Aurora Cannabis Inc. (NYSE: ACB) provided a business update amending the company’s credit facility. The shares were falling in price on the news and were lately down 1% and selling at $10.01.
The company said that there are no changes to the commitment amounts under the facility which currently stand at $101.2 million under the term loan and $15 million under the revolver (currently $2 million drawn). The second amended and restated credit facility has a first ranking general security interest in the assets of Aurora and can be repaid without penalty at the company’s discretion.
“Our substantial liquidity position has enabled us to revise our credit facility terms by extending maturity and transitioning us from a minimum EBITDA covenant to a minimum liquidity covenant, thereby providing us with the financial flexibility we need to execute our business transformation plan. We are already seeing progress with improving cashflow and product successes such as the recent relaunch of our vapour portfolio. We are also driving our consumer strategy that will serve as a foundation for sustainable revenue growth and profitability over the long-term” stated Miguel Martin, Chief Executive Officer of Aurora.
Stifel analyst Andrew Carter said, “Our outlook suggested difficulty in conforming to outstanding covenants, but the delay in achieving positive EBITDA suggests downside to our estimates. We continue with our Sell rating, and we will update our outlook.”
The company said in a statement that this strategy will delay its ability to achieve positive Adjusted EBITDA as management invests in its consumer business; a strategy that the company believes will serve as a foundation for sustainable growth and profitability in the future. Also contributing to the profitability delay is the unpredictability of the current demand environment, including the resurgence of COVID-19. However, with ~$450 million in cash on hand as of December 15, 2020, management is confident in its liquidity position and its ability to fund its current plan while maintaining optionality for future opportunities.”
Closing Aurora Sun
In addition to the change in the company’s revised credit facility, Aurora it is closing the Aurora Sun facility and has reduced production at its Aurora Sky facility by 75%. Aurora Sky is testing new processes and methodologies proven successful at other cultivation sites in Aurora’s leading network, combined with an increased focus on innovation led by deep plant science and genetics expertise.
Mr. Martin concluded “These hard decisions are being taken to improve cash flow and provide agility to our business. We will continue to make decisions and transform Aurora in the long-term best interests of our shareholders. We look forward to 2021 and providing updates on our business transformation.”
“We are moving to a more variable cost structure in cultivation by expanding our network of external supply and responsibly scaling back production from our fixed asset network. Specifically, in November we closed our Aurora Sun facility and are now scaling back production at Aurora Sky to 25% of its previous capacity. At this level of production, we intend to transform the Sky facility into a high-value cultivation center for our premium strains, and in turn, better align production with current demand for premium flower.”
“Our plan to address the opportunities in the Canadian consumer market, combined with a formidable balance sheet, positions Aurora to remain the leader by revenue in the high-margin Canadian medical market. It also allows the Company to invest in the international medical business, which is exhibiting solid growth. Lastly, we will be able to build on our CBD brand Reliva, which is #1 ranked by Nielsen in U.S. CBD.”