Aurora Cannabis Inc. (NYSE: ACB)(TSX: ACB) is getting nowhere near breakeven.
Despite the Edmonton-based company’s net revenues in Q3 hitting $65 million and rising 305 per cent from last year, it still was in the red with a total net loss of $160 million—well above the $21 million loss a year ago, Aurora revealed in a statement May 14.
Installation of glass roof structure at Aurora Sun, Medicine Hat, Alberta. (Photo courtesy of Aurora Cannabis Inc.)
Why was Aurora’s bottom line so much worse this year?
The main reasons for Aurora’s higher net loss:
- Unrealized gains and losses relating to derivatives and securities, which netted a loss of $70 million for the quarter were unfavourable compared to gains of $11 million a year ago. These items were also the main reasons why other expenses of $92 million were so high in Q3.
- General and administrative costs increased by $41 million (416 per cent), mainly due to the company expanding. But it’s expected it will become more efficient and achieve cost savings in future quarters.
- Share-based compensation rose by $23 million. This is also more common as companies grow and try to conserve cash as much as possible. But just because it’s not cash doesn’t mean investors shouldn’t keep an eye on it going forward.
- Depreciation and amortization expenses were up $17 million. As Aurora continues to grow and acquire assets this number may continue to rise. This is mainly an accounting number that generally isn’t a big concern (hence why companies normally focus on EBITDA).
Combined, those four items represent $162 million worth of increases from last year, and a $139 million difference in losses. Changes in fair value added back $16 million to Aurora’s gross profit and helped cover some of those higher costs. But it’s not something that investors can rely on and the danger is it can swing in the other direction and have the reverse effect on gross profit.
One way it may be able to improve its finances is by partnering with another large company the same as other competitors have in recent months.
CEO hints possible partnerships
Chief executive Terry Booth announced bringing on investor Nelson Peltz as a strategic advisor to explore other possible expansion options:
Could mean little, but something for investors to watch. Aurora brought on other executives too, including Carey Squires. Investors may want to watch if the company’s expansion in its executive office means more help to broker future deals.
