results for the first quarter ended
August 31, 2019. All amounts are
expressed in thousands of Canadian dollars, unless otherwise noted
and except for per gram, kilogram, kilogram equivalents, and per
share amounts.
"We are pleased to report a second consecutive quarter of
profitable growth with strong contribution from our Canadian
cannabis operations. Our success was also driven by our
international business and the strength and growth of our brands,
particularly Broken Coast, despite a small fire at our British Columbia facility at the end of the
quarter. This solid start to the year keeps us on track to achieve
our fiscal year 2020 financial outlook," stated Irwin D. Simon. "Going forward, we remain
focused on our highest-return priorities both in Canada and internationally as our team
furthers the development of our medical and adult-use cannabis
brands to drive growth through innovation and return value to
shareholders."
Key Operating Highlights
- Net revenue of $126.1 million in
the first quarter, an increase of 849% from prior year quarter and
decrease of 2% from prior quarter.
- Revenue for adult-use cannabis of $20.0
million in the first quarter, an increase of 8% from prior
quarter.
- Net income of $16.4 million and
adjusted EBITDA of $1.0 million in
the first quarter.
- Adjusted EBITDA from cannabis operations of $1.3 million in the first quarter.
- Ended quarter with a strong balance sheet and liquidity,
including $464.3 million of cash,
cash equivalents and liquid marketable securities, to fund planned
Canadian and International growth.
- Aphria One facility in full crop rotation with more than
600,000 plants.
- On-track for annual production capacity of 255,000 kilograms
when all facilities are fully licensed and operational.
- Launch of Plant Positivity, Aphria's social impact platform
that aims to provide greater education and access to plants within
the communities the Company serves.
- Official roofing ceremony for Aphria's indoor facility in
Neumünster, Germany.
- Completion of Aphria's Cannabis Vault in Bad Bramstedt,
Germany.
- Aphria's subsidiary Marigold Project Jamaica Limited officially
opened its first retail Herb House
at the Peter Tosh Square, Unit #51, Pulse Center, 38a Trafalgar
Road, overlooking the Peter Tosh Museum in New Kingston, Jamaica.
- Signed on as a brand partner for the PAX Era device and
platform.
Subsequent Events
- Launch of "Aphria Educates", a program aimed to educate
Canadian adults on responsible and safe use of all cannabis
products legally available now and in the future.
- Health Canada advised the
Company on October 11, 2019 that they
are in the process of expediting the issuance of Aphria Diamond's
licence.
Key Financial Highlights
|
Three months
ended
|
Three months
ended
|
|
August 31,
2019
|
August 31,
2018
|
Net
revenue
|
$126,112
|
$13,292
|
Gross
profit
|
$45,421
|
$13,764
|
Adjusted cannabis
gross profit 1
|
$15,331
|
$8,458
|
Adjusted cannabis
gross margin 1
|
49.8%
|
63.6%
|
Adjusted distribution
gross profit 1
|
$12,223
|
N/A
|
Adjusted distribution
gross margin 1
|
12.8%
|
N/A
|
Net income
|
$16,441
|
$21,176
|
Adjusted EBITDA
1
|
$1,035
|
($3,964)
|
|
|
|
|
|
|
|
Q1-2020
|
Q4-2019
|
Distribution
revenue
|
$95,327
|
$99,186
|
Net cannabis
revenue
|
$30,785
|
$28,608
|
Net
revenue
|
$126,112
|
$128,568
|
kilogram equivalents
sold 1
|
5,969
|
5,574
|
Cash cost to produce
dried cannabis / gram 1
|
$1.43
|
$1.35
|
"All-in" cost of
goods sold / gram 1
|
$2.52
|
$2.35
|
Adjusted EBITDA from
cannabis operations 1
|
$1,329
|
$1,851
|
Adjusted EBITDA from
businesses under development 1
|
($4,234)
|
($5,514)
|
Adjusted EBITDA from
distribution operations 1
|
$3,940
|
$3,872
|
Cash and cash
equivalents & marketable securities
|
$464,319
|
$570,996
|
Working
capital
|
$612,973
|
$642,284
|
Capital and
intangible asset expenditures – wholly-owned subsidiaries
1
|
$19,277
|
$26,828
|
Capital and
intangible asset expenditures – majority-owned
subsidiaries1
|
$20,071
|
$16,943
|
Strategic
investments1
|
$34,722
|
$6,862
|
Net revenue for the three months ended August 31, 2019 was $126.1
million, an increase of 849% from $13.3 million in the same period last year. First
quarter fiscal 2020 net revenues were lower when compared to the
prior quarter net revenues of $128.6
million as a result of a decrease in distribution revenue
from $99.2 million to $95.3 million associated with a change in
business strategy at CC Pharma to maximize profitability after
recent changes in the German government's medical reimbursement
model. The decrease in distribution revenue was partially offset by
an increase in net cannabis revenue of $30.8
million from $28.6 million.
Net revenue includes over 3,317 kilogram equivalents sold for the
adult-use market and 1,354 kilogram equivalents for medical
cannabis sales. The Company estimates the impact on revenue from
the small fire at Broken Coast to be approximately $1.5 million in the quarter; however, the
majority of the lost quarterly revenue will be reported in the
Company's second quarter.
The average retail selling price of medical cannabis (exclusive
of wholesale), before excise tax, decreased to $7.56 per gram in the quarter, compared to
$7.66 in the prior quarter, primarily
related to a higher percentage of total medical sales coming from
Aphria. The average selling price of adult-use cannabis, before
excise tax, increased to $6.02 per
gram in the quarter, compared to $5.73 per gram in the prior quarter.
Adjusted cannabis gross profit for the first quarter was
$15.3 million, with an adjusted
cannabis gross margin of 49.8%, compared to $15.2 million with an adjusted gross margin of
53.0% in the prior quarter. The decrease in adjusted gross margin
was primarily due to lower sales of higher margin items due to the
Broken Coast fire and temporary higher costs per gram.
Adjusted distribution gross profit for the first quarter was
$12.2 million, with an adjusted gross
margin of 12.8%, compared to $12.3
million with an adjusted gross margin of 12.4% in the prior
quarter.
Selling, general, and administrative costs in the quarter
decreased to $41.4 million from
$60.0 million in the prior quarter,
and increased from $24.1 million in
the prior year. The decrease from the prior quarter is mainly
related to the decrease of $19.5
million in transaction costs primarily associated with the
issuance of the senior convertible debenture and $3.9 million general and administrative costs,
partially offset by $1.9 million in
share-based compensation and $0.5
million in amortization.
Net income for the first quarter of fiscal 2020 was $16.4 million or $0.07 per share, compared to net income of
$15.8 million or $0.05 per share in the prior quarter, and net
income of $21.2 million or
$0.09 per share for the same period
last year. The increase in net income was primarily due to the
increase in gross profit and the net fair value adjustment for
biological assets, and decrease in the SG&A related to G&A
and non-operating income.
Adjusted EBITDA increased $0.8
million to $1.0 million for
the first quarter compared to $0.2
million in the prior quarter. Adjusted EBITDA from cannabis
operations for the first quarter was $1.3
million compared to $1.8
million in the prior quarter. The adjusted EBITDA loss from
businesses under development for the first quarter was $4.2 million compared to a loss of $5.5 million in the prior quarter. Adjusted
EBITDA from distribution operations for the first quarter was
$3.9 million, flat compared to the
prior quarter. The increased adjusted EBITDA is primarily
attributable to cost containment strategies employed across the
businesses under development.
1 – In
this press release, reference is made to adjusted cannabis gross
profit, adjusted cannabis gross margin, adjusted distribution gross
profit, adjusted distribution gross margin, adjusted net loss,
adjusted EBITDA from cannabis operations, adjusted EBITDA from
businesses under development, adjusted EBITDA from distribution
operations, kilogram equivalents sold, cash costs to produce dried
cannabis per gram, "all-in" costs to produce dried cannabis per
gram and investments in capital and intangible assets –
wholly-owned subsidiaries, which are not measures of financial
performance under International Financial Reporting Standards
(IFRS). These metrics and measures are not recognized measures
under IFRS do not have meanings prescribed under IFRS and are as a
result unlikely to be comparable to similar measures presented by
other companies. These measures are provided as information
complimentary to those IFRS measures by providing a further
understanding of our operating results from the perspective of
management. As such, these measures should not be considered in
isolation or in lieu of review of our financial information
reported under IFRS. Definitions and reconciliations for all terms
above can be found in the Company's August 31, 2019 Management's
Discussion and Analysis, filed on SEDAR and EDGAR.
|
Outlook
For fiscal year 2020, the Company is reaffirming its guidance
of:
- Net revenue of approximately $650
million to $700 million, with
distribution revenue representing slightly more than half of the
total net revenue
- Adjusted EBITDA of approximately $88
million to $95 million
Conference Call
Aphria executives will host a conference call to discuss these
results today at 9:00 am ET. To
listen to the live call, dial (888) 231-8191 from Canada and the U.S. or (647) 427-7450 from
International locations and use the passcode 6099303. A telephone
replay will be available approximately two hours after the call
concludes through October 29, 2019.
To access the recording dial (855) 859-2056 and use the passcode
6099303.
There will also be a simultaneous, live webcast available on the
Investors section of Aphria's website at aphriainc.com. The webcast
will be archived for 30 days.
We Have A Good Thing Growing
About Aphria
Aphria Inc. is a leading global cannabis company driven by an
unrelenting commitment to our people, the planet, product quality
and innovation. Headquartered in Leamington, Ontario – the greenhouse capital
of Canada – Aphria Inc. has been
setting the standard for the low-cost production of high-quality
cannabis at scale, grown in the most natural conditions possible.
Focusing on untapped opportunities and backed by the latest
technologies, Aphria Inc. is committed to bringing breakthrough
innovation to the global cannabis market. The Company's portfolio
of brands is grounded in expertly-researched consumer insights
designed to meet the needs of every consumer segment. Rooted in our
founders' multi-generational expertise in commercial agriculture,
Aphria Inc. drives sustainable long-term shareholder value through
a diversified approach to innovation, strategic partnerships and
global expansion, with a presence in more than 10 countries across
5 continents.
For more information, visit: aphriainc.com
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: Certain
information in this news release constitutes forward-looking
statements under applicable securities laws and are expressly
qualified by this cautionary statement. Any statements that are
contained in this news release that are not statements of
historical fact may be deemed to be forward-looking statements.
Forward looking statements are often identified by terms such as
"may", "should", "anticipate", "expect", "potential", "believe",
"intend" or the negative of these terms and similar expressions.
Forward-looking statements in this news release include, but are
not limited to, statements with respect to Net revenue and Adjusted
EBITDA guidance. Various assumptions were used in drawing the
conclusions or making the projections contained in the
forward-looking statements throughout this news release.
Forward-looking statements are based on the opinions and estimates
of management at the date the statements are made, and are subject
to a variety of risks and uncertainties and other factors that
could cause actual events or results to differ materially from
those projected in the forward-looking statements. Forward-looking
statements necessarily involve known and unknown risks, including,
without limitation, risks associated with general economic
conditions; adverse industry events; marketing costs; loss of
markets; future legislative and regulatory developments involving
cannabis; inability to access sufficient capital from internal and
external sources, and/or inability to access sufficient capital on
favorable terms; the cannabis industry in Canada generally, income tax and regulatory
matters, including delays in the issuance of licenses; the ability
of Aphria to meet its liquidity requirements to fund ongoing
operations; the ability of Aphria to implement its business
strategies; competition; crop failure; currency and interest rate
fluctuations.
Readers are cautioned that the foregoing list is not exhaustive
and should consider as other factors discussed under the heading
"Risk Factors" in Aphria's most recent Annual Information Form and
Management's Discussion and Analysis for the financial year ended
May 31, 2019 and under the heading
"Industry Trends and Risks" in Aphria's Management's Discussion and
Analysis for the three months ended August
31, 2019, each available on SEDAR at www.sedar.com and on
EDGAR at www.sec.gov. Readers are further cautioned not to place
undue reliance on forward-looking statements as there can be no
assurance that the plans, intentions or expectations upon which
they are placed will occur. Such information, although considered
reasonable by management at the time of preparation, may prove to
be incorrect and actual results may differ materially from those
anticipated.
The forward-looking statements included in this news release are
made as of the date of this news release and the Company does not
undertake an obligation to publicly update such forward-looking
statements to reflect new information, subsequent events or
otherwise unless required by applicable securities laws. Neither
TSX nor its Regulation Services Provider (as that term is defined
in the policies of Toronto Stock Exchange) accepts responsibility
for the adequacy or accuracy of this release.
Below schedule is an excerpt of Aphria Inc.'s financial
statements prepared on a basis consistent with IFRS for the three
months ended on August 31, 2019 and
filed on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. This
schedule does not contain all the information in Aphria Inc.'s
financial statements that is important to you. You should read the
financial statements and Management's Discussion and Analysis
carefully to obtain a comprehensive understanding of Aphria Inc.'s
financial statements under IFRS and related information.
Aphria Inc.
Consolidated Statements of Income and Comprehensive Income
(In thousands of Canadian dollars, except share and per share
amounts)
|
|
|
|
|
|
|
For the three
months ended
August 31,
|
|
|
|
|
|
|
Note
|
2019
|
2018
|
|
Revenue from cannabis
products
|
|
|
|
$
35,079
|
$ 13,292
|
|
Distribution
revenue
|
|
|
|
95,327
|
--
|
|
Excise
taxes
|
|
|
|
(4,294)
|
--
|
|
|
|
|
|
|
|
|
|
Net
revenue
|
|
|
|
126,112
|
13,292
|
|
|
|
|
|
|
|
|
|
|
Production
costs
|
|
|
6
|
15,454
|
4,834
|
|
Cost of goods
purchased
|
|
|
|
83,104
|
--
|
|
|
|
|
|
|
|
|
|
Gross profit
before fair value adjustments
|
|
|
|
27,554
|
8,458
|
|
|
|
|
|
|
|
|
|
|
Fair value adjustment
on sale of inventory
|
|
|
6
|
7,286
|
4,205
|
|
Fair value adjustment
on growth of biological assets
|
|
|
7
|
(25,153)
|
(9,511)
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
|
45,421
|
13,764
|
Operating
expenses:
|
|
|
|
|
|
|
General and
administrative
|
|
|
24
|
22,305
|
8,851
|
|
Share-based
compensation
|
|
|
|
25
|
4,956
|
6,122
|
|
Selling, marketing
and promotion
|
|
|
|
7,814
|
4,741
|
|
Amortization
|
|
|
|
5,008
|
3,274
|
|
Research and
development
|
|
|
|
610
|
262
|
|
Transaction
costs
|
|
|
|
735
|
865
|
|
|
|
|
|
|
|
41,428
|
24,115
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
|
3,993
|
(10,351)
|
|
|
|
|
|
|
|
|
|
|
Finance income
(expense), net
|
|
|
26
|
(5,257)
|
1,059
|
|
Non-operating
income
|
|
|
27
|
20,303
|
34,430
|
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
|
|
|
19,039
|
25,138
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
|
16
|
2,598
|
3,962
|
Net
income
|
|
|
|
16,441
|
21,176
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income
|
|
|
|
|
|
|
Other comprehensive
income
|
|
|
|
(1,686)
|
--
|
Comprehensive
income
|
|
|
|
$
14,755
|
$ 21,176
|
|
|
|
|
|
|
|
|
|
Total
comprehensive income (loss) is attributable to:
|
|
|
|
|
|
Shareholders of
Aphria Inc.
|
|
|
|
14,926
|
21,387
|
|
Non-controlling
interest
|
|
|
23
|
(171)
|
(211)
|
|
|
|
|
|
|
|
$
14,755
|
$ 21,176
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares - basic
|
|
|
|
251,163,059
|
225,659,684
|
Weighted average
number of common shares - diluted
|
|
|
|
252,741,610
|
230,366,310
|
|
|
|
|
|
|
|
|
|
Earnings per share
- basic
|
|
|
29
|
$
0.07
|
$ 0.09
|
Earnings per share
- diluted
|
|
|
29
|
$
0.07
|
$ 0.09
|
Aphria Inc.
Consolidated Statements of Financial Position
(In thousands of Canadian dollars)
|
|
Note
|
August 31,
2019
|
May 31,
2019
|
Assets
|
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
449,205
|
$ 550,797
|
|
Marketable
securities
|
4
|
15,114
|
20,199
|
|
Accounts
receivable
|
|
47,264
|
25,488
|
|
Prepaids and other
current assets
|
5
|
18,936
|
23,391
|
|
Inventory
|
6
|
112,980
|
91,529
|
|
Biological
assets
|
7
|
29,887
|
18,725
|
|
Promissory notes
receivable
|
15
|
39,200
|
39,200
|
|
Current portion of
convertible notes receivable
|
12
|
23,355
|
11,500
|
|
|
|
|
|
735,941
|
780,829
|
|
Capital
assets
|
9
|
542,200
|
503,898
|
|
Intangible
assets
|
10
|
388,367
|
392,056
|
|
Convertible notes
receivable
|
12
|
10,030
|
20,730
|
|
Interest in equity
investees
|
13
|
--
|
9,311
|
|
Long-term
investments
|
14
|
87,413
|
64,922
|
|
Goodwill
|
11
|
669,618
|
669,846
|
|
|
|
|
|
$
2,433,569
|
$
2,441,592
|
Liabilities
|
|
|
|
Current
liabilities
|
|
|
|
|
Accounts payable and
accrued liabilities
|
|
$
90,773
|
$ 105,813
|
|
Income taxes
payable
|
|
2,148
|
2,722
|
|
Deferred
revenue
|
|
22,687
|
23,678
|
|
Current portion of
lease liabilities
|
3
|
1,080
|
--
|
|
Current portion of
long-term debt
|
18
|
6,280
|
6,332
|
|
|
|
|
|
122,968
|
138,545
|
Long-term
liabilities
|
|
|
|
|
Lease
liabilities
|
3
|
5,284
|
--
|
|
Long-term
debt
|
18
|
54,204
|
60,895
|
|
Convertible
debentures
|
19
|
407,159
|
421,366
|
|
Deferred tax
liability
|
16
|
88,632
|
87,633
|
|
|
|
|
|
678,247
|
708,439
|
Shareholders'
equity
|
|
|
|
|
Share
capital
|
20
|
1,661,641
|
1,655,273
|
|
Warrants
|
21
|
1,336
|
1,336
|
|
Share-based payment
reserve
|
|
37,197
|
36,151
|
|
Accumulated other
comprehensive loss
|
|
(1,805)
|
(119)
|
|
Non-controlling
interest
|
23
|
28,238
|
28,409
|
|
Retained
earnings
|
|
28,715
|
12,103
|
|
|
|
|
|
1,755,322
|
1,733,153
|
|
|
|
|
|
$
2,433,569
|
$
2,441,592
|
|
|
For the three
months ended
August 31,
|
|
|
2019
|
2018
|
|
Net income
(loss)
|
|
|
$
16,441
|
$ 21,176
|
|
Income taxes
(recovery)
|
|
|
2,598
|
3,962
|
|
Finance (income)
expense, net
|
|
|
5,257
|
(1,059)
|
|
Non-operating
(income) loss
|
|
|
(20,303)
|
(34,430)
|
|
Amortization
|
|
|
9,218
|
4,706
|
|
Share-based
compensation
|
|
|
4,956
|
6,122
|
|
Fair value adjustment
on sale of inventory
|
|
|
7,286
|
4,205
|
|
Fair value adjustment
on growth of biological assets
|
|
(25,153)
|
(9,511)
|
|
Transaction
costs
|
|
|
735
|
865
|
|
Adjusted EBITDA from
businesses under development
|
|
4,234
|
3,565
|
|
Adjusted EBITDA from
distribution operations
|
|
|
(3,940)
|
--
|
Adjusted EBITDA
from cannabis operations
|
|
$
1,329
|
$ (399)
|
|
|
For the three
months ended
August 31,
|
|
|
2019
|
2018
|
|
Adjusted EBITDA from
cannabis operations
|
|
|
$
1,329
|
$ (399)
|
|
Adjusted EBITDA from
businesses under development
|
|
(4,234)
|
(3,565)
|
|
Adjusted EBITDA from
distribution operations
|
|
|
3,940
|
--
|
Adjusted
EBITDA
|
|
|
$
1,035
|
$ (3,964)
|
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SOURCE Aphria Inc.