Earnings Briefing: Cannabis Licensed Producers Miss Estimates (CGC, ACB, TGOD, VFF)

CANOPY GROWTH REPORTS SECOND QUARTER FISCAL 2020 FINANCIAL RESULTS

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  • The company has established leading market share across the country including a noteworthy share of over 35% in Alberta, Canada’s most developed provincial recreational market.
  • Consumer demand for cannabis continues to increase versus Q1 2020 with Company-owned recreational same-store sales growth of 17% and global medical organic growth of 23%.
  • More than 30 SKUs submitted to Health Canada for Cannabis 2.0 products across chocolate, vapes, and beverage formats.
  • As part of a management-initiated portfolio review, the Company has taken a restructuring charge of $32.7 million for returns, return provisions, and pricing allowances primarily related to its softgel & oil portfolio. Additionally, management has recorded an inventory charge of $15.9 million to align the portfolio with the new strategy. This new strategy includes new retail pricing architecture, a rationalized package assortment, and a focused marketing/educational strategy to further develop this category. The Q2 2020 gross margin impact of the portfolio restructuring costs is $40.4 million. With this acute restructuring charge, management believes that current inventory levels both internally and externally are in-line with demand forecasts.
  • Consolidated Q2 2020 gross revenue, excluding the portfolio restructuring costs, was up 6% to $118.3 million including increases from full-quarter benefits of the C3 and ThisWorks acquisitions (flat excluding incremental revenue from acquisitions). Net of the portfolio restructuring costs, revenue was $76.6 million, a decrease of 15% over Q1 2020.
  • Cannabis gross revenues for Q2 2020, excluding the portfolio restructuring costs, was $94.7 million, an increase of 2% over Q1 2020.
  • The Company ended Q2 2020 with $2.7 billion in cash and cash equivalents and marketable securities available for sale, with its Canadian Infrastructure and global M&A programs substantially completed.

Aurora Cannabis Generates $70.8 Million Revenue in Q1 and Announces Convertible Note Settlement Plan

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Aurora Cannabis Announces First Quarter 2020 Results & Corporate Action Plan
  • Reports Industry Leading Gross Profit of $53.7 Million and 58% Cannabis Gross Margin
  • Delivers Best-in-Class Indoor Cash Cost to Produce of $0.85 per gram
  • Announces Plan to Settle March 2020 5.0% Convertible Debentures
  • Revises Capital Expenditure Plan to Align with Long-Term Market Growth
  • Generates Total Revenue of $75.6 Million Including Medical and Consumer Cannabis Net Revenue of $60.5 Million, and Wholesale Cannabis Net Revenues of $10.3 Million

First Quarter 2020 Highlights

(Unless otherwise stated, comparisons are made between Fiscal Q1 2020 and Q4 2019 results and are in Canadian dollars)

  • Cash cost to produce per gram sold declined 25% sequentially to $0.85 per gram, delivering on the Company’s promised sub one dollar per gram target KPI
  • Net cannabis revenue of $70.8 million compared to $94.6 million in Q4 2019;
    • Non-wholesale cannabis revenue declined 19% sequentially, comprised of:
      • Medical cannabis revenue of $30.5 million, an increase of 3% sequentially
      • Canadian consumer cannabis revenue of $30.0 million, a decline of 33% sequentially as provincial ordering slowed considerably during the summer as distributors worked through inventories and as the industry was impacted by the slow pace of retail store licensing
    • Wholesale revenues of $10.3 million, at 58% gross margin
  • Production volume increased 43% sequentially to 41,436 kgs
  • Total gross profit of $53.7 million and gross margin on cannabis net revenue of 58%, driven by a significant reduction in cash cost of production
  • Aurora’s medical patient base expanded 8% to 91,116 sequentially. As at the date of this release, Aurora has approximately 91,408 active registered patients
  • Closed an amended and upsized $360 million secured credit facility which includes an accordion feature that enables Aurora to upsize the facility by approximately $40 million. As at the date of this release, approximately $160 million of this facility has not been drawn and remains available to Aurora
  • Sold remaining 28.8 million shares of The Green Organic Dutchman Holdings Ltd. for gross proceeds of $86.5 million

Village Farms International Reports Third Quarter 2019 Financial Results

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Canadian Cannabis JV, Pure Sunfarms, Achieves Fourth Consecutive Quarter of Positive EBITDA, All-In Cost of Production of C$0.63 per Gram, Gross Margin of 69% and EBITDA Margin of 56%

Village Farms’ Financial and Corporate Highlights for the Third Quarter Ended September 30, 2019
(All comparable figures are for the third quarter ended September 30, 2018)

  • Produce sales were US$38.3 million compared with US$39.7 million;
  • Net loss before tax of (US$6.5 million) and included the loss from Pure Sunfarms Corp. (“Pure Sunfarms”) of (US$0.9 million) (Village Farms’ share based on its 50% ownership).  This compares with a net loss before tax of (US$2.7 million);
  • Loss per share was (US$0.10) compared with loss per share of (US$0.04); 
  • EBITDA loss was (US$2.4 million), including the positive contribution from Pure Sunfarms of US$5.0 million (C$6.6 million) (Village Farms’ 50% share).  This compares with an EBITDA loss of (US$2.0 million); and
  • Subsequent to quarter end, completed a bought deal offering of 3,059,000 common shares at a price of C$9.40 per share for aggregate gross proceeds to the Company of C$28,754,600.

Third Quarter Financial Results for Village Farms’ Canadian Cannabis Joint Venture, Pure Sunfarms
(There were are no comparable results for the third quarter ended September 30, 2018 as no production existed.)

  • Net sales (before Village Farms’ 50% share), which consisted entirely of dried cannabis sold predominantly to other licensed producers, were C$24.0 million (US$18.1 million).  Late in the third quarter, Pure Sunfarms began shipping branded packaged product to the Ontario Cannabis Store (“OCS”);
  • Sales for the third quarter did not include C$7.2 million that was invoiced to Emerald Health Therapeutics (see “Update on Pure Sunfarms’ Supply Agreement with Emerald Health Therapeutics” below);
  • Cost of goods sold (“all in cost”) per gram was C$0.63 (US$0.48) per gram;
  • Gross margin was 69%;
  • Selling, general and administrative expenses (before Village Farms’ 50% share) of C$3.7 million (US$2.8 million) or 12% of revenue;
  • Net loss (before Village Farms’ 50% share) of (C$2.4 million) ((US$1.8 million)) which included the non-cash impact of a net charge of (C$12.6 million) due to a change in value of the biological asset; and,
  • EBITDA (before Village Farms’ 50% share) was C$13.3 million (US$10.1 million), marking Pure Sunfarms’ fourth consecutive quarter of positive EBITDA and resulting in an EBITDA margin of 56%.

The Green Organic Dutchman Reports Q3 2019 Results

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  • Continued construction of its Ancaster and Valleyfield facilities, investing $104 million in capital expenditures during the quarter. Unveiled its new construction and operating plan in October 2019, with the most significant change involving demarcating the Valleyfield construction plan into smaller phases while maintaining the optionality to quickly expand production as the market develops. Valleyfield Phase 1 consists of six zones and its production will be shipped to Ancaster for processing.
  • Completed and commissioned its 20,000 square foot Phase 2 indoor cultivation facility at Ancaster and started growing operations within the state-of-the-art facility.
  • Substantially completed the 101,000 square foot Ancaster hybrid greenhouse shortly after the quarter’s end, in October 2019.
  • Experienced a net loss of $20.1 million for Q3-2019, of which $4.3 million was related to non-cash stock-based compensation, depreciation and amortization. As part of the revised strategic plan, the Company has reorganized to reduce general and administrative expenses by approximately $3 million per quarter starting in Q1-2020 on a path towards positive operating cash flow by the end of Q2 2020.
  • Entered the recreational market with a small pilot in Ontario, bringing total Canadian sales to $0.6M. The Company is scaling production in the aforementioned grow spaces to be able to fully supply the OCS and other cannabis boards on a consistent basis and prepare for the launch of the first wave of its Cannabis 2.0 product portfolio at the end of Q4 2019.
  • HemPoland, its wholly owned subsidiary, saw a decrease in revenues to $2 million from $2.9 million in Q2 2019 due to fewer low margin bulk CBD extract sales. However, the Company saw an increased number of sales of its high margin branded CannabiGold and private label products, resulting in gross margin of 80%, up from 69%. The Company has updated product formulations to penetrate new European markets and leverage the brand initiatives already in progress to ensure long-term profitability.

Original Source: Newswire, CanadaNewswire, New Cannabis Ventures

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