Aurora Cannabis Announces Fiscal 2023 Second Quarter Results
Aurora Cannabis (ACB) reported a Q2 2023 net revenue of $61.7 million, a 25% increase from Q1 2023, driven by growth across all cannabis segments and a full contribution from Bevo Agtech Inc. Additionally, the company achieved a positive Adjusted EBITDA of $1.4 million, marking a significant turnaround from previous losses. Aurora has realized approximately $340 million in annual cost savings since early 2020 and reduced debt by $302 million in 2022. Despite a net loss of $67.2 million, the company maintains a net cash position, with approximately $310 million in cash as of February 2023.
- Quarterly net revenue increased by 25% from Q1 2023.
- Achieved positive Adjusted EBITDA of $1.4 million in Q2 2023.
- Realized approximately $340 million in annual cost savings since February 2020.
- Reduced total debt by approximately $302 million in CY 2022.
- Net loss of $67.2 million, compared to $51.9 million in the prior quarter.
- Medical cannabis net revenue down 14% year-over-year.
NASDAQ | TSX: ACB
- Cannabis Revenues Up ~
20% from Fiscal Q1 2023, Net Revenue1 of$61.7 Million - Achieves Positive Adjusted EBITDA1 in Line with Prior Guidance
- Delivers
~ in Annualized Cost Savings Since$340 Million February 2020 - Balance Sheet Remains in Net Cash Position, Among Strongest in Industry; Debt Reduction of
~ in CY 2022$302 Million
"We are pleased to have delivered on our commitment to achieve positive Adjusted EBITDA1 in Q2 2023, following a tremendous effort to realize approximately
"Revenue growth in Q2 2023 was primarily driven by our unique, portable, and profitable international medical program. Our Canadian rec business also demonstrated sequential growth driven by significant product innovation, and our Canadian medical cannabis business continued to benefit from strong patient relationships and high barriers to entry. Q2 2023 also included the first full-quarter of results from our recent
"Looking ahead, we are focused on profitable growth opportunities across all segments, ongoing discipline in capital deployment, and our ability to generate positive operating cash flow as we continue to build value for shareholders," he concluded.
__________________________________ |
1 This press release includes certain non-GAAP financial measures, which are intended to supplement, not substitute for, comparable GAAP financial measures. See "Non-GAAP Measures" below for reconciliations of non-GAAP financial measures to GAAP financial measures. |
Second Quarter 2023 Highlights
(Unless otherwise stated, comparisons are made between fiscal Q2 2023, Q1 2023, and Q2 2022 results and are in Canadian dollars)
Consolidated:
- Total net revenue1 was
$61.7 million $49.3 million $60.6 million $6.6 million August 2022 . - Excluding the impact of the non-core bulk wholesales, adjusted gross margin before fair value adjustments on cannabis net revenue1 for Q2 2023 remained strong and steady, and well above the industry average, at
49% compared to54% in Q1 2023 and54% in Q2 2022. Sequentially, adjusted gross margin was impacted by growth in the consumer channel and incremental export revenue into developing countries, both of which deliver healthy gross margins but at levels below our Canadian and European medical businesses.
Medical Cannabis:
- Medical cannabis net revenue1 was
$39.5 million 25% increase from the prior quarter and a14% decrease from the prior year period, delivering64% of Aurora's Q2 2023 consolidated net revenue1 and87% of Adjusted gross profit before fair value adjustments1. - The increase in net revenue1 from Q1 2023 was primarily attributable to growth into international export markets such as
Australia ,Poland , theUK , andCayman Islands , demonstrating the Company's ability to navigate complex import/export licensing requirements to participate in these high-growth markets. The decrease from the prior year quarter was primarily attributable to timing of sales to certain international export markets. - Adjusted gross margin before fair value adjustments1 on medical cannabis net revenue was
61% compared to63% in the prior year period and67% sequentially. The continued strength of the Company's medical adjusted gross margins1 reflect the direct-to-patient model inCanada and strong and sustained presence in the high margin international medical business. The decrease is primarily driven by higher sales into certain developing international export markets, which yield a slightly lower adjusted gross margin1, but still contribute strong positive adjusted gross profits1.
Consumer Cannabis:
- Consumer cannabis net revenue1 was
$14.6 million 7% increase from the prior quarter. Excluding the one-time Q1 2023 refund of excise taxes, Q2 2023 net revenue1 was a13% sequential increase. - The increase in net revenue1 from Q1 2023 was driven by growth in both Aurora's premium brand San Rafael '71, and by the Company's value brand Daily Special, which offers a strong consumer potency/quality/price proposition.
- Adjusted gross margin before fair value adjustments1 on consumer cannabis net revenue was
20% , compared to25% in the prior quarter and23% in the comparable prior year period.
Selling, General and Administrative ("SG&A"):
- SG&A, including Research and Development ("R&D"), was
$41.6 million $14.0 million $0.9 million - Excluding the non-routine items noted above, SG&A and R&D continued to be well controlled and declining at
$26.6 million $32.1 million $39.3 million
Plant Propagation:
- Plant propagation revenue1 was comprised wholly from the Bevo business, contributing
$6.6 million $3.3 million August 25, 2022 . Bevo's business, is reasonably predictable with customer orders known well in advance of planting dates, and in many instances requiring customer deposits prior to planting coupled with many long tenured customer relationships. However, Bevo's business does exhibit operational seasonality, with the months of January to June representing the busiest operational and financial period for Bevo with July to December being less operationally intensive.
Net Loss:
Net loss for the three months ended
Adjusted EBITDA:
Adjusted EBITDA1 increased to positive
Operational Efficiency Plan, Balance Sheet Strength, & Cash Use:
Aurora has completed its previously announced strategic transformation plan. The achievement of significant and sustainable operating cost and SG&A reductions resulted in positive Adjusted EBITDA during Q2 2023.
Aurora has one of the strongest balance sheets in the Canadian Cannabis industry with approximately
During the three months ended
Cash use is outlined in the following table:
($ thousands) | Q2 2023 | Q2 2022 (2) | Q1 2023 (2) |
Cash, Opening (1) | |||
Cash used in operations, including working capital (3) | ( | ( | ( |
Capital expenditures and investments, net of disposals and government grant income | ( | ||
Acquisition of business, net of cash acquired | - | ( | |
Deposits | ( | ( | |
Debt and interest payments | ( | ( | ( |
Cash use | ( | ( | ( |
Investment in derivatives and proceeds from loans receivable | ( | ( | |
Proceeds raised through debt | - | ||
Proceeds (costs) raised through equity financing | ( | ||
Cash raised | |||
Effect of foreign exchange on cash and cash equivalents | ( | ( | |
Cash, Ending (1) | |||
Total Debt | ( | ( | ( |
(1) Includes restricted cash of |
(2) Prior period comparatives have been recast to conform to the current period's presentation. |
(3) Cash used in operations for Q2 2023 includes |
Key Quarterly Financial and Operating Results
($ thousands, except Operational Results) | Q2 2023 | Q2 2022 | $ Change | % Change | Q1 2023 | $ Change | % Change |
Financial Results | |||||||
Total net revenue (1)(2) | 2 % | 25 % | |||||
Medical cannabis net revenue (1)(2) | ( | (14 %) | 25 % | ||||
Consumer cannabis net revenue (1)(2) | 2 % | 7 % | |||||
Adjusted gross margin before FV adjustments on total net revenue (2) | 45 % | 53 % | N/A | (8 %) | 50 % | N/A | (5 %) |
Adjusted gross margin before FV adjustments on core cannabis net revenue (2) | 49 % | 54 % | N/A | (5 %) | 54 % | N/A | (5 %) |
Adjusted gross margin before FV adjustments on medical cannabis net revenue (2) | 61 % | 63 % | N/A | (2 %) | 67 % | N/A | (6 %) |
Adjusted gross margin before FV adjustments on consumer cannabis net revenue (2) | 20 % | 23 % | N/A | (3 %) | 25 % | N/A | (5 %) |
Adjusted SG&A expense (2) | ( | (33 %) | ( | (17 %) | |||
Adjusted R&D expense (2) | ( | (25 %) | ( | (14 %) | |||
Adjusted EBITDA (2) | ( | 120 % | ( | 119 % | |||
Balance Sheet | |||||||
Working capital (2) | ( | (15 %) | ( | (20) % | |||
Cannabis inventory and biological assets (3) | ( | (33 %) | ( | (23) % | |||
Total assets | ( | (59 %) | ( | (12) % | |||
Operational Results – Cannabis | |||||||
Average net selling price of dried cannabis excluding bulk sales (2) | 6 % | ( | (10) % | ||||
Kilograms sold (4) | 15,269 | 13,043 | 2,226 | 17 % | 12,165 | 3,104 | 26 % |
(1) Includes the impact of actual and expected product returns and price adjustments (Q2 2023 - |
(2) This press release includes certain non-GAAP financial measures, which are intended to supplement, not substitute for, comparable GAAP financial measures. See "Non-GAAP Measures" below for reconciliations of non-GAAP financial measures to GAAP financial measures. |
(3) Represents total biological assets and inventory, exclusive of merchandise, accessories, supplies, consumables and plant propagation biological assets. |
(4) The kilograms sold is offset by the grams returned during the period. |
Conference Call
Aurora will host a conference call today,
Conference Call Details
DATE: | Thursday, |
TIME: | |
WEBCAST: |
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 opening the world to cannabis, serving both the medical and consumer markets. Headquartered in
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:
- pro forma measures including revenue, cash flow, Adjusted gross margin before fair value adjustments1, and expected SG&A run-rates;
- the Company's achievement of the previously announced strategic transformation plan and positive Adjusted EBITDA1;
- the Company's continued focus on profitable growth opportunities, ongoing discipline in capital deployment, cost savings and Adjusted EBITDA1 targets;
- the Company's ability to navigate complex import/export licensing requirements to participate in high-growth markets;
- balance sheet strength and availability of funds under the ATM Program;
- the acquisition of Bevo and the anticipated contribution to top line and Adjusted EBITDA1; and
- the creation of value for shareholders, including the future achievement of positive operating cash flow.
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
Non-GAAP Measures
This news release contains reference to 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. Non-GAAP Measures should be considered together with other data prepared in 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 to assist management and investors in assessing financial performance and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
The information included under the heading "Cautionary Statement Regarding Certain Non-GAAP Performance Measures" in the Company's management's discussion and analysis for the three and six months ended
Net Revenue, Adjusted Gross Profit and Margin
Net revenue, adjusted gross profit before FV adjustments, and adjusted gross margin before FV adjustments are Non-GAAP Measures and can be reconciled with revenue, gross profit and gross margin, the most directly comparable GAAP financial measures, respectively, as follows:
($ thousands) | Medical Cannabis | Consumer Cannabis | Core | Total Core Cannabis | Non-Core Wholesale Bulk Cannabis | Plant Propagation | Total |
Three months ended | |||||||
Gross revenue | 42,340 | 19,820 | 664 | 62,824 | 224 | 6,630 | 69,678 |
Excise taxes | (2,826) | (5,173) | — | (7,999) | — | — | (7,999) |
Net revenue | 39,514 | 14,647 | 664 | 54,825 | 224 | 6,630 | 61,679 |
Cost of sales | (26,380) | (22,673) | (1,013) | (50,066) | (1,417) | (8,080) | (59,563) |
Gross profit (loss) before FV adjustments | 13,134 | (8,026) | (349) | 4,759 | (1,193) | (1,450) | 2,116 |
Depreciation | 2,055 | 1,560 | 68 | 3,683 | 95 | 843 | 4,621 |
Inventory impairment, non-recurring, business transformation, and market development costs included in cost of sales (1)(2)(3)(4) | 8,855 | 9,370 | 436 | 18,661 | 609 | 1,578 | 20,848 |
Adjusted gross profit (loss) before FV adjustments | 24,044 | 2,904 | 155 | 27,103 | (489) | 971 | 27,585 |
Adjusted gross margin before FV adjustments | 61 % | 20 % | 23 % | 49 % | (218 %) | 15 % | 45 % |
Three months ended | |||||||
Gross revenue | 34,452 | 17,298 | — | 51,750 | 688 | 3,297 | 55,735 |
Excise taxes | (2,887) | (3,585) | — | (6,472) | — | — | (6,472) |
Net revenue | 31,565 | 13,713 | — | 45,278 | 688 | 3,297 | 49,263 |
Non-recurring revenue adjustments (3) | — | (752) | (752) | — | — | (752) | |
Adjusted net revenue | 31,565 | 12,961 | — | 44,526 | 688 | 3,297 | 48,511 |
Cost of sales | (21,439) | (20,869) | — | (42,308) | (2,291) | (3,225) | (47,824) |
Gross profit (loss) before FV adjustments | 10,126 | (7,908) | — | 2,218 | (1,603) | 72 | 687 |
Depreciation | 2,093 | 1,936 | — | 4,029 | 190 | 443 | 4,662 |
Inventory impairment and non-recurring, included in cost of sales (1)(3) | 8,772 | 9,151 | — | 17,923 | 1,141 | — | 19,064 |
Adjusted gross profit (loss) before FV adjustments | 20,991 | 3,179 | — | 24,170 | (272) | 515 | 24,413 |
Adjusted gross margin before FV adjustments | 67 % | 25 % | — % | 54 % | (40 %) | 16 % | 50 % |
Three months ended | |||||||
Gross revenue | 48,716 | 19,780 | — | 68,496 | 464 | — | 68,960 |
Excise taxes | (2,968) | (5,406) | — | (8,374) | — | — | (8,374) |
Net revenue | 45,748 | 14,374 | — | 60,122 | 464 | — | 60,586 |
Cost of sales | (35,738) | (34,951) | — | (70,689) | (964) | — | (71,653) |
Gross profit before FV adjustments | 10,010 | (20,577) | — | (10,567) | (500) | — | (11,067) |
Depreciation | 6,772 | 4,468 | — | 11,240 | 277 | — | 11,517 |
Inventory impairment included in cost of sales (1) | 12,159 | 19,398 | — | 31,557 | — | — | 31,557 |
Adjusted gross profit before FV adjustments | 28,941 | 3,289 | — | 32,230 | (223) | — | 32,007 |
Adjusted gross margin before FV adjustments | 63 % | 23 % | — % | 54 % | (48 %) | — % | 53 % |
(1) Inventory impairment includes inventory write-downs due to lower of cost or net realizable value adjustments, obsolescence provision adjustments, and inventory destruction. |
(2) Markets under development represents the adjustment for business operations focused on developing international markets prior to commercialization. |
(3) Non-recurring items includes one-time excise tax refunds, inventory count adjustments resulting from facility shutdowns and inter-site transfers, and abnormal spikes to utilities costs on its plant propagation business. |
(4) Business transformation includes costs in connection with the re-purposing of the Company's Sky facility. |
(5) Prior year comparatives have been recast to conform to the current period's presentation. |
Net selling price of dried cannabis excluding bulk sales is a Non-GAAP Measure comprised of revenue from dried cannabis excluding bulk sales less excise taxes on dried cannabis revenue excluding bulk sales and can be reconciled with revenue, the most directly comparable GAAP financial measure, as follows:
($ thousands) | Three months ended | Six months ended | |||
|
|
|
|
| |
Gross revenue from dried cannabis excluding bulk sales | 41,479 | 33,705 | 50,186 | 75,184 | 99,896 |
Excise taxes | (5,738) | (4,424) | (6,811) | (10,162) | (13,943) |
Net revenue from dried cannabis excluding bulk sales | 35,741 | 29,281 | 43,375 | 65,022 | 85,953 |
Adjusted EBITDA
Adjusted EBITDA is a Non-GAAP Measure and can be reconciled with net income (loss), the most directly comparable GAAP financial measure, as follows:
($ thousands) | Three months ended | Six months ended | |||
|
|
|
|
| |
Net loss from continuing operations | (67,183) | (51,887) | (75,143) | (119,070) | (87,027) |
Income tax expense (recovery) | (98) | (11,977) | (368) | (12,075) | (576) |
Other income (expense) | (4,315) | 10,040 | 19,718 | 5,725 | (7,565) |
Share-based compensation | 4,281 | 2,863 | 3,900 | 7,144 | 6,747 |
Depreciation and amortization | 11,165 | 8,218 | 24,195 | 19,383 | 45,825 |
Acquisition costs | 3,028 | 1,914 | 209 | 4,942 | 384 |
Inventory and biological assets fair value and impairment adjustments | 34,265 | 28,284 | 14,910 | 62,549 | 11,399 |
Business transformation related charges (1) | 11,893 | 9,056 | 2,482 | 20,949 | 2,954 |
Out-of-period adjustments (2) | 516 | 467 | 1,174 | 983 | 5,872 |
Non-recurring items (3) | 6,803 | (5,404) | 223 | 1,399 | 223 |
Markets under development (4) | 1,073 | 1,063 | 1,590 | 2,136 | 2,658 |
Adjusted EBITDA | 1,428 | (7,363) | (7,110) | (5,935) | (19,106) |
(1) Business transformation related charges includes costs related to closed facilities, certain IT project costs, costs associated with the repurposing of Sky, severance and retention costs in connection with the business transformation plan, costs associated with the retention of certain medical aggregators, and payroll costs exited prior to the end of Q2 2023 associated with the medical cannabis business. |
(2) Out-of-period adjustments reflect adjustments to net loss for the financial impact of transactions recorded in the current period that relate to prior periods. |
(3) Non-recurring items includes one-time excise tax refunds, non-core adjusted wholesale bulk margins, inventory count adjustments resulting from facility shutdowns and inter-site transfers, litigation and non-recurring project costs, an abnormal mildew issue on certain cultivation lots, additional expenses associated with the change in fiscal year end to |
(4) Markets under development represents the adjustment for business operations focused on developing international markets prior to commercialization. |
Adjusted SG&A
Adjusted SG&A is a Non-GAAP Measure and can be reconciled with sales and marketing and general and administrative expenses, the most directly comparable GAAP financial measure, as follows:
($ thousands) | Three months ended | Six months ended | |||
|
|
|
|
| |
Sales and marketing | 13,174 | 12,807 | 14,263 | 25,981 | 29,718 |
General and administrative | 27,112 | 29,373 | 28,698 | 56,485 | 59,003 |
Business transformation costs | (11,249) | (8,870) | (2,482) | (20,119) | (2,954) |
Out-of-period adjustments | (516) | (467) | (1,174) | (983) | (6,147) |
Non-recurring costs | (2,179) | (1,138) | - | (3,317) | - |
Market development costs | (914) | (1,063) | (1,590) | (1,977) | (2,658) |
Adjusted SG&A | 25,428 | 30,642 | 37,715 | 56,070 | 76,962 |
Adjusted R&D
Adjusted R&D is a Non-GAAP Measure and can be reconciled with research and development expenses, the most directly comparable GAAP financial measure, as follows:
($ thousands) | Three months ended | Six months ended | |||
|
|
|
|
| |
Research and development | 1,287 | 1,603 | 1,625 | 2,890 | 5,296 |
Business transformation costs | (70) | (186) | - | (256) | - |
Adjusted R&D | 1,217 | 1,417 | 1,625 | 2,634 | 5,296 |
Working Capital
Working capital is a Non-GAAP Measure and can be reconciled with total current assets and total current liabilities, the most directly comparable GAAP financial measure, as follows:
($ thousands) | |||
Total current assets | 542,791 | 681,826 | 604,439 |
Total current liabilities | (133,062) | (167,633) | (122,865) |
Working capital | 409,729 | 514,193 | 481,574 |
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