Aurora Cannabis Inc. (NYSE: ACB) Q1 2021 Earnings Call Highlights
Miguel Martin
“…Our quarterly results were generally in line with our previous expectations. With cannabis net revenues of $67.8 million and adjusted gross margin of 52%, excluding ramp up costs at Nordic. SG&A excluding restructuring items was $43 million, which was consistent with our run rate target of below $40 million range.
Finally, as remade relates to Q1 we demonstrated progress with respect to narrowing our adjusted EBITDA loss, the $10.5 million. This mark the third consecutive quarter of adjusted EBITDA trending towards breakeven.
As you know, as part of our business transformation plan, we have made some very tough decisions and done a lot of hard work over the past year with respect to right sizing our cost structure. This includes taking the largest cut to G&A of any Canadian LP.
For context, we cut quarterly SG&A from $100 million to approximately $43 million per quarter, and sharply reduced our CapEx. Under my leadership, we will continue to our focus on fiscal prudence.
I can say without hesitation that our entire company is in a different mindset now than we were previously and I have empowered all levels of the company to look for opportunities for profitable growth and for the cost efficiencies.
For example, we have demonstrated the capacity to make difficult financial decisions, such as in June, where we were one of the first cannabis companies to take the step to write-down our inventory and re-cost our trim.
I also think we have a real opportunity to better align production cost to sales and shift costs from fixed the variable. In doing so we will manage our working capital investment more effectively, so that we can get to cash flow positive generation more quickly.
This longer term cash flow objective goes beyond simply reaching positive adjusted EBITDA, our goal for the second quarter. Our expectation for the second quarter and demonstrates our leadership in differentiating Aurora and setting the standard for building a value creating global cannabis company.
Back in June, we announced the closure of five cultivation facilities across our network and I can confirm that a few of those facilities are now shuttered. But aligning production costs with sales encompasses more than that. Specifically, our Aurora Nordic 1 facility, which is a new EU GMP certified production facility located in Denmark will allow us to more efficiently distribute products in Europe and around the world, and better allocate production here in Canada.
Before I discuss the performance of our business segments, and in particularly, our Canadian consumer segment, let me briefly address our recent capital raise under the ATM. The $280 million that we raised recently through our previous ATM was a responsible decision in today’s challenging environment.
The cash will ensure that we have the runway needed to complete the remaining elements of our transformation plan, execute our tactical plans to regain market share in the Canadian consumer business and be positioned for the rapidly changing global cannabinoid market.
We appreciate the cannabis companies are being evaluated with respect to their business performance and their liquidity. And we wanted to ensure that we are addressing both sides of this equation without any perceived concerns with respect to liquidity. We now have a much stronger balance sheet that makes it possible for us to act opportunistically and allows investors to focus on our business execution.
In fact, as I said earlier, we are squarely focused on generating operating cash flow as quickly as possible. And of course, as a matter of good governance, we have also filed a new shelf prospectus. This is a common step for most large companies to have available, if needed.
Now let’s discuss our business itself beginning with the Canadian consumer market, where we have much work to do to gain share, but also a strong sense of urgency to continue executing our well thought out tactical plans.
As you know, there are two things to consider that are working in our favor and in doing so, providing us with considerable tailwinds. First, the category is growing, with StatsCan data showing 11% month-over-month growth in July and another 5% in August, and more stores continue to open, particularly in the province of Ontario, which is very encouraging this. In fact from the national data that we have seen, the current store count as approximately 1,200 and can reach 1,300 by December.
And second, the consumer has demonstrated very dynamic tendencies with market share moving very quickly between brands, unlike in more stable CPG categories. This provides us with a great opening for our pivot to premium brands.
These factors suggest to us that with the right accountabilities in focus, the right products, the right sales execution, including product availability, visibility, packaging and better engagement with the provinces, we can gain share in key growth categories quickly, all while achieving profitability.
The data from Canada and other mature markets indicate that premium and super premium brands have been and will continue to be successful in all formats. Therefore, Aurora has a real opportunity for a more articulated and balanced portfolio offering with a greater focus on higher margin and sustainable premium assets, such as vapes, pre-rolls and premium flower offerings across multiple price tiers. For example, gummies is a format where we have a number one position and we are allocating additional resources so that we can enhance and grow that format…”