Mr. Terry Booth reports

AURORA CANNABIS ANNOUNCES FINANCIAL RESULTS FOR THE SECOND QUARTER OF FISCAL 2019

Aurora Cannabis Inc. has released its financial and operational results for the second quarter ended Dec. 31, 2018.

      
                          FINANCIAL AND OPERATIONS HIGHLIGHTS
                                     ($ thousands)    
                                                              Q2 2019         Q1 2019         Q2 2018
Financial results
Gross revenue                                                 $62,000         $29,674         $11,700
Net revenue (1)                                               $54,178         $29,674         $11,700
Cannabis net revenue (2)                                      $47,577         $24,596          $9,773
Gross margin on cannabis net revenue (2)                           54%             70%             63%
Selling, general and administration expense                   $66,362         $65,319         $12,704
(Loss) earnings attributable to common shareholders         ($237,752)       $105,462          $7,722

Operational results -- cannabis
Cash cost of sales per gram produced (2)                        $1.92           $1.45           $1.41
Active registered patients                                     73,579          67,484          21,718
Average net selling price of dried cannabis (2)                 $6.23           $8.39           $7.86
Average net selling price of cannabis extracts (2)             $10.00          $12.12          $13.35
Kilograms produced                                              7,822           4,996           1,204
Kilograms sold                                                  6,999           2,676           1,162
                                                           ==========      ==========      ==========

(1) Net revenue represents the company's total gross revenue exclusive of excise taxes levied 
by the Canada Revenue Agency (CRA) on the sale of medical and recreational cannabis products,
effective Oct. 17, 2018.
(2) These terms and non-generally accepted accounting principle measures are defined or
reconciled in Aurora's second quarter 2019 management's discussion and analysis. 

Second quarter 2019 and subsequent highlights:

• Net revenue of $54.2-million, up 83 per cent sequentially, and up 363 per cent compared with the same period in 2018, driven by Aurora's strong performance in the launch of the Canadian consumer market with sales of $21.6-million, and the company's continued strength in the Canadian and international medical markets with sales of $26.0-million, up 8 per cent in revenue and 23 per cent in volume sold;
• Average selling prices were impacted by the introduction of excise taxes across all Canadian sales channels on Oct. 17, 2018, as well as lower wholesale pricing realized in the Canadian consumer market; going forward, Aurora intends to continue prioritizing medical patients in Canada and globally, where margins continue to exceed those achieved on the wholesale consumer market;
• Second quarter 2019 kilograms produced and kilograms sold of 7,822 and 6,999 were up 57 per cent and 162 per cent, respectively, driven by continued and significant scale-up of Aurora's cultivation operations and strong demand across all the company's markets;
• Gross margin on cannabis sales of 54 per cent was temporarily down from 70 per cent in the prior quarter; the decrease was primarily due to a lower average selling price per gram of dried cannabis, the impact of excise taxes on medical cannabis net revenues and a temporarily lower proportion of cannabis oil sales in the company's sales mix ratio; also impacting gross margin were increased packaging requirements under the Cannabis Act and one-time ramp-up and optimization costs as the company's Sky facility was brought up to full production; the company anticipates that the launch of new derivative product lines, once allowed under Health Canada regulations, will contribute to improving margins;
• The company is performing well in the Canadian consumer market, recording $21.6-million of revenue in second quarter 2019; based on available data released by Health Canada for the second quarter 2019 period, Aurora accounted for approximately 20 per cent of all consumer sales across the country;
• Cash cost to produce per gram of dried cannabis sold temporarily increased from $1.45 in the previous quarter to $1.92 in second quarter 2019; this change was primarily due to ramp-up and optimization costs as the company scaled up Aurora Sky to full production; one-time additional costs incurred related to the launch of the Canadian consumer market, as the company waited for its Sky sales licence (received Oct. 17, 2018), also contributed to the increase;
• Aurora Sky is now fully complete and commissioned, and is expected to reach its full production capacity, based on Health Canada-approved planted rooms, shortly; recent harvests completed to date at the facility have exceeded targeted yields, reflecting that the facility's commissioning has been successful, all environmental and nutrition systems, and operating protocols are dialled in, and technology components are functioning well;
• Second quarter 2019 selling, general and administrative costs remained steady compared with the prior quarter as lower sales and marketing costs were offset by one-time public company and acquisition costs, as well as the absorption of a full quarter of SG&A costs from recently acquired companies, including MedReleaf;
• Non-cash expenses, including the Dec. 31, 2018, mark-to-market adjustments of approximately $190-million primarily on the company's derivative investments contributed significantly to a net loss of $240-million;
• In January, 2019, Aurora completed a $345-million (U.S.) convertible note offering, with the proceeds earmarked predominantly to drive the company's continued high pace of growth in Canada and internationally.

Outlook

The most significant driver of Aurora's revenue growth over the next 12 to 18 months is the company's scale-up of high-quality production available for sale to the Canadian consumer market and the Canadian and international medical markets. Aurora is now operating at an annualized production rate of approximately 120,000 kilograms, based on Health Canada-approved planted rooms, and expects to reach in excess of 150,000 kg by March 31, 2019. Management reiterates previous guidance that, based on the company's current confirmed production results, Aurora will have approximately 25,000 kg available for sale in fourth quarter (April to June, 2019).

The company anticipates that with Aurora Sky operating at full capacity, as well as continued reduction in operating costs, the cash cost to produce per gram will trend significantly lower. Management reiterates its expectation that the sustainable long-term operating cost at its Sky Class facilities will be well below $1 per gram.

Continuing disciplined cost management is expected to result in SG&A costs growing modestly as compared with revenue growth over the rest of the fiscal year.

Consequently, and consistent with previous guidance, management believes that the combination of substantial revenue growth, low cost of production and disciplined operating cost management will position Aurora to achieve sustained positive EBITDA (earnings before interest, taxes, depreciation and amortization) beginning in fourth quarter fiscal 2019 (second quarter calendar 2019).

Longer term, the company expects that the launch of new higher value-added derivative product lines in relation to anticipated changes in Health Canada regulations, as well as the introduction of derivative products to international markets, will contribute to further revenue growth and margin expansion.

Management commentary

"Aurora continues to execute strongly across all of its market segments, as demonstrated by the 83-per-cent revenue growth over last quarter and the significant increase in confirmed production results," said Terry Booth, chief executive officer of Aurora. "Our brands continue to resonate extremely well in the consumer market, our patient numbers continue to increase steadily, and we have maintained our market leadership in Germany and other key international markets. We are experiencing exceptional demand for our Canadian medical and consumer products, as well as sustained strong demand internationally. With our Aurora Sky and MedReleaf Bradford facilities ramping up production as anticipated and our other licensed facilities operating at full capacity, we are reiterating our earlier guidance of achieving sustained EBITDA positive results from the second calendar quarter of this year (our fiscal fourth quarter)."

Glen Ibbott, chief financial officer of Aurora, added: "We are also very pleased with our recent placement of $345-million (U.S.) in convertible notes. These convertible notes were subscribed by high-quality U.S., Canadian and international institutions, and offer Aurora the flexibility and optionality to settle the entire principal amount of the notes in the future for cash, shares or any combination thereof. This funding sufficiently supports the global opportunity for us to continue our commitment to growth in the legal, regulated medical and consumer cannabis systems across the globe. This is a unique time and position as we maintain a high cadence of increasing product supply and international market expansion."

Mr. Booth concluded, "With our strong performance in the Canadian medical and consumer markets, our early-mover advantage in a growing list of important international markets, together with our leadership in high-quality, CBD-[cannabidiol]-rich hemp production, Aurora is strategically positioned across the entire cannabis industry value chain to further extend our rapid growth."

Second quarter 2019 and subsequent operational highlights

International expansion

As the global cannabis market continues to mature, Aurora has secured a distinct first-mover advantage by attaining valuable import and export agreements with markets that have a high barrier to entry, reinforcing the company's commitment to serving the global cannabis industry. New supply agreements this quarter have expanded the company's sales and operations to 23 countries:

• Exports to Poland: In October, 2018, Aurora Deutschland GmbH shipped products to a pain treatment centre and hospital in Warsaw, making Aurora's high-quality medical products available for Polish patients. This shipment is believed to be the first time a non-government-run business has been granted approval to supply medical cannabis products in the country.
• Exports to Czech Republic: During second quarter, the company secured export permits and completed its first shipment of medical cannabis to Czech Medical Herbs sro (CMH), a Czech pharmaceutical wholesaler.
• Export to Luxembourg: In December, 2018, the company was selected by the Luxembourg Health Ministry for the supply of medical cannabis to the country, and an initial purchase order for approximately 20 kilograms was received from Luxembourg officials. To date, Aurora is the only company supplying the Luxembourg medical cannabis system.
• Exports to Mexico: On Dec. 7, 2018, prior to Aurora entering into a letter of intent to acquire Farmacias Magistrales SA, the company entered into discussions with the Mexican pharmaceutical manufacturer to import Aurora THC (tetrahydrocannabinol) products for distribution to the Mexican medical cannabis market. The company believes that Farmacias is the only company in Mexico with the required licences to import and distribute products with a THC content greater than 1 per cent.
• Exports to United Kingdom: On Feb. 11, 2019, the company announced that it had completed its first commercial export of cannabis oil to the United Kingdom, which was subsequently dispensed from a pharmacy. U.K. authorities have recently granted Aurora approval for its first shipment under the new legal framework that came into effect Nov. 1, 2018, and the company is enhancing its U.K. operations to ensure patient access to a range of cannabis-based medicines.

Product developments

During the quarter, the company maintained its focus on product development and continued to execute on its strategy to generate a broad portfolio of high-margin, targeted medical and consumer products:

• Launch of Canada's first legal vape-ready CBD oil cartridges: On Oct. 16, 2018, Aurora received all necessary compliance verifications from Health Canada to commence sales of the first product from the company's innovative, high-potency, vape-ready CBD oil product line, Aurora Cloud. To date, Aurora Cloud products are the only vape-ready CBD products legally available in Canada. The initial product release is the first of a broader line of full-spectrum cannabinoid-based, vape-ready cartridge products, which the company intends to launch in the near future.
• Launch of softgel capsules: On Dec. 3, 2018, the company commenced shipments of cannabis softgel capsules to the Canadian medical and consumer markets from its state-of-the-art Aurora Vie facility. As an alternative drug delivery method, Aurora intends to make this high-volume, smoke-free product available to key domestic and international markets, where legally permissible.
• Continuing scientific trials and studies: Aurora currently has 40 clinical trials and case studies completed or in progress, seven preclinical trials in progress, and six new partnerships with leading academic institutions in development.

Acquisitions

The company has continued to execute on its aggressive growth strategy to build a strong business that incorporates all aspects of the cannabis value chain from greenhouse construction and cultivation to plant science research and consumer branding. During second quarter 2019, Aurora has strengthened the scale of its operations, expanded its market reach, and diversified its expertise across the value chain through a number of highly strategic acquisitions and investments:

• Acquisition of ICC Labs Inc.: On Nov. 22, 2018, Aurora acquired ICC Labs, a leading producer and distributor of CBD and cannabinoid products in South America, a continent with over 420 million people. With over 70 per cent market share in Uruguay and licences to produce medical cannabis in Colombia, the acquisition of ICC Labs has established Aurora as the industry leader in South America.
• Acquisition of Whistler Medical Marijuana Corp: On Jan. 31, 2019, the company entered into a definitive agreement to acquire Whistler. Based in Whistler, B.C., Whistler is one of Canada's most iconic cannabis brands, providing Aurora with a premium-priced and differentiated organic certified product suite to expand its medical and consumer offerings in Canada and internationally.
• Acquisition of Farmacias Magistrales: On Dec. 10, 2018, the company entered into a letter of intent to acquire Farmacias, Mexico's first and only federally licensed importer of raw materials containing THC, with all necessary licences, facilities and permissions to import raw THC material, and manufacture, store and distribute medical cannabis products containing over 1 per cent THC. The acquisition firmly establishes Aurora's first-mover advantage in Mexico, where more than 130 million people will have legal access to a range of Aurora's THC containing medical cannabis products.

Investments in Canadian consumer retailers:

• During second quarter 2019, the company increased its investment in Choom Holdings, a consumer cannabis company that has secured one of the largest retail networks in Canada, and invested in High Tide Inc., an Alberta-based, retail-focused cannabis and lifestyle accessory company.
• Through these strategic investments, Aurora further diversified its retail pull strategy, with additional retail opportunities across Canada.

Financing and capital market activities:

• New York Stock Exchange (NYSE) listing: On Oct. 23, 2018, the company commenced trading on the NYSE under the ticker symbol ACB, exposing the company to a broader institutional investor base and larger liquidity pool.
• Australis Capital Inc. distribution: On Nov. 28, 2018, Aurora, through a selling broker, completed the sale of Australis Capital units on behalf of non-resident shareholders as a part of a spinoff of capital for Aurora shareholders. In total, 11,222,349 units of Australis were sold in the public markets by an independent custodian, and the funds were paid to non-resident shareholders, net of applicable taxes and fees.
• Private offering of convertible senior notes: On Jan. 24, 2019, the company issued $345-million (U.S.) in aggregate principal amount of convertible senior notes. The net proceeds will be used to support Canadian and international expansion initiatives. The notes bear cash interest semi-annually at a fixed rate of 5.5 per cent per annum, and will be convertible by holders into Aurora common shares at a conversion price of $7.23 (U.S.). Upon conversion, the notes will be settled in cash, Aurora common shares or a combination of both, at Aurora's election. The notes are unsecured and will mature by Feb. 28, 2024.

Conference call

Aurora will host a conference call on Feb. 11, 2019, to discuss these results. Mr. Booth, Mr. Ibbott, Cam Battley, chief corporate officer, and Michael Singer, chairman of the board, will host the call starting at 6 p.m. Eastern Time. A question-and-answer session will follow management's presentation.

Date:  Feb. 11, 2019

Time:  6 p.m. Eastern Time or 4 p.m. Mountain Time

Replay:  416-849-0833 or 855-859-2056; available until 12 a.m. Eastern Time on Feb. 18, 2019

Reference No.:  2474319

About Aurora Cannabis Inc.

Headquartered in Edmonton, Alta., Canada, with financed capacity in excess of 500,000 kilograms per annum and sales and operations in 23 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, its production facilities are designed to produce cannabis of significant scale, with high-quality, industry-leading yields and low per-gram production costs.

We seek Safe Harbor.