Aphria Announces Record Adult-Use Cannabis Gross Revenue in First Quarter Fiscal Year 2021

Sixth Consecutive Quarter of Positive Adjusted EBITDA

CANADA: Aphria Inc. announced record adult-use cannabis gross revenue in first quarter fiscal year 2021 and sixth consecutive quarter of positive adjusted EBITDA.

Net Cannabis Revenue Increased 103% from Prior Year Quarter.  Adjusted EBITDA from cannabis business of $10.4 million increased 11% from prior quarter. Cash cost per gram remained below $1.00 and decreased for the fourth consecutive quarter to $0.87

Key Operating Highlights – First Quarter Fiscal 2021

  • Record gross revenue for adult-use cannabis of $69.6 million in the first quarter, an increase of 23% from prior quarter and the sixth consecutive quarter of growth.
  • Net cannabis revenue of $62.5 million in the first quarter, an increase of 103% from prior year quarter.
  • Net revenue of $145.7 million in the first quarter, an increase of 16% from prior year quarter and decrease of 4% from prior quarter, solely due to lower distribution revenue driven by the COVID-19 global health crisis.
  • Cash cost to produce dried cannabis per gram of $0.87 in the first quarter, a decrease of 1% from the prior quarter, and decreased for the fourth consecutive quarter.
  • Adjusted EBITDA from cannabis business of $10.4 million in the first quarter, an increase of 11% from the prior quarter.
  • Adjusted EBITDA of $10.0 million in the first quarter, an increase of 17% from the prior quarter.
  • Ended first quarter with a strong balance sheet and liquidity, including $400.0 million of cash and cash equivalents to fund planned Canadian and International growth.
  • Aphria transferred its stock exchange listing from the New York Stock Exchange to The Nasdaq Global Select Market (“Nasdaq”) on June 8, 2020. This transition did not impact the Company’s primary listing on the Toronto Stock Exchange (TSX: APHA).
  • Filed Prospectus supplement for $100 million (USD) At-the-Market program (“ATM Program”) on July 29, 2020 which the Company plans to use for acquisition opportunities.
  • Good Supply and P’tite Pof launched large-format SKUs, and launched new brand B!NGO, a large format, economy brand utilizing lower potency cannabis.

 Subsequent Events

  • Aphria entered into a Strategic Supply Agreement with Canndoc Ltd. (“Canndoc”), a subsidiary of InterCure Ltd., (TASE: INCR/INCR.TA), one of Israel’s largest and most established medical cannabis producers on August 4, 2020.
  • Liquidated the convertible note receivable from HydRx Farms Ltd.
  • Company completed its first certified European Union Good Manufacturing Practices (“EU GMP”) shipment of dried flower from its Aphria One EU GMP facility to CC Pharma, a leading distributor of pharmaceutical products to more than 13,000 pharmacies in Germany.

Key Financial Highlights
(In thousands of Canadian dollars)

Revenue Overview
Source: Aphria Inc. August 31, 2020 MD&A1 [1]
Net revenue for the three months ended August 31, 2020 was $145.7 million, an increase of 16% from $126.1 million in the same period last year. First quarter fiscal year 2021 net revenue was 4% lower when compared to the prior quarter net revenue of $152.2 million, as significant increases in net cannabis revenue were offset by lower distribution revenue at CC Pharma in Germany.  The decline in distribution revenue is largely a function of the impacts of the COVID-19 global health crisis, including a reduction in the number of elective medical procedures and in-person visits to physicians and pharmacies

The average retail selling price of medical cannabis, before excise tax, increased to $7.38 per gram in the quarter, compared to $6.63 in the prior quarter. The average selling price of adult-use cannabis, before excise tax, decreased to $4.15 per gram in the quarter, compared to $5.23 per gram in the prior quarter, primarily as a result of the initial pipeline fill of new large format offerings, including the introduction of B!NGO, an economy brand utilizing lower potency cannabis.

Adjusted cannabis gross profit for the first quarter was $31.5 million, with an adjusted cannabis gross margin of 49.7%, compared to $28.1 million and 52.9% in the prior quarter. The increase in adjusted cannabis gross profit and decrease in adjusted cannabis gross margin was primarily due to the release of large format products and the pipeline fill for B!NGO, our economy brand utilizing lower potency cannabis, which provided an increase in sales but at lower margins than the Company’s other branded products.

Adjusted distribution gross profit for the first quarter was $11.8 million, with an adjusted distribution gross margin of 14.4%, compared to $11.9 million and 12.1% in the prior quarter. The decrease in adjusted distribution gross profit was a result of the previously discussed decline in distribution revenue at CC Pharma in Europe.  The increase in the gross margin was a function of sales mix and improved cost management at CC Pharma in the quarter.

Selling, general, and administrative costs in the quarter increased to $54.4 million from $116.6 million in the prior quarter, and increased from $41.4 million in the prior year. The increase from the prior year was primarily due to increased operating costs associated with increased global operations and increased selling costs associated with our higher sales.

Net loss for the first quarter of fiscal year 2021 was $5.1 million, or a loss of $0.02 per share, compared to net loss of $98.8 million, or a loss of $0.39 per share in the prior quarter, and net income of $16.4 million, or $0.07 per share for the same period last year.

Adjusted EBITDA increased by $1.4 million to $10.0 million for the first quarter compared to $8.6 million in the prior quarter. Adjusted EBITDA from the cannabis business for the first quarter was $10.4 million compared to $9.4 million in the prior quarter. The adjusted EBITDA loss from businesses under development for the first quarter was $2.8 million compared to a loss of $2.7 million in the prior quarter. Adjusted EBITDA from distribution business for the first quarter was $2.4 million, compared to $1.9 million in the prior quarter.

Since establishing its US$100 million  ATM Program on July 29, 2020, the Company has not drawn on the program.

The Company ended the first quarter with a strong balance sheet, including $400.0 million of cash and cash equivalents.

READ ON APHRIAINC.COM

ILLINOIS: IDFPR Announces Approval Of Permanent Rules For Conditional Adult-Use Cannabis Dispensary Licenses Tie-breaking Process

Illinois Joint Committee on Administrative Rules Approves Tiebreaker Rules; Dispensary Licenses to be Issued in Coming Weeks

ILLINOIS: The Illinois Department of Financial and Professional Regulation (IDFPR) announced today that permanent rules have been adopted for adult use cannabis dispensary licensees to be selected when there are two or more applicants in the same Bureau of Labor Statistics Regions with tied high scores. The rules, which were filed in June, may be found here.

The approval of these rules allows IDFPR to move forward in awarding the 75 conditional adult use cannabis dispensary licenses that were authorized by the 2019 Cannabis Regulation and Tax Act. Consistent with the new rules, IDFPR will provide a public notice announcing the applicants with tied high scores who, if they meet the requirements in the rules, may participate in the selection process for a conditional license.

“We are pleased that these rules have been adopted, and we remain unwavering in our commitment to ensuring these licenses are issued in a fair and objective way that implements Illinois’ equity-centric law,” said Toi Hutchinson, Senior Advisor for Cannabis Control to Gov. Pritzker. “Additional licenses will be made available in the coming years and these rules will help ensure a strong foundation is established for the licensing process in the future.”

Once IDFPR awards a conditional license, the licensee will have 180 days to find a location within its BLS Region to operate. A license to operate cannot be issued if the location is within 1,500 feet of an existing licensed dispensing organization. More about the awarding of the conditional adult use dispensing organization licenses may be found under 410 ILCS 705/15-25 and 15-30 of the Cannabis Regulation and Tax Act.

In addition, application scoring for craft grower, infuser and transporter licenses is being finalized, and the Illinois Department of Agriculture will announce award dates in the near future.

Pritzker Administration Announces Fourth Month Sales Totals For Illinois Adult Use Cannabis

State’s new adult-use cannabis industry generated more than $37 million in sales in April

ILLINOIS: The Illinois Department of Financial and Professional Regulation has announced preliminary numbers show statewide adult-use cannabis sales in April totaled $37,260,497.89. Dispensaries across the state sold 818,954 items over the 30-day period. Sales to Illinois residents totaled $29,735,650.41, while sales to out-of-state residents totaled $7,524,847.47. These figures do not include taxes collected. A portion of every cannabis sale will be reinvested in communities harmed most by the failed war on drugs.

Medical and adult use cannabis dispensaries remain open as part of the essential businesses and operations named in Governor Pritzker’s executive order signed on March 20, 2020. Both sides of the cannabis industry were included to ensure the cannabis supplier industry protects medical cannabis patients during the COVID-19 pandemic. Additionally, the revenue generated by adultuse cannabis sales funds the important social justice and equity goals at the core of Illinois’ adult-use law.

“Our top priority is to ensure consumers are safe when they go to a dispensary to purchase cannabis,” said Toi Hutchinson, Senior Advisor for Cannabis Control to Gov. Pritzker. “The steps we’ve taken to increase social distancing at dispensaries are accomplishing that, while also enabling this new industry to continue to grow. As such, curbside pickup will remain an option for medical cannabis users to obtain the product they need through May 30.”

Dispensaries are permitted to sell medical cannabis outside of their limited access area on their property or on a public walkway or curb adjacent to the dispensary. Medical cannabis patients will be able to continue to utilize their designated caregiver to purchase medicine for them. However, dispensaries may not deliver medical cannabis to a patient or caregiver’s home. These rules do not apply to adult-use cannabis sales; those must still take place inside the limited access area. A complete list of the rules extended may be found here.

Have a Heart, UFCW 21 Forge Washington State’s First Adult-Use Cannabis Union Contract

WASHINGTON: Have a Heart and the UFCW 21 today signed Washington state’s first collective bargaining agreement between the union and an adult-use cannabis retailer.

“This relationship is quite unusual, in a very positive sense,” said Todd Crosby, UFCW 21 President. “It’s rare for an employer and their employees to reach a first contract so quickly and one that is so promising for current and future employees. These partnerships strengthen individuals, families and communities – and lead to superior service for customers.”

Screenshot 2018-08-26 08.27.35

Ryan Kunkel, CEO of Have a Heart, said his company is proud that its agreements with UFCW 21 emphasize equal pay and fair treatment in the workplace regardless of gender, race, religion, sexual orientation, disability or cultural background.

“At Have a Heart, we believe in ‘doing good,’” Kunkel said. “We consistently strive to have a positive impact in the neighborhoods where we do business, and we see our partnership with UFCW 21 as part of our commitment to creating a safe and empowering workplace.”

Under this agreement, 134 current – and countless future – Have a Heart employees will receive above-average compensation for the industry, comprehensive health and welfare coverage and other benefits, including trainings, mentoring programs and staff-development opportunities. As a fast-growing part of Washington’s burgeoning cannabis industry, Have a Heart expects to generate even more family-wage jobs, along with other economic and health advantages.

Last year, the Washington State Institute for Public Policy (WSIPP) found that more than 10,000 people were employed by legal cannabis businesses in 2016, and legal cannabis businesses paid almost $300 million in wages during the industry’s first two and a half years.

LDB Issues Product Call For Non-Medical Cannabis

CANADA: The BC Liquor Distribution Branch (LDB) has issued a second product call as part of a continuing effort to expand its wholesale product assortment for non-medical cannabis.

In July, the LDB entered into memorandums of understanding with 32 licensed producers to form its initial wholesale product assortment to cater to the B.C. market directly following legalization of non-medical cannabis on Oct. 17.

“Now that we have finalized our initial product assortment, we’re looking forward to engaging with additional licensed producers that are interested in supplying the B.C. market,” said Blain Lawson, LDB’s general manager and CEO. “There are more and more licensed producers coming online, and we are committed to working with them to ensure our product assortment remains as competitive as possible in order to compete with the illicit market.”

Licensed producers are invited to make submissions for dried cannabis (including pre-rolls), cannabis oils, capsules and seeds that comply with federal requirements, across various product segments.

The product call opens on Aug. 13 and closes on Aug. 31. Product calls will be issued on a regular basis going forward. Submission documents are available to licensed producers HERE.

Aphria Selects Great North Distributors For Canadian Distribution Of Adult-Use Cannabis

CANADA: Aphria and Great North Distributors, a wholly-owned Canadian subsidiary of Southern Glazer’s Wine & Spirits, have signed an agreement for Great North Distributors to serve as exclusive manufacturer’s representative for Aphria’s adult-use cannabis products throughout Canada, following the legalization of recreational cannabis for adult-use anticipated later this year.

Under the terms of the agreement, Great North Distributors will be Aphria’s exclusive cannabis representative in Canada. The first-of-its kind deal gives Aphria 100% coverage of all cannabis retailers, whether provincially or privately operated, across Canada from the first day of legal adult-use sales.

“With this agreement, Aphria has established an unparalleled sales network, and will hit the ground running from the very first day of legal adult-use sales,” said Jakob Ripshtein, Chief Commercial Officer of Aphria. “Great North Distributors provides us with an experienced, dedicated team with a proven track record of driving sales and exceptional performance across all provinces. This deal will ensure that Aphria’s brands and products are proudly represented by cannabis retailers throughout the country.”

As a subsidiary of Southern Glazer’s, North America’s largest wine and spirits distributor, Great North Distributors has reach across every province across Canada, including established relationships and expertise in working with provincially owned and operated retailers and private retailers alike. Great North Distributors will establish a dedicated cannabis sales team that will be responsible for acting as the selling agent of Aphria’s broad portfolio of adult-use cannabis brands and products to provincial retailers throughout Canada, from the most populated cities to the most remote locations.

Connecticut House Appropriations Committee Approves Marijuana Legalization Bill

CONNECTICUT: The Joint Committee on Appropriations approved a bill that would legalize and regulate marijuana for adults in Connecticut on Thursday, potentially setting it up for floor consideration before the end of this year’s legislative session.

regulate marijuanaHB 5394, which was introduced by the committee, would task the commissioners of Mental Health and Addiction Services and Consumer Protection and Revenue Services with developing regulations for possession and retail sales of marijuana for adults 21 and older. More details will be added to the bill as it moves forward over the coming weeks.

“This committee vote reiterates what most Connecticut residents already know: it is time to make marijuana legal for adults,” said Becky Dansky, legislative counsel for the Marijuana Policy Project. “The discussions that have taken place in the legislature this year have provided more than enough information to effectively move forward with legalization. Connecticut should stop punishing adults for using a substance that is safer than alcohol, and it has an opportunity to regulate marijuana before it starts losing tax revenue to other states in the region that have already started this process.”

There are nine states that have made marijuana legal for adults, as well as the District of Columbia. Neighboring Massachusetts is in the process of implementing its regulated marijuana market, and in nearby New Jersey Gov. Phil Murphy has made legalizing and regulating marijuana a priority this year.

poll conducted by Sacred Heart University in October 2017 showed that 71% of Connecticut residents support regulating and taxing marijuana for adults.

 

A New Day In The Garden State

By Stu Zakim

Today, long suffering New Jersey residents got a breath of fresh air when new Governor Phil Murphy presented his first budget for fiscal 2019 to the members of the NJ Senate and Assembly in Trenton.

After years of Chris Christie and his archaic views of Cannabis, both as Governor and State Attorney General, we now have a Governor who understands how legalizing adult use Cannabis can bring enormous benefits to the Garden State in many areas.

Among the highlights

“I advocate for legalization, regulation and taxation of marijuana sales to adults.”  Murphy wants New Jersey to “join other progressive states such as California, Massachusetts, Washington, and Colorado by legalizing, regulating, and taxing marijuana.”

“According to research, New Jersey spends upwards of $140 million per year adjudicating low-level marijuana possession offenses. And, marijuana-related arrest rates are tilted three-to-one against African-Americans, even though rates of marijuana use are similar among races. These resources must have a better use, whether to tackle the trafficking of illegal guns, provide stronger community policing, or to crack the back of our opioid epidemic, which was devastating our urban centers long before it made headlines.”

“Legalization will allow us to reinvest directly in our communities – especially the urban neighborhoods hardest hit by the misguided War on Drugs – in their economic development, in health care and housing, child care and after-school programs, and other critical areas. These investments will pay dividends far greater than the cost of mass incarceration.”

The Governor plans to legalize adult-use marijuana by January 1, 2019 and projects $80 million in related revenue in the first fiscal year.  We can only hope.

Connecticut Cops Told To Prepare For Legal Recreational Marijuana

CONNECTICUT: — Robert Ticer is no fan of legalized recreational marijuana.

And the Avon, Colo., police chief said Thursday that more pot in Connecticut’s future would increase challenges for cops on this state’s roads.

“It’s mind-boggling,” he said of marijuana’s spread through Colorado, speaking at the Webster Bank Arena as part of a traffic safety summit. “It’s crazy.”

Full legalization was approved as a Colorado constitutional amendment in 2013, and there are now 505 medical dispensaries and 322 retail stores selling recreational cannabis — outnumbering the 405 Starbucks stores and 227 McDonald’s — Ticer said.