Full Press Release Details
Aurora Cannabis Announces Second Quarter
Net Revenue of $66.6 million, excluding provisions
Net Cannabis Revenue, excluding provisions, of $63.2
million, In Line With Recent Guidance
Cash Cost to Produce Per Gram Sold of $0.88
Successful Launch of Cannabis 2.0 Products Across
Consumer Cannabis Net Revenue, excluding provisions,
Grows at 11% Over Prior Quarter
EDMONTON, Feb. 13, 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 second quarter of fiscal 2020 ended December
"Despite delivering modest growth in our
core medical and consumer business in Q2, we took immediate and deliberate actions to align our Company to current market conditions,"
said Michael Singer, Executive Chairman and Interim CEO, Aurora Cannabis. "As announced last week, being a profitable cannabis
company for our investors is the singular near-term focus for Aurora and we have begun to implement a business transformation plan
where we intend to manage the business with a high degree of fiscal discipline."
Second Quarter 2020 Highlights
(Unless otherwise stated, comparisons are
made between Fiscal Q2 2020 and Q1 2020 results and are in Canadian dollars)
Cannabis net revenue
of $63.2 million, excluding provisions, in Q2 2020 compared to $70.8 million in Q1 2020:
Canadian and international
medical cannabis net revenue of $27.4 million, with Canadian medical net revenue sequentially flat at $25.6 million, and international
medical net revenue down from $5.0 million to $1.8 million due to a temporary sales interruption
Consumer cannabis net
revenue, excluding provisions, of $33.5 million was an increase of 11% from $30.0 million in the previous quarter. Including the
$10.6 million provision for returns and price adjustments for prior quarter sales, reported consumer cannabis net revenues were
$22.9 million. Also affecting Q2 consumer cannabis net revenue was slower provincial ordering during the quarter, a shift in the
market to value brands (Aurora launched "Daily Special" in early February 2020), and the industry-wide impact from the
slow pace of retail store licensing
Wholesale bulk cannabis
net revenues of $2.4 million, a decline from $10.3 million in the previous quarter, due to overall volume declines and the wholesale
of lower potency (priced) product
Production volume in
fiscal Q2 was 30,691 kilograms, in-line with previous expectations as Aurora realigned its cultivation strategy to produce a greater
amount of higher value and higher potency strains
Cash cost to produce
per gram sold remained relatively consistent at $0.88 per gram versus $0.85 per gram last quarter - Aurora intends to maintain
this metric below $1.00 per gram
Aurora's medical patient
base remained relatively consistent at 90,307
Successfully launched Cannabis 2.0 products with sales
to provincial distributors commencing on December 17, 2019
Subsequent Events & Business Transformation
Subsequent to the quarter end, the Company
made several decisions designed to strategically transform its operations and provide financial flexibility in response to a changing
market and regulatory environment, while supporting its long-term growth:
Announced CEO succession
plan and expansion of the Board of Directors
Executive Chairman Michael
Singer appointed Interim CEO, effective February 6, 2020; search for permanent successor underway
Two new Independent Directors
joined the Board for a total of 10 directors, including 7 Independents
Announced comprehensive
transformation plan to significantly reduce the Company's expense base, rationalize capital expenditures, and better align its
balance sheet with current market conditions
Secured credit facility amendments that remove EBITDA ratio
covenants and provided additional financial flexibility as Aurora executes transformation plan
"The transformational actions we announced
last week have already positively impacted SG&A expense and we are confident that our run-rate will be approximately $40 million
- $45 million as we exit the fiscal fourth quarter of 2020. This is a very important step toward EBITDA profitability," said
Glen Ibbott, CFO. "In addition, our credit facility was amended to provide greater flexibility to Aurora. More specifically,
Aurora chose to downsize the facility by $96.5 million with the elimination of undrawn term loan capacity, and further used $45
million of restricted cash to repay a portion of the drawn term loan balance for the purpose of reducing leverage and cash required
Following these facility changes, Aurora's
current credit facility and other debt outstanding includes:
$50 million revolving
facility, of which $2 million was drawn as of December 31, 2019
$162 million of fully
drawn senior secured term loans
US$345 million of senior unsecured convertible debentures
Q2 2020 Key Financial and Operational Metrics
| ($ thousands, except Operational Results) | Q2 2020 | Q1 2020 (4) | $ Change | %Change |
| Financial Results | ||||
| Total net revenue (4) | $56,027 | $75,245 | ($19,218) | (26)% |
| Cannabis net revenue (1)(2a) (4) | $52,676 | $70,776 | ($18,100) | (26)% |
| Canadian and international medical cannabis net revenue (1)(2a) | $27,386 | $30,450 | ($3,064) | (10)% |
| Consumer cannabis net revenue (1)(2a) | $22,906 | $30,022 | ($7,116) | (24)% |
| Wholesale bulk cannabis net revenue (1)(2a) | $2,384 | $10,304 | ($7,920) | (77)% |
| Gross margin before FV adjustments on cannabis net revenue (1)(2b) | 44% | 58% | N/A | (14)% |
| Gross margin before FV adjustments on medical cannabis net revenue (1)(2b) | 54% | 63% | N/A | (9)% |
| Gross margin before FV adjustments on consumer cannabis net revenue (1)(2b) | 32% | 53% | N/A | (21)% |
| Gross margin before FV adjustments on wholesale bulk cannabis net revenue (1)(2b) | 45% | 58% | N/A | (13)% |
| Adjusted gross margin before FV adjustments on cannabis net revenue (1)(2b) | 55% | 67% | N/A | (12)% |
| Selling, general and administration expense | $99,882 | $81,132 | $18,750 | 23% |
| Balance Sheet | ||||
| Working capital | $415,936 | $123,750 | $292,186 | 236% |
| Cannabis inventory and biological assets (1)(3) | $216,735 | $178,748 | $37,987 | 21% |
| Total assets | $4,671,912 | $5,606,799 | ($934,887) | (17)% |
| Operational Results - Cannabis | ||||
| Cash cost to produce per gram sold (1)(2c) | $0.88 | $0.85 | $0.03 | 4% |
| Active registered patients | 90,307 | 91,116 | (809) | (1)% |
| Average net selling price of medical cannabis (1) | $7.99 | $8.00 | ($0.01) | 0% |
| Average net selling price of consumer cannabis (1) | $4.76 | $5.28 | ($0.52) | (10)% |
| Average net selling price of wholesale bulk cannabis (1) | $1.90 | $3.46 | ($1.56) | (45)% |
| Kilograms produced | 30,691 | 41,436 | (10,745) | (26)% |
| Kilograms sold | 9,501 | 12,463 | (2,962) | (24)% |
| (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) | Includes impact of actual and expected product returns and price adjustments (three and six months ended December 31, 2019 - $10.6 million; three and six months ended December 31, 2018 - nil) |
| ($ thousands) | Three months ended | |||
| December 31, 2019 | December 31, 2018 | |||
| Net revenue | 56,027 | 54,178 | ||
| Patient counseling services | (695) | (2,334) | ||
| Analytical testing services | (637) | (1,367) | ||
| Other cannabis segment revenues (accessories, hemp, other) | (1,655) | (2,174) | ||
| Horizontally integrated business revenue | (364) | (726) | ||
| Cannabis net revenue | 52,676 | 47,577 |
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 December 31, 2019 and September 30, 2019.
| ($ thousands) | Three months ended | ||
| December 31, 2019 | September 30, 2019 | ||
| Medical cannabis net revenue | |||
| Canada dried cannabis | 14,803 | 14,882 | |
| Canada cannabis extracts (1) | 10,791 | 10,606 | |
| International dried cannabis | 1,758 | 4,553 | |
| International cannabis extracts (1) | 34 | 409 | |
| Total medical cannabis net revenue | 27,386 | 30,450 | |
| Consumer cannabis net revenue | |||
| Dried cannabis | 28,980 | 26,889 | |
| Cannabis extracts (1) | 4,491 | 3,133 | |
| Revenue provisions (2) | (10,565) | - | |
| Total consumer cannabis net revenue | 22,906 | 30,022 | |
| Wholesale bulk cannabis net revenue | |||
| Dried cannabis | 2,352 | 7,432 | |
| Cannabis extracts (1) | 32 | 2,872 | |
| Wholesale bulk cannabis net revenue | 2,384 | 10,304 | |
| Total cannabis net revenue | 52,676 | 70,776 |
| (1) | Cannabis extracts revenue includes cannabis oils, capsules, softgels, sprays and topical revenue. |
| (2) | Revenue provisions consists of actual returns and price adjustments of $6.1 million and a $4.5 million revenue provision for estimated future returns and price adjustments |
Consolidated net revenue, excluding provisions,
was $66.6 million in Q2 2020 as compared to $75.2 million in the prior quarter. Medical cannabis net revenues decreased to $27.4
million in Q2 2020, down 10% over the prior quarter due to a short-term permit issue in Germany (since resolved). Consumer cannabis
revenues were $33.5 million ($22.9 million net of provisions) in Q2 2020. The provisions included in cannabis net revenues are
comprised of $6.1 million of actual returns and price adjustments and a $4.5 million provision for future returns and price adjustments.
Average net selling price of cannabis, including
provisions, decreased to $5.54 per gram over the prior quarter of $5.68. This decrease is attributable to the previously mentioned
provision for returns and price adjustments impacting Q2 2020 which did not affect Q1 2020, lower kilograms sold in Q2 versus Q1,
and lower wholesale bulk volume and pricing.
Gross margin before fair value adjustments
on cannabis net revenue, excluding provisions was 48% in Q2 2020, compared to 58% in the prior quarter. Including the impact
of the return and price adjustment provisions, gross margin before fair value adjustments on cannabis net revenue was 44%.
During Q2 2020, Aurora produced 30,691 kilograms
of cannabis as compared to 41,436 kilograms in the prior quarter. The 26% decrease in production output was primarily due to previously
announced changes to cultivation strategies, including a pivot to high-value, high-potency strains which are lower yielding. With
continued refinement of our cultivation techniques, we expect to achieve quarterly harvest volumes leading to an average of 150,000
kgs annually or better.
Q2 2020 SG&A increased by 23% to $99.9
million from the prior quarter. The increase was primarily driven by a rise in salaries and benefits due to targeted growth in
corporate headcount and annual merit increases, investments in educational marketing campaigns related to the launch of Cannabis