What the Aurora Cannabis Quarterly Report Means for the Future of the Pot Industry

Aurora Cannabis quarterly report
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Aurora Cannabis Quarterly Report

The first wave of quarterly reports post-legalization are set to roll in, and Aurora Cannabis Inc (NYSE:ACB) is leading the way. The Aurora quarterly report came in on November 12 and while it didn’t set the market on fire, the numbers were very positive.

The company’s earnings attributable to common shareholder was catapulted 2,862% to CA$104.2 million, while total revenue climbed to CA$29.7 million, representing a 260% climb compared to the previous year. (Source: “Aurora Cannabis’ earnings surge by 2,800% after it produces 11,000 pounds of pot in 3 months,” CNBC, November 12, 2018.)

The company also managed to sell about 2,676 kilograms of cannabis in the quarter, representing a surge of 201% compared to the same period the year before.

Compared to the previous fiscal year, Aurora produced approximately 400% more cannabis, with 4,996 kilograms grown.

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Another key number that investors ought to focus on is the cost of production. This is a key metric that will help marijuana companies differentiate themselves from their competitors and offer competitive advantages when brokering deals with governments.

The cash cost to produce per gram of dried cannabis sold fell by 22.5% versus the previous year and dropped about 14.7% compared to the preceding quarter.

The company also highlighted its “Aurora Sky” facility, an indoor growing facility in Edmonton, which obtained its sales license on October 17. When it begins harvesting at full capacity by the end of this year, both the cost of production and the supply capacity will likely be significantly boosted.

These are all very strong numbers out of Aurora and this could be key in turning around the marijuana market.

The Aurora Cannabis quarterly report also responded to concerns from investors about marijuana shortages.

“Am I sold out? We wouldn’t sell out, we have budgeted a certain amount of cannabis for distribution every month. Who would sell out of cannabis?” said Terry Booth, CEO of Aurora Cannabis. (Source: “‘We will be ramping up’: Aurora Cannabis aims to pick up slack of Canada-wide shortage,Financial Post, November 12, 2018.)

Booth also wanted to reiterate the company’s global mindset moving forward.

We continue to successfully execute our differentiated and diversified strategy committed towards domestic and international expansion in the medical cannabis market, adult consumer use sales, production scale-up, innovation, plant and medical research, and product development.

(Source: “Aurora Cannabis Announces Financial Results for the First Quarter of Fiscal 2019,” Cision, November 12, 2018.)

He added, “Given the strong unmet consumer demand evident across Canada, we are confident that our rapidly increasing production capacity will result in continued acceleration of revenue growth,”

Analyst Take

The Aurora Cannabis quarterly report is important on a number of fronts.

First, it shows us the rapid expansion of the marijuana industry and is exactly what we wanted to see.

The company registered massive growth in revenue and sales, putting the company on a strong growth path moving forward.

It also helped allay fears that the Canadian marijuana demand would be underwhelming.

The next point of note is that the company was quick to point out that there is no shortage of cannabis supply—at least on the producer’s part. Whether that cannabis hits the shelves or not is up to the government, but that shows that the company is ready to meet the demand.

It’s also worth noting that the Aurora Cannabis quarterly report shows a company planning for the future. Whether via its global mindset or its intent on reducing production cost down in order to better compete for contracts and increase profit margins, there’s a lot to like about the company’s fiscal report.