LEAMINGTON, ON, April 14, 2020 /CNW/ – PRESS RELEASE – Aphria Inc., a global cannabis company, has reported its financial results for the third quarter ended Feb. 29, 2020. All amounts are expressed in Canadian dollars, unless otherwise noted and except for per gram, kilogram, kilogram equivalents, and per share amounts.
« We are proud of our sustained growth in Canada and continued expansion of our international capabilities, » stated Irwin D. Simon, Chairman and Chief Executive Officer. « During this unprecedented time, the well-being of our employees, patients, consumers, partners and the communities we operate in is our primary focus. Our facilities, offices and patient care teams remain open and operational to continue to provide our patients and consumers with what we believe is best-in-class care and service with appropriate measures in place to protect the health and safety of employees. As we face uncertain times, I am proud of how the Aphria team has come together to navigate these uncharted waters. Going forward, we believe Aphria continues to be differentiated in the cannabis industry through our brands, cultivation expertise, high quality standards, cash position and balance sheet. We continue to focus on the highest return opportunities for growth and long-term value creation. »
Key Operating Highlights
- Gross revenue for adult-use cannabis of $44.7 million in the third quarter, an increase of 54% from prior quarter and the 5th consecutive quarter of growth.
- Net cannabis revenue of $55.6 million in the third quarter, an increase of 65% from prior quarter.
- Net revenue of $144.4 million in the third quarter, an increase of 96% from prior year quarter and increase of 20% from prior quarter.
- Operating income of $8.7 million in the third quarter, compared to a loss of $9.6 million in the prior quarter.
- Net income of $5.7 million, or $0.02 per share, and adjusted EBITDA of $5.7 million in the third quarter.
- Adjusted EBITDA from cannabis operations of $6.0 million in the third quarter, an increase of 78% from the prior quarter.
- Ended third quarter with a strong balance sheet and liquidity, including $515.1 million of cash and cash equivalents, to fund planned Canadian and International growth.
- Received its European Union Good Manufacturing Practices (EU GMP) certification, from the Malta Medicines Authority (MMA) at the company’s subsidiary, ARA – Avanti Rx Analytics, as well as the GMP annex at the company’s Aphria One facility, allowing the company to begin to supply medical cannabis across the European Union and bolstering the company’s international export capabilities.
- Equity raise of $100 million, further strengthening the balance sheet.
- Recognized for Executive Gender Diversity by Globe and Mail’s inaugural Report on Business Women Lead Here list, an annual benchmark of executive gender diversity in corporate Canada.
Key Financial Highlights
(In thousands of Canadian dollars)
|Three months ended||Three months ended|
|February 29, 2020||February 28, 2019|
|Adjusted cannabis gross profit 1||$23,744||$5,808|
|Adjusted cannabis gross margin 1||42.7%||36.3%|
|Adjusted distribution gross profit 1||$11,397||$7,854|
|Adjusted distribution gross margin 1||12.9%||13.6%|
|Net income (loss)||$5,697||($108,209)|
|Adjusted EBITDA 1||$5,736||($14,435)|
|Net cannabis revenue||$55,566||$33,708|
|Kilograms (or kilogram equivalents) sold 1||14,014||7,062|
|Cash cost to produce dried cannabis / gram1||$0.93||$1.11|
|« All-in » cost of goods sold / gram1||$1.69||$1.98|
|Adjusted EBITDA from cannabis operations 1||$6,031||$3,386|
|Adjusted EBITDA from businesses under development 1||($2,859)||($3,547)|
|Adjusted EBITDA from distribution operations 1||$2,564||$2,064|
|Cash and cash equivalents & marketable securities||$515,102||$497,694|
|Capital and intangible asset expenditures -wholly-owned subsidiaries1||$23,839||$8,230|
Net revenue for the three months ended Feb. 29, 2020 was $144.4 million, an increase of 96% from $73.6 million in the same period last year. Third quarter fiscal 2020 net revenues were 20% higher when compared to the prior quarter net revenues of $120.6 million, largely due to an increase in net cannabis revenue from sales to provincial control boards. Net revenue included 8,171 kilogram equivalents sold for the adult-use market, 1,352 kilogram equivalents for medical cannabis sales and 4,491 kilogram equivalents sold in the wholesale market.
The average retail selling price of medical cannabis (exclusive of wholesale), before excise tax, decreased to $6.41 per gram in the quarter, compared to $8.16 in the prior quarter, primarily related to the implementation of a compassionate pricing policy in the quarter. The average selling price of adult-use cannabis, before excise tax, increased to $5.47 per gram in the quarter, compared to $5.22 per gram in the prior quarter, primarily as a result of a change in sales mix.
As previously disclosed, customer demand exceeded the company’s supply capabilities in the third quarter as a result of the timing of Aphria Diamond’s license receipt and, as a short-term measure, the company purchased wholesale product from other licensed producers to supplement its near-term supply capabilities. Wholesale product purchases resulted in a higher cost and less margin opportunity for those sales. During the quarter, sales of purchased cannabis accounted for $20.2 million, with gross profit of $5.1 million and a gross margin of 25.2%. If the Company had been able to utilize cannabis it had grown, at the « all-in » cost of sales of dried cannabis per gram reported this quarter, the Company would have reported an additional $7.6 million of gross margin and adjusted EBITDA.
Cannabis gross profit for the third quarter was $23.7 million, with a cannabis gross margin of 42.7%, compared to $19.1 million with a cannabis gross margin of 56.6% in the prior quarter. The decrease in cannabis gross margin was primarily due to the sale of cannabis that was purchased from another wholesaler and the sale of wholesale cannabis.
Distribution gross profit for the third quarter was $11.4 million, with a distribution gross margin of 12.9%, compared to $11.0 million with a distribution gross margin of 12.7% in the prior quarter.
Selling, general and administrative costs in the quarter increased to $50.9 million from $49.2 million in the prior quarter, and decreased from $106.6 million in the prior year. The increase from the prior quarter is mainly related to a $1.8 million increase in transaction costs and an increase in headcounts at all levels of the organization as the company transitions to an annual cultivation capacity of up to 255,000 kgs. These increases were partially offset by a decrease in share-based compensation of $2.4 million.
Net income for the third quarter of fiscal 2020 was $5.7 million, or $0.02 per share, compared to a net loss of $7.9 million, or loss of $0.03 per share in the prior quarter, and net loss of $108.2 million, or loss of $0.43 per share for the same period last year.
Adjusted EBITDA increased by $3.8 million to $5.7 million for the third quarter compared to $1.9 million in the prior quarter. Adjusted EBITDA from cannabis operations for the third quarter was $6.0 million compared to $3.4 million in the prior quarter. The adjusted EBITDA loss from businesses under development for the third quarter was $2.9 million compared to a loss of $3.5 million in the prior quarter. Adjusted EBITDA from distribution operations for the third quarter was $2.6 million, compared to $2.1 million the prior quarter.
The company ended the third quarter with a strong balance sheet, including $515.1 million of cash and cash equivalents.
Coronavirus (COVID-19) Pandemic, Its Impact and Influence on Aphria’s Guidance
The pandemic and its impact on the economy is constantly evolving and presents too many variables and contingencies to accurately forecast the company’s fourth quarter results. For instance, any one of the following could have material impacts on Aphria’s anticipated fourth quarter revenue levels: (i) the United Kingdom government, or any EU government of a country that materially supplies CC Pharma, closes its border to exports; (ii) either the Alberta or Ontario government implements a more restrictive ‘shelter in place program’ or materially adjusts its anticipated sales orders; (iii) current ‘pantry loading’ sales levels in Quebec reverse to pre-pandemic sales levels; (iv) the Alberta, Ontario or Quebec government eliminate or scale-back delivery methods for retail sales as part of a stronger ‘shelter in place program’; (v) the Company’s Leamington or Densborn facilities face greater than current levels of employee absences reasons related to COVID-19; and/or (vi) the company’s supply chain partners materially increase their prices or experience unanticipated material disruptions to their business or chose to implement policy changes affecting Aphria in light of ‘shelter in place programs’. Without clarity on the company’s expected revenue levels, it is improbable to accurately forecast EBITDA levels on these revised revenue levels. For all of the factors surrounding the growing uncertainty and the near-term financial impact of the pandemic, the company is suspending its previously announced guidance for revenue, of $575 million to $625 million, and adjusted EBITDA, of $35 million to $42 million, for fiscal 2020. The company intends to re-instate its annual guidance once the pandemic stabilizes, which may not be until a point in the company’s Fiscal 2021 year.
Aphria executives hosted a conference call to discuss these resultsApril 14 at 9:00 a.m. Eastern Time. To listen to the live call, dial (888) 231-8191 from Canada and the U.S. or (647) 427-7450 from International locations and use the passcode 8021229. A telephone replay will be available approximately two hours after the call concludes through April 29, 2020. To access the recording dial (855)-859-2056 and use the passcode 8021229.
There will also be a simultaneous, live webcast available on the Investors section of Aphria’s website at aphriainc.com. The webcast will be archived for 30 days.
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