Canadian-based cannabis company, Aurora Cannabis (NYSE: ACB) reported their Q1 earnings this morning. The results were mixed at best, with shares rising 21% on the potential for cannabis legalization under a Biden administration. Unless otherwise stated, these figures are in Canadian dollars.
The company’s adjusted gross margin before fair value adjustments on total cannabis net revenue didn’t waver much quarter to quarter, with Aurora Cannabis reporting a 48% adjusted gross margin compared to 50% in Q4 2020. Before fair value adjustments, the company’s adjusted gross margin on cannabis net revenue was 52%.
Aurora reported a slight increase in total and net revenue in Q1, with numbers reaching $67.8 million. Q4’s revenue totaled $67.5 million, so while the increase was small, it was there.
Consumer cannabis net revenue, however, was down 3% quarter over quarter, reaching a stop at $34.3 million. The adjusted gross margin before fair value adjustments on consumer cannabis net revenue was 38% compared to 35% in the prior quarter. Aurora cites sales mix shifting towards higher margin derivative products as the reason for this increase.
One area where Aurora really shined in Q1 is in consumer cannabis extracts, with the net revenue increasing by $3.6 million sequentially. Aurora says this was driven by their focus on high-growth extracts such as vapes, edibles, and concentrates, plus a $1.1 million increase in US CBD.
The company reported a 4% sequential increase in medical cannabis net revenue, ultimately capping out at $33.5 million. Aurora primarily attributes this growth to their strong international medical cannabis presence, which grew a whopping 41% quarter over quarter.
“Our Q1 2021 results are transitional but do highlight successes across a number of diverse profit pools,” said Miguel Martin, CEO of Aurora. “We remain the leader by revenue in the high-margin Canadian medical market, our international medical business experienced more than 40% net revenue growth this quarter, and our CBD brand Reliva is #1 ranked by Nielsen in the U.S. CBD sector.”
The adjusted gross margin on medical cannabis before fair value adjustments was 59% versus 67% in the prior quarter. This is excluding $2.6 million in ramp up costs at Aurora Nordic 1, which is a large cannabis facility located in Denmark.
Aurora’s adjusted EBITDA loss was $57.9 million in Q1, with the company including restructuring payments such as contract and employee termination costs of $47.4 million. Excluding these impacts, the adjusted EBITDA loss as defined under the term credit facility is $10.5 million. Aurora says they remain on track to achieve a positive adjusted EBITDA next quarter.
Aurora Cannabis used $25.2 million cash in Q1 to fund company operations, and used $47.4 million for contract and employee termination costs. This is similar to the prior quarter, however, the use of cash showed significant progress. Cash used to pay for capital expenditures in the first quarter was $15 million compared to $32 million in the prior quarter, as many of their projects are now wrapping up and completing.
Increased net working capital used $37.0 million in the quarter, driven by a $13.8 million increase in accounts receivable and a $25.1 million increase in inventory.
“While we are not satisfied with our past performance in the growing Canadian consumer business, we have a sense of urgency in the execution of our tactical plan to grow profitable market share. Our efforts are directed at delivering the highest quality products, refocusing on our leading premium and ultra-premium brands, better allocating our sales and marketing spend, and executing key account partnerships at both the province and retail levels.”