Aurora Cannabis Reports Rising Revenue, Prices Falling As Cost To Produce Rises

Aurora Cannabis Inc. (ACB) reported that its gross revenue jumped 430% to $62 million over last year’s $11.7 million for the same time period. The net revenue rose 363% to $54.2 million over last year’s $11.7 million.

Losses jumped a whopping 3,179% to $237 million versus last year’s gain of $7.7 million for the same time period. The company said in a statement that “Non-cash expenses including the December 31, 2018 mark-to-market adjustments of approximately $190 million primarily on the company’s derivative investments contributed significantly to a net loss of $240 million.”

“Aurora continues to execute strongly across all of its market segments, as demonstrated by the 83% revenue growth over last quarter and the significant increase in confirmed production results,” said Terry Booth, CEO of Aurora.

The company said average selling prices were impacted by the introduction of excise taxes across all Canadian sales channels on October 17, 2018, as well as lower wholesale pricing realized in the Canadian consumer market. Aurora said that it intends to continue prioritizing medical patients in Canada and globally where margins continue to exceed those achieved on the wholesale consumer market. The cash cost to produce per gram of dried cannabis sold temporarily increased from $1.45in the previous quarter to $1.92 in Q2 2019.

Q2 2019 kilograms produced and kilograms sold of 7,822 and 6,999 were up 57% and 162%, respectively, driven by continued and significant scale-up of Aurora’s cultivation operations and strong demand across all the Company’s markets.

Gross margins on cannabis sales dropped dramatically to 54% from 70% in the prior quarter.  The decrease was primarily due to a lower average selling price per gram of dried cannabis, the impact of excise taxes on medical cannabis net revenues, and a temporarily lower proportion of cannabis oil sales in the company’s sales mix ratio.

Aurora also blamed increased packaging requirements under the Cannabis Act and one-time ramp up and optimization costs for the Sky facility. The company said it expects that the launch of new product lines like edibles and vapes will contribute to improving margins.

Glen Ibbott, CFO of Aurora added, “We are also very pleased with our recent placement of US$345 million in convertible notes.  These convertible notes were subscribed by high-quality US, Canadian, and international institutions and offer Aurora the flexibility and optionality to settle the entire principal amount of the notes in the future for cash, shares, or any combination thereof. This funding sufficiently supports the global opportunity for us to continue our commitment to growth in the legal, regulated medical and consumer cannabis systems across the globe.”

Outlook

Aurora said that it anticipates that with Aurora Sky operating at full capacity, as well as a continued reduction in operating costs, the cash cost to produce per gram will trend significantly lower. Management reiterates its expectation that the sustainable long-term operating cost at its Sky Class facilities will be well below $1 per gram. Aurora said it expects to achieve sustained positive EBITDA beginning in fiscal Q4 2019 (calendar Q2 2019).

Aurora is now operating at an annualized production rate of approximately 120,000 kgs, based on Health Canada approved planted rooms, and expects to reach in excess of 150,000 kgs by March 31, 2019.  Management reiterated its previous guidance that based on the company’s current confirmed production results, Aurora will have approximately 25,000 kgs available for sale in Q4 (April to June 2019).

Debra Borchardt

Debra BorchardtDebra Borchardt

Debra Borchardt is the CEO, Co-Founder, and Editor-In-Chief of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Masters degree in Business Journalism from New York University.


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