Full Press Release Details
Aurora Cannabis Announces Fiscal Third
Quarter 2020 Results & Operational Reset Update
Net revenue of $78.4
million, excluding provisions of $2.9 million, an increase of 18% over prior quarter
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
on track to deliver the Company's commitment to positive Adjusted EBITDA in Q1 2021 with significant improvement in SG&A run
Improved cash position
of $230.2 million; $154.6 million in Q3 cash use represents a 43% decrease over prior quarter
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
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
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
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%
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
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 |
Other Third Quarter 2020 Highlights