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Aurora Cannabis Reaches Adjusted EBITDA Profitability Target in the Second Quarter

Ben Ward

Published: February 10, 2023 10:46 pm

Global marijuana industry leader Aurora Cannabis (CA:ACB) reported second quarter results on Thursday after the closure of US equity markets. Aurora’s shares were sold off heavily into the result with ACB in Canada closing -7.5% lower and the US listing -6.2% as investors were worried about a potentially underwhelming print.

The story seemed better than feared with Aurora reporting sales growth of 25% over the year to $61.68 million from $49.3 million in the prior year. Analysts were expecting a figure of around $60.9 million for the quarter.

Medical cannabis revenue grew 25% in the prior quarter to $39.5 million but decreased 14% when compared to the prior year’s quarter.

The focal point was $1.4 million of positive adjusted EBITDA generated for the quarter in line with management’s guidance. The result was a significant improvement from the -$7.7 million adjusted EBITDA loss in the prior year.

The result was aided by a full quarter of results from the recent Bevo Farms acquisition which is contributing positive adjusted EBITDA.

The group’s net losses narrowed to -$67.2 million when compared to -$75.1 million in 2021. The ongoing positive trends towards becoming net income profitable should aid share price concerns.

Aurora sold 15,269kg of product during the quarter, with production up 17% in Q1. The average sales price per gram also rose from $4.52 in Q1 to $4.79 in Q2, showing easing pressure from oversupplied markets.

Aurora reported a cash balance of $310 million at the 8th of February with $193 million in debt at the end of the quarter.

Management highlighted that the company has delivered around $340 million in annualised cost savings since February of 2020.

A chart from Fintel’s forecast page for ACB shows analyst forward EBITDA forecasts for the stock which suggest the company should continue to grow positive EBITDA over the next few years.

Cowen Equity Research analyst Vivien Azer thinks that while the company is focused on medical cannabis, they are finding a footing in adult use. The firm believes cost savings are now fully in place and Aurora should continue on the current profit dynamic on an annualized run-rate basis.

Cowen remains ‘market perform’ rated with a $1.30 price target on the stock.

Research from the Fintel platform has highlighted that sentiment in the options market has continued to become more bearish over time. This has been described by a declining put/call ratio which suggests call option demand is growing relative to put option demand.

This article originally appeared on Fintel