Aphria Shout Revenue Growth but Expenses Disappoint.

Aphria released fourth quarter financial results for the period that ended on May 31st

Key Financial Highlights

  • During the quarter, Aphria reported an approx. $5 million net loss on $12 million in revenue. When compared to the prior quarter, revenue grew by 17% and was driven primarily by reporting Broken Coast results for a full quarter, increased sales to medical patients at Aphria, all offset by the previously announced decision to discontinue wholesales sales to other licensed producers, to provide increased inventory for the eventual pipeline fill for recreational and international market opportunities over the next six to nine months.
  • Cannabis oil sales, as a percentage of volume, decreased from 33.1% to 29.2%, largely driven by the significantly lower percentage of volume sales of oil purchased by Broken Coast medical patients.
  • Adjusted gross profit for the fourth quarter was $9.46 million, with an adjusted gross margin of 78.7%, compared to $4.9 million with an adjusted gross margin of 85.7% in the prior year's fourth quarter, representing an increase of over 90%. The increase in the adjusted gross margin from the prior quarter is consistent with the increase in revenues combined with improved cost structures.
  • As previously disclosed, the "All-in" costs of dried cannabis per gram increased from $1.56 to $1.60, costs consistent with the additional staff levels added in advance of production capacity increases in the quarter.

Key Operating Highlights

  • Eleventh consecutive quarter of positive Adjusted EBITDA. Generated $2.2 million in adjusted EBITDA in the quarter and $8.4 million for the year, a 38% increase over the prior year.
  • Improved cash costs to produce dried cannabis per gram to $0.95, a decrease of $0.01 in the quarter, remaining below $1.00 for the second consecutive quarter.
  • International operations and presence increased from Canada, US and Australia to also include Germany, Malta, Lesotho, Italy, Colombia, Argentina, United Kingdom and Uruguay.
  • Annual production capacity in Canada currently at 30,000 kgs at Aphria One and 5,000 kgs at Broken Coast.
  • Annual production capacity in Canada growing to 255,000 kgs, with first sale expected in January 2019, all expansions remain on time, pending Health Canada approval, and on budget.
  • Secured partnership with one of North America's largest liquor distributors, Southern Glazer's through their Canadian subsidiary, Great North Distributors, providing Aphria with an exclusive for cannabis representation
  • Signed MOU's with British Columbia, Alberta, Manitoba, Quebec, New Brunswick and the Yukon Territory, with more agreements to be announced in the short-term.
"We are delighted to once again have the support of WFCU Credit Union as Aphria continues to execute on its long-term strategic plan. Our diversified approach to innovation, strategic partnerships and global expansion are driving long-term shareholder value, and as our company and industry evolve we are always looking for opportunities to normalise our debt to equity structure."
— Vic Neufeld, Aphria's CEO

In addition to the above news, Aphria also secured $25 million in debt financing from WFCU Credit Union. The five-year term loan bears interest at 4.68%, has a 15-year amortisation and was entered into on July 27th. This is the second round of debt-financing secured by the company from WFCU, having previously secured a $25 million five-year loan on May 9, 2017.


Although we are favourable on this loan (as it is non-dilutive to shareholders), we were not that impressed with their financials. Yes, their revenue growth was impressive, however massive increases in operating costs and the cost of production were not that great. The stock has been hammered this year and it hit new 2018 lows in the past month. We are concerned for the near term future given the downward trending 150d moving average. We do continue to be very bullish though on their long-term prospects.

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Mark Bernberg
Mark Bernberg

Mark Bernberg is a long-time cannabis investing enthusiast and founder of The Green Fund, Asia Pacific's preeminent media house, positioned at the forefront of the global cannabis industry.

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