Aurora Cannabis Inc. reported another disappointing quarter with sales coming below expectations, as COVID-19 lockdowns and greater competition overshadowed gains made in its medical cannabis business.
Aurora reported $55.1 million in revenue in the quarter, down 25 per cent from a year earlier and well below the $68.8 million that analysts were expecting. The company also booked an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of $24 million in its third quarter, a 52 per cent improvement from last year – but wider than the $10-million loss that analysts expected.
Much of Aurora's sales woes came from a steep decline in its Canadian recreational cannabis business. Sales in that segment fell 53 per cent to $18 million, a result of weak retail activity caused by COVID-19 lockdowns as well as more competition in the market, notably in the value category that Aurora had a commanding presence in a year earlier.
Aurora's net selling price of cannabis rose to $5.00 per gram in the three months ending March 31, from $4.45 in the previous quarter.
"The question that I would have proposed [to investors] is that in the recreational market, would you like us to go to the bottom of the barrel and sell discount flower, lose money but post a big top line market? Probably not," said Miguel Martin, chief executive officer of Aurora Cannabis, in a phone interview.
"So the question is: how do you ride it out? You ride it out by being reasonable in where you try to play."
Aurora's medical business was a bright spot as revenue in that unit rose 17 per cent to $36.4 million. Selling, general and administrative expenses tumbled 42 per cent to $45.1 million, while the company said it has identified another $60 million to $80 million in cost savings that could be executed over the next 18 months.
Martin said those cost savings will come as Aurora's European production facility will begin cultivating cannabis for the continental medical market, saving it from shipping products from Canada, as well as finding further efficiencies in its Canadian facilities. Once those savings are fully realized, Aurora could be in line to report some profits, Martin said.  
"I think there's no question we can deliver $15 million to $20 million [in quarterly savings]. If we can do that, the company looks a lot different," Martin said.
Aurora also said it plans to move its U.S. listing to the Nasdaq from the New York Stock Exchange later this month. And there’s change in the boardroom, as Aurora announced the appointment of Robert Funk as its new independent chair, replacing Michael Singer, who will maintain a seat on Aurora's board.
Aurora ended the quarter with about $520 million in cash and plans to raise another $300 million through an at-the-market offering. That will give the pot producer plenty of dry powder for potential M&A activity, primarily in the U.S. where Congress is expected to reveal new legalization legislation sometime soon.
"If the right thing comes along, we will be in a position to use that [cash] for that," Martin said. "This would be a tactical, opportunistic decision."