- Increasing Original Target for Expense Savings;
Management Now Expects $150 to
$170 Million in Annualized Cost
Savings by H1/2023 versus Stated Target of $60 to $80
Million
- Reiterating Adjusted EBITDA Profitability Run Rate by the
End of Fiscal H1 2023
- Remains #1 Canadian LP in High Margin Global Medical
Cannabis Revenues; International Medical Revenue Increased 55% from
Q3 2021
- Strong balance sheet; Early Repurchase of $141.4
Million in Convertible Debt
EDMONTON, AB, May 12, 2022
/CNW/ - Aurora Cannabis Inc. (the "Company" or
"Aurora") (NASDAQ: ACB) (TSX: ACB), the Canadian company
defining the future of cannabinoids worldwide, today announced its
financial and operational results for the third quarter fiscal 2022
ended March 31, 2022.
"We continue to steer our differentiated global cannabis
business towards long term shareholder value creation. This is
being accomplished through a sole focus on the most profitable
growth opportunities, rationalization of our Canadian cost
structure and disciplined use of capital. Our plan is working and
we remain firmly on track to achieving a positive Adjusted EBITDA
run rate by the first half of fiscal 2023. Today, we are announcing
further cost savings which will enable us to increase our range of
savings under our business transformation plan from $60 to $80 million
to $150 to $170 million. Our balance sheet also remains
among the strongest in the industry, enabling the repurchase of
$141.4 million in convertible debt
early, while also providing meaningful working capital to support
organic growth and pursue strategic M&A, such as our recent
acquisition of Thrive Cannabis," stated Miguel Martin, Chief Executive Officer of
Aurora.
"During Q3, we continued focusing on our global medical cannabis
business because it is both defensive and stable, with cash gross
margins that exceed 60%. We were pleased to have experienced
considerable top-line growth in this segment year over year, and
with new international markets poised to open, our track record and
ability to navigate complex regulatory environments position us
ideally for a significant revenue opportunity globally. In
terms of the Canadian adult-use market, we continue to adjust to
current conditions, are excited for future contributions from the
Thrive team, and are committed to a continuous stream of
innovation, including advancing our premiumization strategy," he
concluded.
Third Quarter 2022 Highlights
(Unless otherwise
stated, comparisons are made between fiscal Q3 2022, Q2 2022, and
Q3 2021 results and are in Canadian dollars)
Medical Cannabis:
- Medical cannabis net revenue1 was $39.4 million, an 8% increase from the prior year
period, delivering 78% of Aurora's Q3 2022 consolidated revenue and
92% of adjusted gross profit.
- The increase in revenue was driven by growth in the
international medical business, up 55% year over year as the
Company continued to develop new, high margin medical markets, but
down 26% sequentially. The sequential revenue decrease was
primarily a result of $8.5 million of
net sales generated from our Israel supply agreement in the previous
quarter. Excluding the impact of Israeli sales, net international
medical revenue increased sequentially by $1.8 million and was driven by growth in key
markets including Germany,
Poland, the UK, and Australia.
- Adjusted gross margin before fair value adjustments on medical
cannabis net revenue1 was 64% compared to 63%
sequentially and 53% in the prior year period. The year over year
improvement was a result of an increase in international sales
which yield higher margins and an overall reduction in production
costs due to the closure of non-core facilities as part of our
business transformation plan.
Consumer Cannabis:
- Consumer cannabis net revenue1 was $10.3 million compared to the prior quarter net
revenue of $14.4 million, with the
decline due mainly to industry-wide pricing pressures across our
portfolio and exacerbated by retail store closures in key provinces
for the Company's premium offerings.
- Adjusted gross margin before fair value adjustments on consumer
cannabis net revenue1 was 29% versus 23% sequentially
and 33% in the prior year period. The increase of 6% from Q2 2022
was driven by the Company's continuing shift toward a premium
product portfolio.
Selling, General and Administrative
("SG&A"):
- SG&A, including Research and Development ("R&D"), was
$39.5 million (excluding $2.0 million of restructuring related costs and
$0.7 million of prior period
employee-related accruals) versus $40.9
million in the prior quarter and $43.0 million in the prior year period, presented
on a comparable basis. Q3 2022 SG&A is now at the lowest level
in almost four years.
Consolidated:
- Q3 2022 total cannabis net revenue1 was $50.4 million, down 17% sequentially. The Q3 2022
average net selling price per gram of dried cannabis1,
excluding the effect of bulk wholesale sales, increased 20% to
$5.41 from $4.52 in Q2 2022.
- Adjusted gross margin before fair value adjustments on cannabis
net revenue1 was 54% in Q3 2022 versus 53% in the prior
quarter and 44% in Q3 2021. The increase in Adjusted gross margin
compared to the prior year period is due to increased sales in our
international medical markets which command significantly higher
average net selling prices and margins.
- Adjusted EBITDA1 loss declined to $12.3 million in Q3 2022 versus $9.0 million in Q2 2022 but narrowed from
$20.9 million in the prior year
period. The change from Q2 2022 was primarily driven by lower
revenue that was partially offset by a decrease in SG&A, net of
restructuring and one-time costs.
Operational Efficiency Plan, Balance Sheet Strength, &
Cash Use:
Aurora has previously identified annualized
cash savings of $60 million to
$80 million and now expects to
surpass the high end of this range with an additional $70 million to $90
million in savings by the end of H1 fiscal 2023, split
evenly between costs of goods sold ("COGS") and SG&A, for a
total of up to $170 million in cash
savings under this transformation program. Projected COGS savings
now include the closure of the Aurora Sky facility in Edmonton (previously announced to be operating
at approximately 25% capacity), in keeping with our diversified
business portfolio, prudent approach to capital allocation, and our
strategy in the Canadian adult-use market to focus on higher margin
premium categories. These cash savings will be reflected in our
P&L either as they occur within SG&A savings, or as
inventory is drawn down for production-related savings.
Resulting from these strategic changes, management concluded
that the carrying value of goodwill in the Canadian market segment
was impaired and that asset specific impairments were required for
production facilities being made redundant. As a result of these
decisions, Aurora recorded a number of one-time non-cash charges in
Q3 2022 including a write down of goodwill of $741.7 million, asset-specific impairments of
$176.1 million, and an inventory
provision charge of $63.6
million.
At March 31, 2022, Aurora had
$480.6 million of cash, including
$50.7 million in restricted cash, no
secured term debt, and access to US$887.6
million of capital under its shelf prospectus, including an
at-the-market (ATM) facility, of which currently US$187.6 million remains under the program. As
disclosed previously, management considers the ATM to be available
for strategic purposes.
During Q3 2022, Aurora repurchased a total of $13.4 million (US$10.6
million) in principal amount of convertible debt at a total
cost, including accrued interest, of $11.8
million (US$9.3 million).
Subsequent to Q3 2022, Aurora repurchased a total of $128.0 million (US$100.0
million) in principal amount of convertible debt at a total
cost, including accrued interest, of $122.9
million (US$96.0 million).
Aurora may, from time to time and subject to market conditions,
repurchase its convertible debt, including in open market purchases
and privately negotiated transactions.
_______________________________
|
1 These
terms are non-GAAP measures, see "Non-GAAP Measures"
below.
|
Aurora continues to materially improve cash use, as outlined in the
following table:
($
thousands)
|
Q3
2022
|
Q2
2022
|
Q3
2021(2)
|
|
|
|
|
Cash, Opening
(1)
|
$383,753
|
$424,301
|
$434,386
|
|
|
|
|
Cash used in
operations, including working capital
|
-$39,303
|
-$20,298
|
-$66,215
|
Capital expenditures
and investments, net of disposals and government grant
income
|
$9,879
|
-$11,497
|
-$12,320
|
Debt and interest
payments
|
-$12,947
|
-$8,753
|
-$7,766
|
Cash use
|
-$42,371
|
-$40,548
|
-$86,301
|
|
|
|
|
Proceeds raised from
sale of marketable securities and investments in
associates
|
-
|
-
|
-
|
Proceeds raised through
debt
|
-
|
-
|
-
|
Proceeds raised through
equity financing
|
$139,170
|
-
|
$172,153
|
Cash raised
|
$139,170
|
-
|
$172,153
|
|
|
|
|
Cash, Ending
(1)
|
$480,552
|
$383,753
|
$520,238
|
|
|
(1)
|
Includes restricted
cash of $50.7M at Q3 2022, $51.3M at Q2 2022, and $50.0M at Q3
2021.
|
(2)
|
Previously reported amounts have been
retroactively recast for the biological assets and inventory
non-material prior period error. Refer to the "Significant
Accounting Policies and Judgments" section in Note 2(d) of the
Financial Statements.
|
Refer to the "Consolidated Statement of Cash Flows" in the
"Consolidated Financial Statements" for our cash flow statements
prepared in accordance with IAS 7 – Statement of Cash Flows.
($ thousands, except
Operational Results)
|
Q3
2022
|
Q3
2021(1)(2)
|
$
Change
|
%
Change
|
Q2
2022
|
$
Change
|
%
Change
|
Financial
Results
|
|
|
|
|
|
|
|
Total net revenue
(3)
|
$50,434
|
$55,161
|
($4,727)
|
(9%)
|
$60,586
|
($10,152)
|
(17%)
|
Medical cannabis net
revenue (3)(4a)
|
$39,359
|
$36,378
|
$2,981
|
8%
|
$45,748
|
($6,389)
|
(14%)
|
Consumer cannabis net
revenue (3)(4a)
|
$10,339
|
$18,023
|
($7,684)
|
(43%)
|
$14,373
|
($4,034)
|
(28%)
|
Adjusted gross margin
before FV adjustments on cannabis net revenue
(4b)
|
54%
|
44%
|
N/A
|
10%
|
53%
|
N/A
|
1%
|
Adjusted gross margin
before FV adjustments on medical cannabis net revenue
(4b)
|
64%
|
53%
|
N/A
|
11%
|
63%
|
N/A
|
1%
|
Adjusted gross margin
before FV adjustments on consumer cannabis net revenue
(4b)
|
29%
|
33%
|
N/A
|
(4%)
|
23%
|
N/A
|
6%
|
SG&A
expense
|
$39,630
|
$41,684
|
($2,054)
|
(5%)
|
$42,961
|
($3,331)
|
(8%)
|
R&D
expense
|
$2,637
|
$3,398
|
($761)
|
(22%)
|
$1,625
|
$1,012
|
62%
|
Adjusted EBITDA
(4c)
|
($12,263)
|
($20,928)
|
$8,665
|
41%
|
($9,040)
|
($3,223)
|
(36%)
|
|
|
|
|
|
|
|
|
Balance
Sheet
|
|
|
|
|
|
|
|
Working
capital
|
$577,566
|
$646,310
|
($68,744)
|
(11%)
|
$481,574
|
$95,992
|
20%
|
Cannabis inventory and
biological assets (5)
|
$118,729
|
$102,637
|
$16,092
|
16%
|
$139,625
|
($20,896)
|
(15)%
|
Total assets
|
$1,570,252
|
$2,839,155
|
($1,268,903)
|
(45%)
|
$2,485,384
|
($915,132)
|
(37)%
|
|
|
|
|
|
|
|
|
Operational Results
– Cannabis
|
|
|
|
|
|
|
|
Average net selling
price of dried cannabis excluding bulk sales
(4)
|
$5.41
|
$5.00
|
$0.41
|
8%
|
$4.52
|
$0.89
|
20%
|
Kilograms sold
(6)
|
9,722
|
13,520
|
(3,798)
|
(28%)
|
13,043
|
(3,321)
|
(25)%
|
(1)
|
Amounts have been
retroactively recast for the biological assets and inventory
non-material prior period error. Refer to the "Change in
Accounting Policies and Estimates" section below for further
detail.
|
(2)
|
As a result of the
Company's dissolution and divestment of its wholly-owned
subsidiaries, Hempco and AHE, during the year ended June 30, 2021,
the operations of Hempco and AHE have been presented as
discontinued operations and the Company's operational results have
been retroactively restated, as required. Refer to Note 12(b) of
the Financial Statements and Note 12(b) of the annual audited
consolidated financial statements for the year ended June 30, 2021
for additional information.
|
(3)
|
Includes the impact of
actual and expected product returns and price adjustments (Q3 2022
- $0.4 million; Q2 2022 - $3.7 million; Q3 2021 - $3.2
million).
|
(4)
|
These terms are defined
in the "Cautionary Statement Regarding Certain Non-GAAP
Performance Measures" section of this MD&A. Refer to the
following sections for reconciliation of non-GAAP measures to the
IFRS equivalent measure:
|
|
a)
|
Refer to the
"Revenue" section for a reconciliation of cannabis net
revenue to the IFRS equivalent.
|
|
b)
|
Refer to the "Cost
of Sales and Gross Margin" section for reconciliation to the
IFRS equivalent.
|
|
c)
|
Refer to the
"Adjusted EBITDA" section for reconciliation to the IFRS
equivalent.
|
(5)
|
Represents total
biological assets and cannabis inventory, exclusive of merchandise,
accessories, supplies and consumables.
|
(6)
|
The kilograms sold is
offset by the grams returned during the period.
|
Conference Call
Aurora will host a conference call today, Thursday, May 12, 2022, to discuss these
results. Miguel Martin, Chief Executive Officer, and
Glen Ibbott, Chief Financial
Officer, will host the call starting at 5:00 p.m. Eastern time
| 3:00 p.m. Mountain Time. A question
and answer session will follow management's presentation.
Conference Call Details
DATE:
|
Thursday, May 12,
2022
|
TIME:
|
5:00 p.m. Eastern Time
| 3:00 p.m. Mountain Time
|
WEBCAST:
|
Click here
|
This weblink has also been posted to the Company's "Investor Info"
link at https://investor.auroramj.com/ under "News &
Events".
About Aurora
Aurora is a global leader in the cannabis industry, serving both
the medical and consumer markets. Headquartered in Edmonton, Alberta, Aurora is a pioneer in
global cannabis, dedicated to helping people improve their lives.
The Company's adult-use brand portfolio includes Aurora Drift, San
Rafael '71, Daily Special, and Whistler, as well as CBD brands,
Reliva and KG7. Medical cannabis brands include MedReleaf,
CanniMed, Aurora, Whistler Medical Marijuana Co, and Pedanios.
Driven by science and innovation, and with a focus on high-quality
cannabis products, Aurora's brands continue to break through as
industry leaders in the medical, performance, wellness and adult
recreational markets wherever they are launched. Learn more at
www.auroramj.com and follow us on Twitter and LinkedIn.
Aurora's common shares trade on the NASDAQ and TSX under the
symbol "ACB" and is a constituent of the S&P/TSX Composite
Index.
Forward Looking Statements
This news 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. Forward-looking statements made in this news
release include, but are not limited to, statements with respect
to:
- pro forma measures including revenue, cash flow, Adjusted gross
margin before fair value adjustments, and expected SG&A
run-rates;
- the Company's ability to execute on its business transformation
plan, and path and timing to achieve Adjusted EBITDA
profitability;
- anticipated cost savings and planned cost efficiencies,
including the execution of the Company's costs savings plan,
including, but not limited to, asset consolidation, operational and
supply chain efficiencies, and other reductions in SG&A
expenses;
- competitive advantages and associated revenue
opportunities;
- the Company's ability to fund organic growth and pursue
strategic M&A;
- future contributions from the Thrive team;
- the opening of new international markets and associated revenue
opportunities;
- the repurchase of additional convertible debentures; and
- the use of proceeds from the ATM facility.
These forward-looking statements are only predictions. Forward
looking information or statements contained in this news release
have been developed based on assumptions management considers to be
reasonable. Material factors or assumptions involved in developing
forward-looking statements include, without limitation, publicly
available information from governmental sources as well as from
market research and industry analysis and on assumptions based on
data and knowledge of this industry which the Company believes to
be reasonable. Forward-looking statements are subject to a variety
of risks, uncertainties and other factors that management believes
to be relevant and reasonable in the circumstances could cause
actual events, results, level of activity, performance, prospects,
opportunities or achievements 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 consumer
sales channels, management's estimates of consumer demand in
Canada and in jurisdictions where
the Company exports, expectations of future results and expenses,
the risk of successful integration of acquired business and
operations, management's estimation that SG&A will grow only in
proportion of revenue growth, the ability to expand and maintain
distribution capabilities, the impact of competition, the general
impact of financial market conditions, the yield from cannabis
growing operations, product demand, changes in prices of required
commodities, competition, and the possibility for changes in laws,
rules, and regulations in the industry, epidemics, pandemics or
other public health crises, including the current outbreak of
COVID-19, and other risks, uncertainties and factors set out under
the heading "Risk Factors" in the Company's annual information form
dated September 27, 2021 (the "AIF")
and filed with Canadian securities regulators available on the
Company's issuer profile on SEDAR at www.sedar.com and filed with
and available on the SEC's website at www.sec.gov. The Company
cautions that the list of risks, uncertainties and other factors
described in the AIF is not exhaustive and other factors could also
adversely affect its results. Readers are urged to consider the
risks, uncertainties and assumptions carefully in evaluating the
forward-looking statements and are cautioned not to place undue
reliance on such information. 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 securities law.
Non-GAAP Measures
This news release contains certain financial performance
measures that are not recognized or defined under IFRS (termed
"Non-GAAP Measures"). As a result, this data may not be comparable
to data presented by other licensed producers of cannabis and
cannabis companies. For an explanation of these measures to related
comparable financial information presented in the consolidated
financial statements prepared in accordance with IFRS, refer to the
discussion below. The Company believes that these Non-GAAP Measures
are useful indicators of operating performance and are specifically
used by management to assess the financial and operational
performance of the Company. These Non-GAAP Measures include, but
are not limited, to the following:
- Cannabis net revenue represents revenue from the sale of
cannabis products, excluding excise taxes. Cannabis net revenue is
further broken down as follows:
-
- Medical cannabis net revenue represents Canadian and
international cannabis net revenue for medical cannabis sales
only.
- Consumer cannabis net revenue represents cannabis net revenue
for consumer cannabis sales only.
- Wholesale bulk cannabis net revenue represents cannabis net
revenue for wholesale bulk cannabis only.
- Ancillary net revenue represents non-cannabis net revenue for
ancillary support functions only.
- Management believes the cannabis net revenue measures provide
more specific information about the net revenue purely generated
from our core cannabis business and by market type.
- Average net selling price per gram and gram equivalent is
calculated by taking cannabis net revenue and removing the impact
of cost of sales net against revenue in agency relationships, which
is then divided by total grams and grams equivalent of cannabis
sold in the period. Average net selling price per gram and gram
equivalent is further broken down as follows:
-
- Average net selling price per gram of dried cannabis represents
the average net selling price per gram for dried cannabis sales
only, excluding wholesale bulk cannabis sold in the period.
- Average net selling price per gram of international dried
cannabis represents the average net selling price per gram for
international dried cannabis sales only, excluding wholesale bulk
cannabis sold in the period.
- Average net selling price per gram and gram equivalent of
Canadian medical cannabis represents the average net selling price
per gram and gram equivalent for dried cannabis and cannabis
derivatives sold in the Canadian medical market.
- Average net selling price per gram and gram equivalent of
medical cannabis represents the average net selling price per gram
and gram equivalent for dried cannabis and cannabis derivatives
sold in the medical market.
- Average net selling price per gram and gram equivalent of
consumer cannabis represents the average net selling price per gram
and gram equivalent for dried cannabis and cannabis derivatives
sold in the consumer market.
- Management believes the average net selling price per gram or
gram equivalent measures provide more specific information about
the pricing trends over time by product and market type. Under an
agency relationship, revenue is recognized net of cost of sales in
accordance with IFRS. Management believes the removal of agency
cost of sales in determining the average net selling price per gram
and gram equivalent is more reflective of our average net selling
price generated in the marketplace.
- Gross profit before FV adjustments on cannabis net
revenue is calculated by subtracting (i) cost of sales, before the
effects of changes in FV of biological assets and inventory, and
(ii) cost of sales from non-cannabis ancillary support functions,
from total cannabis net revenue. Gross margin before FV adjustments
on cannabis net revenue is calculated by dividing gross profit
before FV adjustments on cannabis net revenue divided by cannabis
net revenue. Management believes that these measures provide useful
information to assess the profitability of our cannabis operations
as it excludes the effects of non-cash FV adjustments on inventory
and biological assets, which are required by IFRS.
- Adjusted gross profit before FV adjustments on cannabis
net revenue represents cash gross profit and gross margin on
cannabis net revenue and is calculated by subtracting from total
cannabis net revenue (i) cost of sales, before the effects of
changes in FV of biological assets and inventory; (ii) cost of
sales from non-cannabis ancillary support functions; and removing
(iii) depreciation in cost of sales; (iv) cannabis inventory
impairment; and (v) out-of-period adjustments. Adjusted gross
margin before FV adjustments on cannabis net revenue is calculated
by dividing Adjusted gross profit before FV adjustments on cannabis
net revenue divided by cannabis net revenue. Adjusted gross profit
and gross margin before FV adjustments on cannabis net revenue is
further broken down as follows:
-
- Adjusted gross profit and gross margin before FV adjustments on
medical cannabis net revenue represents gross profit and gross
margin before FV adjustments on sales generated in the medical
market only.
- Adjusted gross profit and gross margin before FV adjustments on
consumer cannabis net revenue represents gross profit and gross
margin before FV adjustments on sales generated in the consumer
market only.
- Adjusted gross profit and gross margin before FV adjustments on
wholesale bulk cannabis net revenue represents gross profit and
gross margin before FV adjustments on sales generated from
wholesale bulk cannabis only.
- Adjusted gross profit and gross margin before FV adjustments on
ancillary net revenue represents gross profit and gross margin
before FV adjustments on sales generated from ancillary support
functions only.
- Management believes that these measures provide useful
information to assess the profitability of our cannabis operations
as it represents the cash gross profit and margin generated from
cannabis operations and excludes (i) out-of-period adjustments to
provide information that reflects current period results; and (ii)
excludes the effects of non-cash FV adjustments on inventory and
biological assets, which are required by IFRS.
- Adjusted EBITDA is calculated as net income (loss)
excluding interest income (expense), accretion, income taxes,
depreciation, amortization, changes in fair value of inventory
sold, changes in fair value of biological assets, share-based
compensation, acquisition costs, foreign exchange, share of income
(losses) from investment in associates, government grant income,
fair value gains and losses on financial instruments, gains and
losses on deemed disposal, losses on disposal of assets,
restructuring charges, onerous contract provisions, out-of-period
adjustments, and non-cash impairments of deposits, property, plant
and equipment, equity investments, intangibles, goodwill, and other
assets. Adjusted EBITDA is intended to provide a proxy for the
Company's operating cash flow and is widely used by industry
analysts to compare Aurora to its competitors, and derive
expectations of future financial performance for Aurora, and
excludes out-of-period adjustments that are not reflective of
current operating results. Adjusted EBITDA increases comparability
between comparative companies by eliminating variability resulting
from differences in capital structures, management decisions
related to resource allocation, and the impact of FV adjustments on
biological assets and inventory and financial instruments, which
may be volatile and fluctuate significantly from period to
period.
Non-GAAP measures should be considered together with other data
prepared accordance with IFRS to enable investors to evaluate the
Company's operating results, underlying performance and prospects
in a manner similar to Aurora's management. Accordingly, these
non-GAAP measures are intended to provide additional information
and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with IFRS.
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SOURCE Aurora Cannabis Inc.