Aurora Cannabis Investors Should Be Happy with Q3

Aurora Cannabis Inc. (TSX:ACB), one of the Canadian marijuana stocks, announced its financial results for the third quarter of 2019 on May 14

John Brooker | May 20, 2019 | SmallCapPower: Aurora Cannabis Inc. (TSX:ACB) (NYSE:ACB), one of the Canadian cannabis stocks, reported its third-quarter earnings after the market close on May 14, 2019. Aurora reported a loss per share of $0.16, missing analysts’ estimates by $0.06. Aurora Cannabis’ high SG&A can be attributed as one of the main culprits of Aurora’s perceived underperformance for this quarter. ACB reported an increased SG&A of $67.1 million, which represents 103% of the Company’s reported revenues. Overall, the Company reported a net loss of $158 million as it continued to realize the expenses necessary to expand its facilities. Comparatively, Aurora Cannabis posted a net loss of $237 million in the previous quarter.

Despite just missing analyst expectations, there are a variety of positives that can be taken from Aurora Cannabis’ reported results.

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Q3 revenue was $65.1M, growing at 20% sequentially. Growth in revenues can be attributed to Aurora’s Canadian recreational sales increasing by 37%, Canadian medical sales rising 8%, and International medical sales up by 40%.

Adjusted EBITDA loss improved by 20% to a loss of $36.6 million as Aurora Cannabis continues to trek towards achieving positive EBITDA results.

Production volume increased by 99% since Q2 to 15,590 kgs. This represents a 1,200% year-over-year improvement. The increase in production accelerated through the quarter, with most of the harvested volume realized in the last half of the quarter.

Although the average selling price per gram decreased slightly, Aurora’s cash cost to produce per gram declined by 26% to $1.42 per gram. The impact of Aurora Sky’s size, scale, and efficiency are finally being realized by the Company.

Aurora Cannabis Inc.’s medical patient base rose 5% to 77,136. As product availability ramps up in the upcoming quarter, Aurora will continue to register new patients.

The Aurora Sky facility in Edmonton and the Bradford facility are now operating at full capacity. Based on the amount of planted rooms, ACB’s annual production run across its operational facilities is now over 150,000kg.

Aurora Cannabis also expects supply to Europe and other international markets to increase as more of Aurora’s production facilities receive EU-GMP certification, such as the Bradford facility, which has recently undergone an audit to obtain EU-GMP certification.

Although Aurora Cannabis expects SG&A costs to grow modestly over the remainder of the fiscal year, management anticipates that with sustained revenue growth and lower cash costs per gram, Aurora is positioned to achieve positive EBITDA beginning in fiscal Q4/2019.

Despite missing their estimates by a small margin, Aurora Cannabis still seems to be growing at a favourable rate, and the Company’s international expansion strategy is materializing itself as a very high-performing endeavour. More and more of their production facilities are producing at full capacity, and Aurora’s investment into innovation and efficiency is paying off as their cost of production per gram is driving downwards.

It also should be noted that Aurora Cannabis filed a prospectus alongside its Q3 earnings stating that the Company is raising US$400 million in an equity financing.

Aurora stock ended more than 3% higher on Wednesday. Aurora Cannabis trades at a market cap of $11.9 billion.

Disclosure: Neither the author nor his family own shares in the company mentioned above.

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