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Aurora Cannabis (ACB) is a leading player in the cannabis industry. After Canopy Growth announced disastrous results last month and pulled out of the cannabis market, investors were waiting for the benefits of Aurora Cannabis. The company released its fourth-quarter results on Wednesday after the market closed. Has the company impressed investors?
Did Aurora Cannabis deliver as promised?
Aurora Cannabis generated an increase in net revenues of 52% to $ 98.9 million in the fourth quarter. The company missed its revenue forecast, which ranged from C $ 100 million to C $ 107 million. The company also missed analysts' estimate of $ 108.2 million.
Aurora Cannabis has not kept most of its promises by increasing its forecasts. However, the results have not been very bad news.
In particular, the company's net cannabis revenues were in line with expectations. Revenues increased 61% sequentially to C $ 94.6 million. The company expected growth in all of its business segments. Canadian cannabis consumers' incomes increased by 52% to 44.9 Canadian dollars. Medical cannabis revenues also increased 10% to $ 29.7 million. The company's wholesale revenues were approximately 20.1 million Canadian dollars.
Aurora Cannabis expected an increase in production cost per gram and gross margin. Gross margin on net cannabis income increased 3% to 58% sequentially. However, the cash cost per gram fell 20% sequentially to $ 1.14 per gram.
What motivated the revenue and the gross margin?
Aurora Cannabis's fourth quarter results advanced in all business segments. Revenues from increased production capacity and supply from Aurora Sky and Aurora River were particularly significant. The lower production cost per gram resulted in the gross margin. Higher gross margin on bulk sales also resulted in gross margin. Cannabis produced in the fourth quarter reached 29,034 kilograms against 15,590 kilograms. Increased production capacity of Aurora Sky, Aurora River, and Ridge's facilities contributed to the increase in production.
Has the profitability of Aurora Cannabis increased?
Aurora Cannabis is expected to post a positive EBITDA. However, the company announced a negative EBITDA of 11.7 million Canadian dollars. EBITDA was lower than analysts' estimate of C $ 19.5 million and EBITDA for the same period last year.
We know why a positive EBITDA is important for a company. Most cannabis users reported a negative EBITDA in their last quarter, which implies that their operational costs are higher. The Canadian mainstream continues to challenge Aurora Cannabis. The company is working with its regulatory partners and partners to streamline distribution to improve profitability.
Tilray could post a negative EBITDA of $ 17.5 million in the third quarter, which is lower than its third quarter EBITDA of 2018. The company could report a loss of $ 0.31 per share in the third quarter, compared loss of $ 0.20 per share in 2005. the third quarter of 2018.
Canopy Growth (CGC) (WEED) recorded a negative EBITDA of C $ 92.06 million in the first quarter of 2020. The company also reported significant losses of C $ 0.30 per share.
Aphria (APHA) recorded negative EBITDA of C $ 0.2 million in the fourth quarter. However, the company announced earnings of $ 0.05 per share in the fourth quarter.
Management's point of view
For fiscal 2019, Aurora Cannabis's revenues increased by 349% to $ 247.9 million. The gross margin also increased to 55%, compared to 65% in 2018.
Glen Ibbott, Chief Financial Officer of Aurora Cannabis, said, "We continue to see strong growth in cannabis revenues in the medical product and consumer categories. The execution of our culture continues to reduce production costs and improve gross margins. Aurora's diversified product portfolio remains in demand for both patients and consumers. "
Inventory performance of Aurora Cannabis
Aurora Cannabis gained 18%, while Aphria and Canopy Growth gained 10.2% and 16.2% in September. The company closed 3.3% higher yesterday. However, Aurora Cannabis is currently trading at 8.1% below the market gap.
The Horizons Marijuana Life Sciences ETF (HMMJ) gained 6.7% in September. HMMJ follows the cannabis industry in North America. Tilray fell in August after his results. However, the business rose 20% in September.
What is the next step?
All cannabis companies are gearing up for Cannabis 2.0, the second phase of cannabis legalization in Canada. Cannabis 2.0 will legalize foods, beverages, extracts and various other products infused with cannabis. To learn more, read Cannabis 2.0 Legalization: Canada is ready.
Aurora Cannabis's management said, "With the Canadian launch of derivatives in the coming months, we have made the necessary investments to prepare and focus on a variety of value-added products. We are very excited about providing high quality cannabis and new product forms to an expanded consumer market. "
In collaboration with Canopy Growth, Tilray, the Cronos Group and other Canadian cannabis companies, Aurora Cannabis plans to expand its edible products business after legalization.
Aurora Cannabis plans to launch a very successful product line in December. The company does not expect an increase in revenue from the food sector. However, the company is optimistic that Adjusted EBITDA could improve in the future due to higher revenue growth and improved gross margin. The Company also plans to advance its hemp business in the United States with the death of American Farm Bill.
Cannabis industry
We know how important regulation is for the cannabis industry. I think cannabis players could benefit from the federal legalization of marijuana. Regulatory violations have hit the industry in recent months. As a result, presidential candidates push for legalization. Aurora Cannabis has indicated that it is taking steps to ensure that its expansion into the US market complies with federal and federal laws. To learn more, read Cannabis: While the United States is waiting, the world is opening.
Until now, the month of September has been beneficial for cannabis companies. Markets and analysts were optimistic about the results of Aurora Cannabis. Will the company's results have a negative impact on the sector? The company will hold its earnings call today when the market opens.
We will do a thorough review of the fourth quarter results of Aurora Cannabis after the call of its results.
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