Aurora Cannabis Announced Second Quarter 2020 Results

Aurora Cannabis Inc. (NYSE | TSX: ACB), is a Canadian company defining the future of cannabis worldwide. The company announced its financial and operational results for the second quarter of fiscal 2020 ended December 31, 2019.

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.

“Despite delivering modest growth in our core medical and consumer business in Q2, we took immediate and deliberate actions to align our Company to current market conditions,” said Michael Singer, Executive Chairman and Interim CEO, Aurora Cannabis. “As announced last week, being a profitable cannabis company for our investors is the singular near-term focus for Aurora and we have begun to implement a business transformation plan where we intend to manage the business with a high degree of fiscal discipline.”

Second Quarter 2020 Highlights

• Cannabis net revenue of $63.2 million, excluding provisions, in Q2 2020 compared to $70.8 million in Q1 2020: Canadian and international medical cannabis net revenue of $27.4 million, with Canadian medical net revenue sequentially flat at $25.6 million, and international medical net revenue down from $5.0 million to $1.8 million due to a temporary sales interruption. Consumer cannabis net revenue, excluding provisions, of $33.5 million was an increase of 11% from $30.0 million in the previous quarter. Including the $10.6 million provision for returns and price adjustments for prior quarter sales, reported consumer cannabis net revenues were $22.9 million. Also affecting Q2 consumer cannabis net revenue was slower provincial ordering during the quarter, a shift in the market to value brands (Aurora launched “Daily Special” in early February 2020), and the industry-wide impact from the slow pace of retail store licensing. Wholesale bulk cannabis net revenues of $2.4 million, a decline from $10.3 million in the previous quarter, due to overall volume declines and the wholesale of lower potency (priced) product
• Production volume in fiscal Q2 was 30,691 kilograms, in-line with previous expectations as Aurora realigned its cultivation strategy to produce a greater amount of higher value and higher potency strains.
• Cash cost to produce per gram sold remained relatively consistent at $0.88 per gram versus $0.85 per gram last quarter – Aurora intends to maintain this metric below $1.00 per gram.
• Aurora’s medical patient base remained relatively consistent at 90,307.
• Successfully launched Cannabis 2.0 products with sales to provincial distributors commencing on December 17, 2019.

Subsequent Events & Business Transformation Plan

Subsequent to the quarter end, the Company made several decisions designed to strategically transform its operations and provide financial flexibility in response to a changing market and regulatory environment, while supporting its long-term growth:

• Announced CEO succession plan and expansion of the Board of Directors
• Executive Chairman Michael Singer appointed Interim CEO, effective February 6, 2020; search for permanent successor underway
• Two new Independent Directors joined the Board for a total of 10 directors, including 7 Independents
• Announced comprehensive transformation plan to significantly reduce the Company’s expense base, rationalize capital expenditures, and better align its balance sheet with current market conditions
• Secured credit facility amendments that remove EBITDA ratio covenants and provided additional financial flexibility as Aurora executes transformation plan

“The transformational actions we announced last week have already positively impacted SG&A expense and we are confident that our run-rate will be approximately $40 million – $45 million as we exit the fiscal fourth quarter of 2020.  This is a very important step toward EBITDA profitability,” said Glen Ibbott, CFO. “In addition, our credit facility was amended to provide greater flexibility to Aurora. More specifically, Aurora chose to downsize the facility by $96.5 million with the elimination of undrawn term loan capacity, and further used $45 million of restricted cash to repay a portion of the drawn term loan balance for the purpose of reducing leverage and cash required for debt service.”

Following these facility changes, Aurora’s current credit facility and other debt outstanding includes:

• $50 million revolving facility, of which $2 million was drawn as of December 31, 2019
• $162 million of fully drawn senior secured term loans
• US$345 million of senior unsecured convertible debentures due February 2024