Aurora Cannabis (ACB) shares closed about 3.5% higher the day after the company missed consensus revenue estimates for its latest quarterly results released after the bell Wednesday.
While Aurora’s third-quarter revenue of just C$65.1 million ($48.45 million USD) missed the consensus expectation of C$71.7 million ($53.37 million USD), the company nearly doubled its production volumes year-over-year to more than 15,500 kilograms of cannabis, notched 305% net revenue growth over the same period last year and reiterated plans to be cash flow positive by the end of its current quarter.
In an exclusive interview with Yahoo Finance’s YFi PM, Chief Corporate Officer Cam Battley stressed that despite seeing cannabis prices slip 20% to C$6.40 ($4.76 USD) per gram, investments in key product areas, eventual U.S. expansion plans and falling production costs will help carry the company to positive EBITDA.
“The average price per gram in our last quarter slipped a little bit and the reason why was we were moving a lot of dried flower and not as much of our derivative products and they are higher margin,” he said. “We think that we are still going to achieve that positive EBITDA in this current June quarter and that’s been our target since the beginning of the year and that’s where we’re tracking.”
Entering the U.S. market
Battley also addressed Aurora’s plans to enter the U.S. market following moves by competitors Tilray and Canopy Growth to set up access to a market that analysts estimate to be 10-times as large as the opportunity in Canada. Aurora brought in billionaire investor Nelson Peltz as a strategic advisor in March and Battley revealed how he has been guiding how Aurora could soon be acquiring U.S. cannabis players.
“One of the first things that he told us was, ‘Take your time to enter not just one mature industry, but multiple different verticals.’ And, he said, ‘That would be a better thing for us to do for our shareholders.’”
Any entrance to the U.S. market would have to thread multiple needles to appease regulators and exchanges, similar to the hurdles navigated by Canopy Growth’s tentative agreement to buy multi-state U.S. cannabis operator Acreage Holdings that is set to be executed only when the sale of cannabis becomes permissible at a federal level. Battley said Aurora would look to structure deals in a similar way that wouldn’t violate exchange rules, but maximize opportunities to sell multiple products in multiple states.
“Our interest in participating in large verticals with companies, in many cases based in the U.S., is about spreading that opportunity as much as possible,” he said. “We don’t want to give up control to one company in one mature industry. Ideally, we want to participate in multiple verticals, and we see the opportunity to do that and that will be the best thing for our shareholders.”
If historical precedence is any indication, investors might expect Aurora to fund future deals with more share issuances. The company has seen outstanding shares skyrocket to more than 1 billion as it funded acquisitions with common stock over the course of last year. However, Battley caveated that trend could change, considering the company has parlayed those stock-based deals into a cash flow positive future.
“That shareholder capital has been invested very, very wisely. On a go forward basis let’s remember that very soon we are going to be producing positive cash flow,” he said. “And so we’ve got great access to capital right now, we’ve got positive cash flow coming. The future is looking pretty bright.”
Zack Guzman is the host of YFi PM as well as a senior writer and on-air reporter covering entrepreneurship, startups, and breaking news at Yahoo Finance. Follow him on Twitter @zGuz.
Read more
What Curaleaf's record $950 million deal says about U.S. cannabis consolidation
Blue Moon's creator launched a cannabis beer that sold out in 4 hours
Constellation Brands shareholders are getting Canopy Growth almost for 'free': Canopy CEO
Exclusive: Canopy Growth to invest up to $500 million in hemp production in U.S. states