Aurora Q2 Financial Results: Static Revenue Growth; 71% Improvement In EBITDA

Aurora Cannabis Inc. (ACB), a constituent in the munKNEE Pure-Play Pot Stock Index, announced its Q2 financial results last Thursday for the period ended December 30, 2020 (see Q1 summary here). The highlights are as follows:

Q2 Financial Highlights (All results are presented in Canadian dollars - go here to convert into USD - and compared to the previous quarter.)

Total Net Revenue: almost unchanged at $67.7M
- - Adj. Gross Margin: decreased to 42% from 48% due to a) the purposeful reduction in production levels at Aurora Sky resulting in an increase in cash cost of sales due to the under-utilization of capacity and a $1.8 million increase in actual net returns, price adjustments and provisions primarily relating to company-initiated product returns meant to open channels to a newer, higher-potency flower that Aurora is now producing. Normalizing for these impacts, adjusted gross margin was 52%.
- Consumer Cannabis Net Revenue: decreased 17% to $28.6M driven by product launches in vapes, edibles, and concentrates.
  - Adj. Gross Margin: decreased to 22% from 38% primarily driven by a $3.3 million increase in the cost of sales due to under-utilized capacity as a result of the scaling back production at Aurora Sky and sales of their lower margin Daily Special value brand which was not present in the prior comparative period.
- Medical Cannabis Net Revenue: increased 16% to $38.9M primarily attributable to a continued strong performance in both the international and Canadian medical businesses. International medical sales grew by 562% over the prior year comparative period.
  - Adj. Gross Margin: declined to 56% from 59% primarily driven by the increase in the cost of sales due to the under-utilized capacity as a result of the scaling back of production at Aurora Sky.
SG&A/R&D: decreased 5% to $44.4M as a result of cost savings related to restructuring charges, and severance and benefit costs associated with the Business Transformation Plan. Excluding these impacts, Q2 2021 SG&A and R&D was $42.3 million
Adj. EBITDA: loss reduced by 71% to $(16.8)M primarily driven by the substantial decrease in SG&A and R&D expenses.
Cash-on-Hand: $434.4M

Operational Highlights

Kilograms Sold: decreased by 5%
Average Net Selling Price/g of Dried Cannabis: increased 8% to $4.00/g
Capital Expenditures: reduced by 41%

Management Commentary

Miguel Martin, Chief Executive Officer, said:

"...Our core revenue strength in medical and consumer was complemented by initial rollouts in vape products and concentrates...[as] part of...[our] CPG strategy.
...Several decisions were made in the quarter that we believe will clear a path for our premium product focus and more variable cost model...[and] give Aurora maximum flexibility and position the organization to drive significant cash flow in the coming quarters.
To further support this strategy, we have also focused on improving our cash burn, margins, and overall financial flexibility...”

Stock Performance

The Aurora stock price is up 50% YTD, up 11.9% in the first 2 weeks of February, and up a further 8% so far today as can be seen in the chart below. (Chart below is in Canadian dollars - go here to convert into USD).