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Aphria Announces Financial Results for the Third Quarter of Fiscal Year 2019
- Provides an update on the Green Growth Brands offer
- Appoints Walter Robb and David Hopkinson as Independent Directors on the Board of Directors
- Net revenues of $ 73.6 million, up 240% from the previous quarter and 617% over the same period of the previous year
- Current annualized production capacity of 115,000 kilograms
LEAMINGTON, ON, April 15, 2019 / PRNewswire / – Aphria Inc. ("Aphria" or "the Company") (TSX: APHA and NYSE: APHA) announced today its results for the third quarter and the period for the nine months ended February 28, 2019. All amounts are in thousands of Canadian dollars, unless otherwise indicated, except for amounts per gram, kilogram, kilogram equivalent and per share.
I am proud of the efforts of our more than 1,000 employees around the world to position Aphria for future growth and success in the global cannabis industry for medical and adult use. Our organization has undergone significant changes in a very short time, which was necessary to move society forward.
Irwin D. Simon, Acting President and CEO of Aphria
Our board of directors and management team will continue to focus on advancing Aphria's leading position in the global cannabis industry and we are pleased to announce today the appointment of two new independent directors. Aphria will continue to deliver long-term shareholder value over the long term by leveraging its strong brand positioning, superior retail model, product innovation, culture and industrial scale automation, its leadership in medical use and its strategic global platform.
Non-cash depreciation charge on LATAM assets
As part of a continuous disclosure review, the Ontario Securities Commission has asked the Company to perform an impairment test of its LATAM assets after the filing of the financial statements of the corporation. second quarter of 2019. As a result of this impairment test conducted by the Company, the Company determined that a non-cash impairment of $ 50 million of the carrying value of LATAM's assets was required. This impairment arises from the Company's revaluation of the discount rate and the financial forecasts of these entities as a result of new financial information received from the Special Committee's financial advisors who examined the LATAM transaction. This new financial information included gross margins and lower EBITDA margins used by the financial advisor for the Special Committee and recent financial information from LATAM entities with higher than expected expenses. As a result of this new information, Aphria determined that the discount rate needed to be adjusted, which resulted in the non-cash depreciation of the carrying amount of LATAM's assets.
Highlights of the operation
- Net revenues of $ 73.6 million, up 240% from the previous quarter and 617% over the prior year
- Quarter ended with a balance sheet and strong liquidity, including $ 107.5 million in cash and $ 27.2 million in marketable securities, to fund planned growth in Canada and abroad
- The special committee concluded the review and concluded that the acquisition of LATAM assets was within an acceptable range, even though it was in the upper range of the measures. observable evaluation; the Company has invested approximately $ 225 million in LATAM's assets, after accounting for the aforementioned non-cash impairment charge, approximately $ 30 million more than the original agreed purchase price of approximately $ 195 million.
- Announcement of early termination and liquidation of interests in Liberty Health Sciences, Inc., pursuant to the Company's commitment to improve corporate governance practices and strategic priorities, while generating liquidity dilution for shareholders
- Signature of a license agreement with Manna Molecular Science for the development of state-of-the-art cannabis transdermal patches
- Signature of an exclusive agreement with UNOapp Inc. based in Toronto to collaborate on the development of technological and analytical solutions for the Canadian adult cannabis industry
- Signature of an exclusive agreement with the Colombian Medical Federation, a national guild that oversees the ethical exercise of the medical profession in Colombia, to jointly develop a university program on the use of cannabis to medical purposes.
- Signature of a letter of intent for an exclusive supply agreement with Insumos Medicos, SA, a Paraguayan company manufacturing, importing and distributing pharmaceuticals, with a view to providing cannabis for medical purposes in Paraguay
- Signature of a letter of intent with the Cannabis Avatãra Sociedad del Estado belonging to the Argentine State with a view to the conclusion of a cooperation agreement concerning the cultivation of cannabis, which will expand the activities the company in Argentina, subject to the issuance of a culture license.
- Announcement of the first transfer of plant cuttings from the company's four cannabis strains to Danish company Schroll Medical as part of the strategic partnership previously announced by the company
- Closure of the acquisition of CC Pharma GmbH ("CC Pharma"), one of the leading distributors of pharmaceuticals, including medical cannabis, in more than 13,000 pharmacies in Germany and Europe.
Later events
- Aphria One has received Health Canada approval for the extensions of Parts IV and V, bringing the total annualized Aphria One production capacity to 110,000 kilograms and the total capacity of the company to 115,000 kilograms.
- Launch of Cann Rectif, a range of CBD nutraceuticals and cosmetics for the German market and distributed by the company's subsidiary, CC Pharma
- Provisional approval granted in Germany for a cannabis cultivation license, consisting of five lots with a minimum annual capacity of 200 kilograms
Green Growth Brands Update
In a separate press release issued today, the company also announced that it had entered into a series of transactions that would speed up the expiration date of unsolicited offers launched by Green Growth. Brands Inc. and provide additional liquidity of $ 89.0 million to the Company without dilution to shareholders. Please refer to this separate press release for the terms and conditions of this transaction.
Appointments to the board of directors
The board has appointed two new independent directors as of today. Walter Robb and David Hopkinson will fill two of the three vacant director positions.
Walter Robb is an investor, mentor and advisor to the next generation of businesses. As a former co-director of Whole Foods Market, he brings to Aphria a long and rich entrepreneurial history ranging from the retailer of natural foods to the farmer through the consultant. Mr. Robb joined Whole Foods Market in 1991 and was named co-CEO in 2010, when he joined the board of directors of Whole Foods Market. In 2017, he became Chairman of the Board of the Whole Kids Foundation and the Whole Cities Foundation. Mr. Robb also sits on the Board of Directors of Union Square Hospitality Group, The Container Store, FoodMaven, HeatGenie and Apeel Sciences.
David Hopkinson is Global Head of Real Madrid Club Futbol Partnerships (Real Madrid). He joined Real Madrid in August 2018 and brings to Aphria his 25 years of experience in sales, marketing and leadership in professional sports. Mr. Hopkinson began his career in professional sports in Toronto, Canada, where he moved from being the first employee of the NBA's Raptors of Toronto to the position of MLSE Sales Director, owners of the Raptors and Maple Leafs. Toronto NHL. , Toronto FC MLS, Toronto Argonauts CFL and Raptors Uprising Spirit Team NBA2K. He also sits on the Advisory Committee of the Chancellor of McGill University in Montreal. In 2012, David received the Queen Elizabeth II Diamond Jubilee Medal in recognition of his contribution to Canada.
Key financial data
Mr. Simon continued, "We continue to take decisive action to increase efficiency, including investing additional capital in automation and packaging and adapting production to a new method of cultivation. While this has contributed to an increase in our costs, we expect higher future returns per square foot, which will translate into better results early in fiscal year 2020. We believe that the actions we have taken Contribute to the growth of our strategic initiatives in Canada and internationally to generate long-term shareholder value. "
Net income for the three months ended February 28, 2019 was $ 73.6 million compared to $ 21.7 million in the prior quarter and $ 10.3 million in the corresponding quarter of the same period last year. Previous exercice. The increase in revenue during the quarter was driven by revenue from the distribution of CC Pharma and ABP for $ 57.6 million. Net income includes more than 1,329 kilograms of equivalent sold in the Canadian market for adult use and 1,274 kilograms of equivalent for sales of cannabis for medical purposes. The decrease in cannabis revenues and kilograms sold compared to the previous quarter is mainly due to supply shortages, the transition of growing methods in late fall and early winter, as well as 'temporary packaging and distribution problems.
The average retail sale price of cannabis for medical purposes (excluding wholesale), before excise tax, reached $ 8.03 per gram in the quarter, compared to $ 7.51 in the previous quarter, mainly because of rising oil sales. The average selling price of cannabis used by adults, before excise tax, decreased to $ 5.14 per gram during the quarter, compared with $ 6.32 per gram in the quarter. precedent due to the shift to smaller packaging to maximize the range of brands.
Adjusted gross margin for the third quarter was $ 13.4 million, with an adjusted gross margin of 18%, compared to $ 10.2 million with an adjusted gross margin of 47% in the prior quarter. The decrease in adjusted gross margin is mainly due to higher revenues from our distribution operations, which have lower gross margins than our cannabis business. In addition, the company experienced a temporary increase in packaging and distribution costs, pending the industrial scale-up and automation of Part IV and Part V to become operational.
Selling, general and administrative expenses for the quarter were $ 106.6 million compared to $ 27.5 million in the prior quarter and $ 16.9 million last year. The increase is mainly attributable to the $ 50.0 million write-down related to the acquisition of LATAM, an increase in cash-free equity compensation, as well as to the inclusion of a full quarter of LATAM and two months of CC Pharma.
The net loss for the third quarter of 2019 is $ 108.2 million, or $ 0.43 per share, compared to net income of $ 54.8 million or $ 0.22 per share. last quarter and net earnings of $ 12.9 million or $ 0.08 per share for the same period last year. The decrease in net income is due to non-cash impairment losses of $ 58 million and additional non-operating losses of $ 30 million. Excluding the aforementioned non-cash impairment charges, the adjusted net loss is $ 50.2 million, or $ 0.20 per share.
Adjusted EBITDA for cannabis activities in Canada for the third quarter was $ 13.8 million, compared to a loss of $ 6.1 million in the prior quarter. Aphria International's adjusted loss in adjusted EBITDA for the third quarter was $ 0.6 million, compared to a loss of $ 3.5 million in the prior quarter. The increase in Adjusted EBITDA for Cannabis-related Canadian operations in the third quarter is mainly attributable to an increase in general and administrative expenses to support the company's planned capacity expansions, as well as higher overhead costs related to shortages. supply and a temporary increase in packaging. and distribution costs for the adult market.
In this press release, reference is made to Adjusted Gross Margin, Adjusted Gross Margin, Adjusted Net Loss, Adjusted EBITDA Loss of Cannabis Operations in Canada and Aphria Adjusted EBITDA Losses. International, per kilogram (or equivalent kilograms) sold, at cash costs to produce dried cannabis. per gram, all-in costs of dried cannabis production per gram and investments in tangible and intangible assets – 100% subsidiaries, which are not a measure of financial performance in terms of international financial reporting standards . The definitions of all of the above terms can be found in the Company's February 28, 2019 MD & A, filed on SEDAR and EDGAR.
Conference call
Aphria executives will hold a teleconference to discuss these results today at 9:00 am ET. To listen to the live call, dial (888) 231-8191 from Canada and the United States or (647) 427-7450 from international locations and use access code 9475768. Phone replay will be available approximately two hours after the end of the call, until the month of May. 15, 2019. To access the registration, dial (855) 859-2056 and use access code 9475768.
A live simultaneous webcast will also be available in the investors section of the Aphria website, at the address aphria.ca. The webcast will be archived for 30 days.
New company logo
Aphria has launched a new logo today, which coincides with the evolution of society from a licensed medical cannabis producer in Canada to a leading cannabis company in the US. global scale. Aphria's mission is to be the world's leading cannabis company with an unwavering commitment to our citizens, the planet, the quality of our products and our innovation. As the company enters the next phase of its growth, the launch of this brand marks Aphria's strategic priority for the transformation of the cannabis industry. The Aphria tricolor logo, used since 2013, will continue to be the company's flagship brand of medical cannabis, Aphria, which has proudly supported nearly 70,000 patients in Canada and in the medical cannabis markets.
We have good things that grow
About Aphria
Aphria is a global leader in the cannabis industry, driven by an unwavering commitment to our people, the quality of its products and innovation. Aphria, headquartered in Leamington, Ontario – Canada's greenhouse capital – has set the standard for low-cost, high-quality cannabis production on a large scale, grown under the most natural conditions possible. Focusing on untapped opportunities and relying on the latest technology, Aphria is committed to bringing breakthrough innovation to the global cannabis market. The company's brand portfolio is based on in-depth consumer knowledge designed to meet the needs of all consumer segments. Rooted in the multigenerational know-how of our founders in commercial agriculture, Aphria delivers long-term, sustainable shareholder value through a diversified approach to innovation, strategic partnerships, and global expansion, with a focus on presence in more than 10 countries on 5 continents.
For more information, visit: aphria.ca
Original press release
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