Mr. Terry Booth reports

AURORA CANNABIS ANNOUNCES FIRST QUARTER 2020 RESULTS & CORPORATE ACTION PLAN

Aurora Cannabis Inc. has released its financial and operational results for the first quarter of fiscal 2020 ended Sept. 30, 2019.

Press release highlights:

• Reports industry-leading gross profit of $53.7-million and 58-per-cent cannabis gross margin;
• Delivers best-in-class indoor cash cost to produce of 85 cents per gram;
• Announces plan to settle March, 2020, 5.0 per cent convertible debentures;
• Revises capital expenditure plan to align with long-term market growth;
• Generates total revenue of $75.6-million, including medical and consumer cannabis net revenue of $60.5-million and wholesale cannabis net revenues of $10.3-million.

"Over the past several years, Aurora has earned its place as a global leader in the cannabis industry. Despite short-term distribution and regulatory headwinds in Canada that have temporarily impacted the industry, the long-term opportunity for Aurora in the global cannabis and cannabinoids market is immense," said Terry Booth, chief executive officer of Aurora. "Aurora has and will continue to focus on everything in our control. Our success in doing this was demonstrated again this quarter by continued strong improvement in our core KPIs [key performance indicators]. We delivered solid operating results this quarter, exemplified by our industry-leading cash cost to produce, which declined another 25 per cent to 85 cents per gram this quarter, as well as by our industry-leading gross margins and market share."

Mr. Booth added: "In order to capitalize on this global market, we recognize the need to be nimble and pro-active. To enhance our financial flexibility and position us to take maximum advantage of future growth opportunities, we have also taken decisive steps to immediately strengthen our balance sheet. Specifically, these steps include: (1) the announcement of a formal plan to settle our 5.0 per cent convertible debentures due March, 2020; (2) a reduction in our capital investments over the next several quarters by over $190-million to better match near-term capacity expansion with anticipated demand, while maintaining our long-term demand outlook; and (3) raising over $124-million (U.S.) in gross equity proceeds since the start of fiscal 2020 through our at-the-market (ATM) financing program."

First quarter 2020 highlights (unless otherwise stated, comparisons are made between fiscal first quarter 2020 and fourth quarter 2019 results and are in Canadian dollars):

• Cash cost to produce per gram sold declined 25 per cent sequentially to 85 cents per gram, delivering on the company's promised sub-$1-per-gram target KPI;
• Net cannabis revenue of $70.8-million, compared with $94.6-million in the fourth quarter of 2019:
  • Non-wholesale cannabis revenue declined 19 per cent sequentially, comprising:
    • Medical cannabis revenue of $30.5-million, an increase of 3 per cent sequentially;
    • Canadian consumer cannabis revenue of $30.0-million, a decline of 33 per cent sequentially, as provincial ordering slowed considerably during the summer as distributors worked through inventories and as the industry was impacted by the slow pace of retail store licensing;
  • Wholesale revenues of $10.3-million, at 58-per-cent gross margin;
• Production volume increased 43 per cent sequentially to 41,436 kilograms;
• Total gross profit of $53.7-million and gross margin on cannabis net revenue of 58 per cent, driven by a significant reduction in cash cost of production;
• Aurora's medical patient base expanded 8 per cent to 91,116 sequentially. As at the date of this release, Aurora has approximately 91,408 active registered patients;
• Closed an amended and upsized $360-million secured credit facility, which includes an accordion feature that enables Aurora to upsize the facility by approximately $40-million. As at the date of this release, approximately $160-million of this facility has not been drawn and remains available to Aurora;
• Sold remaining 28.8 million shares of The Green Organic Dutchman Holdings Ltd. for gross proceeds of $86.5-million.

Subsequent events and corporate action items

Subsequent to quarter-end, the company made several decisions designed to streamline its operations, provide financial flexibility and reduce financial leverage in response to a changing market and regulatory environment, while supporting its long-term growth:

• Aurora has secured the commitment of investors holding approximately $155-million of the principal value of the 5 per cent March, 2020, convertible debentures to voluntarily convert their debentures under a temporarily amended early conversion privilege. Under this contemplated transaction, all remaining holders of the March convertible debentures will be granted an opportunity, for a period of time, at a price equal to a 6-per-cent discount to a five-day volume-weighted average price (VWAP), to convert their debentures. Any holders not exercising their early conversion privilege will remain holders of their original debentures, which have a coupon of 5 per cent, have a $13.05 conversion price and mature on March 9, 2020.
• In an effort to expand responsibly in line with global demand, the company has made the decision to immediately cease construction activity at its Aurora Nordic 2 facility in Denmark, which is expected to save approximately $80-million over the next 12 months. Aurora Nordic 1, a 100,000-square-foot facility located in Odense, Denmark, is fully completed and has received a production licence, and the company expects to receive a licence to sell shortly. Furthermore, the company has decided to defer the majority of the final construction and commissioning activities at its Aurora Sun facility for the foreseeable future, which is expected to conserve approximately $110-million of cash. With the work completed to date, both the Aurora Nordic 2 and Aurora Sun facilities are now fully enclosed. The company expects to have at least six flower rooms completed and in operation at Aurora Sun in 2020, for a total of 238,000 square feet. As global demand develops, or as Aurora's market share in the global cannabis market increases, the company will reactivate these projects.
• Aurora has been active under the $400-million (U.S.) ATM distribution program, as it represents a strategically valuable source of equity capital. In the fiscal year to date, the company has raised gross proceeds of $124.4-million (U.S.) through the issuance of 29,057,944 common shares.

               FIRST QUARTER 2020 KEY FINANCIAL AND OPERATIONAL METRICS
                 (in thousands of dollars, except operational results)

                                                                   Q1 2020       Q4 2019 (4)
Financial results
Total net revenue                                                  $75,245       $98,942
Cannabis net revenue (1)(2)                                        $70,776       $94,640
Medical cannabis net revenue (1)(2)                                $30,450       $29,651
Consumer cannabis net revenue (1)(2)                               $30,022       $44,882
Wholesale bulk cannabis net revenue (1)(2)                         $10,304       $20,107
Gross margin before FV adjustments on 
cannabis net revenue (1)(2)                                            58%           58%
Gross margin before FV adjustments on 
medical cannabis net revenue (1)(2)                                    63%           60%
Gross margin before FV adjustments on 
consumer cannabis net revenue (1)(2)                                   53%           55%
Gross margin before FV adjustments on 
wholesale bulk cannabis net revenue (1)(2)                             58%           61%
Selling, general and administration expense                        $81,132       $72,869
Balance sheet
Working capital                                                   $123,750      $227,802
Cannabis inventory and biological assets (3)                      $178,748      $144,275
Total assets                                                    $5,606,799    $5,502,830
Operational results -- cannabis
Cash cost to produce per gram sold (1)(2)                            $0.85         $1.14
Active registered patients                                          91,116        84,729
Average net selling price of medical cannabis (1)                    $8.00         $8.51
Average net selling price of consumer cannabis (1)                   $5.28         $5.14
Average net selling price of wholesale bulk cannabis (1)             $3.46         $3.61
Kilograms produced                                                  41,436        29,034
Kilograms sold                                                      12,463        17,793

(1) Non-GAAP (generally accepted accounting principles) performance measures.
(2) Refer to Aurora's MD&A (management's discussion and analysis) for a reconciliation 
    of these non-GAAP measures to the IFRS (international financial reporting standards)
    equivalent measure.
(3) Represents total biological assets and cannabis inventory, exclusive of merchandise, 
    accessories, supplies and consumables.
(4) During the three months ended June 30, 2019, the company recorded non-material 
    year-end corrections to: (i) capitalize certain payroll, share-based compensation 
    and borrowing costs, related to the construction of its production facilities that 
    were incorrectly expensed in prior periods; and (ii) reverse items that had been 
    overaccrued in prior periods. The net impact of these adjustments on fourth quarter 
    2019 adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) 
    was a $14.9-million reduction in reported operating expenses.


(in thousands of dollars)                            Three months ended
          
                                     Sept. 30, 2019     June 30, 2019     Sept. 30, 2018

Net revenue                               $  75,245         $  98,942          $  29,674
Design, engineering and 
construction services                             -                 -             (1,489)
Patient counseling services                  (1,055)             (606)            (1,242)
Analytical testing services                    (816)             (317)              (447)
Other cannabis segment 
revenues (accessories, hemp, 
other)                                       (2,168)           (2,760)            (1,385)
Horizontally integrated 
business revenue                               (430)             (619)              (515)
Cannabis net revenue                         70,776            94,640             24,596

The accompanying table outlines the breakdown of cannabis net revenue between Aurora's medical, consumer and wholesale bulk markets, as well as its dried cannabis and cannabis extracts, for the three months ended Sept. 30, 2019, and the comparative periods.

(in thousands of dollars)                            Three months ended
          
                                     Sept. 30, 2019     June 30, 2019     Sept. 30, 2018
Medical cannabis net revenue 
Canada dried cannabis                     $  14,882            14,438             13,752
Canada cannabis extracts (1)                 10,606            10,732              7,488
International dried cannabis                  4,553             4,481              2,803
International cannabis extracts (1)             409                 -                  -
Total medical cannabis net revenue           30,450            29,651             24,043
Consumer cannabis net revenue
Dried cannabis                               26,889            41,813                533
Cannabis extracts (1)                         3,133             3,069                 20
Total consumer cannabis net revenue          30,022            44,882                553
Wholesale bulk cannabis net revenue
Dried cannabis                                7,432            20,107                  -
Cannabis extracts (1)                         2,872                 -                  -
Wholesale bulk cannabis net revenue          10,304            20,107                  -
Total cannabis net revenue                   70,776            94,640             24,596

(1) Cannabis extracts revenue includes cannabis oils, capsules, softgels, sprays and 
    topical revenue.

Consolidated net revenue was $75.2-million in the first quarter of 2020, compared with $98.9-million in the prior quarter. Medical cannabis net revenues increased to $30.5-million in the first quarter of 2020, up 3 per cent over the prior quarter. Consumer cannabis revenues were $30.0-million in the first quarter of 2020, a decline of 33 per cent from the prior quarter, and contributed 40 per cent to total consolidated net revenue. The decline in cannabis net revenues is primarily attributable to previously identified constraints in Canadian consumer retail and distribution infrastructure, coupled with a decline in wholesale revenues. The Canadian wholesale market is rapidly evolving and remains an important long-term opportunity for Aurora.

As a leader in highly automated, low-cost production, Aurora is well positioned to align its operating assets to rapidly respond to evolving consumer preferences while pursuing potential white-label wholesale opportunities and building a strong inventory of high-quality derivative products for launch later this year.

The average net selling price of cannabis increased by 36 cents per gram over the prior quarter from $5.32 in the fourth quarter of 2019 to $5.68 in the first quarter of 2020. This increase is primarily attributable to an increase in the average net selling price of consumer cannabis, coupled with a decrease in sales volumes to the bulk wholesale markets, which yield lower average net selling prices as compared with the consumer and medical markets.

Gross margin on cannabis net revenue remained stable at 58 per cent in the first quarter of 2020, compared with 58 per cent in the prior quarter.

During the first quarter of 2020, Aurora produced 41,436 kilograms of cannabis, compared with 29,034 kilograms in the prior quarter. The 42.7-per-cent increase in production output was primarily due to continuing production scale-up at the company's Aurora Sky facility. While Aurora Sky has delivered well above expectations from a capacity perspective, in responding to shifting consumer preferences the company is likely to plant higher-potency, lower-yielding strains, which are in higher demand in the recreational market. As such, Aurora does not expect near-term production to reach levels achieved in the first quarter of 2020, and the company continues to operate at a 150,000-kilogram annual production capacity.

Excluding the impact of $10.6-million in out-of-period adjustments that were recognized in the fourth quarter of 2019, first quarter 2020 SG&A (selling, general and administration) decreased by 3 per cent to $81.1-million. The decline was driven by a decrease in fulfilment and shipping costs, as well as a decline in one-time expenses related to derivative product launches and regulatory fees during the first quarter of 2020.

Adjusted EBITDA loss was $39.7-million in the first quarter of 2020, compared with $26.6-million in the fourth quarter of 2019, excluding the impact of the $14.9-million out-of-period adjustments recognized in the prior quarter. Developing a profitable and robust global cannabis company is extremely important to Aurora. While the company strongly believes that the global market opportunity for cannabis is robust, there is uncertainty in the timing of revenue ramp-up in its core markets, and it continues to invest in its global operations, which may result in near-term challenges to achieving positive adjusted EBITDA. However, the company expects adjusted EBITDA to continue to improve in the future as it increases revenue through the sale of higher-margin extract products and as it increases gross margins through economies of scale, while investing in corporate capabilities with controlled SG&A growth.

Outlook

The global medical cannabis and hemp-derived cannabinoids markets represent a significant opportunity for Aurora. To support the company's prospects in these markets, Aurora continues to make necessary investments that will build long-term value for its shareholders while balancing growth with prudent financial management and capital allocation. This focus includes aligning Aurora's planned cultivation assets and capital expenditures with global cannabis demand. With the company's operating cultivation assets outperforming nameplate capacity, Aurora is positioned to the meet near-term global market demand and to pursue long-term white-label and contract manufacturing agreements with distribution partners in the Canadian and international markets.

Effective Oct. 17, 2019, new regulations under the Cannabis Act came into effect, which will allow for the sale of higher-value, in-demand products such as vape pens, edibles and other derivatives in the consumer market (Cannabis 2.0). The implementation of Cannabis 2.0 remains the most important market opportunity for the company in Canada. Aurora is extremely well positioned and has prioritized its resources to prepare for a successful initial launch and supported a continuing replenishment strategy to ensure that consumers across Canada will have access to a diverse portfolio of high-quality derivative products they want to buy. Aurora expects to begin shipping these new product formats to provincial regulators starting late December, 2019.

The other near-term focus and market opportunity for the company is expanding its operating footprint in the United States. To ensure a successful entry, Aurora is evaluating a number of potential accretive alternatives with a focus on adding operating cash flows. The company is committed to engage only in activities that are permissible under both state and federal laws.

Conference call

Aurora will host a conference call today, Nov. 14, 2019, to discuss these results. Terry Booth, CEO, Glen Ibbott, chief financial officer, Cam Battley, chief corporate officer, and Michael Singer, executive chairman, will host the call starting at 6 p.m. ET. A question-and-answer session will follow management's presentation.

Date:  Thursday, Nov. 14, 2019

Time:  6 p.m. ET/4 p.m. MT

Webcast:  on-line

Replay:  416-849-0833 or 855-859-2056 until 12 a.m. ET (midnight) on Thursday, Nov. 21, 2019

Reference code:  3751059

About Aurora Cannabis Inc.

Headquartered in Edmonton, Alta., with financed capacity in excess of 625,000 kilograms per year and sales and operations in 25 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, and 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, consistent product.

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