Mr. Miguel Martin reports
AURORA CANNABIS ANNOUNCES FISCAL 2021 FOURTH QUARTER RESULTS
Aurora Cannabis Inc. has released its financial and operational results for the fourth quarter and full-year fiscal 2021 ended June 30, 2021.
"We are very pleased with our strategic and financial progress in growing our high-margin medical revenue, rationalizing expenses, strengthening our balance sheet and reducing our cash burn during fiscal year 2021. Given ongoing challenges in the Canadian adult recreational market, our broad diversification across domestic medical, international medical and adult recreational segments provides us with underlying strength, stability and growth opportunities in an evolving industry for global cannabinoids. Additionally, our enviable leadership position as the No. 1 Canadian LP [licensed producer] in global medical cannabis by revenue on a trailing 12-month basis, supported by regulatory and compliance expertise, is a tailwind that we expect to enable us to ultimately expand into global adult recreational as medical regimes evolve," stated Miguel Martin, chief executive officer of Aurora Cannabis.
"During the quarter, we delivered another strong yet steady performance in domestic medical, the largest federally regulated medical market globally, exceptional year-over-year growth in our high-margin international medical segment, where we remain the No. 2 Canadian LP by revenue on a trailing 12-month basis, and quarterly sequential growth in adult recreational, which included higher sales of premium cultivars. We are now delighted to announce a long-term supply agreement with Cantek in Israel that we expect to provide us with a steady stream of high-margin revenue that could also evolve into a larger partnership over time. We further believe our Canadian adult recreational segment is poised for recovery due to our product portfolio enhancements, coupled with an acceleration of new store openings and rising consumer demand," he continued.
"We have positioned ourselves for long-term success by delivering further improvement in our industry-leading adjusted gross margin and substantially narrowing our adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] loss compared to the year-ago period. With annual cost savings of approximately $60-million to $80-million across selling, general and administrative (SG&A), production cost, facility and logistic expenses, we have a clear pathway to achieve adjusted EBITDA profitability. Importantly, our considerable cash balance of $440.9-million, substantial improvement in working capital and strong balance sheet support our organic growth and can be utilized for opportunistic M&A [mergers and acquisitions], particularly in the U.S.," he concluded.
Fourth quarter 2021 highlights
(unless otherwise stated, comparisons are made between fiscal Q4 2021 and Q4 2020 results)
- Medical cannabis net revenue was $35-million, a 9-per-cent increase from the prior-year period. The increase was primarily attributable to continued growth in the international medical business, 88 per cent over the prior-year comparative period, as the company continued to grow new, high-margin medical markets.
- Adjusted gross margin before fair-value adjustments on medical cannabis net revenue was 68 per cent versus 64 per cent in the prior year, as a result of overall reduction in production costs due to the closure of non-core facilities as part of the company's business transformation plan and higher sales coming from the company's international sales, which yield higher margins.
Consumer cannabis net revenue was $19.5-million ($20.2-million excluding provisions), a 45-per-cent decrease from $35.3-million ($37.1-million excluding provisions) in the prior year. This was due primarily to a reduction in orders from provinces in response to slower consumer demand, reflecting the impact of lockdown restrictions related to COVID-19. Sequentially, consumer cannabis net revenue increased 8 per cent over the prior quarter, mainly due to completion of the transition of the company's fixed sales force to Great North and a $2.5-million reduction in actual net returns, price adjustments and provisions as the company completed its product swap initiative to replace low-quality product with higher-potency product at the provinces.
- Adjusted gross margin before fair-value adjustments on consumer cannabis net revenue was 31 per cent versus 36 per cent in the prior-year period. This was primarily driven by an increase in cost of sales due to underutilized capacity at Aurora Sky as a result of the scaling back production (expected to partially reverse in future quarters), offset by an increase in the consumer cannabis sales mix attributed to the company's core and premium brands, contributing to an increase in the company's average net selling price per gram of dried cannabis.
Adjusted gross margin before fair-value adjustments on cannabis net revenue was 54 per cent in Q4 2021 versus 49 per cent in the prior-year period and 44 per cent in Q3 2021. The increase in adjusted gross margin compared with Q4 2020 is due primarily to a shift in sales mix toward the medical market, which commands higher average net selling prices and margins.
- Adjusted EBITDA loss improved to $19.3-million in Q4 2021 ($13.9-million loss excluding restructuring charges), compared with the prior-year adjusted EBITDA loss of $33.3-million ($31.5-million loss excluding restructuring charges) primarily driven by the substantial decrease in SG&A and R&D (research and development) expenses and an increase in gross margins.
- Q4 2021 total cannabis net revenue was $54.8-million, essentially flat sequentially and a 19-per-cent decrease in over fiscal Q4 of the prior year.
- Reflecting the shift in mix toward the company's medical businesses, the Q4 2021 average net selling price per gram of dried cannabis increased to $5.11 per gram from $3.60 in Q4 2020 and $5 in Q3 2021. This excludes the impact of bulk wholesale of excess mid-potency cannabis flower at clearout pricing.
SG&A expenses, including R&D, were $44.8-million, excluding $5.2-million in severance and restructuring costs ($49.9-million reported), down $19.1-million, or 30 per cent, from the prior year as a result of the company's business transformation plan.
Operational efficiency plan, balance sheet strength and working capital improvement
Aurora has identified cash savings of $60-million to $80-million. The company expects to deliver $30-million to $40-million of annualized cash savings within the next year and the remainder by the end of Q2 fiscal 2023.
Approximately 60 per cent of the savings are expected to be driven out of the company's network through asset consolidation and operational and supply chain efficiencies. In fact, last week, Aurora announced the centralization of much of the company's Canadian manufacturing processes to its River facility in Bradford, Ont., and the resultant closure of the company's Western Canada manufacturing facility. The remaining 40 per cent of savings are intended to be sourced through SG&A expenses; a portion of those savings will be through insurance structures that are already partially executed.
These cash savings will be reflected in the company's profit/loss either as they occur for SG&A savings or as inventory is drawn down for production-related savings. These efficiencies are incremental to the approximately $300-million of total cost reductions achieved since the announcement of the company's business transformation plan in February, 2020.
Aurora materially improved its balance sheet during fiscal year 2021 through a number of purposeful actions, including repaying the credit facility in full in June, 2021, which resulted in interest and principal repayment reductions of approximately $25-million annually. The company views a strong balance sheet as critical to operating the business, executing its strategic plans and pursuing growth opportunities in an unconstrained manner, including within the United States.
At June 30, 2021, Aurora has a cash balance of approximately $440.9-million, comprising $421.5-million of cash and cash equivalents and $19.4-million in restricted cash; no secured term debt; and access to $1-billion (U.S.) of capital under its shelf prospectus.
The company's focus on realizing operational efficiencies and ability to manage cash has greatly improved operating cash flow; reducing the need for incremental capital. In Q4 2021, Aurora managed cash flow tightly using $7.8-million in cash to finance operations, including working capital investments and restructuring and severance payments of $5.1-million. Cash inflow from capital expenditures, net of $17.5-million disposals and government grant income, in Q4 2021 was $6.2-million versus $32.8-million of cash used in Q4 2020 and $12.2-million of cash used in Q3 2021. Cash used in operations and for capital expenditures are crucial metrics in Aurora's drive toward generating sustainable positive free cash flow, and both have improved significantly over the past year. The company's continuing business transformation, with the additional cost-efficiency savings described earlier, is expected to move the operating cash flow metric in a positive direction over the coming quarters.
Fiscal Q4 2021 cash use
The main components of cash source and use in Q4 2021 were as shown in an attached table.
Aurora will host a conference call on Sept. 27, 2021, to discuss these results. Miguel Martin, chief executive officer, and Glen Ibbott, chief financial officer, will host the call starting at 5 p.m. Eastern Time/3 p.m. Mountain Time. A question-and-answer session will follow management's presentation.
Conference call details
Date: Tuesday, Sept. 27, 2021
Time: 5 p.m. Eastern Time/3 p.m. Mountain Time
Investors may submit questions in advance or during the conference call itself. A link to the webcast has been posted to the company's website under news and events.
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, MedReleaf, CanniMed, Whistler and Reliva CBD. 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.
Aurora's common shares trade on the Nasdaq Stock Market and the Toronto Stock Exchange under the symbol ACB and is a constituent of the S&P/TSX Composite Index.
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