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 second quarter fiscal 2022 ended December 31, 2021.
"During the second quarter, we improved our Adjusted EBITDA by $2.5 million over Q1, moving us closer to our profitability goal. Our focus remains on further cost reductions, and we are pleased to announce today that we expect to reach the high end of the $60 to $80 million range. Our balance sheet remains among the strongest in the industry, with approximately $445 million in cash as of yesterday. This gives us significant working capital to support organic growth and positions us to pursue strategic M&A opportunities," stated Miguel Martin, Chief Executive Officer of Aurora.
"Q2 total cannabis net revenue held steady sequentially, driven by our industry leading, high margin global medical cannabis business. New international markets are rapidly opening, and with the unique ability to navigate complex regulatory environments, we see a significant revenue opportunity of which we are at the forefront. While the Canadian adult-use market continues to face challenges, we are focused on introducing a new range of products set to launch this spring," he concluded.
Second Quarter 2022 Highlights
(Unless otherwise stated, comparisons are made between fiscal Q2 2022, Q1 2022, and Q2 2021 results and are in Canadian dollars)
Medical Cannabis:
Consumer Cannabis:
Selling, General and Administrative ("SG&A"):
Consolidated:
1 These terms are non-GAAP measures, see "Non-GAAP Measures" below. |
Operational Efficiency Plan, Balance Sheet Strength, & Working Capital Improvement:
Aurora has previously identified cash savings of $60 million to $80 million. We have already executed approximately $60 million in annualized run-rate cost savings to date, and now expect to reach the high end of this range by the end of H1 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.
At December 31, 2021, Aurora had $383.8 million of cash, including $51.3 million in restricted cash, no secured term debt, and access to US$1.0 billion of capital under its shelf prospectus, including the full amount of a US$300 million at-the-market (ATM) facility. Subsequent to Q2 2022, the Company issued 19,595,000 common shares for gross proceeds of US$89.7 million under the ATM program. As disclosed previously, management considers the ATM to be available for strategic purposes.
Quarterly cash flow summary:
($ thousands) | Q2 2022 | Q1 2022 | Q2 2021(2) |
Cash, Opening (1) | $424,301 | $440,851 | $133,678 |
Cash used in operations, including working capital | -$20,298 | -$17,968 | -$67,271 |
Capital expenditures and investments, net of disposals and | -$11,497 | $3,053 | -$8,837 |
Debt and interest payments | -$8,753 | -$1,551 | -$8,474 |
Cash use | -$40,548 | -$16,466 | -$84,582 |
Proceeds raised from sale of marketable securities and | - | - | $6,135 |
Proceeds raised through debt | - | - | - |
Proceeds raised through equity financing | - | -$84 | $379,155 |
Cash raised | - | -$84 | $385,290 |
Cash, Ending (1) | $383,753 | $424,301 | $434,386 |
(1) | Includes restricted cash of $51.3M at Q2 2022, $51.5M at Q1 2022, and $50.0M at Q2 2021. |
(2) | Previously reported amounts have been retroactively recast for the biological assets and inventory non-material prior period error. Refer to the "Significant Accounting Policies and Judgments" section in Note 2(d) of the Financial Statements. |
Refer to the "Consolidated Statement of Cash Flows" in the "Consolidated Financial Statements" for our cash flow statements prepared in accordance with IAS 7 – Statement of Cash Flows.
($ thousands, except Operational Results) | Q2 2022 | Q2 2021(1)(2) | $ Change | % Change | Q1 2022 | $ Change | % Change |
Financial Results | |||||||
Total net revenue (3) | $60,586 | $67,673 | ($7,087) | (10)% | $60,108 | $478 | 1% |
Medical cannabis net revenue (3)(4a) | $45,748 | $38,856 | $6,892 | 18% | $40,984 | $4,764 | 12% |
Consumer cannabis net revenue (3)(4a) | $14,838 | $28,573 | ($13,735) | (48)% | $19,124 | ($4,286) | (22)% |
Adjusted gross margin before FV adjustments on | 53% | 44% | N/A | 9% | 54% | N/A | (1) % |
Adjusted gross margin before FV adjustments on | 62% | 56% | N/A | 6% | 64% | N/A | (2)% |
Adjusted gross margin before FV adjustments on | 24% | 27% | N/A | (3)% | 32% | N/A | (8)% |
SG&A expense | $42,961 | $41,961 | $1,000 | 2% | $45,760 | ($2,799) | (6)% |
R&D expense | $1,625 | $2,432 | ($807) | (33)% | $3,671 | ($2,046) | (56)% |
Adjusted EBITDA (4c) | ($9,040) | ($11,185) | $2,145 | 19% | ($11,543) | $2,503 | 22% |
Balance Sheet | |||||||
Working capital | $481,574 | $592,519 | ($110,945) | (19)% | $532,612 | ($51,038) | (10)% |
Cannabis inventory and biological assets (5) | $139,625 | $179,275 | ($39,650) | (22)% | $139,103 | $522 | 0% |
Total assets | $2,485,384 | $2,829,963 | ($344,579) | (12)% | $2,560,316 | ($74,932) | (3)% |
Operational Results – Cannabis | |||||||
Average net selling price of dried cannabis excluding bulk sales (4) | $4.20 | $4.45 | ($0.25) | (6)% | $4.67 | ($0.47) | (10)% |
Kilograms sold (6) | 13,043 | 15,253 | (2,210) | (14)% | 12,484 | 559 | 4% |
(1) | Amounts have been retroactively recast for the biological assets and inventory non-material prior period error. Refer to the "Change in Accounting Policies and Estimates" section below 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 and Note 12(b) of the annual audited consolidated financial statements for the year ended June 30, 2021 for additional information. | |
(3) | Includes the impact of actual and expected product returns and price adjustments (Q2 2022 - $1.3 million; Q1 2022 - $0.7 million; Q2 2021 - $2.7 million). | |
(4) | These terms are defined in the "Cautionary Statement Regarding Certain Non-GAAP Performance Measures" section of this 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, Thursday, February 10, 2022, 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: | Thursday, February 10, 2022 |
TIME: | 5:00 p.m. Eastern Time | 3:00 p.m. Mountain Time |
WEBCAST: | https://viavid.webcasts.com/starthere.jsp?ei=1524077&tp_key=b38bc0a5e1 |
Investors may submit questions in advance or during the conference call itself through the 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 adult-use brand portfolio includes Aurora Drift, San Rafael '71, Daily Special, and Whistler, as well as CBD brands, Reliva and KG7. Medical cannabis brands include MedReleaf, CanniMed, Aurora and Whistler Medical Marijuana Co. 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 NASDAQ and TSX 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.
Adjusted EBITDA
The following is the Company's adjusted EBITDA:
($ thousands) | Three months ended | Six months ended | |||
December 31, | September 30, | December 31, | December 31, | December 31, | |
Net income (loss) from continuing operations | (75,143) | (11,884) | (300,222) | (87,027) | (398,883) |
Non-operating expense (income) (3) | 14,779 | (27,185) | 10,318 | (12,406) | 26,682 |
Income tax expense (recovery) | (368) | (208) | 3,167 | (576) | 3,778 |
Depreciation and amortization | 24,195 | 21,630 | 24,463 | 45,825 | 47,114 |
Inventory and biological assets fair value adjustments | (16,647) | 1,297 | 4,954 | (15,350) | (7,921) |
Share-based compensation | 3,900 | 2,847 | 5,987 | 6,747 | 12,848 |
Acquisition costs | 209 | 175 | — | 384 | 1,104 |
Restructuring related charges (4) | 3,023 | 1,894 | 5,645 | 4,917 | 53,236 |
Out-of-period adjustments (5) | 1,174 | 4,699 | 374 | 5,873 | (282) |
Asset impairments | 35,838 | (4,808) | 234,129 | 31,030 | 240,599 |
Adjusted EBITDA (6) | (9,040) | (11,543) | (11,185) | (20,583) | (21,725) |
(1) | Amounts have been retroactively recast for the biological assets and inventory non-material prior period error. Refer to the "Change in Accounting Policies and Estimates" section below 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 and Note 12(b) of the annual audited consolidated financial statements for the year ended June 30, 2021 for more information about the divestiture. During the three months ended December 31, 2020, Hempco and AHE incurred an EBITDA loss of $0.5 million and $0.5 million, respectively. |
(3) | Non-operating expense (income) includes: interest and other income; finance and other costs; foreign exchange gain (loss); government grant income; and fair value changes on derivative investments, derivative liabilities, contingent consideration, loss on extinguishment of derivative investment, and (gain) loss on the modification of debt. Refer to Note 19 of the Financial Statements. |
(4) | Restructuring related charges includes legal contract termination fees, restructuring charges and severance associated with the business transformation plan and revenue provisions as a result of Company initiated product swap to replace low quality product with higher potency product at the provinces. |
(5) | Included in out-of-period adjustments in Q2 2022 are $1.2 million related to prior period payroll related expenses; Q1 2022 are $6.3 million expenses related to the prior year employee bonuses offset by $1.6 million other gains related to prior periods. |
(6) | Adjusted EBITDA is a non-GAAP financial measure and is not a recognized, defined, or standardized measure under IFRS. Refer to "Cautionary Statement Regarding Certain Non-GAAP Performance Measures" section of the MD&A. In order to provide more direct comparability to industry peers, management has captured restructuring and out of period costs for prior periods, as well as the current period, in this reconciliation. Previously management reported these costs separately as a further adjustment to EBITDA. |
| Last Trade: | US$3.75 |
| Daily Change: | -0.10 -2.60 |
| Daily Volume: | 453,232 |
| Market Cap: | US$205.800M |
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