Consumer Products

Why Aurora Cannabis Posted Such Awful Q4 Results

When Aurora Cannabis Inc. (NYSE: ACB) reported fourth-quarter fiscal 2020 results after markets closed Tuesday, the marijuana grower and distributor reported a quarterly net loss per share of C$2.70 on revenue of C$72.1 million. In the same period a year ago, the company reported a loss per share of $0.02 on revenue of C$98.9 million. Analysts had forecast a net loss per share of C$0.53 and revenues of C$72.1 million. At today’s conversion rate, one Canadian dollar is equal to $0.75.

For its full fiscal year, Aurora posted a loss per share of C$33.94, nearly double the expected net loss of C$17.50 per share.

Earlier this month, Aurora announced a write-down on goodwill and intangible assets of up to $1.8 billion. The reported write-down totaled $1.6 billion. Aurora also took a C$86.5 million impairment charge on fixed assets and a C$135.1 million charge on the carrying value of some inventory.

CEO Miguel Martin, who took up the role on September 8, said that Aurora had “slipped from its top position” in the Canadian consumer market for cannabis and related product, a statement guaranteed to elicit a response from investors. And the response was predictable, with shares dropping by as much as 25% in New York early Wednesday morning.

Aurora was able to reduce its quarterly cash burn from C$154.6 million in the third quarter to C$150.0 million in the fourth quarter. Debt and interest payments totaled C$53.3 million in the quarter and capital spending came in at C$32.8 million. Adding in C$81.9 million in new cash, the company ended the quarter with C$162.2 million.

CEO Martin’s plan to turn the company around centers on regaining Aurora’s top position in the Canadian consumer market “immediately.” He expects to do this by prioritizing marketing efforts on the company’s premium brands followed by a strategic marketing effort in edibles and derivatives.

The catch is that all this costs money, and Aurora doesn’t have a lot of that to devote to a major marketing push. While capital spending can be curtailed, debt and interest payments probably won’t change much, and cash used in operations totaled nearly C$64 million in the fourth quarter, up by nearly C$10 million sequentially.

Investors were running away from Aurora and most other marijuana stocks as fast as they can on Wednesday. Of the pot stocks we follow, Toronto-traded Horizons Marijuana Life Sciences Index ETF has dropped the least, down about 3.2% on the day at C$5.97 in a 52-week range of C$4.39 to C$13.32.

Tilray Inc. (NASDAQ: TLRY) stock traded down about 8.4% at $4.92 in New York. Its 52-week range is $2.43 to $27.24.

Aurora traded down 24.7% at last look, at $5.51 in a 52-week range of $5.30 to $59.04. The price target on Aurora’s stock is C$13.21 (US$9.89).