Aurora Cannabis Inc. (the “Company” or “Aurora”) (NYSE: ACB) (TSX: ACB), the Canadian company that defines the future of cannabinoids worldwide, today released a business update.
“Our substantial liquidity position has enabled us to change the terms of credit facilities by extending the term and moving from a minimum EBITDA covenant to a minimum liquidity covenant, giving us the financial flexibility we need to execute our business conversion plan We already are. We are seeing progress in improving cash flow and product success such as the recent relaunch of our steam portfolio. We are also advancing our consumer strategy, which will serve as the foundation for sustainable sales growth and profitability over the long term, “said Miguel Martin, CEO of Aurora.
“We are switching to a more variable cost structure in cultivation by expanding our external supply network and responsibly reducing production from our fixed assets. In November in particular, we closed our Aurora Sun plant and are now reducing production at Aurora Sky to 25% of previous capacity At this production level, we intend to convert the Sky facility into a high-quality cultivation center for our premium varieties and thus better coordinate production with the current demand for premium flowers. “
“Our plan to capitalize on opportunities in the Canadian consumer market coupled with an impressive track record enables Aurora to remain a leader in revenue in the high-margin Canadian medical market. It also gives the company the opportunity to invest in the international medical business. The company is instructing solid growth. After all, we can build on our Reliva CBD brand, which Nielsen ranks # 1 in the US CBD. “
Modified credit facilities and cash balances provide a runway for growth
The Company is pleased to announce that it has entered into a second modified and adjusted credit facility agreement (the “Agreement”) with its existing syndicate of lenders, subject to final documentation. Given Aurora’s significant liquidity position, the agreement provides Aurora with greater financial flexibility in executing the Business Conversion Plan by moving the facility to a minimum liquidity agreement rather than a minimum EBITDA agreement and extending the facility through December 31, 2022.
There are no changes to the facility commitments, which are currently $ 101.2 million under the term loan and $ 15 million under the Revolver (currently $ 2 million drawn). The second modified and adjusted credit facility has a general security interest in Aurora’s assets and is repayable without penalty at the Company’s discretion.
The agreement is based on the company’s “Back to Basics” regulatory strategy for packaged consumer goods. This strategy will delay the company’s ability to generate positive Adjusted EBITDA when management invests in its consumer business. A strategy that the company believes will serve as the foundation for sustainable growth and profitability going forward. The unpredictability of the current demand environment, including the resurgence of COVID-19, also contributes to the delay in profitability. However, with approximately $ 450 million in cash as of December 15, 2020, management is confident it will be liquid and able to fund its current plan while maintaining the option for future opportunities.
Rationalization of the production strategy with the trading strategy
Aurora is increasing its operational flexibility to improve cash flow and better serve consumer needs. This includes the switch to a more variable cost structure, the use of outsourcing and the search for ways to increase the throughput of high-margin premium products.
The company has expanded its external supply network through spot purchasing from outsourced third-party providers. Aurora expects to continue expanding the external supply of dried flowers in its brand architecture to reduce cultivation risk and improve the cash conversion cycle.
Aurora Sun & Aurora Sky facilities
Effective December 15, 2020, the company closed operations at the Aurora Sun plant and reduced production at the Aurora Sky plant by 75%. Aurora Sky is testing new practices and methodologies that have proven successful at other growing locations in Aurora’s leading network, combined with an increased focus on innovation led by in-depth experience in plant science and genetics.
Mr. Martin concluded, “These tough decisions are being made to improve cash flow and make our business more agile. We will continue to make decisions and reshape Aurora in the long-term interests of our shareholders. We look forward to 2021 and announce our business transformation.”