Yet again, Aurora Cannabis (NASDAQOTH:ACBFF) knocked it out of the park with outstanding quarterly fiscal results. Back in February when Q2 results posted, the Canadian-based cannabis grower reveled in fantastic figures. And now, with Q3 results in, Aurora’s CEO Terry Booth declared the company is displaying “exceptional performance across all function.”
If you don’t want to read Aurora’s full Q3 update, dense with numbers, here are three key takeaways investors should know about this marijuana stock’s quarter.
1. The sales of this marijuana stock are more diversified than they’ve ever been.
Total revenue reported for Aurora’s Q3 was CA$16.1 million. This figure went beyond tripling the company’s same period results of last year and represented a 38% increase from its Q2 fiscal revenue. Of even greater interest, however, is the methodology of Aurora’s revenue: increasingly diversified sales.
Aurora’s biggest revenue generator remains dried cannabis, sold on Canada’s medical marijuana market. During the company’s third quarter, it had CA$6.3 million in dried cannabis sales in Canada, a figure that showed an increase of 45.4% year over year. What are becoming a more integral and profitable part of Aurora’s revenue now, however, are cannabis oils. In its prior-year period, Aurora had no sales of cannabis oil; in Q3, its cannabis oil sales posted at CA$2.2 million, a 44.4% rise from its Q2 sales.
In addition, a significant portion of cash came in separate from cannabis sales. This cash, reported as CA$2.3 million, stemmed from services (up 175.1% YOY) and other sources of revenue (up 17.8% YOY). A noteworthy first time occurrence for Aurora was the CA$3 million it pulled in from revenue for construction consulting, and design activities.
2. Marijuana stock Aurora Cannabis’ medical marijuana sales in Europe slipped.
European MMJ sales are another of Aurora’s keys to revenue growth year over year. For starters, the company’s Q3 dried cannabis sales in European MMJ markets was CA$2.3 million. Comparatively, Aurora posted zero international sales in the same period the prior year. This quarter’s European sales, however, still reflected a decline of 6.1% from its sales in Q2. So, what caused this?
Investors need to understand, first of all, that this doesn’t reflect a decline in demand whatsoever. The real problem lies in Aurora’s capacity constraint. The company’s facility, Aurora Mountain, is already operating at full capacity, which is impairing its growth as it struggles to keep up with the rapid expansion of Germany’s MMJ market.
The good news is that Aurora shouldn’t have an issue with limited capacity for very long. The company has two more facilities that will be available soon online – Aurora Sky and Aurora Vie. Then there is the 1-million square foot Denmark facility, Aurora Nordic, which is still under construction, as well as the project of retrofitting the greenhouse space that already exists in Denmark. Between these facilities, Aurora should be able to keep production up to speed with the growth of international demand in the medical marijuana markets.
3. The recent deals of this marijuana business ought to pay off soon.
Strategic partnerships and acquisitions completed in recent months should start to payoff soon for Aurora Cannabis. By far the largest (and priciest) deal was the acquisition of CanniMed Therapeutics (OTC:CMMDF), which made industry history. While CanniMed sales only accounted for 16 days of Aurora’s revenue for Q3, the acquisition’s contribution will be much higher in Aurora’s Q4 results.
Another of Aurora’s recent deals, adding capacity to the marijuana stock, was the company’s strategic purchase of 18% of The Green Organic Dutchman (TSE: TGOD). The Green Organic Dutchman recently offered its stock to the public for the first time on the Toronto Stock Exchange. The deal struck between Aurora and The Green Organic Dutchman offers Aurora rights to buy an estimated 23,000 annual kilograms of organic marijuana from the private grower. As with other growers, Aurora has Canada’s expected legalization of recreational marijuana in mind as it strives to increase its capacity.
Related to Canada’s impending recreational market, Aurora finalized an investment in Liquor Stores NA (TSE: LIQ), one of Western Canada’s leading retail liquor chains, that should prove strategic as well. Aurora will be the supplier for the portion of retail shops Liquor Stores converts to recreational marijuana shops, as well as the brand new shops Liquor Stores opens.
Meanwhile, the medical marijuana market in Canada continues its rapid rate of growth, yet even this growth is exceeded by the opportunities arising on an international scale. The anticipated opening of a recreational market in Canada, where Aurora is based, will create even more opportunities. In short, Aurora should expect a great deal of activity for the remainder of the year.
A potential next step for Aurora Cannabis may involve another acquisition, specifically, with MedReleaf (NASDAQOTH:MEDFF) marijuana stock.
The company is currently engaged in discussions with MedReleaf. Were the two growers to combine forces, Aurora would find itself immediately bumped to the top marijuana stock worldwide. It should be noted, though, that there has been no finalizing of any details.
That said, the biggest issue Aurora faces as it strives to keep a continued pace of growth is how supply and demand will pan out. Should both domestic and international demand be as large as has been projected, Aurora only needs to ensure its capacity is great enough to supply the demand. However, if the cannabis supply glut happens as predicted, Aurora will face falling valuations along with every other marijuana grower that has been aggressively expanding capacity.
The hope is that, even if an oversupply occurs temporarily, demand will surpass supply in the big picture. As it stands, Aurora Cannabis should be looking at more outstanding fiscal quarters in the near future.
(For more information, read A Quick Review of 7 Cannabis Stocks Cultivating An Unbelievable Amount of Green)