Aurora Cannabis stock drops after earnings, as revenue misses revised target – MarketWatch

Aurora Cannabis stock drops after earnings, as revenue misses revised target - MarketWatch
Marijuana Stocks: Aurora Cannabis Earnings Are Due As Weed Giant Looks To Take Lead In Canada
Aurora Cannabis Inc. shares declined in the extended session Wednesday after the pot company missed revenue expectations even after dropping its forecast.

The Edmonton, Alberta-based Aurora ACB, +3.34% ACB, +3.15%  announced a fiscal fourth-quarter net loss of C$2.26 million on net revenue of C$98.94 million, with an adjusted Ebitda loss of C$11.7 million ($8.9 million). In a separate filing, Aurora said that its net loss attributable to common shareholders was less than $200,000, and less than a penny a share.

This news also release includes statements containing certain “forward-looking information” within the meaning of applicable securities law (“forward-looking statements”). Forward-looking statements are frequently characterized by words such as “plan”, “continue”, “expect”, “project”, “intend”, “believe”, “anticipate”, “estimate”, “may”, “will”, “potential”, “proposed” and other similar words, or statements that certain events or conditions “may” or “will” occur and include, but are not limited to the execution of definitive agreements and the closing of the transaction. These statements are only predictions. Various assumptions were used in drawing the conclusions or making the projections contained in the forward-looking statements throughout this news release. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. These risks include, but are not limited to, the ability to retain key personnel, the ability to continue investing in infrastructure to support growth, the ability to obtain financing on acceptable terms, the continued quality of our products, customer experience and retention, the development of third party government and non-government adult-use  sales channels, managements estimation of consumer demand in Canada and in jurisdictions where the Company exports, expectations of future results and expenses, the availability of additional capital to complete construction projects and facilities improvements, the risk of successful integration of acquired business and operations, the ability to expand and maintain distribution capabilities, the impact of competition, and the possibility for changes in laws, rules, and regulations in the industry. The Company is under no obligation, and expressly disclaims any intention or obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by applicable law.

Earlier this year, Aurora executives had said the company was on track to achieve a sort of profitability: On an adjusted basis, the company would post a positive figure for earnings before interest, taxes, depreciation and amortization. Aurora adjusts its Ebitda figure for biological asset transformation, among other things.

This news release makes reference to certain non-IFRS measures, including certain industry metrics. These metrics and measures are not recognized measures under IFRS do not have meanings prescribed under IFRS and are as a result unlikely to be comparable to similar measures presented by other companies. These measures are provided as information complimentary to those IFRS measures by providing a further understanding of our operating results from the perspective of management. As such, these measures should not be considered in isolation or in lieu of review of our financial information reported under IFRS. This news release uses non-IFRS measures including “cannabis net revenue”, “Adjusted EBITDA”, “cannabis inveventory and biological assets”, “cash cost to produce per gram sold”, “average net selling price per gram”, “production capacity”,  and “SG&A”.  The foregoing are commonly used operating measures in the industry but may be calculated differently compared to other companies in the industry. These non-IFRS measures, including the industry measures, are used to provide investors with supplementary measures of our operating performance that may not otherwise be apparent when relying solely on IFRS metrics. Definitions of the non-IFRS measures can be found in our financial statements, MD&A and this news release.

But in August, the company appeared to walk back the figure, saying in a news release that it was on track to achieve positive adjusted Ebitda without mentioning a specific time frame, as it had previously. In the outlook provided in Wednesdays announcement, Aurora even stopped pointing to that adjusted profitability, saying instead that it expects adjusted Ebitda to continue to improve in the future due to expected revenue growth, improvements in gross margin and prudent SG&A growth.

Prior to the August guidance, analysts polled by FactSet had estimated fourth-quarter revenue of C$111.9 million. In the August update, the company tamped down expectations, telling investors that it was now on track to book sales of C$100 million to C$107 million, net of excise taxes, but it failed to hit that mark in the end.

In 2019 Aurora took its place as the global leader in cannabis production, research, innovation and international market development, Chief Executive Terry Booth said in Wednesdays announcement. We are executing on all our strategic priorities.

Aurora Cannabis Q4 2019 Key Performance Indicators (CNW Group/Aurora Cannabis Inc.)More”In 2019 Aurora took its place as the global leader in cannabis production, research, innovation, and international market development. We are executing on all our strategic priorities,” said Terry Booth , CEO. “Our best in class cultivation methods allow us to grow consistent, high-quality cannabis at scale. Because of this, weve delivered solid revenue growth in the fourth quarter. We are working to extend our reach in the U.S. markets. Our partnership with the UFC is a basis to explore CBD-from-hemp and hemp food products. We are also exploring additional opportunities and leveraging our Strategic Advisor. We are focused on building a sustainable, high-margin business while providing patients and consumers with access to safe and reliable medicine.”

Auroras fourth-quarter results arrive amid a swath of disappointing top-line results from the largest Canadian pot companies. Difficulties growing and packaging the plant have contributed to the lackluster start to legal recreational cannabis in Canada, as has the relatively small number of retail locations in provinces such as Ontario, the most populous.

In Q4 2019, adjusted EBITDA loss improved 68% to $11.7 million from $36.6 million in the prior quarter. Developing a profitable and robust global cannabis company is extremely important to Aurora. In fiscal 2019 Aurora was focused on excellence in execution, and the Companys KPIs show its success in this regard. Furthermore, Aurora has addressed previously identified production bottlenecks and continues to see strong sell-through of the Companys products at the retail level. However, the Canadian consumer channel continues to experience challenges at the retail level in key markets and resolution of this issue is beyond the Companys control. Aurora is working closely with all our regulatory and channel partners to streamline distribution as the Company continues to track toward positive adjusted EBITDA on a consolidated basis.

Much like other cannabis companies that purchased cultivation and other production assets ahead of recreational legalization last October, Aurora carries a substantial amount of goodwill on its balance sheet, roughly C$2.4 billion according to its third-quarter financial results. Its difficult to determine when and if the company will write down the value.

Though Aurora sold its stake in Green Organic Dutchman Holdings Ltd. TGOD, +5.02% TGODF, +4.86%  for C$86.5 million on Sept. 4, those shares were still on the books during the June quarter. The companys bottom line has in the past been affected by the value of a number of its investments in other cannabis companies, such as Dutchman, and swings in the sector.

Glen Ibbott , CFO, added, “We continue to see strong growth in cannabis revenues in both medical and consumer categories. Our cultivation execution continues to drive production costs lower and improve gross margins. Auroras diversified product portfolio remains in demand with patients and consumers alike. With the Canadian launch of derivative products in the coming months, we have made the necessary investments to ensure readiness and focus on a variety of value added products. We are very excited to supply an expanded consumer market with premium cannabis and new product forms.”

U.S.-traded shares of Aurora have gained 30% this year, with the S&P 500 index SPX, +0.72%  rising 18.9%.

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