- Net revenue of $78.4
million, excluding provisions of $2.9
million, an increase of 18% over prior quarter
- Consumer cannabis net revenue of $41.5 million, excluding provisions, a 24%
increase over prior quarter
- Cash cost to produce per gram of dried cannabis sold at
$0.85, down from $0.88 in Q2 2020
- Operational reset on track to deliver the Company's
commitment to positive Adjusted EBITDA in Q1 2021 with significant
improvement in SG&A run rate
- Improved cash position of $230.2
million; $154.6 million in Q3
cash use represents a 43% decrease over prior quarter
NYSE | TSX: ACB
EDMONTON, AB, May 14, 2020 /CNW/ - Aurora Cannabis Inc.
(the "Company" or "Aurora") (NYSE | TSX: ACB), the
Canadian company defining the future of cannabis worldwide,
announced today its financial and operational results for the third
quarter of fiscal 2020 ended March 31,
2020.
Michael Singer, Executive
Chairman and Interim CEO of Aurora stated, "I am incredibly proud
of the Aurora team for working through these challenging times in
order to maintain uninterrupted operations at all of our production
facilities and ensure we continue to meet the needs of our patients
and consumers. I am also pleased that our third quarter 2020
financial results were in-line with our expectations, and that we
remain firmly on track with the cost-savings and capex goals we
detailed during our business transformation plan in February 2020."
Since announcing the Business Transformation Plan on
February 6, 2020, Aurora has taken a
number of concrete steps which place Aurora firmly on track to meet
or exceed previously announced targets. These steps are designed to
strengthen Aurora's balance sheet and reduce go-forward costs, as
the Company works to achieve profitability and positive cash flow.
Management considers the following metrics to be key to the success
of the operational reset and future profitability of Aurora:
Net Revenue Growth; Maintains Market Share Leadership
Position
Net revenue, excluding provisions, of $78.4 million in Q3 2020 was up 18% quarter over
quarter. Cannabis net revenue, excluding provisions, was
$72.6 million, up 15% over Q2
2020.
Consumer cannabis net revenue, excluding provisions, was up 24%
from the prior quarter to $41.5
million, demonstrating the impact of the launch of Daily
Special, Aurora's value brand, and a full quarter of Cannabis
2.0 products. Medical cannabis net revenue, both Canadian
and international, showed healthy growth of 13.5% overall.
The variables associated with the COVID-19 pandemic and the
still-developing Canadian consumer market, including consumer
buying behaviour and new store rollout, have led Aurora to focus on
market share for the near term, rather than revenue targets, to
manage the business. Aurora has established leading market share in
key consumer categories in Canada,
leads the Canadian medical market in revenue, and has significant
market share in Germany. As such,
the Company's goal is to gain market share where it can and remain
well positioned to capture more share of the revenue growth of the
various cannabis markets over time.
Gross Margin Strength; Adjusted Gross Margin, before Fair Value
Adjustments, on Cannabis Net Revenue at 54%1
Gross margin, before fair value adjustments, on cannabis net
revenue was 44% in Q3 2020, unchanged compared to 44% in the prior
quarter.
Adjusted gross margin, before fair value adjustments, on
cannabis net revenue was 54% in Q3 2020, versus the 55% in the
prior quarter. Management believes adjusted gross margin is a
better gauge of the health of the Company, demonstrating the
strength of Aurora's purpose-built business model and an important
metric to manage as Aurora works to achieve positive adjusted
EBITDA in a market that is experiencing price compression.
- Target: Greater than 50% (On track)
The Company looks to maintain this metric at better than 50% over
the long term. The majority of the operating costs in the Company's
purpose-built facilities ramp in a step-function manner. Current
facilities have the capacity to support additional revenue without
adding significantly to the cost of production. Ongoing cost
efficiency initiatives also contribute to the Company's margins,
even as price competition increases.
Selling, General and Administrative (SG&A) Expense
Reduction; Current Run-Rate of $55
million and Tracking to $40
million to $45 million
SG&A costs in Q3 2020 of $75.1
million, excluding one-time termination costs associated
with the business transformation plan, were down $24.7 million from the prior quarter. For
clarity, Aurora plans to include Research and Development (R&D)
expenses within the SG&A reset plan target noted
below.
- Target: $40 million to
$45 million (On track)
Reductions in SG&A began mid-quarter of Q3 and included
cancellation of a number of information technology projects,
professional fees, renegotiation of several key contracts related
to marketing and R&D, reduction in certain marketing programs,
elimination of headcount across the SG&A functions, and the
divestiture of several non-core subsidiaries that had low gross
margins and carried heavy SG&A burden.
___________________________________________
|
1
|
These financial
performance measures are not recognized or defined under IFRS. As a
result, this data may not be comparable to data presented by other
licensed producers of cannabis and cannabis companies. See
"Non-GAAP Performance Measures" section below.
|
Adjusted EBITDA Profitability; Tracking to Q1 2021 Stated
Goal
Q3 SG&A was $75.1 million, and
at this point, the current run rate is now approximately
$55 million. Management has set, and
confirms, its intention to reduce costs in the Company to an
SG&A, including R&D, run rate of approximately $40 - $45 million
exiting Q4 2020.
Adjusted EBITDA, excluding one-time termination costs associated
with the business transformation plan, was a loss of $45.9 million in Q3, an improvement of
$34.4 million from the prior quarter
adjusted EBITDA of $80.3 million.
- Target: Positive EBITDA for Q1 2021 (On track)
The Company has committed to being adjusted EBITDA positive in
fiscal Q1 2021, the July to September
2020 quarter. The Company intends to meet this goal through
cost reductions and efficiencies in COGS and SG&A, if
necessary. As stated above, the Company acknowledges it is not
feasible to predict near term revenues with an adequate degree of
precision, but believes it has numerous cost levers at its disposal
to meet the positive adjusted EBITDA goal.
Capital Expenditure Reductions; Tracking Below $25 million in Q4 2020
Capital Expenditures, which includes additions to intangible
assets and excludes the impact of capitalized borrowing costs and
share based compensation, were approximately $73.7 million in Q3 2020. This represents a
significant decline from the previous quarter as management
reviewed all capital spending with the parameters of generating
near term returns, a focus on core businesses, and the preservation
of financial resources. A number of projects wrapped up in Q3 or
were cancelled. Continuing capital projects include: (i) the
planned amalgamation of the Company's subsidiaries servicing
medical patients and centralized distribution for the amalgamated
entity, (ii) co-generation capabilities at Aurora's River facility,
reducing risk at one of the Company's major facilities and reducing
energy costs, with a $10.0 million
offsetting grant expected over the next 12 months, (iii) completion
of the joint venture arrangement to co-locate treatment of cannabis
products within the Company's Polaris facility, thereby reducing
treatment costs and release timelines for cannabis products, (iv)
the completion of the first six rooms at Aurora Sun to produce high
demand cultivars, and (v) continued development of the German
production facility. All projects, except for the German
production facility, are expected to be largely complete in Q4
2020.
- Target: Less than $100 million
second half of fiscal 2020 (On Track)
Management committed to reducing capital expenditures to below
$100 million in the second half of
fiscal 2020, and with $73.7 million
in Q3 2020, is on track to meet this objective. Capital spending in
Q1 2021 is planned to be well below Q3 and Q4 2020 levels.
Fiscal Q3 2020 Sources & Uses of Cash; Q3 2020 Cash Use
Decreased 43% over Q2 2020
Cash use in Q3 2020 decreased by over $118 million from the prior quarter, and given
the Company's adjusted gross margins before fair value adjustments
on cannabis net revenue and reductions in SG&A expense and
capital expenditures as described above, management expects cash
use in Q4 2020 to further decrease. The main components of cash use
in Q3 2020 were as follows:
($
thousands)
|
Q3
2020
|
|
Q2
2020
|
|
Q1 2021
Expectations
|
|
|
|
|
Cash
Flow
|
|
|
|
Cash,
Opening
|
$156,334
|
|
$152,526
|
|
|
|
|
|
|
|
|
Cash used in
operations / EBITDA
|
($55,370)
|
|
($86,157)
|
|
Positive
EBITDA
|
Working capital
change
|
$607
|
|
($52,847)
|
|
Neutral or cash
generating. Inventory build expected to slow and reverse to
steady state over next 2-3 quarters
|
Capital
expenditures
|
($83,938)
|
|
($128,405)
|
|
Less than $10 million
per quarter for currently planned projects
|
Debt and interest
payments
|
($15,887)
|
|
($5,579)
|
|
Steady for next
several years / Convertible debt payments only at six month
points (Q3, 2020, Q1 2021, etc)
|
Cash use
|
($154,588)
|
|
($272,988)
|
|
|
|
|
|
|
|
|
Proceeds raised
through debt
|
$22,000
|
|
$14,394
|
|
nil
|
Proceeds raised
through ATM
|
$206,462
|
|
$262,402
|
|
Access to capital in
an uncertain environment is paramount but cost control
and focus on positive EBITDA is primary levers. ATM to be available
as backstop.
|
Cash
raised
|
$228,462
|
|
$276,796
|
|
|
|
|
|
|
|
|
Cash, March 31,
2020
|
$230,208
|
|
$156,334
|
|
|
(1)
|
Refer to "Condensed
Consolidated Interim Statement of Cash Flows" in the "Condensed
Consolidated Interim Financial Statements (unaudited)" for our
cash flow statement prepared in accordance with IAS 7 – Statement
of Cash Flows.
|
Other Third Quarter 2020 Highlights
(Unless otherwise stated, comparisons are made between fiscal
Q3 2020 and Q2 2020 results and are in Canadian dollars)
- Q3 2020 total net revenue of $78.4
million, excluding provisions of $2.9
million, a 18% increase from the prior quarter. Cannabis net
revenue of $72.6 million in Q3 2020,
excluding provisions, increased 15% compared to the previous
quarter:
-
- Consumer cannabis net revenue, excluding provisions of
$2.9 million, of $41.5 million was an increase of 24%over the
previous quarter. The growth is primarily attributable to the
launch of Daily Special in February
2020 and an increase in Cannabis 2.0 sales, which commenced
near the end of December 2019
- Medical cannabis net revenue was $31.1
million, with Canadian medical net revenue up from
$25.6 million to $27.0 million due to sales growth in cannabis
derivative products, and international medical net revenue up from
$1.8 million to $4.0 million due to the resumption of sales
operations in the European Union in February
2020 after a temporary halt of distribution related to an
administrative permit issue in Germany
- Production volume in fiscal Q3 was 36,207 kilograms, a return
to targeted production rates following a scheduled Q2 2020 pivot of
production towards the cultivation of certain strains to align
production capacity with evolving consumer preferences
- Aurora has moved to reduce complexity in its business
operations through strategic divestitures, asset disposals and
subsidiary closures, with further simplification expected
-
- Since the Business Transformation Plan announcement in
February 2020, the Company has: (i)
sold its non-core greenhouse facility in Exeter, ON; (ii) sold non-core investment
holdings in marketable securities; and (iii) reached agreement for
the divestiture of several non-core subsidiaries
Events Subsequent to Quarter End
- Aurora renewed its ATM program to enable the Company to raise
an additional US$250 million pursuant
to its outstanding base shelf prospectus dated May 14, 2019, under which approximately
US$350 million is available, in order
to provide further balance sheet strength and preserve
flexibility
- Aurora completed its previously announced plan to consolidate
all of its outstanding common shares (the "Common Shares")
on the basis of 1 Common Share for every 12 Common Shares currently
outstanding
- Facilities in Canada and
internationally continue to be fully operational and the Company is
working closely with local, national and international authorities
to ensure it is following or exceeding the stated guidelines
related to COVID-19 within each region
Q3 2020 Key Financial and Operational Metrics
($
thousands)
|
Q3
2020
|
|
Q2
2020
|
|
$
Change
|
|
%
Change
|
Total net revenue
(1)
|
$75,520
|
|
$56,027
|
|
$19,493
|
|
35
|
%
|
|
|
|
|
|
|
|
|
|
Canadian medical
cannabis net revenue (2)
|
$27,049
|
|
$25,594
|
|
$1,455
|
|
6
|
%
|
International medical
cannabis net revenue (2)
|
$4,037
|
|
$1,792
|
|
$2,245
|
|
125
|
%
|
Consumer cannabis net
revenue (2)
|
$41,469
|
|
$33,471
|
|
$7,998
|
|
24
|
%
|
Wholesale bulk
cannabis net revenue (2)
|
-
|
|
$2,384
|
|
($2,384)
|
|
(100)
|
%
|
Provision for
returns
|
($2,918)
|
|
($10,565)
|
|
$7,647
|
|
(72)
|
%
|
Cannabis net
revenue
|
$69,637
|
|
$52,676
|
|
$16,961
|
|
32
|
%
|
|
|
|
|
|
|
|
|
Adjusted gross margin
before FV adjustments on cannabis net revenue
(2)
|
54
|
%
|
55
|
%
|
N/A
|
(1)
|
%
|
Selling, general and
administration expense (3)
|
$80,147
|
|
$99,882
|
|
($19,735)
|
|
(20)
|
%
|
Adjusted EBITDA
(2) (4)
|
($50,850)
|
|
($80,246)
|
|
$29,396
|
|
37
|
%
|
|
|
|
|
|
Non-cash working
capital
|
$217,604
|
|
$214,600
|
|
$3,004
|
|
1
|
%
|
Cannabis inventory and
biological assets (5)
|
$244,485
|
|
$216,735
|
|
$27,750
|
|
13
|
%
|
Cash cost to produce
per gram sold (2)
|
$0.85
|
|
$0.88
|
|
($0.03)
|
|
(3)
|
%
|
Kilograms
produced
|
36,207
|
|
30,691
|
|
5,516
|
|
18
|
%
|
Kilograms sold
(6)
|
12,729
|
|
9,501
|
|
3,228
|
|
34
|
%
|
(1)
|
Includes the impact
of actual and expected product returns and price adjustments (three
and nine months ended March 31, 2020 - $2.9 million
and $13.5 million; three and nine months ended March 31, 2019 -
nil).
|
(2)
|
These financial
performance measures are not recognized or defined under IFRS. As a
result, this data may not be comparable to data
presented by other licensed producers of cannabis and cannabis
companies. See "Non-GAAP Performance Measures" below.
|
(3)
|
Includes $5.0 million
of one-time severance costs associated with the business
transformation plan. Excluding these severance costs, SG&A
would have decreased by 25% to $75.1 million.
|
(4)
|
Includes $5.0 million
of one-time severance costs associated with the business
transformation plan. Excluding these severance costs, adjusted
EBITDA would have decreased by 43% to $45.9 million.
|
(5)
|
Represents total
biological assets and cannabis inventory, exclusive of merchandise,
accessories, supplies and consumables.
|
(6)
|
The kilograms sold is
offset by the grams returned during Q3 2020.
|
Conference Call
Aurora will host a conference call today, May 14, 2020, to
discuss these results. Michael Singer, Executive Chairman and
Interim Chief Executive Officer, and Glen Ibbott, Chief Financial Officer, will host
the call starting at 5:00 p.m. Eastern time. A question and
answer session will follow management's presentation.
DATE:
|
Thursday, May 14,
2020
|
TIME:
|
5:00 p.m. Eastern
Time | 3:00 p.m. Mountain Time
|
WEBCAST:
|
http://public.viavid.com/index.php?id=139582
|
REPLAY:
|
(844) 512-2921 or
(412) 317-6671
Available until 11:59 p.m. Eastern Time Thursday, May 28,
2020
|
PIN
NUMBER:
|
13702972
|
About Aurora
Aurora is a global leader in the cannabis industry serving both
the medical and consumer markets. Headquartered in Edmonton, Alberta, Aurora is a pioneer in
global cannabis dedicated to helping people improve their lives.
The Company's brand portfolio includes Aurora, Aurora Drift, San
Rafael '71, Daily Special, AltaVie, MedReleaf, CanniMed, Whistler,
and ROAR Sports. Providing customers with innovative, high-quality
cannabis and hemp products, Aurora's brands continue to break
through as industry leaders in the medical, performance, wellness
and recreational markets wherever they are launched. For more
information, please visit our website at www.auroramj.com.
Aurora's Common Shares trade on the TSX and NYSE under the
symbol "ACB", and is a constituent of the S&P/TSX Composite
Index.
Forward Looking Statements
This news release includes statements containing certain
"forward-looking information" within the meaning of applicable
securities law ("forward-looking statements").
Forward-looking statements are frequently characterized by words
such as "plan", "continue", "expect", "project", "intend",
"believe", "anticipate", "estimate", "may", "will", "potential",
"proposed" and other similar words, or statements that certain
events or conditions "may" or "will" occur. These forward-looking
statements are only predictions. 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, estimates and
assumptions of management in light of management's experience and
perception of historical trends, current conditions and expected
developments at the date the statements are made, such as current
and future market conditions, the current and future regulatory
environment and future approvals and permits. Forward-looking
statements are subject to a variety of risks, uncertainties and
other factors that management believes to be relevant and
reasonable in the circumstances could cause actual events, results,
level of activity, performance, prospects, opportunities or
achievements to differ materially from those projected in the
forward-looking statements, including general business and economic
conditions, changes in laws and regulations, product demand,
changes in prices of required commodities, competition, the effects
of and responses to the COVID-19 pandemic and other risks,
uncertainties and factors set out under the heading "Risk Factors"
in the Company's annual information form dated September 10, 2019 (the "AIF") and
prospectus supplement dated April 16,
2020 (the "Prospectus Supplement") to its outstanding
base shelf prospectus dated May 14,
2019 and filed with Canadian securities regulators available
on the Company's issuer profile on SEDAR at www.sedar.com. The
Company cautions that the list of risks, uncertainties and other
factors described in the AIF and Prospectus Supplement is not
exhaustive and other factors could also adversely affect its
results. Readers are urged to consider the risks, uncertainties and
assumptions carefully in evaluating the forward-looking statements
and are cautioned not to place undue reliance on such information.
The Company is under no obligation, and expressly disclaims any
intention or obligation, to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise, except as expressly required by applicable securities
laws.
Non-GAAP Performance Measures
The Company uses financial measures regarding itself, such as
cash cost of sales of dried cannabis sold, cash cost to produce per
gram of dried cannabis sold, cannabis net revenue, medical cannabis
net revenue, consumer cannabis net revenue, wholesale bulk cannabis
net revenue, average selling price per gram and gram equivalent,
gross profit and gross margin before fair value adjustments, gross
profit and gross margin before fair value adjustments on medical
cannabis net revenue, gross profit and gross margin before fair
value adjustments on consumer cannabis net revenue, gross profit
and gross margin before fair value adjustments on wholesale bulk
cannabis net revenue, adjusted gross profit and adjusted gross
margin before fair value adjustments, and adjusted EBITDA that do
not have standardized meaning under the International Financial
Reporting Standards ("IFRS") and may not be comparable to
similar measures presented by other entities ("non-IFRS
measures"). Further information relating to non-IFRS measures,
is set out in the Company's management discussion and analysis for
the three and nine months ended March 31,
2020 and 2019 under the heading "Cautionary Statement
Regarding Non-GAAP Performance Measures" and the "Adjusted EBITDA,
"Revenue", "Gross Margin" and "Cash Cost of Sales of Dried Cannabis
and Cash Cost to Produce Dried Cannabis Sold – Aurora Produced
Cannabis" section for reconciliation to the IFRS equivalent.
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SOURCE Aurora Cannabis Inc.