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