Obviously, thats not the number we were hoping for, chief corporate officer Cam Battley told analysts on a Thursday night post-earnings conference call. The past few months have been challenging for the broader cannabis industry between issues of governance, evolving consumer demand and provincial retail bottlenecks. Theres been no shortage of negative news.
This news also 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 and include, but are not limited to the settlement of the March Convertible Debentures, reduction in capital investments, and the successful launch and replenishment strategy for Cannabis 2.0 . These 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 and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results 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 adult-use sales channels, managements estimation of consumer demand in Canada and in jurisdictions where the Company exports, expectations of future results and expenses, the availability of additional capital to complete construction projects and facilities improvements, the risk of successful integration of acquired business and operations, the ability to expand and maintain distribution capabilities, the impact of competition, and the possibility for changes in laws, rules, and regulations in the industry. 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 law.
New York-listed shares fell 13.64 per cent to $2.85 in pre-market trading on Friday, the lowest level since recreational legalization in Canada.
Analysts had expected revenue of $90.6 million, and an adjusted EBITDA loss of $19.5 million, according to Bloomberg estimates.
In addition to the Companys rapid organic growth and strong execution on strategic M&A, which to date includes 17 wholly owned subsidiary companies – MedReleaf, CanvasRX, Peloton Pharmaceutical, Aurora Deutschland, H2 Biopharma, BC Northern Lights, Larssen Greenhouses, CanniMed Therapeutics, Anandia, HotHouse Consulting, MED Colombia, Agropro, Borela, ICC Labs, Whistler, Chemi Pharmaceutical, and Hempco – Aurora is distinguished by its reputation as a partner and employer of choice in the global cannabis sector, having invested in and established strategic partnerships with a range of leading innovators, including: Radient Technologies Inc. (TSXV: RTI), Cann Group Ltd. (ASX: CAN), Micron Waste Technologies Inc. (CSE: MWM), Choom Holdings Inc. (CSE: CHOO), CTT Pharmaceuticals (OTCC: CTTH), Alcanna Inc. (TSX: CLIQ), High Tide Inc. (CSE: HITI), EnWave Corporation (TSXV: ENW), Capcium Inc. (private), Evio Beauty Group (private), and Wagner Dimas (private).
In a dramatic shift from the industry-wide race to grow production capacity, Aurora announced it will scale back development of its cultivation footprint.
Under the plan, the company will immediately cease construction activity at its Aurora Nordic 2 facility in Denmark, which is expected to save approximately $80 million over the next year. The company has also decided to defer construction activity at its Aurora Sun facility in Medicine Hat, Alta., for the foreseeable future to conserve about $110 million in cash.
These adjustments will result in a significant decrease in our ongoing quarterly level of capital investment and are expected to conserve approximately $190 million of cash over the next few quarters as compared to our previous build-out plan, chief financial officer Glen Ibbott said on the call.
With the work completed to date, the company will be well positioned to advance these capital projects as global demand or as Auroras market share grow.
Other steps include, the announcement of a formal plan to settle our five per cent convertible debentures due March 2020… and raising over US$124 million in gross equity proceeds since the start of fiscal 2020 through our at-the-market financing program.
Battley touted a number of bright spots in the quarter, including the companys steady 58 per cent gross margin, reducing cash cost to produce 25 per cent to $0.85 per gram, and a three per cent gain on net selling price to consumers to $5.28 per gram.
The global medical cannabis and hemp derived cannabinoids markets represent a significant opportunity for Aurora. To support the Companys prospects in these markets, Aurora continues to make necessary investments that will build long-term value for its shareholders while balancing growth with prudent financial management and capital allocation. This focus includes aligning Auroras planned cultivation assets and capital expenditures with global cannabis demand. With the Companys operating cultivation assets outperforming nameplate capacity, Aurora is positioned to the meet near term global market demand and to pursue long term white label and contract manufacturing agreements with distribution partners in the Canadian and international markets.
We have a suite of production assets that deliver very high-quality cannabis on a consistent basis and with the lowest production costs among those of our peers that are operating at scale, Ibbott said.
Lets consider two comparable companies, each with $80 million of quarterly SG&A. Aurora would need to generate about $130 million of revenue to flip to profitability. A comparable company, lets say, a 30 per cent gross margin, would need almost $270 million in revenue to break even.
During Q1 2020, Aurora produced 41,436 kilograms of cannabis as compared to 29,034 kilograms in the prior quarter. The 42.7% increase in production output was primarily due to continuing production scale up at the Companys Aurora Sky facility. While Aurora Sky has delivered well above expectations from a capacity perspective, in responding to shifting consumer preferences the Company is likely to plant higher potency, lower yielding strains which are in higher demand in the recreational market. As such we do not expect near term production to reach levels achieved in Q1 2020, and the Company continues to operate at a 150,000 kg annual production capacity.
22h ago Aurora latest pot firm to disappoint as recreational sales plunge 33% Kristine Owram, Bloomberg News
Headquartered in Edmonton, Alberta, Canada with funded capacity in excess of 625,000 kg per annum and sales and operations in 25 countries across five continents, Aurora is one of the worlds largest and leading cannabis companies. Aurora is vertically integrated and horizontally diversified across every key segment of the value chain, from facility engineering and design to cannabis breeding and genetics research, cannabis and hemp production, derivatives, high value-add product development, home cultivation, wholesale and retail distribution.
Aurora Cannabis Inc. shares fell 9 per cent in post-market trading as it became the latest pot company to miss estimates.
Aurora reported quarterly net revenue of $75.2 million (US$56.8 million), below the average analyst estimate of $90.6 million. Sales into the Canadian recreational market tumbled 33 per cent to $30 million.
Average net selling price of cannabis increased by $0.36 per gram over the prior quarter from $5.32 in Q4 2019 to $5.68 in Q1 2020. This increase is primarily attributable to an increase in the average net selling price of consumer cannabis coupled with a decrease in sales volumes to the bulk wholesale markets which yield lower average net selling prices as compared to the consumer and medical markets.
The companys adjusted loss before interest, taxes, depreciation and amortization was $39.7 million, wider than the expected $20.8 million. It also appeared to walk back its statement last quarter that it continues to track toward positive adjusted Ebitda, citing near-term challenges to achieving positive adjusted Ebitda.
The other near-term focus and market opportunity for the Company is expanding its operating footprint in the United States. To ensure a successful entry, Aurora is evaluating a number of potential accretive alternatives with a focus on adding operating cash flows. The Company is committed to engage only in activities which are permissible under both state and federal laws.
Aurora said it has ceased construction at its Aurora Nordic 2 facility in Denmark, which will save approximately $80 million over the next year. The company also reached an agreement with investors holding about $155 million of its March 2020 convertible debentures to convert early at a lower price.
Earlier Thursday, Canopy Growth Corp. reported revenue that missed the lowest analyst estimate amid a large restructuring charge, sending its shares to the lowest since 2017. Investors are growing increasingly impatient with cannabis companies that dont show a clear path to profitability.