Aurora sets big hopes in the new CEO
Miguel Martin is supposed to fix the numerous problems of the once most important cannabis player.
While forest fires rage in the Pacific Northwest, former Promise licensed producer Aurora Cannabis, Inc. (TSX and NYSE: ACB) is desperately fighting its own financial fire. In a series of statements, the company reported $ 1.8 billion in impairment losses on Tuesday, including a preview of fourth quarter earnings and the appointment of former chief commercial officer Miguel Martin as chief executive officer. Aurora stock fell nearly 11 percent that day to $ 9.92 on the Toronto Stock Exchange. The company's stock price fell nearly 69 percent from $ 31.56 on January 2, 2020 to $ 31.56 and 94 percent from $ 153.96 on March 15, 2019. Note that these prices are relative to a reverse Split from Aurora at a ratio of 1:12, which was conducted in May to avoid delisting from the New York Stock Exchange, meaning the company was valued at around $ 2.63 per share in January. "I am excited to take on the role of CEO at this turning point in Aurora's business," said Martin in the first statement. He joined Aurora in May when the company acquired Reliva, LLC - where Martin was CEO - for $ 40 million in common stock. Those stocks are now worth half the price they were when Aurora's valuation rose sharply after its earnings surge in the third quarter. But now the income will decrease. With a preview of fourth quarter financials in a second statement, the full results of which are due September 22, the company expects total revenues of $ 70-72 million, up from $ 75.5 million in the third quarter. Net cannabis revenues are expected to be between $ 66-68 million, compared to $ 69.6 million previously. As part of its previously announced restructuring plan, which included a cut in spending and capital spending, Aurora says it "expects to make a number of balance sheet adjustments in the fourth quarter of 2020 to reflect market realities and position the company for future performance" . These adjustments include up to $ 90 million in impairment of fixed assets due to the rationalization of manufacturing facilities and a charge of approximately $ 140 million for "mostly trimming" to accommodate short-term demand. Aurora reports that 40 percent of its market value adjustment is related to inventory. Expect a non-cash amortization of goodwill and intangible assets of $ 1.6 billion to $ 1.8 billion. The producer also pushed back a previously stated commitment to achieve positive EBITDA by the first quarter of 2021. When analysts asked Aurora about projected profitability on its last earnings call, interim CEO Michael Singer said the company's new plan could grow to EBITDA profitability under several reasonable scenarios. "We have an operational goal and SG&A goals, but if we have to, we can pull additional cost levers within the company," he said. "We are committed to achieving positive EBITDA in the first quarter. However, on Tuesday, Aurora reduced the Adjusted EBITDA milestones for its credit facility required for the fiscal year ended June 30 from $ 51 million to $ 20 million, shifting the requirement to achieve positive adjusted EBITDA to the second quarter includes, "in accordance with management's revised tactical business plan". Part of that plan includes ending a highly publicized deal with the UFC. The company says a one-time payment of $ 30 million will avoid more than $ 150 million in fees, research costs, and marketing expenses over the next five years. "We thank our lending partners for their continued support in reaching this agreement," said CFO Glen Ibbott of the loan facility adjustments. As of June 30, Aurora said it had approximately $ 160 million in cash. On Tuesday, Aurora reported a total of approximately $ 275 million available under its existing marketing program. New boss Martin says he is confident Aurora has the infrastructure and skills to ensure long-term success in the global cannabinoid industry. "Given my 25 years of battling regulated product opportunities, including serving as president of one of the largest electronic cigarette companies, I believe we will do well with both the current portfolio and new margin growth formats," he said . Martin is referring to his time at Logic Technology Development LLC, a major e-cigarette manufacturer in the United States, where he served as President and General Manager. He also has his eye on the planned high growth potential of the Canadian cannabis 2.0 market, which has grown steadily in size since it opened earlier this year. In July, vapes accounted for 15.96 percent of total sales in Canada. Aurora closed five facilities and laid off hundreds of employees this year. It also faces multiple lawsuits from investors and previous business partners.