Aurora Cannabis shares (ACB) closed more than 9% lower Thursday after reporting financial results for its fourth quarter that missed the company’s own estimates.
The Canadian cannabis giant reported C$98.9 million ($74.83 million USD) in net revenue for the quarter, which missed the C$100-C$107 million range the company had been projecting ahead of reporting results. The company also reported a wider-than-expected C$0.29 loss per share compared to the C$0.06 loss analysts polled by Bloomberg had been bracing for.
“If you’re asking if we’re a little red-faced, yes we are,” Aurora’s Chief Corporate Officer Cam Battley told Yahoo Finance, blaming the miss on the company’s ancillary businesses. “If you take a look at our core business, our cannabis businesses, we came in exactly where we guided for which was between C$90 [million] and C$95 [million] and we came in at C$95 million.”
Battley listed the company’s construction division and analytics testing labs for the weakness in ancillary segments.
“In the beginning of the year, we were targeting positive EBITDA in our fourth quarter, the June quarter of this year,” he said. “At that point we were anticipating — as I think everybody else was — that there would be more retail stores open in Canada.”
As the largest seller of recreational cannabis in Canada, Battley said the fact that stores have been slower to open has “disproportionately” impacted Aurora’s sales. Other Canadian cannabis companies that have been hammered for slowing growth have pointed to the same theme on earnings calls.
Gross margins a bright spot
Looking for a silver lining from the quarter, Battley highlighted that gross margins continue to improve — something that competitor Canopy Growth was not able to say in their latest quarter. Aurora’s margins inched higher to 58% from 55% last quarter.
“That would make any other cannabis company green with envy,” he said. “The reason why we’re able to generate increased margin is because even though [our] average selling price came down, because we were selling more in the consumer market and a little bit less proportionately in medical, [is] we actually brought our cost of production — our cash cost to produce — came way down to about C$1.14 [per gram.]”
For now, that silver lining wasn’t enough to reverse what has been continued pressure for Aurora and the sector overall. Aurora shares are now down about 25% over the past three months.