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Aurora Cannabis Inc (2)
Symbol ACB
Shares Issued 197,413,275
Close 2021-02-11 C$ 18.31
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Aurora Cannabis talks revenue, omits Q2 P&L from NR

2021-02-11 16:32 ET - News Release

Mr. Miguel Martin reports


Aurora Cannabis Inc. has released its financial and operational results for the second quarter of fiscal 2021 ended Dec. 31, 2020.

"Aurora had an excellent second quarter, and I'm pleased that we're advancing nicely against the plan we laid out in September of 2020," stated Miguel Martin, chief executive officer of Aurora Cannabis. "For the period, our core revenue strength in medical and consumer was complemented by initial rollouts in vape products and concentrates. Combined, these elements are part of the proven, regulated CPG strategy we've adopted. Adjusted EBITDA for the quarter, while vastly improved year over year, was impacted by several decisions that we believe will clear a path for our premium product focus and more variable cost model. We are confident that this will give Aurora maximum flexibility and position the organization to drive significant cash flow in the coming quarters."

"To further support this strategy, we have also focused on improving our cash burn, margins and overall financial flexibility. To that point, our year-over-year cash use has decreased by 74 per cent to $70.5-million, our normalized margins remain solid, particularly in medical, and our recently amended credit facility gives Aurora much improved optionality as opportunities arise. Combined with $565-million in cash on our balance sheet today, Aurora will continue to be a long-term player in the global cannabinoid market and increasingly positioned to deliver for shareholders over the long run."

Second quarter 2021 highlights (unless otherwise stated, comparisons are made between fiscal Q2 2021 and Q2 2020 results)

Q2 2021 total and cannabis net revenue (1) before provisions was $70.3-million, an 11-per-cent increase over Q2 2020 and 2.5 per cent sequentially. After accounting for return and price provisions, Q2 2021 total cannabis net revenue was $67.7-million, a 28-per-cent increase in cannabis net revenue (1) over fiscal Q2 of the prior year.

Adjusted gross margin before fair value adjustments on cannabis net revenue (1) was 42 per cent in Q2 2021, versus 48 per cent in Q2 2020. The decrease is due to the purposeful reduction in production levels at Aurora Sky, resulting in an increase in cash cost of sales due to the underutilization of capacity. Also impacting adjusted gross margin was a $1.8-million increase in actual net returns, price adjustments and provisions primarily relating to company-initiated product returns meant to open channels to newer, higher-potency flower that Aurora is now producing. Normalizing for these impacts, adjusted gross margin was 52 per cent.

(1) These terms are non-generally accepted accounting principle measures.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) (1) loss was $16.8-million in Q2 2021, which includes termination and restructuring costs of $2.9-million. Excluding restructuring costs and product return provisions, the company's adjusted EBITDA loss is $12.1-million.

Consumer cannabis:

  • Consumer cannabis net revenue (1) was $28.6-million ($31.1-million excluding provisions), a 25-per-cent increase from the prior year. Additionally, Aurora's consumer cannabis derivative product net revenue increased by $1.7-million sequentially, driven by product launches in vapes, edibles and concentrates.
  • Adjusted gross margin before fair value adjustments on consumer cannabis net revenue (1) was 27 per cent in Q2 2021 versus 33 per cent in the prior-year period, primarily driven by a $3.3-million increase in cost of sales due to underutilized capacity as a result of scaling back production at Aurora Sky, which is expected to partially reverse in subsequent quarters and sales of the lower-margin Daily Special value brand, which was not present in the prior comparative period.

Medical cannabis:

  • Medical cannabis net revenue (1) was $38.9-million ($39-million excluding provisions), a 42-per-cent increase from the prior-year period. The increase was primarily attributable to a continued strong performance in both the international and Canadian medical businesses. International medical sales grew by 562 per cent over the prior-year comparative period.
  • Adjusted gross margin before fair value adjustments on medical cannabis net revenue (1) was 56 per cent in Q2 2021 versus 59 per cent in the prior year and prior quarter, primarily driven by the increase in cost of sales due to the underutilized capacity as a result of scaling back production at Aurora Sky.

Selling, general and administrative (SG&A) and adjusted EBITDA:

  • SG&A, including research and development (R&D), was $44.4-million in Q2 2021, down $49.7-million or 53 per cent from the prior-year period as a result of the company's business transformation plan. Included in SG&A and R&D in Q2 2021 is $2.1-million of costs related to restructuring charges and severance and benefit costs associated with the business transformation plan. Excluding these impacts, Q2 2021 SG&A and R&D were $42.3-million.
  • Adjusted EBITDA (1) in Q2 2021 was a loss of $16.8-million ($12.1-million loss excluding the increase in revenue provisions and restructuring costs), compared with the prior-year adjusted EBITDA loss of $69.9-million primarily driven by the substantial decrease in SG&A and R&D expenses.

Additional financial information:

  • Cash balance as of Feb. 10, 2021, was approximately $565-million.
  • Aurora continues to increase its operational flexibility to improve its cash flow and better address consumer needs by reducing production and complexity. Of the four cultivation facilities set to close, three are now fully shuttered. Effective Dec. 15, 2020, the company also shuttered operations at the Aurora Sun facility and reduced production at its Aurora Sky facility by 75 per cent, where it is testing new processes and methodologies proved successful at other premium cultivation sites.

Fiscal Q2 2021 cash use: significant improvement in cash used in operations

Total cash use in Q2 2021 showed significant improvement relative to both second quarter 2020 and first quarter 2021.

In Q2 2021, the company used $22.7-million in cash to finance operations, excluding working capital investments. This use included $2.1-million in restructuring/termination payments. Cash used to pay for capital expenditures, net of disposals, in Q2 2021 was $8.8-million versus $15.0-million in the prior quarter, as many long-lead projects are now complete. Cash used in operations and cash for capital expenditures are crucial metrics in Aurora's drive toward generating sustainable positive free cash flow, and both have improved significantly and consistently over the past several quarters.

Increased net working capital used $30.4-million in the quarter, driven by a $23.9-million decrease in accounts payable and a $11.7-million increase in prepaids, offset by a $16.4-million decrease in accounts receivable. Within working capital, inventory and biological assets used $10.0-million, a marked improvement from the $25.1-million in Q1 2021, demonstrating the company's progress to more closely align production levels with demand.

Given Aurora's continued strong gross margins, reduced level of SG&A expense and capital expenditures, and continuing improvements in working capital investment, management expects the company to continue its progress toward positive cash flow.

Refer to condensed consolidated interim statement of cash flows in the condensed consolidated interim financial statements (unaudited) for cash flow statements prepared in accordance with IAS 7 (international accounting standard 7) (Statement of Cash Flows).

                             KEY FINANCIAL AND OPERATIONAL METRICS
                           ($ thousands, except operational results)  

                                                              Q2 2021        Q1 2021        Q2 2020
Financial results
Total net revenue (1)                                         $67,673        $67,812        $55,138
Cannabis net revenue (1) (2) (3a)                             $67,673        $67,812        $52,676
Medical cannabis net revenue (2) (3a)                         $38,856        $33,474        $27,386
Consumer cannabis net revenue (1) (2) (3a)                    $28,573        $34,338        $22,906
Wholesale bulk cannabis net revenue (2) (3a)                     $244             $-         $2,384
Adjusted gross margin before FV
adjustments on cannabis net revenue (2) (3b)                       42%            48%            48%
Adjusted gross margin before FV
adjustments on medical cannabis net revenue (2) (3b)               56%            59%            59%
Adjusted gross margin before FV
adjustments on consumer cannabis net revenue (2) (3b)              27%            38%            33%
Adjusted gross margin before FV
adjustments on wholesale bulk cannabis net
revenue (2) (3b)                                                (305%)           n/a             61%
SG&A expense                                                  $41,972        $44,324        $87,301
R&D expense                                                    $2,432         $2,584         $6,775
Adjusted EBITDA (2) (3c)                                     ($16,802)      ($57,891)      ($69,857)

(1) Includes the impact of actual and expected product returns and price adjustments (three months ended Dec. 31, 2020: $2.7-million; three months ended Sept. 30, 2020: $800,000).

(2) These terms are defined in the "Cautionary Statement Regarding Certain Non-GAAP Performance Measures" section of management's discussion and analysis. Excluding product return provisions and restructuring charges, adjusted EBITDA is $12.1-million.

(3) Refer to the following MD&A 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 international financial reporting standard 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.

Events subsequent to Q2 2021 quarter-end:

  • On Jan. 14, 2021, Aurora entered into an agreement with Great North Distributors Inc., Canada's first national sales broker for legalized adult-use cannabis, to be the exclusive representative for Aurora's Canadian cannabis retail brands. Great North has reach across every province in Canada, including established relationships and expertise in working with provincially owned and operated retailers and private retailers in Canada's cannabis industry. The agreement was designed to significantly bolster Aurora's market position in Canada.
  • On Jan. 26, 2021, Aurora closed its bought deal public offering of units of the company for total gross proceeds of $137.9-million (U.S.). The company sold 13.2 million units at a price of $10.45 (U.S.) per unit, including 1.2 million units sold pursuant to the exercise in full of the underwriters' overallotment option. BMO Capital Markets and ATB Capital Markets acted as the bookrunners for the offering. The company believes that this opportunistic financing fits with its broader strategy to have a strong balance sheet while maintaining maximum flexibility to invest and build toward being a leader in global cannabinoids.
  • Additionally, Allan Cleiren, chief operating officer, has decided to retire from the company, effective March 31, 2021. The company would like to thank Mr. Cleiren for his years of dedicated service and wish him well in his future endeavours.

Conference call

Aurora will host a conference call Feb. 11, 2021, to discuss these results. Mr. Martin, and Glen Ibbott, chief financial officer, will host the call starting at 5 p.m. Eastern Time. A question-and-answer session will follow management's presentation.

Date:  Feb. 11, 2021

Time:  5 p.m. Eastern Time or 3 p.m. Mountain Time

About Aurora Cannabis Inc.

Aurora is a global leader in the cannabis industry, serving both the medical and consumer markets. Headquartered in Edmonton, Alta., Aurora is a pioneer in global cannabis dedicated to helping people improve their lives. The company's brand portfolio includes Aurora, Aurora Drift, San Rafael '71, Daily Special, AltaVie, MedReleaf, CanniMed, Whistler and Reliva CBD. Providing customers with innovative, high-quality cannabis products, Aurora's brands continue to break through as industry leaders in the medical, performance, wellness and recreational markets wherever they are launched.

Aurora's common shares trade on the Toronto Stock Exchange and the New York Stock Exchange under the symbol ACB, and is a constituent of the S&P/TSX Composite Index.

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