Aurora Cannabis Inc. (the "Company" or "Aurora") (NASDAQ: ACB) (TSX: ACB), the Canadian company defining the future of cannabinoids worldwide, today announced its financial and operational results for the first quarter fiscal 2022 ended September 30, 2021.
"Our transformation plan is on track. We continue to strengthen and transform our business while benefitting from broad diversification across our international medical, domestic medical, and adult recreational segments. On a run-rate basis to date, we have executed over $33 million in annualized cost savings and are positioned to deliver approximately $60 to $80 million in aggregate across selling, general and administrative ("SG&A"), production, facility and logistic expenses upon the completion of our business transformation. Our strong Adjusted gross margins and narrowing Adjusted EBITDA loss are also providing us with a clear path to profitability by the first half of fiscal 2023 as we position ourselves for long-term success. Importantly, our robust balance sheet and working capital support our organic growth plans, and provide us with the financial flexibility to evaluate accretive M&A opportunities," stated Miguel Martin, Chief Executive Officer of Aurora Cannabis.
"During the quarter, total cannabis net revenue increased by approximately 10% sequentially, driven by our industry leading and high margin global medical cannabis business. Our premiumization strategy also gained traction, as evidenced by 29% sequential revenue growth in our premium dry flower brands of San Rafael '71 and Whistler, primarily driven by the launch of three new Coast cultivars," he continued.
"Our regulatory and compliance expertise in medical is also enabling us to expand into global adult recreational as evidenced by our recent entry into the Dutch recreational market through an investment in Growery B.V., which based on today's global regulatory framework we expect to become the largest regulated recreational market outside of Canada," he concluded.
First Quarter 2022 Highlights
(Unless otherwise stated, comparisons are made between fiscal Q1 2022, Q4 2021, and Q1 2021 results and are in Canadian dollars)
Medical Cannabis:
Consumer Cannabis:
Consolidated:
Selling, General and Administrative ("SG&A"):
1 These terms are non-GAAP measures, see "Non-GAAP Measures" below. |
Operational Efficiency Plan, Balance Sheet Strength, & Working Capital Improvement
Aurora has identified cash savings of $60 million to $80 million. We have already executed over $33 million in annualized run-rate cost savings to date, and expect to deliver the remainder before the end of Q2 fiscal 2023.
Approximately 60% of the savings are expected to be removed from our network through asset consolidation, and operational and supply chain efficiencies. The remaining 40% of savings are intended to be sourced through SG&A.
These cash savings will be reflected in our P&L 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.
The Company also views a strong balance sheet as critical to operating the business, executing its strategic plans, and pursuing growth opportunities in a prudent, disciplined manner, including within the U.S. At September 30, 2021 Aurora has a cash balance of approximately $424.3 million, comprised of $372.8 million of cash and cash equivalents and $51.5 million in restricted cash, no secured term debt, and access to US$1 billion of capital under its shelf prospectus.
The Company's focus on realizing operational efficiencies and management of cash has greatly improved operating cash flow; reducing the need for incremental capital. In Q1 2022, Aurora managed cash flow tightly using $18.1 million in cash to fund operations, including working capital investments and restructuring and severance payments of $0.6 million. Cash inflow from capital expenditures, net of disposals, in Q1 2022 was $3.1 million versus cash outflow of $15.3 million in Q1 2021 and $6.2 million of cash inflow in Q4 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 ongoing 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.
Net working capital generated a cash outflow of $3.4 million in the quarter, excluding the impacts of inventory impairment primarily driven by a decrease in accounts receivable.
Fiscal Q1 2022 Cash Use
The main components of cash source and use in Q1 2022 were as follows:
($ thousands) | Q1 2022 | Q4 2021 | Q1 2021(3) |
Cash Flow | |||
Cash, Opening (1) | $440,851 | $520,238 | $162,179 |
Cash used in operations, including working capital | ($18,052) | ($7,840) | ($109,540) |
Capital expenditures, net of disposals and government grant income | $3,053 | $6,230 | ($15,278) |
Debt and interest payments | ($1,551) | ($90,141) (2) | ($17,966) |
Cash use | ($16,550) | ($91,751) | ($142,784) |
Proceeds raised from sale of marketable securities and investments in associates | - | $11,929 | - |
Proceeds raised through debt | - | - | - |
Proceeds raised through equity financing | - | $435 | $114,283 |
Cash raised | - | $12,364 | $114,283 |
Cash, Ending (1) | $424,301 | $440,851 | $133,678 |
(1) | Includes restricted cash of $51.5M at Q1 2022, $19.4M at Q4 2021, and nil at Q1 2021. |
(2) | Includes $88.7 million full principal repayment on the BMO Credit Facility. As of June 30, 2021, the BMO Credit Facility has been fully settled and discharged. |
(3) | Previously reported amounts have been retroactively recast for the biological assets and inventory non-material prior period error. Refer to the "Significant Accounting Policies and Judgments" section in Note 2(d) of the Financial Statements. |
Refer to the "Consolidated Statement of Cash Flows" in the "Consolidated Financial Statements" for our cash flow statements prepared in accordance with IAS 7 – Statement of Cash Flows.
($ thousands, except Operational Results) | Q1 2022 | Q1 2021(1)(2) | $ Change | % Change | Q4 2021 | $ Change | % Change | |||||
Financial Results | ||||||||||||
Total net revenue (3) | $60,108 | $67,593 | ($7,485) | (11) | % | $54,825 | $5,283 | 10 | % | |||
Medical cannabis net revenue (3)(4a) | $40,984 | $33,255 | $7,729 | 23 | % | $35,022 | $5,962 | 17 | % | |||
Consumer cannabis net revenue (3)(4a) | $19,124 | $34,338 | ($15,214) | (44) | % | $19,514 | ($390) | (2) | % | |||
Adjusted gross margin before FV adjustments | 54 | % | 48 | % | N/A | 6 | % | 53 | % | N/A | 1 | % |
Adjusted gross margin before FV adjustments | 64 | % | 56 | % | N/A | 8 | % | 67 | % | N/A | (3) | % |
Adjusted gross margin before FV adjustments | 32 | % | 41 | % | N/A | (9) | % | 30 | % | N/A | 2 | % |
SG&A expense | $45,760 | $44,088 | $1,672 | 4 | % | $46,902 | ($1,142) | (2) | % | |||
R&D expense | $3,671 | $2,583 | $1,088 | 42 | % | $3,034 | $637 | 21 | % | |||
Adjusted EBITDA (4c) | ($12,104) | ($58,124) | $46,020 | 79 | % | ($19,719) | $7,615 | 39 | % | |||
Balance Sheet | ||||||||||||
Working capital | $532,612 | $206,335 | $362,277 | 158 | % | $549,517 | $16,905 | (3) | % | |||
Cannabis inventory and biological assets(5) (2)(3)(7) | $139,103 | $171,086 | ($31,983) | (19) | % | $120,297 | $18,806 | 16 | % | |||
Total assets | $2,560,316 | $2,762,181 | ($201,865) | (7) | % | $2,604,731 | ($44,415) | (2) | % | |||
Operational Results – Cannabis | ||||||||||||
Average net selling price of dried cannabis excluding bulk sales (4) | $4.67 | $3.86 | $0.81 | 21 | % | $5.11 | ($0.44) | (9) | % | |||
Kilograms sold (6) | 12,484 | 16,139 | (3,655) | (23) | % | 11,346 | 1,138 | 10 | % | |||
(1) | Amounts have been retroactively recast for the biological assets and inventory non-material prior period error. Refer to the "Significant Accounting Policies and Judgments" Note 2(d) in the Financial Statements for further detail. | |
(2) | As a result of the Company's dissolution and divestment of its wholly-owned subsidiaries, Hempco and AHE, during the year ended June 30, 2021, the operations of Hempco and AHE have been presented as discontinued operations and the Company's operational results have been retroactively restated, as required. Refer to Note 12(b) of the Financial Statements for additional information. | |
(3) | Includes the impact of actual and expected product returns and price adjustments (Q1 2022 - $0.7 million; Q4 2021 - $0.7 million; Q1 2020 - $0.8 million). | |
(4) | These terms are defined in the "Cautionary Statement Regarding Certain Non-GAAP Performance Measures" section of the MD&A. Refer to the following 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 IFRS 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. | |
(5) | Represents total biological assets and cannabis inventory, exclusive of merchandise, accessories, supplies and consumables. | |
(6) | The kilograms sold is offset by the grams returned during the period. |
Conference Call
Aurora will host a conference call today,Tuesday, November 9, 2021, to discuss these results. Miguel Martin, Chief Executive Officer, and Glen Ibbott, Chief Financial Officer, will host the call starting at 5:00 p.m. Eastern Time | 3:00 p.m. Mountain Time. A question and answer session will follow management's presentation.
Conference Call Details
DATE: | Tuesday, November 9, 2021 | |
TIME: | 5:00 p.m. Eastern Time | 3:00 p.m. Mountain Time | |
WEBCAST: |
Investors may submit questions in advance or during the conference call itself through same weblink listed above. This weblink has also been posted to the Company's "Investor Info" link at https://investor.auroramj.com/ under "News & Events".
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 brand portfolio includes Aurora, Aurora Drift, San Rafael '71, Daily Special, MedReleaf, CanniMed, Pedanios, Whistler, Reliva and KG7 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. Learn more at www.auroramj.com and follow us on Twitter and LinkedIn.
Aurora's common shares trade on the TSX and NASDAQ under the symbol "ACB" and is a constituent of the S&P/TSX Composite Index.
Forward Looking Statements
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. Forward-looking statements made in this news release include, but are not limited to, statements with respect to:
These forward-looking statements are only predictions. Forward looking information or statements contained in this news release have been developed based on assumptions management considers to be reasonable. Material factors or assumptions involved in developing forward-looking statements include, without limitation, publicly available information from governmental sources as well as from market research and industry analysis and on assumptions based on data and knowledge of this industry which the Company believes to be reasonable. 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. These risks include, but are not limited to, the ability to retain key personnel, the ability to continue investing in infrastructure to support growth, the ability to obtain financing on acceptable terms, the continued quality of our products, customer experience and retention, the development of third party government and non-government consumer sales channels, management's estimates of consumer demand in Canada and in jurisdictions where the Company exports, expectations of future results and expenses, the risk of successful integration of acquired business and operations, management's estimation that SG&A will grow only in proportion of revenue growth, the ability to expand and maintain distribution capabilities, the impact of competition, the general impact of financial market conditions, the yield from cannabis growing operations, product demand, changes in prices of required commodities, competition, and the possibility for changes in laws, rules, and regulations in the industry, epidemics, pandemics or other public health crises, including the current outbreak of COVID-19, and other risks, uncertainties and factors set out under the heading "Risk Factors" in the Company's annual information form dated September 27, 2021 (the "AIF") and filed with Canadian securities regulators available on the Company's issuer profile on SEDAR at www.sedar.com and filed with and available on the SEC's website at www.sec.gov. 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 law
Non-GAAP Measures
This news release contains certain financial performance measures that are not recognized or defined under IFRS (termed "Non-GAAP Measures"). As a result, this data may not be comparable to data presented by other licensed producers of cannabis and cannabis companies. For an explanation of these measures to related comparable financial information presented in the consolidated financial statements prepared in accordance with IFRS, refer to the discussion below. The Company believes that these Non-GAAP Measures are useful indicators of operating performance and are specifically used by management to assess the financial and operational performance of the Company. These Non-GAAP Measures include, but are not limited, to the following:
Non-GAAP measures should be considered together with other data prepared accordance with IFRS to enable investors to evaluate the Company's operating results, underlying performance and prospects in a manner similar to Aurora's management. Accordingly, these non-GAAP measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
Last Trade: | US$5.41 |
Daily Change: | -0.19 -3.39 |
Daily Volume: | 970,768 |
Market Cap: | US$295.710M |
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