Solid Net Revenue Growth Across All
Channels to $65.1
Million
Production Volumes Double While
Per-Unit Production Costs Decline
On Track to
Deliver Positive EBITDA Beginning in Fiscal Q4 2019
TSX: ACB | NYSE: ACB
EDMONTON, May 14, 2019 /CNW/ - Aurora Cannabis Inc.
(the "Company" or "Aurora") (NYSE:ACB) (TSX: ACB),
announced today its financial and operational results for the third
quarter ended March 31st,
2019.
Third Quarter 2019 Highlights
(Unless otherwise stated, comparisons are made between Fiscal
Q3 2019 and Fiscal Q2 2019 results)
- Continued solid revenue growth averaging 20% across all key
markets, driven by successful scale up of the Company's production
and continued strong performance across the Canadian consumer, and
Canadian and International medical cannabis markets:
-
- Canadian Consumer up 37%
- Canadian Medical up 8%
- International Medical up 40%
- Growth of the Company's medical patient base, up by 5% to
77,136. As at the date of this release, Aurora has 82,745 active
registered patients, a further increase of 7%, and continues
to register new patients as product availability ramps up.
- Cash cost to produce per gram declined 26% to $1.42 per gram, as the initial impact of Aurora
Sky's scale and efficiency began to be realized.
- Production volume increased 99% to 15,590 kgs, up 1,200%
year-over-year. The increase in production accelerated through
the quarter, with the majority of the harvested volume realized in
the last half of the quarter.
- SG&A expenses have stabilized with a modest increase of 1%,
reflecting Aurora's ongoing commitment to disciplined cost
management.
- Average selling price per gram decreased marginally due to
product mix effects (higher contribution from wholesale consumer),
extraction capacity constraints resulting in extract-based products
comprising 18% of net cannabis sales, and the first full quarter
impact of excise tax on medical cannabis.
- Adjusted EBITDA loss improved by 20% to $36.6 million as the company continues to track
towards achieving EBITDA positive results beginning in Q4 2019 as
operations continue to ramp up.
- In January 2019, Aurora completed
a US$345 million Convertible Notes
offering, with the proceeds earmarked to continue the Company's
pace of growth in Canada and
internationally. IFRS accounting standards require a
mark-to-market adjustment at each period end for the derivative
portion of these notes. Due to the increase in Aurora's stock
price since the issuance of the notes, the Company recorded a
$102 million non-cash fair value loss
in the Q3 2019 profit and loss statement.
Management Commentary
"I'm exceptionally proud of our company and team as Aurora
continues to deliver on our domestic and international growth
strategy. We achieved solid revenue growth and strong operating
results in a quarter proven challenging across the industry.
We are laser focused on building a long-term sustainable business,"
said Terry Booth, CEO. "During the
quarter, we formally welcomed Nelson
Peltz a key strategic advisor. He has been incredibly
engaged, collaborative, and strategically focused on assisting our
pursuit of growth in global markets and with mature companies in
adjacent industries."
Glen Ibbott, CFO, added, "Aurora
is an extremely active and diversified company, leading the
industry in cannabis research, product development, cultivation,
global scale, and revenue growth. With a solid Q3 on all
fronts, it's time to move the yardsticks for the industry
again. The company we have built with purpose through both
organic growth and targeted acquisitions has provided a unique
opportunity: continue to lead the industry in revenue growth while
also progressing to positive operating earnings in the near
term."
Q3 2019 Key Financial and Operational Metrics
($ thousands,
unless otherwise noted)
|
Q3
2019
|
Q2
2019
|
%
Change
|
Q3
2018
|
%
Change
|
Financial
Results
|
|
|
|
|
|
Gross
revenue
|
$75,238
|
$62,000
|
21%
|
$16,100
|
367%
|
Net revenue
(1)
|
$65,145
|
$54,178
|
20%
|
$16,100
|
305%
|
Cannabis net revenue
(1)
|
$58,652
|
$47,577
|
23%
|
$10,810
|
443%
|
Medical cannabis net
revenue
|
$29,075
|
$25,994
|
12%
|
$10,810
|
169%
|
Consumer cannabis net
revenue
|
$29,577
|
$21,583
|
37%
|
NA
|
NA
|
Gross margin on
cannabis net revenue (1)
|
55%
|
54%
|
1%
|
59%
|
(4)%
|
Selling, general and
administration expense
|
$67,104
|
$66,362
|
1%
|
$15,727
|
(327)%
|
Adjusted EBITDA
(2)
|
($36,617)
|
($45,524)
|
(20)%
|
($12,904)
|
184%
|
(Loss) earnings
attributable to common shareholders
|
($158,354)
|
($237,752)
|
(33)%
|
($19,215)
|
724%
|
|
|
|
|
|
|
Balance
Sheet
|
|
|
|
|
|
Working
capital
|
$469,729
|
$274,629
|
71%
|
$338,476
|
39%
|
Cannabis inventory
and biological assets (2)
|
$118,023
|
$79,924
|
48%
|
$28,478
|
314%
|
Total
assets
|
$5,549,780
|
$4,875,884
|
14%
|
$1,671,400
|
232%
|
|
|
|
|
|
|
Operational
Results – Cannabis
|
|
|
|
|
|
Cash cost to produce
per gram of dried sold (2)
|
$1.42
|
$1.92
|
(26)%
|
$1.53
|
(7)%
|
Active registered
patients
|
77,136
|
73,579
|
5%
|
45,776
|
69%
|
Average net selling
price per gram (2)
|
$6.40
|
$6.80
|
(6)%
|
$7.99
|
(20)%
|
Kilograms
produced
|
15,590
|
7,822
|
99%
|
1,206
|
1,193%
|
Kilograms
sold
|
9,160
|
6,999
|
31%
|
1,353
|
577%
|
|
|
(1)
|
Net revenue
represents our total gross revenue exclusive of excise taxes levied
by the Canada Revenue Agency ("CRA") on the sale of medical and
recreational cannabis products effective October 17,
2018.
|
(2)
|
These terms and
non-GAAP measures are defined or reconciled in Aurora's Q3 2019
MD&A.
|
Outlook
The Aurora Sky and Bradford
facilities are now operating at full capacity. With this, the
Company's annualized production run rate across its operational
facilities is in excess of 150,000 kg per annum, based on planted
rooms.
Aurora reiterates its target for Q4 with production available
for sale in excess of 25,000 kg. Management intends to allocate a
portion of this capacity to its inventory for manufacturing new
products. Aurora remains focused on having vapes and certain
edibles ready for launch under new regulations in the Canadian
consumer market which are expected toward the end of the calendar
year.
With production ramping up, the Company continues to scale up
manufacturing capacity, with innovation and technologies aimed at
reducing time from harvest to market. The Company anticipates that
increased processing, packaging and delivery efficiencies in Q4 and
beyond will accelerate availability of product.
Supply to Europe and other
international markets is expected to increase as more of Aurora's
production facilities receive EU GMP certification. The
Bradford facility has recently
undergone an audit to obtain EU GMP certification. In Q3, the
Company began exports of full spectrum cannabis extracts in
Germany. Management anticipates
these sales will contribute to growth given the higher margins in
extracts.
Oil extraction capacity has been a constraint during the second
and third fiscal quarters of 2019. Subsequent to quarter's end,
Aurora expanded its internal extraction capacity to almost 7,000
kgs per quarter currently and will reach almost 16,000 kgs per
quarter in fiscal Q1. As well, the Company's extraction partner
Radient Technologies is scaling up commercial production at its
Edmonton facility. Consequently,
Aurora anticipates production of extract-based products to
increase, with the full impact starting to materialize towards the
end of fiscal Q4. This increase in internal and external extraction
capacity will enhance Aurora's ability to produce derivative
products at scale, which management expects will have a positive
impact on both revenues and gross margin.
With Aurora Sky now operating at full capacity, the Company
anticipates continued reduction in production and manufacturing
costs allowing cash costs per gram to continue to trend lower.
Management reiterates its expectation that the average cash cost to
produce per gram at its Sky Class
facilities will be below $1.
With disciplined cost management, the Company expects SG&A
costs to grow modestly over the remainder of the fiscal year.
Consequently, management anticipates that with sustained revenue
growth and lower cash costs per gram, Aurora is well positioned to
achieve positive EBITDA beginning in fiscal Q4 2019 (calendar Q2
2019).
Q3 2019 Facility and Production Update
Aurora defines production rate as the capacity of all planted
rooms that have been approved by the regulator for sales, using
anticipated annualized harvests at maturity based on a historical
yield per plant. These targeted yields have been met or exceeded at
all of Aurora's current operating facilities. To view a video
overview of Aurora's production facilities, click here:
https://youtu.be/irTfAXbFS38.
- Construction at Aurora Sky is complete, and all grow rooms have
been licensed by Health Canada. Fully planted, Aurora Sky is
operating at its full design capacity of over 100,000 kg per
annum.
- All rooms at Bradford are
licensed by Health Canada and the facility has been fully planted.
The facility has received no major observations during its audit to
obtain EU GMP certification. Obtaining this certificate will
substantially increase the Company's capacity to ship product to
the European market.
- The first saleable harvest at Aurora Nordic 1 is expected by
the end of fiscal Q4 2019, with product sales anticipated in
December 2019, or as soon as
regulatory approvals are provided. Initial harvests for testing and
licensing purposes have been completed successfully.
- Construction of Aurora Sun is
progressing well, with the facility anticipated to be ready for
planting by mid calendar 2020. Aurora
Sun will measure 1.62 million square feet, reflecting a 33%
increase from its originally planned size.
-
- Erection of the steel structure is well underway and
anticipated for completion in late June
2019.
- Construction of the glass roof has commenced and is anticipated
for completion shortly after installation of the steel
structure.
- Whistler Alpha Lake is currently
operating at its designed capacity of 480 kg/year of organic
certified cannabis, utilizing four grow rooms.
- Construction of Whistler Pemberton remains on track for
completion in calendar Q4 2019
-
- Four rooms are fully operational with an annual capacity
of 1,200kg of organic certified cannabis
- 11 additional rooms are expected to come online beginning
in November 2019
- Upon completion Pemberton is expected to produce 4,500 kg/year
of organic certified cannabis
- The Pemberton facility will incorporate a public lounge to
educate visitors about WMMC and its history as cultivation pioneers
of organic certified cannabis
- During the most recent grow season in Europe, Agropro harvested a combined 3,950
acres of hemp across Lithuania,
Latvia and Estonia. For the upcoming grow season,
beginning in May 2019, Agropro plans
to contract 8,150 acres of hemp for harvest, which is expected to
begin in August.
Q3 2019 and Subsequent Corporate Highlights
Acquisitions
- Acquisition of Whistler Medical Marijuana Corporation
("Whistler")
On March 1,
2019, Aurora acquired Whistler, an iconic Canadian organic
cannabis brand which commands a significant premium for its
products in both the Canadian medical and consumer markets. The
Company is currently scaling up Whistler's operations and
anticipates an increase in products available for sale for the
remainder of the calendar year.
- Acquisition of Hempco Food and Fiber Inc.
("Hempco")
On April 16, 2019,
the Company entered a binding letter agreement with Hempco to
acquire all of the issued and outstanding shares of Hempco. The
acquisition will strengthen the Company's industrial hemp and
CBD-from-hemp infrastructure.
- Acquisition of Chemi Pharmaceuticals Inc.
("Chemi")
On April 24, 2019,
the Company acquired Chemi, an Ontario-based laboratory specializing in high
quality analytics services for the pharmaceutical and cannabis
industries. The acquisition is intended to expand the Company's
analytical services for derivative products.
Strategic Developments
- Appointment of Nelson
Peltz
On March 13,
2019, the Company appointed Nelson
Peltz as a strategic advisor to work collaboratively with
Aurora on exploring global expansion and partnership opportunities.
Management believes the Company is well positioned to pursue
partnerships across a number of industry verticals and is working
with Mr. Peltz and his team to assess opportunities.
- Aurora Polaris
On February
12, 2019, the Company announced the construction of Aurora
Polaris, a 300,000 square foot international logistics hub and
facility for the industrial-scale production of derivative cannabis
products. Construction is on schedule and the Company anticipates
completion towards the end of the calendar year. In anticipation of
new regulations, the Company is in the process of installing
interim production lines in licensed space across its production
infrastructure in Canada to ensure
a full complement of products will be available for sale in
substantial quantities when permitted.
International Expansion
- German Cannabis Production Tender
On April 5, 2019, the Company was selected by the
German Federal Institute for Drugs and Medical Devices as one of
three winners in a public tender to cultivate and distribute
medical cannabis in Germany.
Aurora scored highest across 11 of 13 tender lots and was allotted
the maximum number given to any LP of five. Aurora has commenced
work on the construction of a facility in Germany and anticipated product to reach the
German market in October 2020.
Management expects that becoming a local producer will strengthen
brand awareness and market development in a large and important
market.
- Exports of Medical Cannabis to the United Kingdom
On February 11, 2019, the Company completed its
first commercial export of cannabis oil to the United Kingdom. Under the new UK framework,
specialist doctors can legally issue prescriptions for
cannabis-based medicines when they agree that their patients could
benefit from this treatment.
- Expansion into Portugal
On February 26, 2019, the Company created
Aurora Portugal Lda. through an
agreement to acquire a 51% ownership interest in Gaia Pharm Lda. Construction of an EU GMP
compliant production cannabis facility is now underway in
Portugal.
- Exports of Cannabis Oil to Germany
On March
11, 2019, the Company commenced sales of cannabis oils to
German pharmacies. Aurora's full spectrum extract is differentiated
in a market predominantly serviced with synthetic cannabinoids.
With this, management believes the Company has a significant
competitive advantage to establish early mover leadership, brand
awareness and sales growth in this higher margin segment.
Financing Activities
- Offering of Convertible Notes
On January 24, 2019, the Company closed an offering
of Convertible Notes for gross proceeds of US$345 million to fuel Canadian and international
expansion initiatives, for future acquisitions and for general
corporate purposes, including working capital requirements to
continue the Company's accelerated growth.
- Filing of Final Base Shelf Prospectus and Prospectus
Supplement for At-the-Market Offering
On May 10, 2019, the Company filed a final
short-form base shelf prospectus (the "Shelf Prospectus") with the
securities commissions in each of the provinces of Canada, except Quebec, and a corresponding shelf registration
statement with the United States Securities and Exchange Commission
on Form F-10. These filings allow the Company to qualify the
distribution under a prospectus in Canada and the
United States of up to US$750,000,000 of common shares, warrants,
subscription receipts, debt securities, or any combination of such
securities (all of the foregoing, collectively, the "Shelf
Securities") during the 25-month period that the final short form
base shelf prospectus remains effective. The specific terms of any
future offerings under the Shelf Prospectus will be established in
a prospectus supplement. Any prospectus supplement will be
filed with the applicable securities regulatory authorities in
connection with such offering.
On May 14, 2019, the Company filed
a prospectus supplement (the "Prospectus Supplement") to the Shelf
Prospectus.In connection with the Prospectus Supplement, Aurora
entered into a Sales Agreement dated May 14,
2019 with Cowen and Company, LLC ("Cowen") and BMO Capital
Markets ("BMO") who will act as the selling agents (the "Selling
Agents") for the sale of common shares of Aurora (the "Common
Shares") by way of "at-the-market distributions" on the New York
Stock Exchange in the United
States. Subject to the terms of the Sales Agreement and
applicable regulatory requirements, Common Shares in the aggregate
amount of up to US$400,000,000
may be issued and sold from time to time at the discretion of
Aurora over a period of up to 25 months. The Common Shares will be
distributed at market prices prevailing at the time of the sale of
such Common Shares and, as a result, prices may vary as between
purchasers and during the period of distribution. The net proceeds
of such sales, if any, will be used for general corporate purposes,
including: (i) working capital; (ii) potential future acquisitions;
(iii) debt repayments; and (iv) capital expenditures. The volume
and timing of sales, if any, of Common Shares is at the discretion
of Aurora.
Aurora expects to use the net proceeds from the prospectus will
support its expansion initiatives, global partnership strategy, and
to continue the Company's accelerated growth.
The Shelf Prospectus and Prospectus Supplement have been filed
on SEDAR and the U.S. version of the Shelf Prospectus and the
Prospectus Supplement have been filed on the SEC's website
(www.sec.gov).
This news release does not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of
these Securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to the registration or
qualification under the securities laws of any such
jurisdiction.
Financial Supplement Q3 2019
($
thousands)
|
Three months
ended
|
March
31,
2019
|
December 31,
2018
|
Medical cannabis
net revenue
|
|
|
Canada dried
cannabis
|
16,576
|
15,411
|
EU dried
cannabis
|
4,004
|
2,853
|
Cannabis extracts
(1)
|
8,495
|
7,731
|
Total medical
cannabis net revenue
|
29,075
|
25,994
|
|
|
|
Consumer cannabis
net revenue
|
|
|
Dried
cannabis
|
27,461
|
18,796
|
Cannabis extracts
(1)
|
2,116
|
2,787
|
Total consumer
cannabis net revenue
|
29,577
|
21,583
|
|
|
|
Total cannabis net
revenue
|
58,652
|
47,577
|
($
thousands)
|
Three months
ended
|
Nine months
ended
|
March 31,
2019
|
March 31,
2018
|
March 31,
2019
|
March 31,
2018
|
Net
revenue
|
65,145
|
16,100
|
148,997
|
36,049
|
Design, engineering
and construction services
|
(914)
|
(2,979)
|
(2,403)
|
(2,979)
|
Patient counseling
services
|
(809)
|
(609)
|
(3,608)
|
(2,416)
|
Analytical testing
services
|
(1,238)
|
—
|
(2,659)
|
—
|
Accessories and other
cannabis segment revenue
|
(962)
|
(81)
|
(2,131)
|
(107)
|
Horizontally
integrated business revenue
|
(2,570)
|
(1,621)
|
(7,370)
|
(2,674)
|
|
|
|
|
|
Cannabis net
revenue
|
58,652
|
10,810
|
130,826
|
27,873
|
Options Grant
The Company granted a total of 383,000 options to purchase
common shares of Aurora to Directors and Officers of the Company.
The options vest annually over 36 months and have a weighted
average exercise price of $9.35
per common share.
Conference Call
Aurora will host a conference call tomorrow, May 15, 2019,
to discuss these results. Terry Booth, Chief Executive
Officer, Glen Ibbott, Chief Financial Officer, Cam Battley, Chief Corporate Officer, and
Michael Singer, Executive
Chairman, will host the call starting at 10:30 a.m.
Eastern time. A question and answer session will follow
management's presentation.
Date:
|
Wednesday, May
15th, 2019
|
Time:
|
10:30 a.m. Eastern
Time | 8:30 a.m. Mountain Time
|
Webcast:
|
https://bit.ly/2GRpDP3
|
Replay:
|
(416) 849-0833 or
(855) 859-2056
|
|
until 12:00 midnight
Eastern Time Wednesday, May 22, 2019
|
Reference
Number:
|
1103129
|
|
|
(1)
|
Non-IFRS measures are
defined in the company's
MD&A.
|
About Aurora
Headquartered in Edmonton, Alberta,
Canada with funded capacity in excess of 625,000 kg per
annum and sales and operations in 24 countries across five
continents, Aurora is one of the world's largest and leading
cannabis companies. Aurora is vertically integrated and
horizontally diversified across every key segment of the value
chain, from facility engineering and design to cannabis breeding
and genetics research, cannabis and hemp production, derivatives,
high value-add product development, home cultivation, wholesale and
retail distribution.
Highly differentiated from its peers, Aurora has established a
uniquely advanced, consistent and efficient production strategy,
based on purpose-built facilities that integrate leading-edge
technologies across all processes, defined by extensive automation
and customization, resulting in the massive scale production of
high-quality product at low cost. Intended to be replicable and
scalable globally, our production facilities are designed to
produce cannabis of significant scale, with high quality,
industry-leading yields, and low per gram production costs. Each of
Aurora's facilities is built to meet EU GMP standards. EU GMP
certification has been granted to Aurora's first production
facility in Mountain View County, the MedReleaf Markham facility,
and its wholly owned European medical cannabis distributor Aurora
Deutschland.
In addition to the Company's rapid organic growth and strong
execution on strategic M&A, which to date includes 16 wholly
owned subsidiary companies – MedReleaf, CanvasRX, Peloton
Pharmaceutical, Aurora Deutschland, H2 Biopharma, Urban Cultivator,
BC Northern Lights, Larssen Greenhouses, CanniMed Therapeutics,
Anandia, HotHouse Consulting, MED Colombia, Agropro, Borela, ICC
Labs, Whistler, and Chemi Pharmaceutical – Aurora is distinguished
by its reputation as a partner and employer of choice in the global
cannabis sector, having invested in and established strategic
partnerships with a range of leading innovators, including: Radient
Technologies Inc. (TSXV: RTI), Hempco Food and Fiber Inc. (TSXV:
HEMP), Cann Group Ltd. (ASX: CAN), Micron Waste Technologies Inc.
(CSE: MWM), Choom Holdings Inc. (CSE: CHOO), Capcium Inc.
(private), Evio Beauty Group (private), Wagner Dimas (private), CTT
Pharmaceuticals (OTCC: CTTH), Alcanna Inc. (TSX: CLIQ), High Tide
Inc. (CSE: HITI) and EnWave Corporate (TSXV: ENW).
Aurora's Common Shares trade on the TSX and NYSE under the
symbol "ACB", and are a constituent of the S&P/TSX Composite
Index.
For more information about Aurora, please visit our investor
website, investor.auroramj.com
Terry Booth, CEO
Aurora Cannabis Inc.
Forward Looking Statements and Non-IFRS Industry
Measures
This news release makes reference to certain non-IFRS measures,
including certain industry metrics. These metrics and measures are
not recognized measures under IFRS do not have meanings prescribed
under IFRS and are as a result unlikely to be comparable to similar
measures presented by other companies. These measures are provided
as information complimentary to those IFRS measures by providing a
further understanding of our operating results from the perspective
of management. As such, these measures should not be considered in
isolation or in lieu of review of our financial information
reported under IFRS. This news release uses non-IFRS measures
including "EBITDA", "production rate", "production available
for sale" and "SG&A". Production available for sale and
production rate are commonly used operating measures in the
industry but may be calculated differently compared to other
companies in the industry. These non-IFRS measures, including the
industry measures, are used to provide investors with supplementary
measures of our operating performance that may not otherwise be
apparent when relying solely on IFRS metrics. Definitions of the
non-IFRS measures can be found in our financial statements,
MD&A and this news release.
This news also release includes statements containing certain
"forward-looking information" within the meaning of applicable
securities law ("forward-looking statements"). Forward-looking
statements are frequently characterized by words such as "plan",
"continue", "expect", "project", "intend", "believe", "anticipate",
"estimate", "may", "will", "potential", "proposed" and other
similar words, or statements that certain events or conditions
"may" or "will" occur and include, but are not limited to the
execution of definitive agreements and the closing of the
transaction. These statements are only predictions. Various
assumptions were used in drawing the conclusions or making the
projections contained in the forward-looking statements throughout
this news release. Forward-looking statements are based on the
opinions and estimates of management at the date the statements are
made, and are subject to a variety of risks and uncertainties and
other factors that could cause actual events or results to differ
materially from those projected in the forward-looking statements.
These risks include, but are not limited to, the ability to retain
key personnel, the ability to continue investing in infrastructure
to support growth, the ability to obtain financing on acceptable
terms, the continued quality of our products, customer experience
and retention, the development of third party government and
non-government adult-use sales channels, managements
estimation of consumer demand in Canada and in jurisdictions where the Company
exports, expectations of future results and expenses, the
availability of additional capital to complete construction
projects and facilities improvements, the risk of successful
integration of acquired business and operations, the ability to
expand and maintain distribution capabilities, the impact of
competition, and the possibility for changes in laws, rules, and
regulations in the industry. The Company is under no obligation,
and expressly disclaims any intention or obligation, to update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as expressly
required by applicable law.
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SOURCE Aurora Cannabis Inc.