Canadian-based cannabis company Aurora Cannabis Inc. (NYSE: ACB) becomes the latest cannabis company to toss its CEO and layoff employees as the company seeks to cut costs and aim for profitability. Aurora blamed slower than expected growth for its moves.
Booth was the founder and leader of the company and is the latest cannabis company founder who has been shown the door when expansion plans became more aggressive than revenue could handle. Michael Singer, Aurora’s Executive Chairman was named interim CEO.
“Over the last seven years, Aurora has built an incredible platform and a leading position in the global Cannabis industry. While there is still much work to be done, the timing is right to announce my retirement with a thoughtful succession plan in place and the immediate expansion of the Board of Directors,” said Booth. “These changes, along with the financial transformation which we are undertaking, should clearly demonstrate to investors that Aurora has the continuity, strategic direction and leadership it needs to transition from its entrepreneurial roots to an established organization well-positioned to capitalize on a global growth opportunity.”
The company has cut 500 full-time positions including 25% of its corporate jobs and is restructuring spending across the board. Aurora said its plan is to get the SG&A to a range between $40 million to $45 million per quarter by the end of the fiscal fourth quarter of 2020, a significant decrease from the preliminary fiscal second quarter 2020 range announced today.
The company said that in order to get there it plans to focus on the following areas: 1) Canadian consumer market; 2) Canadian medical market; 3) established international medical markets; and 4) U.S. market initiatives. Severance and other one-time charges related to SG&A reductions are expected to range from $2 million to $4 million and will be largely incurred in the company’s fiscal second and third quarters ending December 31, 2019, and March 31, 2020, respectively.
Preliminary Fiscal 2020 Second Quarter Financial Results
The company also released its unaudited preliminary second-quarter fiscal 2020 financial results. It said it expects cannabis revenues for the second quarter of fiscal 2020 to be in the range of $62 million to $66 million, net of excise taxes. Aurora expects to record provisions for returns, price reductions and future provisions of approximately $12 million, almost all of which relate to product sold in previous quarters.
“Therefore, net cannabis revenues, after giving effect to these offsets, are expected to be $50 million to $54 million. These revenue expectations reflect consistent quarter-over-quarter medical revenues, a decrease in international revenues due to short-term German supply interruptions, and much lower bulk sales.
The cash cost to produce per gram of dried cannabis sold is expected to remain below $1.00, sales and marketing expenses are expected to be between $28 million to $32 million and general and administrative expenses are expected to be between $70 million to $75 million.”
The company also noted that it will likely “show little to no growth relative to fiscal Q2’s cannabis revenue of $62 million to $66 million, prior to the provisions for returns and price reductions.”
Singer said, “I look forward to serving as Interim CEO and executing on our short-term plans, which include rationalization of our cost structure, reduced capital spending, and a more conservative and targeted approach to capital deployment. These are necessary steps that reflect a fundamental change in how we will operate the business going forward.” Singer continued, “As one of the original cannabis visionaries, Terry is an invaluable resource with deep industry knowledge that we can leverage strategically. I look forward to having him continue on as a Senior Strategic Advisor to our Board of Directors.”