After the market closed on Monday, Aurora Cannabis Inc. (NASDAQ: ACB) (TSX: ACB) released fourth quarter and full year financial and operational results.
The next morning, MKM Partners upgraded Aurora Cannabis to Neutral and raised the price target to C$7 from C$6. We consider the upgrade and price target hike from the broker-dealer to be significant as it breaks a trend of lower ratings and lower price targets on the Canadian cannabis company.
Today, we want to issue an update on Aurora Cannabis and highlight 11 facts from the earnings report that we consider to be significant:
As of June 30th, Aurora Cannabis reported to have more than $440 million of cash on hand. This amount of capital is comprised of $421.5 million of cash and cash equivalents, $19.4 million in restricted cash, and no secured term debt. The company can access to US$1 billion of capital under its shelf prospectus and we are favorable on the strength of the balance sheet
Aurora Cannabis has identified cash savings of $60 million to $80 million per year and expects to deliver $30 million to $40 million of cash savings within the next year
The management is executing on a growth strategy to combat the ongoing challenges in the Canadian recreational and medical cannabis market as well as it international medical and recreational markets
Aurora Cannabis announced a long-term supply agreement with Cantek in Israel that should provide the business with a steady stream of high-margin revenue that could also evolve into a more significant partnership over the long-term
Aurora Cannabis CEO Miguel Martin believes the business is positioned to capitalize on Canada’s recreational market due to product portfolio enhancements, an increase in the number of new store openings, and rising consumer demand
The company said its strong balance sheet should support its organic growth strategy and can be utilized for strategic acquisitions (particularly in the US)
When compared to the same quarter last year, the amount of medical cannabis sold increased by 9%. The increase was primarily due to an 88% increase in international medical cannabis revenue when compared to the same period in 2020
Aurora Cannabis recorded a sharp decline in recreational cannabis revenue due to less orders from Canadian provinces which reflects the impact of COVID lockdown restrictions. When compared to the same quarter last year, the amount of recreational cannabis sold increased by 35% (from $35.3 million to $19.5 million).
When compared to the same quarter last year, the cannabis company saw an improvement in adjusted gross margin compared due to a shift in sales mix towards the medical market which commands higher average net selling prices and margins
Adjusted EBITDA loss improved by approx. $13 million when compared to the prior year’s loss of $33.3 million. The improvement was primarily related to the company cutting expenses
The average price per gram sold increased to $5.11 per gram from $3.60 in the same quarter last year
The company’s focus on realizing operational efficiencies and on managing cash has greatly improved operating cash flow and reduced the need for incremental capital. During the quarter, Aurora Cannabis used $7.8 million of cash to fund operations (including working capital investments and restructuring and severance payments of $5.1 million).
Cash used in operations and for capital expenditures showed significant improvements and these metrics are important parts of the company’s plan to generate sustainable positive free cash flow. The company believes its ongoing business transformation is expected to result in positive operating cash flow over the coming quarters.
Although Aurora Cannabis announced significant improvements on several important financial and operating metrics, the stock is trading slightly lower in the pre-market. We will continue to monitor how the management team tries to turn the business around.
Comments