Full Press Release Details
Aurora Cannabis Announces Fiscal Fourth
Quarter 2020 Results
EBITDA Improvement Due to Strong Gross Margins and Reduced SG&A
CapEx Spend Down Substantially in Q4 2020
EDMONTON, AB, Sept. 22, 2020 /CNW/ - Aurora
Cannabis Inc. (the "Company" or "Aurora") (NYSE | TSX: ACB), the Canadian company defining the
future of cannabinoids worldwide, today announced its financial and operational results for the fourth quarter of fiscal 2020 ended
"As reported in our September 8, 2020
business update, our Q4 demonstrated progress in rationalization of SG&A and cash burn along with continued leadership in both
Canadian and international medical. However, Aurora has slipped from its top position in Canadian consumer, a market that continues
to support material growth and opportunity," stated Miguel Martin, recently appointed Chief Executive Officer of Aurora. "My
focus is therefore to re-position the Canadian consumer business immediately. We look to expand beyond the value flower segment,
leverage our capabilities in science and product innovation and put our effort on a finite number of emerging growth formats. This
entails prioritizing our San Rafael, Aurora and Whistler premium brands in flower, pre-rolls and vapor, which will be shortly followed
by strategic marketing and innovation efforts in concentrates and edibles."
"I accepted the CEO role because I see
an opportunity to utilize my skill set in regulated CPG brand development. I am fortunate to have stepped into a Company built
with a dedication to science and a compliance first approach. Through successful execution, I believe what we build in Canada will
be very portable to other larger global cannabinoid markets. Having now spent four months at Aurora, I have seen the talent and
industry knowledge that makes this Company innovative and agile. I want Aurora to be a leader in cannabinoids when the largest
markets open up globally and my job is to make sure we can deliver on that plan."
Fourth Quarter 2020 Highlights
(Unless otherwise stated, comparisons are
made between fiscal Q4 2020 and Q3 2020 results and are in Canadian dollars. Certain key metrics in prior quarters have been restated
to reflect accounting policy changes for inventory costing and the allocation of production staff salaries. See Change in Accounting
Policy section below)
net revenue was $72.1 million, a 5% decrease from the prior quarter. Cannabis net revenue1 was $67.5 million in Q4
2020, a 3% decrease from the prior quarter. Adjusted gross margin, before FV adjustments, on cannabis net revenue1 was
50%, up from 43% in Q3.
cannabis net revenue1 was $35.3 million, a decrease of 9% over the previous quarter. Total volume of dried consumer
cannabis sold increased by 36%, but was offset by a 30% decrease in the average net selling price per gram of consumer cannabis1
as the Company's value segment brand, Daily Special, accounted for a greater percentage of consumer cannabis net revenue,
at 62% of flower revenue compared to 35% in the prior quarter. Consumer cannabis extract net revenue decreased by $1.5 million
as compared to the prior quarter driven primarily by a loss of market share for vaporizer products.
Adjusted gross margin,
before fair value adjustments on consumer cannabis net revenue1 was 35% in Q4 2020, versus the 29% in the prior quarter.
Despite the pressure on average selling price ("ASP") in this segment, continued per-unit reductions in production costs
supported a healthy average margin.
cannabis net revenue1 was $32.2 million, a 4% increase from the prior quarter. The increase was primarily attributable
to a sustainable and profitable Canadian medical business growing by 2% and strong traction in Europe growing by 14% quarter over
Adjusted gross margin,
before fair value adjustments of medical cannabis net revenue1 was 67% in Q4 2020, versus the 60% in the prior quarter.
The medical cannabis segment continues to benefit from the Company's leading share of the Canadian and European medical markets,
with strong average net selling price of medical cannabis1 and continued per unit production cost reductions.
General and Administrative ("SG&A") and Adjusted EBITDA:
including Research and Development ("R&D"), was $67.7 million in Q4 2020, down $11.2 million from the prior quarter
as a result of the Company's Business Transformation Plan. Included in SG&A is $3.9 million of costs related to divested businesses,
R&D termination costs and severance and benefit costs associated with the Business Transformation Plan. Excluding these impacts,
Q4 SG&A was $63.8 million.
in Q4 2020 was a loss of $34.6 million, an improvement of $15.8 million from the prior quarter Adjusted EBITDA loss of $50.4
million. Excluding severance costs, R&D termination costs and divested business results, Q4 Adjusted EBITDA was a loss of
volume in Q4 2020 was 44,406 kilograms, a 23% increase from the prior quarter, contributing to a 27% decrease in cash cost to
produce per gram of dried cannabis sold1 quarter over quarter.
Expenditures ("CapEx") were approximately $16.4 million in Q4 2020, a significant decline from the $73.7 million reported
in Q3 2020, as the Company's business transformation continued to deliver concrete results. This includes additions to intangible
assets and excludes the impact of capitalized borrowing costs and share based compensation.
Aurora recorded a number
of balance sheet adjustments in Q4 2020 to recognize market realities and position the Company for future performance. These adjustments
include fixed asset impairment charges of $86.5 million due to production facility rationalization, and a charge of $135.1 million
in the carrying value of certain inventory, predominantly trim, in order to align inventory on hand with near term expectations
for demand. Of the $135.1 million inventory impairment, $105.5 million is recognized through cost of sales and $29.6 million is
recognized through changes in fair value of inventory sold on the statements of comprehensive loss. Finally, the Company recognized
a non-cash write-down of goodwill and intangible assets of $1.6 billion.
Fiscal Q4 2020 Cash Use:
Significant Reduction in CapEx levels
and Adjusted EBITDA Loss. Term Debt Paid Down Substantially.
Cash use in Q4 2020 was similar to the prior
quarter, however the mix within the use showed significant positive progress. In Q4 2020, Aurora used $53.3 million cash to pay
down term debt and lease obligations, and following further paydowns subsequent to the quarter end, term debt stands at $110.5
million as of September 21, 2020. Cash used for capital expenditures was $32.8 million, which includes invoices paid related for
work done in Q3, and was $51.2 million lower than in Q3. Cash used in operations was $63.9 million, excluding the $105.5 million
of non-cash inventory impairment in cost of sales (see "Additional Highlights" above).
Given the Company's continued strength in adjusted
gross margins before fair value adjustments on cannabis net revenue and further reductions in SG&A expense and capital
expenditures as described above, management expects cash use in fiscal Q1 2021 to further decrease.
The main components of cash source and use
in Q4 2020 were as follows:
| ($ thousands) | Q4 2020 | Q3 2020 (2) | First Half 2021 Expectations | ||
| Cash Flow | |||||
| Cash, Opening | $230,208 | $156,334 | |||
| Cash used in operations | ($63,912) | ($54,763) | Positive Adjusted EBITDA targeted for Q2 2021, and inventory build expected to reduce over next 2 - 3 quarters | ||
| Capital expenditures | ($32,768) | ($83,938) | Less than $10 million quarterly average for currently planned 2021 projects | ||
| Debt and interest payments | ($53,287) | ($15,887) | Term debt declining / Convertible debt payments only at six month points (Q1, 2021, Q3 2021, etc) | ||
| Cash use | ($149,967) | ($154,588) | |||
| Proceeds raised through debt | $- | $22,000 | |||
| Proceeds raised from sale of marketable securities and investments in associates | $33,673 | $- | |||
| Proceeds raised through equity issuance | $48,265 | $206,462 | Access to capital in an uncertain environment is paramount but cost control and healthy net revenue growth are primary levers. Equity capital to be available as backstop or for near-term positive NPV investments. | ||
| Cash raised | $81,938 | $228,462 | |||
| Cash, Ending | $162,179 | $230,208 |
| (1) | Refer to "Consolidated Statement of Cash Flows" prepared in accordance with IAS 7 - Statement of Cash Flows below. |
| (2) | April 1, 2020, the Company changed its accounting policy for inventory costing relating to by-products, and the allocation of production management staff salaries, previously charged to G&A, and now charged to inventory and cost of sales. Management applied the change in accounting policy retrospectively. Previously reported metrics have been restated to reflect adjustments made as a result of these changes in accounting policy. |
Q4 2020 Key Financial and Operational Metrics
| ($ thousands, except Operational Results) | Q4 2020 | Q3 2020 (1) | $ Change | % Change |
| Financial Results | ||||
| Total net revenue (2) | $72,114 | $75,520 | ($3,406) | (5)% |
| Cannabis net revenue (2)(3a) | $67,492 | $69,637 | ($2,145) | (3)% |
| Medical cannabis net revenue (3a) | $32,226 | $31,086 | $1,140 | 4% |
| Consumer cannabis net revenue (3a) | $35,266 | $38,551 | ($3,285) | (9)% |
| Adjusted gross margin before FV adjustments on cannabis net revenue (3b) | 50% | 43% | N/A | 7% |
| Adjusted gross margin before FV adjustments on medical cannabis net revenue (3b) | 67% | 60% | N/A | 7% |
| Adjusted gross margin before FV adjustments on consumer cannabis net revenue (3b) | 35% | 29% | N/A | 6% |
| SG&A expense (4) | $60,088 | $73,289 | ($13,201) | (18)% |
| R&D expense | $7,646 | $5,601 | $2,045 | 37% |
| Adjusted EBITDA (3c)(7) | ($34,606) | ($50,427) | $15,821 | 31% |
| Balance Sheet | ||||
| Working capital | $147,933 | $429,293 | ($281,360) | (66)% |
| Cannabis inventory and biological assets (5) | $139,198 | $225,966 | ($86,768) | (38)% |
| Total assets | $2,783,695 | $4,699,137 | ($1,915,442) | (41)% |
| Operational Results - Cannabis | ||||
| Cash cost to produce per gram of dried cannabis sold (3d) | $0.89 | $1.22 | ($0.33) | (27)% |
| Average net selling price of dried cannabis (3) | $3.60 | $4.64 | ($1.04) | (22)% |
| Kilograms produced | 44,406 | 36,207 | 8,199 | 23% |
| Kilograms sold (6) | 16,748 | 12,729 | 4,019 | 32% |
| (1) | Certain previously reported amounts have been restated to exclude the results related to discontinued operations and change in accounting policy for inventory costing relating to by-products and the allocation of production management staff salaries. For further detail, refer to " Change in Accounting Policies " section below. | |
| (2) | Includes the impact of actual and expected product returns and price adjustments (three and twelve months ended June 30, 2020 - $1.9 million and $15.3 million; three and twelve months ended June 30, 2019 - nil and nil). | |
| (3) | These terms are defined in the " Non-GAAP Measures " below. Refer to the following sections for reconciliation of the non-GAAP measures to the IFRS equivalent measure | |
| a. Refer to the " Net Revenue " section for a reconciliation to the IFRS equivalent. | ||
| b. Refer to the "Adjusted Gross Margin " section for reconciliation to the IFRS equivalent. | ||
| c. Refer to the " Adjusted EBITDA" section for reconciliation to the IFRS equivalent. | ||
| d. Refer to the " Cash Cost to Produce Dried Cannabis Sold " section for reconciliation to the IFRS equivalent. | ||
| (4) | Includes costs from divested businesses and severance and benefit costs associated with our business transformation plan of $2.1 million and $1.0 million, respectively (Q3 2020 - $1.0 million and $5.0 million, respectively). | |
| (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. | |
| (7) | Included in Q4 2020, are $3.1 million SG&A costs relating to divested businesses and severance and benefit costs associated with our business transformation plan, and $0.8 million R&D termination costs. Excluding these expenses, Adjusted EBITDA loss would have been $30.7 million. |
Events Subsequent to Quarter End
Martin was appointed Chief Executive Officer, effective September 8, 2020. With deep, diverse experience in consumer packaged
goods, highly regulated industries and the U.S. cannabinoid industry, Miguel is well-positioned to execute the next phase of Aurora's
business transformation, with a focus on commercial strategy. Michael Singer, who served as Interim CEO beginning February 2020,
stepped down from his temporary role and remains Executive Chairman.
a press release on September 8, 2020, Aurora provided a business update, including the following announcements:
Company is now operating at its quarterly SG&A run-rate in the low $40 million range, and expects operational cost reductions
from facility closures up to $10 million per quarter starting in the second half of fiscal 2021. With a tailwind of growth in
the Canadian recreational market, the Company is better positioned for its next phase focused on profitability.
and the UFC have agreed to mutually terminate their partnership. For the Company, this decision reflects the evolution of the
realities of the cannabis market and a focus on near term profit pools. In connection with this decision, the Company expects
to make a one-time payment of US$30 million to terminate the contract in Q1 2021, which is expected to avoid more than $150 million
in fees, research costs, and marketing activation expenses over the next five years.
reached an agreement with its syndicate of banks regarding amendments to its secured credit agreement. These amendments have provided
additional flexibility during the Company's Business Transformation Plan.
Effective immediately,
Dr. Jason Dyck has elected to step down from the Board of Directors in order to pursue other opportunities.
Subsequent to June 30, 2020, the Company raised