- Global Cannabis Net Revenue of $60.6 Million
- Adjusted EBITDA Improved by 22% to a loss of $9.0 Million versus Q1 2022
- Company Reaffirms Goal of Adjusted EBITDA Profitability by H1/2023
- Transformation Plan Ahead of Schedule; Company Now Expects to Realize Upper End of $60 to $80 Million Range in Total Cost Savings by H1/2023; ~$60 Million Annualized Savings Implemented to Date
- Company Remains #1 Canadian LP in Global Medical Cannabis; International Cannabis Revenue Increased 24% from Q1 2022
NASDAQ |TSX: ACB
EDMONTON, AB, Feb. 10, 2022 /CNW/ – 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:
- Medical cannabis net revenue1 was $45.7 million, an 18% increase from the prior year period, delivering 76% of Aurora’s Q2 2022 consolidated revenue and 89% of adjusted gross profit.
- The increase in revenue was driven by continued growth in the international medical business, up 24% sequentially and 67% year over year, as the Company continued to develop new, high margin medical markets. We do not currently expect to recognize revenue from shipments to Israel in Q3.
- Net revenue in Q2 2022 includes a provision recorded against international revenue of $2.4 million for certain current and prior period international shipments that were either above or below target THC potency ranges. Management does not expect this level of provision to recur. Year over year international revenue growth, excluding the provision was 87%.
- Adjusted gross margin before fair value adjustments on medical cannabis net revenue1 was 62% compared to 64% sequentially and 56% in the prior year period. The year over year improvement was a result of an increase in international sales which yield higher margins and an overall reduction in production costs due to the closure of non-core facilities as part of our business transformation plan.
Consumer Cannabis:
- Consumer cannabis net revenue1 was $14.8 million compared to the prior quarter net revenue of $19.1 million, with the decline due mainly to industry-wide pricing pressures across our portfolio and an 18% decrease of kilograms and equivalent sold compared to the prior quarter. This was partially offset by a positive 5% mix shift in the Company’s brand mix from Daily Special to San Rafael ’71, as the Aurora continues to pivot towards premium offerings.
- Adjusted gross margin before fair value adjustments on consumer cannabis net revenue1 was 24% versus 32% sequentially and 27% in the prior year period. The decrease of 8% from Q1 2022 was mainly related to industry-wide pricing compression, offset by a 2% improvement from Aurora’s continuing shift toward a premium product portfolio. Additionally, the clear out of aging and low potency consumer cannabis through bulk wholesale channels impacted margins negatively by 4%. Excluding the discounted bulk sales, which are not expected to recur regularly, the Company’s consumer adjusted gross margin would be 28%.
Selling, General and Administrative (“SG&A”):
- SG&A, including Research and Development (“R&D”), was $40.9 million (excluding $2.5 million of restructuring related costs and $1.2 million of prior period employee-related accruals) versus $44.0 million in the prior quarter and $43.3 million in the prior year period, presented on a comparable basis.
Consolidated:
- Q2 2022 total cannabis net revenue1 was $60.6 million, up 1% sequentially. The Q2 2022 average net selling price per gram of dried cannabis1, excluding the effect of bulk wholesale of excess mid-potency cannabis flower, declined 10% to $4.20 from $4.67 in Q1 2022 reflecting continued downward pressures on pricing due to competition.
- Adjusted gross margin before fair value adjustments on cannabis net revenue1 was 53% in Q2 2022 versus 54% in the prior quarter and 44% in Q2 2021. The increase in Adjusted gross margin compared to the prior year period is due to increased sales in our international medical markets which command significantly higher average net selling prices and margins.
- Adjusted EBITDA1 loss improved to $9.0 million in Q2 2022 versus $11.5 million in Q1 2022 and $11.2 million in the prior year period. The decrease in loss as compared to Q1 2022 was primarily driven by the $3.1 million decrease in SG&A, net of restructuring and one-time costs, while revenue and Adjusted gross margins remained steady.
| __________ |
| 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 government grant income | -$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 investments in associates | – | – | $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 cannabis net revenue (4b) | 53% | 44% | N/A | 9% | 54% | N/A | (1) % |
| Adjusted gross margin before FV adjustments on medical cannabis net revenue (4b) | 62% | 56% | N/A | 6% | 64% | N/A | (2)% |
| Adjusted gross margin before FV adjustments on consumer cannabis net revenue (4b) | 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”.
