Aurora Cannabis Posts Loss of $158 Million for Third Quarter

Aurora Cannabis (TSX: ACB; NYSE: ACB) reported its third quarter 2019 earnings last night, posting net revenues of CAD$65.14mm for the quarter ending March 31, 2019, bringing total net revenues for the year to $148.99mm. Gross profits before fair value adjustments came in at $36.23mm for the quarter.

I’m exceptionally proud of our company and team as Aurora continues to deliver on our domestic and international growth strategy. We achieved solid revenue growth and strong operating results in a quarter proven challenging across the industry

Terry Booth, CEO, Aurora Cannabis

While it appears that the market has generally viewed the results as bullish based on current social sentiment, there are a few items that should be pointed out within these financials. First is a loss of $158.35mm for the quarter, of which $67.10mm is attributed to selling, general and admin expenses.

While Aurora has highlighted that SG&A costing has only increased 1% on a quarter over quarter basis – allegedly demonstrating disciplined cost management – the firm fails to clearly identify that this figure is still higher than net revenues of $65.14mm for the quarter, posing a significant issue for operations.

Nevertheless, Aurora posted a 20% decrease in its adjusted EBITDA loss on a quarter over quarter basis, with an adjusted EBITDA loss of $36.61mm. Aurora Cannabis also provided guidance indicating that it would post a positive EBITDA figure for the fourth quarter of the fiscal year.

Installation of glass roof structure at Aurora Sun, Medicine Hat, Alberta. (Aurora Cannabis Inc.)

In terms of cannabis production, Aurora increased its produced kilograms figure by 99%, producing a total of 15,590 KG in the third quarter. Current biological assets suggest that the company could almost double this production figure for Q4 2019, with current estimates suggesting a yield of up to 34,494 KG.

This however leads into a potential issue – current inventory levels. While Aurora managed to increase production figures by 99%, sales increased by 31% – resulting in inventory growing from $69.77mm in Q2 2019, to that of $82.70mm in Q3. The question remains whether the current market requires further production to come online without experiencing price erosion.

As it stands, the average net selling price per gram decreased by $0.40, or 6% quarter over quarter. Aurora Cannabis however was fortunate in that it managed to decrease the cash cost to produce a dried gram of cannabis by 26%, to $1.42 per gram thanks to operational facilities with Aurora Sky coming online.

Within the associated news release, Aurora Cannabis confirmed that it is now operating at an annualized production run rate of 150,000 KG per year, and that it expects the cost per gram to continue to trend downward with Aurora Sky expecting to grow at a sub $1.00 per gram cost. The firm also selected to reiterate its target of producing over 25,000 KG of cannabis for the fourth quarter of 2019.

Aurora Cannabis closed yesterdays session at $11.32, posting a gain of $0.49, or 4.52%.


Information for this briefing was found via Sedar and Aurora Cannabis. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

Jay

As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive's stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.