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Oct. 15, 2019, 7:00 a.m. EDT

Aphria Inc. Announces Second Consecutive Quarter of Profitability and Positive Adjusted EBITDA

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LEAMINGTON, ON, Oct. 15, 2019 (Canada NewsWire via COMTEX) -- Net Income Increases 4.5% and Adjusted EBITDA Increases Four-fold from the Prior QuarterAdult-Use Cannabis Revenue Increases 8% from Prior QuarterMaintains Strong Balance Sheet and Cash Position to Support Future Growth Reiterates Fiscal Year 2020 Outlook

Aphria Inc. ("Aphria" or the "Company") today reported its results for the first quarter ended August 31, 2019. All amounts are expressed in thousands of Canadian dollars, unless otherwise noted and except for per gram, kilogram, kilogram equivalents, and per share amounts.

"We are pleased to report a second consecutive quarter of profitable growth with strong contribution from our Canadian cannabis operations. Our success was also driven by our international business and the strength and growth of our brands, particularly Broken Coast, despite a small fire at our British Columbia facility at the end of the quarter. This solid start to the year keeps us on track to achieve our fiscal year 2020 financial outlook," stated Irwin D. Simon. "Going forward, we remain focused on our highest-return priorities both in Canada and internationally as our team furthers the development of our medical and adult-use cannabis brands to drive growth through innovation and return value to shareholders."

Key Operating Highlights







        
            --  Net revenue of $126.1 million in the first quarter, an increase
                of 849% from prior year quarter and decrease of 2% from prior
                quarter.
            --  Revenue for adult-use cannabis of $20.0 million in the first
                quarter, an increase of 8% from prior quarter.
            --  Net income of $16.4 million and adjusted EBITDA of $1.0 million
                in the first quarter.
            --  Adjusted EBITDA from cannabis operations of $1.3 million in the
                first quarter.
            --  Ended quarter with a strong balance sheet and liquidity,
                including $464.3 million of cash, cash equivalents and liquid
                marketable securities, to fund planned Canadian and
                International growth.
            --  Aphria One facility in full crop rotation with more than
                600,000 plants.
            --  On-track for annual production capacity of 255,000 kilograms
                when all facilities are fully licensed and operational.
            --  Launch of Plant Positivity, Aphria's social impact platform
                that aims to provide greater education and access to plants
                within the communities the Company serves.
            --  Official roofing ceremony for Aphria's indoor facility in
                Neum�nster, Germany.
            --  Completion of Aphria's Cannabis Vault in Bad Bramstedt,
                Germany.
            --  Aphria's subsidiary Marigold Project Jamaica Limited officially
                opened its first retail Herb House at the Peter Tosh Square,
                Unit #51, Pulse Center, 38a Trafalgar Road, overlooking the
                Peter Tosh Museum in New Kingston, Jamaica.
            --  Signed on as a brand partner for the PAX Era device and
                platform.
        
        
        


Subsequent Events







        
            --  Launch of "Aphria Educates", a program aimed to educate
                Canadian adults on responsible and safe use of all cannabis
                products legally available now and in the future.
            --  Health Canada advised the Company on October 11, 2019 that they
                are in the process of expediting the issuance of Aphria
                Diamond's licence.
        
        
        


Key Financial Highlights







        
        
                Three months ended
                 Three months ended
        
        
        
                August 31, 2019
                 August 31, 2018
        
        
        
        
               Net revenue                                                                                        $126,112                            $13,292
        
        
        
               Gross profit                                                                                        $45,421                            $13,764
        
        
        
               Adjusted cannabis gross profit (1)                                                                  $15,331                             $8,458
        
        
        
               Adjusted cannabis gross margin (1)                                                                    49.8%                             63.6%
        
        
        
               Adjusted distribution gross profit (1)                                                              $12,223                                N/A
        
        
        
               Adjusted distribution gross margin (1)                                                                12.8%                               N/A
        
        
        
               Net income                                                                                          $16,441                            $21,176
        
        
        
               Adjusted EBITDA (1)                                                                                  $1,035                           ($3,964)
        
            ---
        
        
        
        
        
        
                  Q1-2020
                   Q4-2019
        
        
        
        
               Distribution revenue                                                                                $95,327                            $99,186
        
        
        
               Net cannabis revenue                                                                                $30,785                            $28,608
        
        
        
               Net revenue                                                                                        $126,112                           $128,568
        
        
        
               kilogram equivalents sold (1)                                                                         5,969                              5,574
        
        
        
               Cash cost to produce dried cannabis / gram 1                                                          $1.43                              $1.35
        
        
        
               "All-in" cost of goods sold / gram 1                                                                  $2.52                              $2.35
        
        
        
               Adjusted EBITDA from cannabis operations (1)                                                         $1,329                             $1,851
        
        
        
               Adjusted EBITDA from businesses under development (1)                                              ($4,234)                          ($5,514)
        
        
        
               Adjusted EBITDA from distribution operations (1)                                                     $3,940                             $3,872
        
        
        
               Cash and cash equivalents & marketable securities                                                  $464,319                           $570,996
        
        
        
               Working capital                                                                                    $612,973                           $642,284
        
        
        
               Capital and intangible asset expenditures - wholly-owned subsidiaries 1                             $19,277                            $26,828
        
        
        
               Capital and intangible asset expenditures - majority-owned subsidiaries(1)                          $20,071                            $16,943
        
        
        
               Strategic investments(1)                                                                            $34,722                             $6,862
        
            ---
        
        


Net revenue for the three months ended August 31, 2019 was $126.1 million, an increase of 849% from $13.3 million in the same period last year. First quarter fiscal 2020 net revenues were lower when compared to the prior quarter net revenues of $128.6 million as a result of a decrease in distribution revenue from $99.2 million to $95.3 million associated with a change in business strategy at CC Pharma to maximize profitability after recent changes in the German government's medical reimbursement model. The decrease in distribution revenue was partially offset by an increase in net cannabis revenue of $30.8 million from $28.6 million. Net revenue includes over 3,317 kilogram equivalents sold for the adult-use market and 1,354 kilogram equivalents for medical cannabis sales. The Company estimates the impact on revenue from the small fire at Broken Coast to be approximately $1.5 million in the quarter; however, the majority of the lost quarterly revenue will be reported in the Company's second quarter.

The average retail selling price of medical cannabis (exclusive of wholesale), before excise tax, decreased to $7.56 per gram in the quarter, compared to $7.66 in the prior quarter, primarily related to a higher percentage of total medical sales coming from Aphria. The average selling price of adult-use cannabis, before excise tax, increased to $6.02 per gram in the quarter, compared to $5.73 per gram in the prior quarter.

Adjusted cannabis gross profit for the first quarter was $15.3 million, with an adjusted cannabis gross margin of 49.8%, compared to $15.2 million with an adjusted gross margin of 53.0% in the prior quarter. The decrease in adjusted gross margin was primarily due to lower sales of higher margin items due to the Broken Coast fire and temporary higher costs per gram.

Adjusted distribution gross profit for the first quarter was $12.2 million, with an adjusted gross margin of 12.8%, compared to $12.3 million with an adjusted gross margin of 12.4% in the prior quarter.

Selling, general, and administrative costs in the quarter decreased to $41.4 million from $60.0 million in the prior quarter, and increased from $24.1 million in the prior year. The decrease from the prior quarter is mainly related to the decrease of $19.5 million in transaction costs primarily associated with the issuance of the senior convertible debenture and $3.9 million general and administrative costs, partially offset by $1.9 million in share-based compensation and $0.5 million in amortization.

Net income for the first quarter of fiscal 2020 was $16.4 million or $0.07 per share, compared to net income of $15.8 million or $0.05 per share in the prior quarter, and net income of $21.2 million or $0.09 per share for the same period last year. The increase in net income was primarily due to the increase in gross profit and the net fair value adjustment for biological assets, and decrease in the SG&A related to G&A and non-operating income.

Adjusted EBITDA increased $0.8 million to $1.0 million for the first quarter compared to $0.2 million in the prior quarter. Adjusted EBITDA from cannabis operations for the first quarter was $1.3 million compared to $1.8 million in the prior quarter. The adjusted EBITDA loss from businesses under development for the first quarter was $4.2 million compared to a loss of $5.5 million in the prior quarter. Adjusted EBITDA from distribution operations for the first quarter was $3.9 million, flat compared to the prior quarter. The increased adjusted EBITDA is primarily attributable to cost containment strategies employed across the businesses under development.







        
                                    (1) - In this press release,
                                     reference is made to adjusted
                                     cannabis gross profit, adjusted
                                     cannabis gross margin, adjusted
                                     distribution gross profit, adjusted
                                     distribution gross margin, adjusted
                                     net loss, adjusted EBITDA from
                                     cannabis operations, adjusted
                                     EBITDA from businesses under
                                     development, adjusted EBITDA from
                                     distribution operations, kilogram
                                     equivalents sold, cash costs to
                                     produce dried cannabis per gram,
                                     "all-in" costs to produce dried
                                     cannabis per gram and investments
                                     in capital and intangible assets -
                                     wholly-owned subsidiaries, which
                                     are not measures of financial
                                     performance under International
                                     Financial Reporting Standards
                                     (IFRS). These metrics and measures
                                     are not recognized measures under
                                     IFRS do not have meanings
                                     prescribed under IFRS and are as a
                                     result unlikely to be comparable to
                                     similar measures presented by other
                                     companies. These measures are
                                     provided as information
                                     complimentary to those IFRS
                                     measures by providing a further
                                     understanding of our operating
                                     results from the perspective of
                                     management. As such, these measures
                                     should not be considered in
                                     isolation or in lieu of review of
                                     our financial information reported
                                     under IFRS. Definitions and
                                     reconciliations for all terms above
                                     can be found in the Company's
                                     August 31, 2019 Management's
                                     Discussion and Analysis, filed on
                                     SEDAR and EDGAR.
        
        
        


Outlook

For fiscal year 2020, the Company is reaffirming its guidance of:

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