It is still early days, but Aurora Cannabis Inc. appears to be steering itself toward calmer waters.
Only three months since announcing a major corporate restructuring that led to the retirement of its founder and chief executive officer Terry Booth and a massive $1-billion write-down, the Canadian pot giant is showing signs of a turnaround. If it succeeds, it could place the company on track to finally achieve its long-stated goal of attaining profitability by the end of the year.
"We're turning this ship around, and it's a big ship," Michael Singer, Aurora's chairman and interim CEO, said in a phone interview with BNN Bloomberg.
The company reported mixed first-quarter results late Thursday, posting $75.5 million in revenue in the three-month period ending Mar. 31, beating analyst expectations and up 35 per cent from the prior quarter. However, its earnings before interest, taxes, depreciation, and amortization (EBITDA) came to a $50.9-million loss amid a $27-million impairment charge in the quarter.
Still, investors are cheering those revenue numbers, which helped drive Aurora's stock up by a whopping 40 per cent during Friday's trading session.
The ship isn't fully turned around, however, and Singer notes that more divestments are on the horizon as the company outlines which kinds of businesses it still wants to keep. That determination will help secure badly needed capital for Aurora, which currently has $230.2 million in cash, and US$650 million available via a refreshed at-the-market (ATM) equity program that Singer remains cautious to draw from.
"Think of the ATM as an insurance policy," he said. "It's a prudent measure for us to protect the company and our shareholders in an uncertain environment. We're certainly mindful diluting our shareholders and we won't use it if we don't need to."
Paring down operations is a tactic that other large cannabis companies are also adopting. Aurora's main rival Canopy Growth Corp. is among them, having recently announced similar moves aimed at ending a steady streak of losses. While Canopy's moves are being largely dictated by its new CEO David Klein, Singer notes that "efficiencies" are being sought from everyone at Aurora, from top brass to front-line cultivation workers.
"I'm at my desk. I'm on the phone sometimes 12 or 14 hours a day and we're leveraging all the talent around the table," he said. "There's only so much [management] can do. We're not in the trenches and I can't tell you how a trimmer or packager can be more efficient, but they can."
The company's search for a permanent CEO remains ongoing, with a "very, very short list" of candidates completed and a final decision expected within months, Singer said. He added that introducing a new hire to Aurora's operations has been challenging amid nationwide travel restrictions in the wake of the COVID-19 pandemic.
Singer said that Aurora's Cannabis 2.0 product line up will continue to be refined and that it plans to "double down" on some items it sees as being main profit drivers, such as chocolates and gummies. The U.S. continues to be a major market that Aurora can't ignore, Singer noted, but whatever moves made there need to be "accretive and complement Aurora's existing business."
He didn't specify whether Aurora's U.S. plans would involve a joint venture or acquiring an existing business, but Singer's conditions for a deal south of the border must be cash-flow-positive and completed before the possibility of federal regulations changing toward full legalization.
"That market is the largest opportunity in the world but as we think about the U.S., we need to do it in a responsible and thoughtful way," he said.
The COVID-19 crisis has created significant uncertainty for the Canadian cannabis market and could thwart the company's efforts in reaching profitability, David Kideckel, senior equity research analyst at AltaCorp Capital, said in a research report released on Friday.
Singer acknowledged the challenges that COVID-19 is allaying onto the broader pot sector. He said access to capital is "almost non-existent" and that consolidation is more than likely to occur within the space.
"This COVID-19 environment is going to cause of a lot of uncertainty," he said. "There's going to be a lot of carnage."
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