Aurora Cannabis Inc. (NASDAQ:ACB) (TSX:ACB), a Canadian cannabis company, announced its financial and operational results late Thursday for the third quarter of fiscal 2022 ended March 31, 2022.
Q3 Fiscal 2022 Highlights
- Q3 2022 total cannabis net revenue was $50.4 million, down 17% sequentially. The Q3 2022 average net selling price per gram of dried cannabis, excluding the effect of bulk wholesale sales, increased 20% to $5.41 from $4.52 in Q2 2022.
- Adjusted gross margin before fair value adjustments on cannabis net revenue1 was 54% in Q3 2022 versus 53% in the prior quarter and 44% in Q3 2021. The increase in Adjusted gross margin compared to the prior-year period is due to increased sales in our international medical markets which command significantly higher average net selling prices and margins.
- Adjusted EBITDA loss declined to $12.3 million in Q3 2022 versus $9.0 million in Q2 2022 but narrowed from $20.9 million in the prior-year period. The change from Q2 2022 was primarily driven by lower revenue that was partially offset by a decrease in SG&A, net restructuring, and one-time costs.
Medical Cannabis
- Medical cannabis net revenue was $39.4 million, an 8% increase from the prior-year period, delivering 78% of Aurora's Q3 2022 consolidated revenue and 92% of adjusted gross profit.
- Adjusted gross margin before fair value adjustments on medical cannabis net revenue was 64% compared to 63% sequentially and 53% in the prior-year period.
The increase in revenue was driven by growth in the international medical business, up 55% year over year as the company continued to develop new, high margin medical markets, but down 26% sequentially. The sequential revenue decrease was primarily a result of $8.5 million of net sales generated from our Israel supply agreement in the previous quarter.
Excluding the impact of Israeli sales, net international medical revenue increased sequentially by $1.8 million and was driven by growth in key markets including Germany, Poland, the UK, and Australia.
‘Consumer Cannabis’
- Consumer cannabis net revenue was $10.3 million compared to the prior quarter's net revenue of $14.4 million, with the decline due mainly to industry-wide pricing pressures across our portfolio and exacerbated by retail store closures in key provinces for the company's premium offerings.
- Adjusted gross margin before fair value adjustments on consumer cannabis net revenue1 was 29% versus 23% sequentially and 33% in the prior-year period. “The increase of 6% from Q2 2022 was driven by the Company's continuing shift toward a premium product portfolio,” stated the firm in a press release.
- SG&A, including Research and Development, was $39.5 million (excluding $2.0 million of restructuring-related costs and $0.7 million of prior period employee-related accruals) versus $40.9 million in the prior quarter and $43.0 million in the prior-year period, presented on a comparable basis. Q3 2022 SG&A is now at the lowest level in almost four years.
Management Commentary
"We continue to steer our differentiated global cannabis business towards long-term shareholder value creation. This is being accomplished through a sole focus on the most profitable growth opportunities, rationalization of our Canadian cost structure, and disciplined use of capital. Our plan is working and we remain firmly on track to achieving a positive Adjusted EBITDA run rate by the first half of fiscal 2023,” said Miguel Martin, CEO of Aurora.
“Further cost savings will enable us to increase our range of savings under our business transformation plan from $60 to $80 million to $150 to $170 million. Our balance sheet also remains among the strongest in the industry, enabling the repurchase of $141.4 million in convertible debt early, while also providing meaningful working capital to support organic growth and pursue strategic M&A, such as our recent acquisition of Thrive Cannabis," added the CEO.
"During Q3, we continued focusing on our global medical cannabis business because it is both defensive and stable, with cash gross margins that exceed 60%. In terms of the Canadian adult-use market, we are committed to advancing our premiumization strategy," he concluded.
