Aurora Cannabis Inc. (ACB) Announces Second Quarter 2020 Results

Gross margin before fair value adjustments on cannabis net revenue, excluding provisions was 48% in Q2 2020, compared to 58% in the prior quarter.  Including the impact of the return and price adjustment provisions, gross margin before fair value adjustments on cannabis net revenue was 44%.

During Q2 2020, Aurora produced 30,691 kilograms of cannabis as compared to 41,436 kilograms in the prior quarter. The 26% decrease in production output was primarily due to previously announced changes to cultivation strategies, including a pivot to high-value, high-potency strains which are lower yielding. With continued refinement of our cultivation techniques, we expect to achieve quarterly harvest volumes leading to an average of 150,000 kgs annually or better.

Q2 2020 SG&A increased by 23% to $99.9 million from the prior quarter. The increase was primarily driven by a rise in salaries and benefits due to targeted growth in corporate headcount and annual merit increases, investments in educational marketing campaigns related to the launch of Cannabis 2.0 products, and marketing initiatives related to the launch of the Aurora Drift brand.  On February 6, 2020 , Aurora announced decisive action effective immediately to reduce SG&A expenses from the Q2 2020 levels, and expects to manage the business with an SG&A expense run-rate of between $40 million to $45 million per quarter exiting Q4 2020 ( June 30, 2020 ).

Adjusted EBITDA⁽¹⁾ loss was $80.2 million in Q2 2020 compared to $39.7 million in Q1 2020. The decline in adjusted EBITDA loss is primarily due to the quarter over quarter decrease in revenue (including provisions), an increase in production costs relating to the ramp up for the legalization of Cannabis 2.0, and the increase in SG&A expenses. Developing a profitable cannabis company in the near term is extremely important to Aurora. While the Company strongly believes the global market opportunity for cannabis is robust, there is uncertainty in the timing of revenue ramp-up in our core markets.  Therefore, the Company has taken action to materially reduce SG&A expenses focused on achieving positive adjusted EBITDA.

Outlook 

Consistent with Aurora’s release dated February 6, 2020 ; the Company is bullish on the long-term potential for the global cannabis opportunity. However, due to several short-term factors, there is likely to be a slower than previously expected rate of industry growth in the near-term. The Company has outlined a number of fiscally responsible steps it has already taken to realign its business operations to this expected industry growth rate. Aurora reiterates its outlook for fiscal third quarter that cannabis revenue will be impacted by previously mentioned industry headwinds, and as such will likely show modest to no growth relative to fiscal Q2’s cannabis revenue, excluding provisions, of approximately $65 million .

Conference Call

Aurora will host a conference call today, February 13, 2020, to discuss these results. Michael Singer, Executive Chairman and Interim Chief Executive Officer, and Glen Ibbott , Chief Financial Officer will host the call starting at 8:00 a.m. Eastern time. A question and answer session will follow management’s presentation.

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 presence spans 25 countries across 5 continents with a brand portfolio that includes Aurora, Aurora Drift, San Rafael ’71, Daily Special, AltaVie, MedReleaf, CanniMed, Whistler, and ROAR Sports. Providing customers with innovative, high-quality cannabis and hemp products, Aurora’s brands continue to break through as industry leaders in the medical, performance, wellness and recreational markets wherever they are launched. For more information, please visit our website at www.auroramj.com.

Aurora’s Common Shares trade on the TSX and NYSE under the symbol “ACB”, and is a constituent of the S&P/TSX Composite Index.

Forward Looking Statements and Non-IFRS Industry Measures

This news release makes reference to certain non-IFRS measures, including certain industry metrics. These metrics and measures are not recognized measures under IFRS do not have meanings prescribed under IFRS and are as a result unlikely to be comparable to similar measures presented by other companies. These measures are provided as information complimentary to those IFRS measures by providing a further understanding of our operating results from the perspective of management. As such, these measures should not be considered in isolation or in lieu of review of our financial information reported under IFRS. This news release uses non-IFRS measures including “cannabis net revenue”, “Adjusted EBITDA”, “cannabis inventory and biological assets”, “cash cost to produce per gram sold”, “average net selling price”, and “SG&A”. The foregoing are commonly used operating measures in the industry but may be calculated differently compared to other companies in the industry. These non-IFRS measures, including the industry measures, are used to provide investors with supplementary measures of our operating performance that may not otherwise be apparent when relying solely on IFRS metrics. Definitions of the non-IFRS measures can be found in our financial statements, MD&A and this news release.

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. These forward-looking statements are only predictions. Various assumptions were used in drawing the conclusions or making the projections contained in the forward-looking statements throughout this news release. Forward-looking statements are based on the opinions, estimates and assumptions of management in light of management’s experience and perception of historical trends, current conditions and expected developments at the date the statements are made, such as current and future market conditions, the current and future regulatory environment and future approvals and permits. 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, including general business and economic conditions, changes in laws and regulations, product demand, changes in prices of required commodities, competition and other risks, uncertainties and factors set out under the heading “Risk Factors” in the Company’s annual information form dated September 10, 2019 (the “AIF”) and filed with Canadian securities regulators available on the Company’s issuer profile on SEDAR at www.sedar.com. 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 laws.

Neither TSX nor its Regulation Services Provider (as that term is defined in the policies of Toronto Stock Exchange) accepts responsibility for the adequacy or accuracy of this release.

SOURCE Aurora Cannabis Inc.