Aurora Cannabis: Booth Out, $775 Million Goodwill Hit, And Declining Revenues

Like was much speculated this afternoon, Aurora Cannabis (TSX: ACB) (NYSE: ACB) CEO Terry Booth will be retiring from his role as Chief Executive Officer of the firm effective immediately. Taking his place on an interim basis will be that of Chairman Michael Singer. Booth will retain his role as a director of the firm, while also acting as a senior strategic advisor to the company.

The announcement of Booth’s retirement coincided with many updates provided by the company, including that Lance Friedmann and Michael Detlefsen will be joining the firms Board.

What has been described as sweeping changes to the firms operations are planned to occur as well, with the firm set to let go of approximately 500 employees, including 25% of its corporate staff. Aurora is looking to reduce its quarterly selling, general and administrative (SG&A) expenses to $40 – $45 million per quarter, and as a result has refocused its operations on core areas including the Canadian consumer market, Canadian medical market, established international medical markets, and US market initiatives.

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As a result, severance and one-time charges are expected to be as much as $2 – $4 million and will be incurred in the fiscal second and third quarters of 2020. Spending on initiatives such as marketing information technology, travel, and other non-revenue generating activities is being “restructured.”

Capital expenditures for the second half of fiscal 2020 are also being reduced, to under that of $100 million.

With respect to Aurora’s balance sheet and liquidity position, a number of changes have also occurred. In relation to its currently outstanding credit facility, a number of covenants have been removed related to ratio’s the firm must retain, but in exchange the overall credit limit of the facility has been reduced by $141.5 million. The firm will also be required to enter EBITDA positive territory in Q1 2021 as a result of the revised credit facility.

Furthermore, the much anticipated write down of assets and goodwill for Aurora Cannabis is now to occur during the fiscal second quarter financial statements, which will be released next week. In total, impairments to the value of the firms property, plant, and equipment will be in the range of $190 to $225 million, while an additional goodwill write down in the range of $740 to $775 million will also occur.

The cash position of the firm is expected to be approximately $156 million, which excludes $45 million in restricted cash. Additionally, the firm reported that in fiscal 2020 they have attained an additional US$245 million (C$325 million) from the public markets via their previously announced at-the-market financing which is capped at US$400 million. The program is expected to fund the company through to cash flow positive operations.

Finally, preliminary numbers for the fiscal second quarter for Aurora Cannabis are anticipated to come in at $50 – $54 million for the quarter, which is net of excise taxes and provisions for returns, price reductions, and future provisions. The significant decrease over the previous quarters revenues is a result of falling bulk product sales as well as a halt on the international sale of Aurora’s cannabis products in Germany.

Aurora is expecting little to no growth for the fiscal third quarter of 2020, with anticipate revenues net of excise taxes to come in at $62 – $66 million.

Aurora Cannabis last traded at $2.00 on the NYSE.

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.