NYSE | TSX: ACB
- Reports Industry Leading Gross Profit of $53.7 Million and 58% Cannabis Gross
Margin
- Delivers Best-in-Class Indoor Cash Cost to Produce of
$0.85 per gram
- Announces Plan to Settle March
2020 5.0% Convertible Debentures
- Revises Capital Expenditure Plan to Align with Long-Term
Market Growth
- Generates Total Revenue of $75.6
Million Including Medical and Consumer Cannabis Net Revenue
of $60.5 Million, and Wholesale
Cannabis Net Revenues of $10.3
Million
EDMONTON, Nov. 14, 2019 /PRNewswire/ - 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 first
quarter of fiscal 2020 ended September 30,
2019.
"Over the past several years, Aurora has earned its place as a
global leader in the cannabis industry. Despite short term
distribution and regulatory headwinds in Canada that have temporarily impacted the
industry, the long-term opportunity for Aurora in the global
cannabis and cannabinoids market is immense," said Terry Booth, CEO, Aurora
Cannabis. "Aurora has, and will continue to focus on
everything in our control. Our success in doing this was
demonstrated again this quarter by continued strong improvement in
our core KPIs. We delivered solid operating results this quarter,
exemplified by our industry-leading cash cost to produce which
declined another 25% to $0.85 per
gram this quarter, as well as by our industry-leading gross margins
and market share."
Mr. Booth added, "In order to capitalize on this global market,
we recognize the need to be nimble and proactive. To enhance our
financial flexibility and position us to take maximum advantage of
future growth opportunities, we have also taken decisive steps to
immediately strengthen our balance sheet. Specifically, these steps
include: (1) the announcement of a formal plan to settle our 5.0%
convertible debentures due March
2020, (2) a reduction in our capital investments over the
next several quarters by over $190
million to better match near-term capacity expansion with
anticipated demand, while maintaining our long-term demand outlook,
and (3) raising over US$124 million
in gross equity proceeds since the start of fiscal 2020 through our
at-the-market ("ATM") financing program."
First Quarter 2020 Highlights
(Unless otherwise stated, comparisons are made between Fiscal
Q1 2020 and Q4 2019 results and are in Canadian dollars)
- Cash cost to produce per gram sold declined 25% sequentially to
$0.85 per gram, delivering on the
Company's promised sub one dollar per
gram target KPI
- Net cannabis revenue of $70.8
million compared to $94.6
million in Q4 2019;
-
- Non-wholesale cannabis revenue declined 19% sequentially,
comprised of:
-
- Medical cannabis revenue of $30.5
million, an increase of 3% sequentially
- Canadian consumer cannabis revenue of $30.0 million, a decline of 33% sequentially as
provincial ordering slowed considerably during the summer as
distributors worked through inventories and as the industry was
impacted by the slow pace of retail store licensing
- Wholesale revenues of $10.3
million, at 58% gross margin
- Production volume increased 43% sequentially to 41,436 kgs
- Total gross profit of $53.7
million and gross margin on cannabis net revenue of 58%,
driven by a significant reduction in cash cost of production
- Aurora's medical patient base expanded 8% to
91,116 sequentially. As at the date of this release, Aurora
has approximately 91,408 active registered patients
- Closed an amended and upsized $360
million secured credit facility which includes an accordion
feature that enables Aurora to upsize the facility by approximately
$40 million. As at the date of this
release, approximately $160 million
of this facility has not been drawn and remains available to
Aurora
- Sold remaining 28.8 million shares of The Green Organic
Dutchman Holdings Ltd. for gross proceeds of $86.5 million
Subsequent Events & Corporate Action Items
Subsequent to the quarter end, the Company made several
decisions designed to streamline its operations, provide financial
flexibility and reduce financial leverage in response to a changing
market and regulatory environment, while supporting our long-term
growth:
- Aurora has secured the commitment of investors holding
approximately $155 million of the principal value of the 5%
March 2020 Convertible Debentures
("March Convertible Debenture") to voluntarily convert their
Debentures under a temporarily amended early conversion privilege
(the "Amended Early Conversion Privilege"). Under this contemplated
transaction, all remaining holders of the March Convertible
Debentures will be granted an opportunity, for a period of time, at
a price equal to a 6% discount to a 5-day volume weighted average
price ("VWAP") to convert their debentures. Any holders not
exercising their early conversion privilege will remain holders of
their original debentures that have a 5% coupon, $13.05 conversion price and mature on
March 9, 2020.
- In an effort to expand responsibly in line with global demand,
the Company has made the decision to immediately cease construction
activity at its Aurora Nordic 2 facility in Denmark, which is expected to save
approximately $80 million over the
next 12 months. Aurora Nordic 1, a 100,000 square foot facility
located in Odense, Denmark, is
fully completed, has received a production license, and the Company
expects to receive a license to sell shortly. Furthermore, the
Company has decided to defer the majority of the final construction
and commissioning activities at its Aurora Sun facility for the
foreseeable future which is expected to conserve approximately
$110 million of cash. With the work
completed to date, both the Aurora Nordic 2 and Aurora Sun
facilities are now fully enclosed. The Company expects to
have at least six flower rooms completed and in operation at Aurora
Sun in 2020, for a total of 238,000 square feet. As global demand
develops, or as Aurora's market share in the global cannabis market
increases, we will reactivate these projects.
- Aurora has been active under the US$400
million ATM distribution program as it represents a
strategically valuable source of equity capital. Fiscal year
to date, the Company has raised gross proceeds of US$124.4 million through the issuance of
29,057,944 common shares.
Q1 2020 Key Financial and Operational Metrics
($ thousands,
except Operational Results)
|
Q1
2020
|
Q4 2019
(4)
|
$
Change
|
%
Change
|
Financial
Results
|
|
|
|
|
Total net
revenue
|
$75,245
|
$98,942
|
($23,697)
|
(24)%
|
Cannabis net revenue
(1)(2a)
|
$70,776
|
$94,640
|
($23,864)
|
(25)%
|
Medical cannabis net
revenue (1)(2a)
|
$30,450
|
$29,651
|
$799
|
3%
|
Consumer cannabis net
revenue (1)(2a)
|
$30,022
|
$44,882
|
($14,860)
|
(33)%
|
Wholesale bulk
cannabis net revenue (1)(2a)
|
$10,304
|
$20,107
|
($9,803)
|
(49)%
|
Gross margin before
FV adjustments on cannabis net revenue
(1)(2b)
|
58%
|
58%
|
N/A
|
0%
|
Gross margin before
FV adjustments on medical cannabis net revenue
(1)(2b)
|
63%
|
60%
|
N/A
|
3%
|
Gross margin before
FV adjustments on consumer cannabis net revenue
(1)(2b)
|
53%
|
55%
|
N/A
|
(2)%
|
Gross margin before
FV adjustments on wholesale bulk cannabis net revenue
(1)(2b)
|
58%
|
61%
|
N/A
|
(3)%
|
Selling, general and
administration expense
|
$81,132
|
$72,869
|
$8,263
|
11%
|
|
|
|
|
|
Balance
Sheet
|
|
|
|
|
Working
capital
|
$123,750
|
$227,802
|
($104,052)
|
(46)%
|
Cannabis inventory
and biological assets (3)
|
$178,748
|
$144,275
|
$34,473
|
24%
|
Total
assets
|
$5,606,799
|
$5,502,830
|
$103,969
|
2%
|
|
|
|
|
|
Operational
Results – Cannabis
|
|
|
|
|
Cash cost to produce
per gram sold (1)(2c)
|
$0.85
|
$1.14
|
($0.29)
|
(25)%
|
Active registered
patients
|
91,116
|
84,729
|
6,387
|
8%
|
Average net selling
price of medical cannabis (1)
|
$8.00
|
$8.51
|
($0.51)
|
(6)%
|
Average net selling
price of consumer cannabis (1)
|
$5.28
|
$5.14
|
$0.14
|
3%
|
Average net selling
price of wholesale bulk cannabis (1)
|
$3.46
|
$3.61
|
($0.15)
|
(4)%
|
Kilograms
produced
|
41,436
|
29,034
|
12,402
|
43%
|
Kilograms
sold
|
12,463
|
17,793
|
(5,330)
|
(30)%
|
(1)
|
These terms are
defined in the "Cautionary Statement Regarding Certain Non-GAAP
Performance Measures" section of the MD&A.
|
(2)
|
Refer to the
following sections in the MD&A for reconciliation of non-GAAP
measures to the IFRS equivalent measure:
|
|
a.
|
Refer to the
"Revenue" section in the MD&A for a reconciliation of
cannabis net revenue to the IFRS equivalent.
|
|
b.
|
Refer to the
"Gross Margin" section in the MD&A for reconciliation to
the IFRS equivalent.
|
|
c.
|
Refer to the "Cash
Cost of Sales of Dried Cannabis and Cash Cost to Produce Dried
Cannabis Sold – Aurora Produced Cannabis" section of the
MD&A for reconciliation to the IFRS equivalent.
|
(3)
|
Represents total
biological assets and cannabis inventory, exclusive of merchandise,
accessories, supplies and consumables.
|
(4)
|
During the three
months ended June 30, 2019, the Company recorded non-material
year-end corrections to: (i) capitalize certain payroll,
share-based compensation and borrowing costs, related to the
construction of our production facilities that were incorrectly
expensed in prior periods; and (ii) reverse items that had been
over-accrued in prior periods. The net impact of these adjustments
to Q4 2019 Adjusted EBITDA was a $14.9 million reduction in
reported operating expenses.
|
($
thousands)
|
Three months
ended
|
September 30,
2019
|
June 30,
2019
|
September 30,
2018
|
Net
revenue
|
75,245
|
98,942
|
29,674
|
Design, engineering
and construction services
|
—
|
—
|
(1,489)
|
Patient counseling
services
|
(1,055)
|
(606)
|
(1,242)
|
Analytical testing
services
|
(816)
|
(317)
|
(447)
|
Other cannabis
segment revenues (accessories, hemp, other)
|
(2,168)
|
(2,760)
|
(1,385)
|
Horizontally
integrated business revenue
|
(430)
|
(619)
|
(515)
|
Cannabis net
revenue
|
70,776
|
94,640
|
24,596
|
The table below outlines the breakdown of cannabis net revenue
between our medical, consumer and wholesale bulk markets, as well
as our dried cannabis and cannabis extracts for the three months
ended September 30, 2019 and the comparative periods.
($
thousands)
|
Three months
ended
|
September 30,
2019
|
June 30,
2019
|
September 30,
2018
|
Medical cannabis
net revenue
|
|
|
|
Canada dried
cannabis
|
14,882
|
14,438
|
13,752
|
Canada cannabis
extracts (1)
|
10,606
|
10,732
|
7,488
|
International dried
cannabis
|
4,553
|
4,481
|
2,803
|
International
cannabis extracts (1)
|
409
|
—
|
—
|
Total medical
cannabis net revenue
|
30,450
|
29,651
|
24,043
|
|
|
|
|
Consumer cannabis
net revenue
|
|
|
|
Dried
cannabis
|
26,889
|
41,813
|
533
|
Cannabis extracts
(1)
|
3,133
|
3,069
|
20
|
Total consumer
cannabis net revenue
|
30,022
|
44,882
|
553
|
|
|
|
|
Wholesale bulk
cannabis net revenue
|
|
|
|
Dried
cannabis
|
7,432
|
20,107
|
—
|
Cannabis extracts
(1)
|
2,872
|
—
|
—
|
Wholesale bulk
cannabis net revenue
|
10,304
|
20,107
|
—
|
|
|
|
|
Total cannabis net
revenue
|
70,776
|
94,640
|
24,596
|
(1)
|
Cannabis extracts
revenue includes cannabis oils, capsules, softgels, sprays and
topical revenue.
|
Consolidated net revenue was $75.2
million in Q1 2020 as compared to $98.9 million in the prior quarter. Medical
cannabis net revenues increased to $30.5
million in Q1 2020, up 3% over the prior quarter. Consumer
cannabis revenues were $30.0 million
in Q1 2020, a decline of 33% from the prior quarter and contributed
40% to total consolidated net revenue. The decline in cannabis net
revenues is primarily attributable to previously identified
constraints in Canadian consumer retail and distribution
infrastructure coupled with a decline in wholesale revenues. The
Canadian wholesale market is rapidly evolving and remains an
important long-term opportunity for Aurora.
As a leader in highly automated, low cost production, Aurora is
well positioned to align its operating assets to rapidly respond to
evolving consumer preferences while pursuing potential white label
wholesale opportunities and building a strong inventory of
high-quality derivative products for launch later this year.
Average net selling price of cannabis increased by $0.36 per gram over the prior quarter from
$5.32 in Q4 2019 to $5.68 in Q1 2020. This increase is primarily
attributable to an increase in the average net selling price of
consumer cannabis coupled with a decrease in sales volumes to the
bulk wholesale markets which yield lower average net selling prices
as compared to the consumer and medical markets.
Gross margin on cannabis net revenue remained stable at 58% in
Q1 2020, compared to 58% in the prior quarter.
During Q1 2020, Aurora produced 41,436 kilograms of cannabis as
compared to 29,034 kilograms in the prior quarter. The 42.7%
increase in production output was primarily due to continuing
production scale up at the Company's Aurora Sky facility. While
Aurora Sky has delivered well above expectations from a capacity
perspective, in responding to shifting consumer preferences the
Company is likely to plant higher potency, lower yielding strains
which are in higher demand in the recreational market. As such we
do not expect near term production to reach levels achieved in Q1
2020, and the Company continues to operate at a 150,000 kg annual
production capacity.
Excluding the impact of $10.6
million in out-of-period adjustments that were recognized in
Q4 2019, Q1 2020 SG&A decreased by 3% to $81.1 million. The decline was driven by a
decrease in fulfilment and shipping costs, and a decline in
one-time expenses related to derivative product launches
and regulatory fees during Q1 2020.
Adjusted EBITDA loss was $39.7
million in Q1 2020 compared to $26.6
million in Q4 2019, excluding the impact of the $14.9 million out-of-period adjustments
recognized in the prior quarter. Developing a profitable and robust
global cannabis company is extremely important to Aurora. While the
Company strongly believes the global market opportunity for
cannabis is robust, there is uncertainty in the timing of revenue
ramp-up in our core markets, and we continue to invest in our
global operations which may result in near term challenges to
achieving positive adjusted EBITDA. However, the Company expects
adjusted EBITDA to continue to improve in the future as we increase
revenue through the sale of higher-margin extract products and
increase gross margins through economies of scale, while investing
in corporate capabilities with controlled SG&A growth.
Outlook
The global medical cannabis and hemp derived cannabinoids
markets represent a significant opportunity for Aurora. To support
the Company's prospects in these markets, Aurora continues to make
necessary investments that will build long-term value for its
shareholders while balancing growth with prudent financial
management and capital allocation. This focus includes aligning
Aurora's planned cultivation assets and capital expenditures with
global cannabis demand. With the Company's operating cultivation
assets outperforming nameplate capacity, Aurora is positioned to
the meet near term global market demand and to pursue long term
white label and contract manufacturing agreements with distribution
partners in the Canadian and international markets.
Effective October 17, 2019, new
regulations under the Cannabis Act came into effect which will
allow for the sale of higher value, in-demand products such as vape
pens, edibles, and other derivatives in the consumer market
("Cannabis 2.0"). The implementation of Cannabis 2.0 remains the
most important market opportunity for the Company in Canada. Aurora is extremely well positioned
and has prioritized its resources to prepare for a successful
initial launch and supported an ongoing replenishment strategy to
ensure consumers across Canada
will have access to a diverse portfolio of high-quality derivative
products they want to buy. Aurora expects to begin shipping these
new product formats to provincial regulators starting late
December 2019.
The other near-term focus and market opportunity for the Company
is expanding its operating footprint in the United States. To ensure a successful
entry, Aurora is evaluating a number of potential accretive
alternatives with a focus on adding operating cash flows. The
Company is committed to engage only in activities which are
permissible under both state and federal laws.
Conference Call
Aurora will host a conference call today, November 14,
2019, to discuss these results. Terry Booth, Chief Executive
Officer, Glen Ibbott, Chief Financial Officer, Cam Battley, Chief Corporate Officer, and
Michael Singer, Executive
Chairman, will host the call starting at 6:00 p.m.
Eastern time. A question and answer session will follow
management's presentation.
Date:
|
Thursday,
November 14th, 2019
|
Time:
|
6:00 p.m. Eastern
Time | 4:00 p.m. Mountain Time
|
Webcast:
|
https://bit.ly/2JBOI2s
|
Replay:
|
(416) 849-0833 or
(855) 859-2056
|
|
until 12:00 midnight
Eastern Time Thursday, November 21, 2019
|
Reference
Number:
|
3751059
|
About Aurora
Headquartered in Edmonton, Alberta,
Canada with funded capacity in excess of 625,000 kg per
annum and sales and operations in 25 countries across five
continents, Aurora is one of the world's largest and leading
cannabis companies. Aurora is vertically integrated and
horizontally diversified across every key segment of the value
chain, from facility engineering and design to cannabis breeding
and genetics research, cannabis and hemp production, derivatives,
high value-add product development, home cultivation, wholesale and
retail distribution.
Highly differentiated from its peers, Aurora has established a
uniquely advanced, consistent and efficient production strategy,
based on purpose-built facilities that integrate leading-edge
technologies across all processes, defined by extensive automation
and customization, resulting in the massive scale production of
high-quality consistent product. Designed to be replicable and
scalable globally, our production facilities are designed to
produce cannabis at significant scale, with high quality,
industry-leading yields, and low-per gram production costs. Each of
Aurora's facilities is built to meet European Union Good
Manufacturing Practices ("EU GMP") standards. Certification has
been granted to Aurora's first production facility in Mountain View
County, the MedReleaf Markham facility, and its wholly owned
European medical cannabis distributor Aurora Deutschland. All
Aurora facilities are designed and built to the EU GMP
standard.
In addition to the Company's rapid organic growth and strong
execution on strategic M&A, which to date includes 17 wholly
owned subsidiary companies – MedReleaf, CanvasRX, Peloton
Pharmaceutical, Aurora Deutschland, H2 Biopharma, BC Northern
Lights, Larssen Greenhouses, CanniMed Therapeutics, Anandia,
HotHouse Consulting, MED Colombia, Agropro, Borela, ICC Labs,
Whistler, Chemi Pharmaceutical, and Hempco – Aurora is
distinguished by its reputation as a partner and employer of choice
in the global cannabis sector, having invested in and established
strategic partnerships with a range of leading innovators,
including: Radient Technologies Inc. (TSXV: RTI), Cann Group Ltd.
(ASX: CAN), Micron Waste Technologies Inc. (CSE: MWM), Choom
Holdings Inc. (CSE: CHOO), CTT Pharmaceuticals (OTCC: CTTH),
Alcanna Inc. (TSX: CLIQ), High Tide Inc. (CSE: HITI), EnWave
Corporation (TSXV: ENW), Capcium Inc. (private), Evio Beauty Group
(private), and Wagner Dimas (private).
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.
For more information about Aurora, please visit our investor
website, investor.auroramj.com
Terry Booth,
CEO
Aurora Cannabis Inc.
Forward Looking Statements and Non-IFRS Industry
Measures
This news release makes reference to certain
non-IFRS measures, including certain industry metrics. 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. This news release uses
non-IFRS measures including "cannabis net revenue", "Adjusted
EBITDA", "cannabis inventory and biological assets", "cash cost to
produce per gram sold", "average net selling price", "production
capacity", and "SG&A". The foregoing are commonly used
operating measures in the industry but may be calculated
differently compared to other companies in the industry. These
non-IFRS measures, including the industry measures, are used to
provide investors with supplementary measures of our operating
performance that may not otherwise be apparent when relying solely
on IFRS metrics. Definitions of the non-IFRS measures can be found
in our financial statements, MD&A and this news release.
This news also 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 and include, but are not limited to the
settlement of the March Convertible Debentures, reduction in
capital investments, and the successful launch and replenishment
strategy for Cannabis 2.0 . These 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 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. These risks include, but are not
limited to, the ability to retain key personnel, the ability to
continue investing in infrastructure to support growth, the ability
to obtain financing on acceptable terms, the continued quality of
our products, customer experience and retention, the development of
third party government and non-government adult-use sales
channels, managements estimation of consumer demand in Canada and in jurisdictions where the Company
exports, expectations of future results and expenses, the
availability of additional capital to complete construction
projects and facilities improvements, the risk of successful
integration of acquired business and operations, the ability to
expand and maintain distribution capabilities, the impact of
competition, and the possibility for changes in laws, rules, and
regulations in the industry. 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 law.
Neither TSX, NYSE nor their applicable Regulation
Services Providers (as that term is defined in the policies of the
Toronto Stock Exchange and New York Stock Exchange) accept
responsibility for the adequacy or accuracy of this
release.
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SOURCE Aurora Cannabis Inc.