David George-Cosh

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Aurora Cannabis Inc. said its second-quarter revenue came in flat from the prior period, while missing expectations as the company sold less legal pot in the Canadian recreational market. 

Aurora said that it generated $67.7 million in revenue in its fiscal second quarter, little changed from the prior three-month period, but up 23 per cent from last year. The Edmonton-based company said its sales in the Canadian recreational cannabis market fell 17 per cent from the prior quarter to $28.6 million while its medical cannabis revenue rose 16 per cent to $38.9 million. 

"We made some decisions in the quarter that impact on revenue," said Miguel Martin, chief executive officer at Aurora, in an interview. 

"We've made some pretty significant changes to our product quality, both on the premium side and on the discount side." 

Aurora reported an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of $16.8 million in the quarter, a 76 per cent improvement from the same period a year earlier. It booked a $292.8-million net loss in the quarter, which includes a $221.6-million impairment charge on its property, plants and equipment. 

Analysts polled by Bloomberg expected Aurora to report $68.9 million in revenue and an adjusted EBITDA loss of $5.8 million. 

Canadian cannabis companies have been hammered in recent months, posting large losses amid a highly competitive market while writing down millions of dollars after shutting production facilities due to an oversupply of legal pot. 

Aurora has tried to clean up its balance sheet since Martin took over the CEO role in September, substantially reducing costs and closing unnecessary cultivation facilities including idling much its massive Aurora Sky facility as well as several other underperforming facilities to better balance out how much supply it feeds to the market. 

Aurora said Thursday it plans to sell two of its facilities for $24.6 million and will consolidate its European corporate offices in Portugal, Spain and Italy. It also plans to sell its Colombia operations and will take a $1.3-million loss on the sale. 

The company didn't provide a roadmap for when it expects to report positive adjusted EBITDA. Aurora previously dropped its forecast on when it plans to be profitable last quarter due to uncertainty brought on by the COVID-19 pandemic. 

Despite its sales declines, Aurora was among the top five producers for dried flower, edibles and vape products in the Canadian recreational market between November to January, according to BMO Capital Markets. It also has shifted its strategy to focus more on selling premium products, eschewing the recent trend seen across the industry of offering large-scale and cheaper items. 

"As we reposition the company towards our premium brands, we can't do that overnight," Martin said. "A lot of that has to do with product quality." He added that recent products have higher THC percentages, which are more attractive to consumers. 

Since Martin was installed as CEO, Aurora's stock is up over 70 per cent on the Toronto Stock Exchange and recently was part of a broad-based rally enjoyed by cannabis stocks as more retail investors begin eyeing the sector. 

"I know retail investors get excited about things like a short squeeze in Reddit and all of those things," Martin said. "I can't control it, so I really don't spend a lot of time on that. I'm sensitive to what it means to our shareholders, but I feel like the CEO’s objective is really to build the infrastructure and be rewarded on long-term things like being profitable."