Aurora Cannabis Inc Second Quarter 2020 Results

Aurora Cannabis release second quarter financial results and provide a statement from their CEO.

Aurora Cannabis Inc, 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 31, 2019.

"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.

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 Plan

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 for debt service."

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 due February 2024

Outlook  

Consistent with Aurora's release dated February 6, 2020; the Company is bullish on the long-term potential for the global cannabis opportunity.

However, due to several short-term factors, there is likely to be a slower than previously expected rate of industry growth in the near-term. The Company has outlined a number of fiscally responsible steps it has already taken to realign its business operations to this expected industry growth rate.

Aurora reiterates its outlook for fiscal third quarter that cannabis revenue will be impacted by previously mentioned industry headwinds, and as such will likely show modest to no growth relative to fiscal Q2's cannabis revenue, excluding provisions, of approximately $65 million.

To learn more about Aurora Cannabis visit their Company HQ here

Disclaimer: Past performance is not an indicator of future performance.


This could be one of the best investing opportunities of 2020

Legislative changes are blowing through the US, and with it, an ever-increasing number of states legalising cannabis for recreational use.

With the success seen in Illinois, which legalised for adult-use on January 1 and saw products moving off the shelf at an unprecedented rate, this company is primed to take advantage of the booming US recreational market.

They have secured partnerships with the biggest cannabis companies in the US, and their portfolio is second to none.

And with the sector-wide pullback of 2019, this company is now at a bargain-basement price.

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Niki Mohazeb
Niki Mohazeb

Niki is a Sydney based writer, with a passion for promoting the health benefits of medicinal cannabis. Niki also enjoys researching and writing about the future of cannabis along with the many other benefits that the plant provides, such as the diverse utilities of hemp.

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