Aurora Cannabis Inc. suffered its worst financial quarter since the start of the pandemic as revenue plunged substantially from a year ago, driven by a massive drop in the sales of recreational cannabis products.
The Edmonton-based pot company generated $55.2-million in revenue for its fiscal third-quarter ended March 31, a 25-per-cent decline from the same period a year ago. Revenue was down 18 per cent compared with the quarter ended Dec. 31.
The drop was led by a decline in sales of non-medical cannabis. Aurora generated just $18-million in domestic sales from recreational cannabis, compared with $28.6-million in the quarter ended Dec. 31, a whopping 37-per-cent decline.
The company posted a net loss of $164.7-million, an improvement from $292.8-million last quarter. Adjusted gross margins were virtually unchanged on a quarterly basis, up 2 per cent to 44 per cent.
Aurora is currently sitting on $525-million in cash but it plans to access a US$300-million at-the-market share offering program, a financing mechanism that allows public companies to issue shares gradually to raise capital when necessary.
Aurora chief executive Miguel Martin blamed the pandemic-induced lockdown, particularly in Ontario and Alberta, for his company’s weak quarterly performance. “The reality is that curbside delivery has made the recreational side of the business a challenge in the short term. There are 154 stores in Ontario that have a licence but can’t open. This is not a long-term problem,” he told The Globe and Mail in an interview.
Other comparable cannabis companies, such as Aphria Inc. and Cronos Group Inc., reported weakening recreational cannabis sales in the same period, but their declines were not as severe as Aurora’s.
The competition for market share in the Canadian cannabis industry has been tough to predict throughout the pandemic, as companies navigate shifting brand loyalties and a growing preference for premium cannabis products with a higher concentration of THC. One of Aurora’s largest facilities, Edmonton-based Aurora Sky, is currently being retooled to produce premium cannabis, a strategy that the company hopes will eventually pay off.
“Some companies have posted different revenue numbers and a lot of that has happened because they have sold flower at a ridiculously low price,” Mr. Martin said. He added that Aurora would continue charging ahead with its strategy of premium products. “These are products that are more margin accretive,” he said.
Mr. Martin has taken steps to drastically cut costs since becoming CEO in September, 2020, including shuttering five sprawling, high-tech production facilities and laying off hundreds of workers. The company said that it plans to accelerate that cost-cutting strategy, resulting in savings of between $60-million and $80-million over the next 12 to 18 months.
When asked whether the company plans to lay off more workers, Mr. Martin said that the company has not made any firm decisions on “headcount.” Aurora collected $23.7-million from the Canada Emergency Wage Subsidy program in 2020, and will continue to collect subsidies as long as it is eligible. The program was designed by the federal government to help companies with declining revenues preserve jobs.
“There’s no indication that anything we have done, or anything we will do, violates the spirit of that program,” Mr. Martin said, when asked about past and future job cuts.
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Vanmala Subramaniam