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Aurora Appoints New CEO, Previews Turbulent Quarter

September 15, 2020

Aurora Cannabis set expectations low in advance of its next earnings report, due out next week, amid a host of updates on its progress. The company expects net revenue for its fiscal fourth quarter 2020 to be between C$70-C$72 million ($53-$54.6m), down from C$75.5 million ($57.3m) in Q3. Revenue from cannabis operations should account for C$66-C$68 million ($50.1-$51.6m) of that figure, down around C$3 million ($2.2m) from the previous reporting period.

In addition to other operational updates, Aurora announced that Miguel Martin has been appointed CEO, effective immediately. Martin joined Aurora in July as chief commercial officer and was CEO of U.S. CBD company Reliva before Aurora acquired it last May. Prior to Reliva, Martin was president of Logic Technology, a manufacturer of e-cigarettes. He was also a senior vice president and general manager at Altria, among other consumer packaged goods experience. He takes over from Michael Singer, who has been interim CEO since co-founder Terry Booth resigned in early February.

“In his short time at Aurora, Miguel has demonstrated decisive leadership,” Singer said. “Miguel is a highly experienced executive with an exceptional track record of performance in a number of consumer products categories. After an extensive search that included evaluation of many highly-respected candidates, Miguel stood apart with both strong commercial and cannabinoid sector expertise, as well as his passion for Aurora’s success.”

The company also provided an update on cost-cutting measures and related facility closures. It noted that it now operates on a quarterly general run rate “in the low C$40 million ($30.4m) range” and expects to save up to C$10 million ($7.6m) per quarter by the second half of its fiscal 2021 by closing unnecessary facilities and greenhouses. The company’s tactical plan for near-term revenue growth includes growing its market share in Canada but also, notably, “building leading brands under Reliva in the U.S. CBD market.”

Aurora further noted a number of balance sheet adjustments that will weigh on the forthcoming Q4 results. These charges include “fixed asset impairment charges, now expected to be up to $90 million ($68.3m), due to production facility rationalization, and a charge of approximately $140 million ($106.2m) in the carrying value of certain inventory, predominantly trim, in order to align inventory on hand with near term expectations for demand,” among others. Worse, however, is a consideration of industry risk and the book value of the company relative to current market capitalization, which requires Aurora to recognize a non-cash write-down of goodwill and intangible assets in the range of C$1.6-C$1.8 billion ($1.2-$1.4b).

Aurora also terminated its partnership with Ultimate Fighting Championship. The decision will cost the company a $30 million ($22.8m) one-time payment in Q1 2021 but is expected to save more than C$150 million ($113.8m) in fees, research costs, and marketing activation over the next five years.—Danny Sullivan

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