Aurora Cannabis Announces Fiscal 2021 Second Quarter Results

    --  Total Cannabis Net Revenue of $70.3 Million, Excluding Provisions of
        $2.7 Million, Up 11% over Q2 2020


    --  Medical Cannabis Net Revenue of $38.9 Million, Up 42% Versus Q2 2020,
        Driven by a 562% Increase in High Margin International Medical Sales


    --  Adjusted EBITDA Loss, excluding Provisions and Termination Costs, of
        $12.1 Million Represents an Improvement of $53.1 Million Over Q2 2020;
        Current Loss Triggered by Several Decisions Expected to Boost Long-Term
        Profitability
    --  Improved Cash Use by More Than 74% Versus Q2 2020; Cash on Hand at
        February 10, 2021 of $565 Million

NYSE | TSX: ACB

EDMONTON, AB, Feb. 11, 2021 /PRNewswire/ - Aurora Cannabis Inc. (the "Company" or "Aurora") (NYSE: ACB) (TSX: ACB), the Canadian company defining the future of cannabinoids worldwide, today announced its financial and operational results for the second quarter of fiscal 2021 ended December 31, 2020.

"Aurora had an excellent second quarter, and I'm pleased that we're advancing nicely against the plan we laid out in September of 2020," stated Miguel Martin, Chief Executive Officer of Aurora Cannabis. "For the period, our core revenue strength in medical and consumer was complemented by initial rollouts in vape products and concentrates. Combined, these elements are part of the proven, regulated CPG strategy we've adopted. Adjusted EBITDA for the quarter, while vastly improved year over year, was impacted by several decisions that we believe will clear a path for our premium product focus and more variable cost model. We are confident that this will give Aurora maximum flexibility and position the organization to drive significant cashflow in the coming quarters."

"To further support this strategy, we have also focused on improving our cash burn, margins and overall financial flexibility. To that point, our year over year cash use has decreased by 74% to $70.5 million, our normalized margins remain solid particularly in medical, and our recently amended credit facility gives Aurora much improved optionality as opportunities arise. Combined with $565 million in cash on our balance sheet today, Aurora will continue to be a long-term player in the global cannabinoid market and increasingly positioned to deliver for shareholders over the long run."

Second Quarter 2021 Highlights
(Unless otherwise stated, comparisons are made between fiscal Q2 2021 and Q2 2020 results and are in Canadian dollars)

Q2 2021 total and cannabis net revenue(1) before provisions was $70.3 million, an 11% increase over Q2 2020 and 2.5% sequentially. After accounting for return and price provisions, Q2 2021 total cannabis net revenue was $67.7 million, a 28% increase in cannabis net revenue(1) over fiscal Q2 of the prior year.

Adjusted gross margin before fair value adjustments on cannabis net revenue(1) was 42% in Q2 2021, versus 48% in Q2 2020. The decrease is due to the purposeful reduction in production levels at Aurora Sky resulting in an increase in cash cost of sales due to the under-utilization of capacity. Also impacting adjusted gross margin was a $1.8 million increase in actual net returns, price adjustments and provisions primarily relating to company-initiated product returns meant to open channels to newer, higher-potency flower that Aurora is now producing. Normalizing for these impacts, adjusted gross margin was 52%.



            _____________________


                        (1) These terms are non-GAAP measures, see "Non-GAAP
                         Measures" below.

Adjusted EBITDA(1) loss was $16.8 million in Q2 2021, which includes termination and restructuring costs of $2.9 million. Excluding restructuring costs and product return provisions, the Company's Adjusted EBITDA loss is $12.1 million.

Consumer cannabis:

    --  Consumer cannabis net revenue(1) was $28.6 million ($31.1 million
        excluding provisions), a 25% increase from the prior year. Additionally,
        Aurora's consumer cannabis derivative products net revenue increased by
        $1.7 million sequentially, driven by product launches in vapes, edibles
        and concentrates.
    --  Adjusted gross margin before fair value adjustments on consumer cannabis
        net revenue(1) was 27% in Q2 2021 versus 33% in the prior year period,
        primarily driven by a $3.3 million increase in cost of sales due to
        under-utilized capacity as a result of the scaling back production at
        Aurora Sky, which is expected to partially reverse in subsequent
        quarters and sales of our lower margin Daily Special value brand which
        was not present in the prior comparative period.

Medical cannabis:

    --  Medical cannabis net revenue(1) was $38.9 million ($39 million excluding
        provisions), a 42% increase from the prior year period. The increase was
        primarily attributable to a continued strong performance in both the
        international and Canadian medical businesses. International medical
        sales grew by 562% over the prior year comparative period.
    --  Adjusted gross margin before fair value adjustments on medical cannabis
        net revenue(1) was 56% in Q2 2021 versus 59% in the prior year and prior
        quarter, primarily driven by the increase in cost of sales due to the
        under-utilized capacity as a result of the scaling back production at
        Aurora Sky.

Selling, General and Administrative ("SG&A") and Adjusted EBITDA:

    --  SG&A, including Research and Development ("R&D"), was $44.4 million in
        Q2 2021, down $49.7 million or 53% from the prior year period as a
        result of the Company's Business Transformation Plan. Included in SG&A
        and R&D in Q2 2021 is $2.1 million of costs related to restructuring
        charges, and severance and benefit costs associated with the Business
        Transformation Plan. Excluding these impacts, Q2 2021 SG&A and R&D was
        $42.3 million.
    --  Adjusted EBITDA(1) in Q2 2021 was a loss of $16.8 million ($12.1 million
        loss excluding the increase in revenue provisions and restructuring
        costs), compared to the prior year Adjusted EBITDA loss of $69.9 million
        primarily driven by the substantial decrease in SG&A and R&D expenses.

Additional Financial Information:

    --  Cash balance as of February 10, 2021 was approximately $565 million.
    --  Aurora continues to increase its operational flexibility to improve its
        cashflow and better address consumer needs by reducing production and
        complexity. Of the four cultivation facilities set to close, three are
        now fully shuttered. Effective December 15, 2020, the Company also
        shuttered operations at the Aurora Sun facility and reduced production
        at its Aurora Sky facility by 75%, where it is testing new processes and
        methodologies proven successful at other premium cultivation sites.

Fiscal Q2 2021 Cash Use: Significant Improvement in Cash Used in Operations

Total cash use in Q2 2021 showed significant improvement relative to both Q2 2020 and Q1 2021.

In Q2 2021, the Company used $22.7 million in cash to fund operations, excluding working capital investments. This use included $2.1 million in restructuring/termination payments. Cash used to pay for capital expenditures, net of disposals, in Q2 2021 was $8.8 million versus $15.0 million in the prior quarter, as many long-lead projects are now complete. Cash used in operations and for capital expenditures are crucial metrics in Aurora's drive toward generating sustainable positive free cash flow, and both have improved significantly and consistently over the past several quarters.

Increased net working capital used $30.4 million in the quarter, driven by a $23.9 million decrease in accounts payable and a $11.7 million increase in prepaids, offset by a $16.4 million decrease in accounts receivable. Within working capital, inventory and biological assets used $10.0 million, a marked improvement from the $25.1 million in Q1 2021 demonstrating the Company's progress to more closely align production levels with demand.

Given Aurora's continued strong gross margins, reduced level of SG&A expense and capital expenditures, and ongoing improvements in working capital investment, management expects the Company to continue its progress toward positive cash flow.

The main components of cash source and use in Q2 2021 were as follows:


                     ($ thousands)       Q2 2021 Q2 2020(3)     Q1 2021

    ---

                     Cash Flow

    ---

                     Cash, Opening      $133,678    $152,526     $162,179




        Cash used in operations        ($22,709)  ($84,766)   ($72,580)


        Working capital change         ($30,433)  ($54,238)   ($37,012)



       Capital expenditures            ($8,837) ($128,405)   ($14,980)


        Debt and interest payments      ($8,559)   ($5,579)   ($18,212)

    ---


       Cash use                       ($70,538) ($272,988)  ($142,784)




        Proceeds raised from sale of
         marketable securities and
         investments in associates        $6,135


        Proceeds raised through debt                $14,394


        Proceeds raised through equity
         financing (1)                  $365,111    $262,402     $114,283

    ---


       Cash raised                     $371,246    $276,796     $114,283




                     Cash, Ending (2)   $434,386    $156,334     $133,678

    ---


     
     (1) Includes impact of FX on USD cash raised
              from financing



     
     (2) Ending cash balance above includes $50.0M
              restricted cash as required under the
              amended BMO Credit Facility. The $50.0M
              restricted cash can be used to repay, at
              any time at the Company's discretion the
              outstanding principal on its term loan on
              a 1:1 basis with a corresponding
              reduction in the restricted cash balance
              requirement.



     
     (3) Previous reported amounts have been
              restated to adjust for the change in
              accounting policy for inventory costing
              relating to by-products and the
              allocation of production management staff
              salaries. Refer to Note 2(e) of the
              unaudited Condensed Consolidated Interim
              Financial Statements for a reconciliation
              on the change in accounting policy.

Refer to "Condensed Consolidated Interim Statement of Cash Flows" in the "Condensed Consolidated Interim Financial Statements (unaudited)" for our cash flow statements prepared in accordance with IAS 7 - Statement of Cash Flows.

Q2 2021 Key Financial and Operational Metrics



              
                ($ thousands, except Operational Results)      Q2 2021 Q1 2021 
     
         $ Change  % Change Q2 2020   
          
            $ Change                 % Change

    ---


              
                Financial Results

    ---


              Total net revenue (1)                                       $67,673                   $67,812             ($139)              0                  $55,138                $12,535          23
                                                                                                                                           %                                                        %



              Cannabis net revenue (1)(2)(3a)                             $67,673                   $67,812             ($139)              0                  $52,676                $14,997          28
                                                                                                                                           %                                                        %



              Medical cannabis net revenue (2)(3a)                        $38,856                   $33,474             $5,382              16                  $27,386                $11,470          42
                                                                                                                                           %                                                        %



              Consumer cannabis net revenue (1)(2)(3a)                    $28,573                   $34,338           ($5,765)           (17)
                                                                                                                                                                                                    %
                                                                                                                                           %                 $22,906                 $5,667          25



              Wholesale bulk cannabis net revenue (2)(3a)                    $244             
              $-              $244             N/A                  $2,384               ($2,140)       (90)
                                                                                                                                                                                                    %



              Adjusted gross margin before FV                        42
            %             48
            %               N/A      (6)
                                                                                                                                                                                                    %
                                                                                                                                     %         48
           %                           N/A        (6)
    adjustments on cannabis net revenue (2)(3b)



              Adjusted gross margin before FV                        56
            %             59
            %               N/A      (3)
                                                                                                                                                                                                    %
                                                                                                                                     %         59
           %                           N/A        (3)
    adjustments on medical cannabis
    net revenue (2)(3b)



              Adjusted gross margin before FV                        27
            %             38
            %               N/A     (11)
                                                                                                                                                                                                    %
                                                                                                                                     %         33
           %                           N/A        (6)
    adjustments on consumer cannabis
    net revenue (2)(3b)



              Adjusted gross margin before FV                               (305)                      N/A               N/A      N/A         61
           %                N/A        (366)
                                                                                 %                                                                                                       %
    adjustments on wholesale bulk c
    annabis net revenue (2)(3b)



              SG&A expense                                                $41,972                   $44,324           ($2,352)            (5)
                                                                                                                                                                                                    %
                                                                                                                                           %                 $87,301              ($45,329)       (52)



              R&D expense                                                  $2,432                    $2,584             ($152)            (6)
                                                                                                                                                                                                    %
                                                                                                                                           %                  $6,775               ($4,343)       (64)



              Adjusted EBITDA (2) (3c)                                  ($16,802)                ($57,891)           $41,089            (71)
                                                                                                                                                                                                    %
                                                                                                                                           %               ($69,857)               $53,055        (76)





              
                Balance Sheet

    ---


              Working capital (6)                                        $592,746                  $201,425           $391,321             194
                                                                                                                                                                                                    %
                                                                                                                                           %                $400,070               $192,676          48



              Cannabis inventory and biological assets (2)(4)            $179,502                  $166,178            $13,324               8                 $200,868              ($21,366)       (11)
                                                                                                                                           %                                                        %



              Total assets (6)                                         $2,830,190                $2,757,272            $72,918               3               $4,656,046           ($1,825,856)       (39)
                                                                                                                                           %                                                        %





              
                Operational Results - Cannabis

    ---


              Average net selling price of dried cannabis (2)               $4.00                     $3.72              $0.28               8                    $4.69                ($0.69)       (15)
                                                                                                                                           %                                                        %



              Kilograms sold (5)                                           15,253                    16,139              (886)            (5)
                                                                                                                                                                                                    %
                                                                                                                                           %                   9,501                  5,752          61

    ===


     
     (1) Includes the
              impact of actual
              and expected
              product returns
              and price
              adjustments
              (three months
              ended December
              31, 2020 -$2.7
              million; three
              months ended
              September 30,
              2020 -$0.8
              million).



     
     (2) These terms are
              defined in the
              "Cautionary
              Statement
              Regarding
              Certain Non-
              GAAP Performance
              Measures"
              section of the
              MD&A.  Excluding
              product return
              provisions and
              restructuring
              charges,
              Adjusted EBITDA
              is $12.1
              million.



     
     (3) Refer to the
              following MD&A
              sections for
              reconciliation
              of non-GAAP
              measures to the
              IFRS equivalent
              measure:


                            a. Refer to the "Revenue" section
                                for a reconciliation of cannabis
                                net revenue to the IFRS
                                equivalent.


                            b. Refer to the "Cost of Sales and
                                Gross Margin" section for
                                reconciliation to the IFRS
                                equivalent.


                            c. Refer to the "Adjusted EBITDA"
                                section for reconciliation to
                                the IFRS equivalent.



     
     (4) Represents total
              biological
              assets and
              cannabis
              inventory,
              exclusive of
              merchandise,
              accessories,
              supplies and
              consumables.



     
     (5) The kilograms
              sold is offset
              by the grams
              returned during
              the period.



     
     (6) In accordance
              with IFRS 3 -
              Business
              Combinations,
              acquisition date
              fair values
              assigned to the
              Reliva purchase
              price allocation
              and goodwill
              have been
              adjusted, within
              the applicable
              measurement
              period, where
              new information
              is obtained
              about facts and
              circumstances
              that existed at
              the acquisition
              date. Refer to
              Note 12 of the
              Financial
              Statements.

Events Subsequent to Q2 2021 Quarter End

    --  On January 14, 2021, Aurora entered into an agreement with Great North
        Distributors Inc., Canada's first national sales broker for legalized
        adult-use cannabis, to be the exclusive representative for Aurora's
        Canadian cannabis retail brands. Great North has reach across every
        province in Canada, including established relationships and expertise in
        working with provincially-owned and operated retailers and private
        retailers in Canada's cannabis industry. The agreement was designed to
        significantly bolster Aurora's market position in Canada.


    --  On January 26, 2021, Aurora closed its bought deal public offering (the
        "Offering") of units of the Company for total gross proceeds of US$137.9
        million. The Company sold 13,200,000 Units at a price of US$10.45 per
        Unit, including 1,200,000 Units sold pursuant to the exercise in full of
        the underwriters' over-allotment option. BMO Capital Markets and ATB
        Capital Markets acted as the bookrunners for the Offering. The Company
        believes that this opportunistic financing fits with its broader
        strategy to have a strong balance sheet while maintaining maximum
        flexibility to invest and build towards being a leader in global
        cannabinoids.
    --  Additionally, Allan Cleiren, Chief Operating Officer, has decided to
        retire from the Company effective March 31, 2021. The Company would like
        to thank Allan for his years of dedicated service and wish him well in
        his future endeavours.

Conference Call

Aurora will host a conference call today, February 11, 2021, to discuss these results. Miguel Martin, Chief Executive Officer, and Glen Ibbott, Chief Financial Officer, will host the call starting at 5:00 p.m. Eastern time. A question and answer session will follow management's presentation.



     DATE:    
     Thursday, February 11, 2021



     TIME:    
     5:00 p.m. Eastern Time | 3:00 p.m. Mountain Time



     WEBCAST: 
     
                http://public.viavid.com/index.php?id=143267

About Aurora

Aurora is a global leader in the cannabis industry serving both the medical and consumer markets. Headquartered in Edmonton, Alberta, Aurora is a pioneer in global cannabis dedicated to helping people improve their lives. The Company's brand portfolio includes Aurora, Aurora Drift, San Rafael '71, Daily Special, AltaVie, MedReleaf, CanniMed, Whistler, and Reliva CBD. Providing customers with innovative, high-quality cannabis products, Aurora's brands continue to break through as industry leaders in the medical, performance, wellness and recreational markets wherever they are launched. For more information, please visit our website at www.auroramj.com.

Aurora's common shares trade on the TSX and NYSE under the symbol "ACB", and is a constituent of the S&P/TSX Composite Index.

Forward Looking Statements

This news release includes certain statements which may constitute "forward-looking information" and "forward-looking statements" within the meaning of Canadian securities law requirements (collectively, "forward-looking statements" or "FLS"). These forward-looking statements are made as of the date of this press release and the Company does not intend, and does not assume any obligation, to update these FLS, except as required under applicable securities legislation. FLS relate to future events or future performance and reflect Company management's expectations or beliefs regarding future events. In certain cases, FLS can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved" or the negative of these terms or comparable terminology. In this document, certain forward-looking statements are identified by words including "may", "future", "expected", "intends" and "estimates". By their very nature FLS involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the FLS. The Company provides no assurance that FLS will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on FLS. Certain FLS in this press release include, but are not limited to the following:

    --  the impact of the Company's premium product focus and variable cost
        model
    --  delivery of shareholder value
    --  strategic relationships, and capital expenditures, and related benefits;
    --  future strategic plans;
    --  growth in the global consumer use cannabis market;
    --  expectations regarding production capacity, costs and yields; and
    --  expectations regarding progress towards positive cash flow

The above and other aspects of the Company's anticipated future operations are forward-looking in nature and, as a result, are subject to certain risks and uncertainties. Although the Company believes that the expectations reflected in these FLS are reasonable, undue reliance should not be placed on them as actual results may differ materially from the forward-looking statements. Such FLS are estimates reflecting the Company's best judgment based upon current information and involve a number of risks and uncertainties, and there can be no assurance that other factors will not affect the accuracy of such forward-looking statements. These risks include, but are not limited to, the ability to retain key personnel, the ability to continue investing in infrastructure to support growth, the ability to obtain financing on acceptable terms, the continued quality of our products, customer experience and retention, the development of third party government and non-government consumer sales channels, management's estimates of consumer demand in Canada and in jurisdictions where the Company exports, expectations of future results and expenses, the availability of additional capital to complete construction projects and facilities improvements, the risk of successful integration of acquired business and operations, management's estimation that SG&A will grow only in proportion of revenue growth, the ability to expand and maintain distribution capabilities, the impact of competition, the general impact of financial market conditions, the yield from cannabis growing operations, product demand, changes in prices of required commodities, competition, and the possibility for changes in laws, rules, and regulations in the industry, epidemics, pandemics or other public health crises, including the current outbreak of COVID-19. Readers are urged to consider the risks, uncertainties and assumptions carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such information.

Should one or more of these risks or uncertainties materialize, or should underlying factors or assumptions prove incorrect, actual results may vary materially from those described in forward looking statements. Material factors or assumptions involved in developing forward-looking statements include, without limitation, publicly available information from governmental sources as well as from market research and industry analysis and on assumptions based on data and knowledge of this industry which the Company believes to be reasonable.

Although the Company believes that the expectations conveyed by the forward-looking statements are reasonable based on the information available to the Company on the date hereof, no assurance can be given as to future results, approvals or achievements. Forward-looking statements contained in this press release are expressly qualified by this cautionary statement. The Company disclaims any duty to update any of the forward-looking statements after the date of this Annual Information form except as otherwise required by applicable law.

Non-GAAP Measures

The Company uses certain financial performance measures that are not recognized or defined under IFRS (termed "Non-GAAP Measures"). As a result, this data may not be comparable to data presented by other licensed producers of cannabis and cannabis companies. For an explanation of these measures to related comparable financial information presented in the consolidated financial statements prepared in accordance with IFRS, refer to the discussion below. The Company believes that these Non-GAAP Measures are useful indicators of operating performance and are specifically used by management to assess the financial and operational performance of the Company. These Non-GAAP Measures include, but are not limited, to the following:

    --  Cannabis net revenue represents revenue from the sale of cannabis
        products, excluding excise taxes. Cannabis net revenue is further broken
        down as follows:
        --  Medical cannabis net revenue represents Canadian and international
            cannabis net revenue for medical cannabis sales only, excluding
            wholesale bulk cannabis net revenue.
        --  Consumer cannabis net revenue represents cannabis net revenue for
            consumer cannabis sales only.
        --  Wholesale bulk cannabis net revenue represents cannabis net revenue
            for wholesale bulk sales only.
    --  Management believes the cannabis net revenue measures provide more
        specific information about the net revenue purely generated from our
        core cannabis business and by market type.
    --  Average net selling price per gram and gram equivalent is calculated by
        taking cannabis net revenue divided by total grams and grams equivalent
        of cannabis sold in the period. Average net selling price per gram and
        gram equivalent is further broken down as follows:
        --  Average net selling price per gram of dried cannabis represents the
            average net selling price per gram for dried cannabis sales only,
            excluding wholesale bulk cannabis sold in the period.

        --  Average net selling price per gram and gram equivalent of consumer
            cannabis represents the average net selling price per gram and gram
            equivalent for dried cannabis and cannabis extracts sold in the
            consumer marketManagement believes the average net selling price per
            gram or gram equivalent measures provide more specific information
            about the pricing trends over time by product and market type.
    --  Adjusted gross profit before FV adjustments on cannabis net revenue
        represents cash gross profit and gross margin on cannabis net revenue
        and is calculated by subtracting from total cannabis net revenue (i)
        cost of sales, before the effects of changes in FV of biological assets
        and inventory; (ii) cost of sales from non-cannabis auxiliary support
        functions; and removing (iii) depreciation in cost of sales; and (iv)
        cannabis inventory impairment. Adjusted gross margin before FV
        adjustments on cannabis net revenue is calculated by dividing adjusted
        gross profit before FV adjustments on cannabis net revenue divided by
        cannabis net revenue. Adjusted gross profit and gross margin before FV
        adjustments on cannabis net revenue is further broken down as follows:
        --  Adjusted gross profit and gross margin before FV adjustments on
            medical cannabis net revenue represents adjusted gross profit and
            gross margin before FV adjustments on sales generated in the medical
            market only.
        --  Adjusted gross profit and gross margin before FV adjustments on
            consumer cannabis net revenue represents adjusted gross profit and
            gross margin before FV adjustments on sales generated in the
            consumer market only.

        --  Adjusted gross profit and gross margin before FV adjustments on
            wholesale bulk cannabis net revenue represents adjusted gross profit
            and gross margin before FV adjustments on sales generated from
            wholesale bulk cannabis onlyManagement believes that these measures
            provide useful information to assess the profitability of our
            cannabis operations as it represents the cash gross profit and
            margin generated from cannabis operations and excludes the effects
            of non-cash FV adjustments on inventory and biological assets, which
            are required by IFRS.
    --  Adjusted EBITDA is calculated as net income (loss) excluding interest
        income (expense), accretion, income taxes, depreciation, amortization,
        changes in fair value of inventory sold, changes in fair value of
        biological assets, share-based compensation, acquisition costs, foreign
        exchange, share of income (losses) from investment in associates,
        government grant income, fair value gains and losses on financial
        instruments, gains and losses on deemed disposal, losses on disposal of
        assets, restructuring charges, onerous contract provisions, and non-cash
        impairments of deposits, property, plant and equipment, equity
        investments, intangibles, goodwill, and other assets. Adjusted EBITDA is
        intended to provide a proxy for the Company's operating cash flow and is
        widely used by industry analysts to compare Aurora to its competitors,
        and derive expectations of future financial performance for Aurora.
        Adjusted EBITDA increases comparability between comparative companies by
        eliminating variability resulting from differences in capital
        structures, management decisions related to resource allocation, and the
        impact of FV adjustments on biological assets and inventory and
        financial instruments, which may be volatile and fluctuate significantly
        from period to period.

Non-GAAP measures should be considered together with other data prepared accordance with IFRS to enable investors to evaluate the Company's operating results, underlying performance and prospects in a manner similar to Aurora's management. Accordingly, these non-GAAP measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

Reconciliation of Non-GAAP Measures

Net Revenue


                          Three months ended


                                December 31, September 30  December 31,
                                        2020          2020       2019 (1)



        Medical cannabis
         net revenue                  38,856        33,474         27,386


        Consumer cannabis
         net revenue                  28,573        34,338         22,906


        Wholesale bulk
         cannabis net
         revenue                         244                       2,384


        Total cannabis
         net revenue                  67,673        67,812         52,676


        Total net revenue             67,673        67,812         55,138

    ---


              
                (1)              As a result of the Company's
                                               divestment of its wholly owned
                                               subsidiaries ALPS and AHE, the
                                               operations of ALPS and AHE have
                                               been presented as discontinued
                                               operations and the Company's
                                               results have been retroactively
                                               restated, as required. Refer to
                                               Note 11(b) of the Financial
                                               Statements for information
                                               about the divestitures.

Adjusted Gross Margin



       
                ($ thousands)                                               Medical Consumer 
             
     Wholesale bulk     Ancillary       Total
                                                                                Cannabis Cannabis                   Cannabis       Support
                                                                                                                                 Functions

    ---


       
                
                  Three months ended December 31, 2020



       Net revenue                                                               38,856             28,573                  244                     67,673



       Cost of sales                                                           (23,946)          (25,681)             (1,017)                  (50,644)

    ---


       
                Gross profit (loss) before FV adjustments                    14,910              2,892                (773)                    17,029



       Depreciation in cost of sales                                              6,376              4,472                   29                     10,877



       Inventory impairment in cost of sales                                        333                406                                            739



       
                Adjusted gross profit (loss) before FV adjustments           21,619              7,770                (744)                    28,645



       
                Adjusted gross margin before FV adjustments                      56                 27               (305)%                        42

                                                                                       %                 %                                             %

    ---




       
                
                  Three months ended September 30, 2020



       Net revenue                                                               33,474             34,338                                         67,812



       Cost of sales                                                           (18,150)          (25,144)                                      (43,294)

    ---


       
                Gross profit before FV adjustments                           15,324              9,194                                         24,518



       Depreciation                                                               4,587              3,783                                          8,370



       
                Adjusted gross profit before FV adjustments                  19,911             12,977                                         32,888



       
                Adjusted gross margin before FV adjustments                      59                 38                                             48

                                                                                       %                 %                                             %

    ---




       
                
                  Three months ended December 31, 2019 (1)(2)

    ---


       Net revenue                                                               27,386             22,906                2,384          2,462       55,138

    ---


       Cost of sales                                                           (14,099)          (18,129)             (1,169)       (3,540)    (36,937)

    ---


       
                Gross profit (loss) before FV adjustments                    13,287              4,777                1,215        (1,078)      18,201

    ---


       Depreciation                                                               2,992              2,793                  233                      6,018

    ---


       
                Adjusted gross profit (loss) before FV adjustments           16,279              7,570                1,448        (1,078)      24,219

    ---


       
                Adjusted gross margin before FV adjustments                      59                 33                  61%         (44)%          44

                                                                                       %                 %                                             %

    ---


     
     (1) Previous reported amounts have been
              restated to adjust for the change in
              accounting policy for inventory costing
              relating to by-products and the
              allocation of production management staff
              salaries. Refer to Note 2(e) of the
              unaudited Condensed Consolidated Interim
              Financial Statements for a reconciliation
              on the change in accounting policy.



     
     (2) As a result of the Company's divestment of
              its wholly owned subsidiaries ALPS and
              AHE, the operations of ALPS and AHE have
              been presented as discontinued operations
              and the Company's results have been
              retroactively restated, as required.
              Refer to Note 11(b) of the Financial
              Statements for information about the
              divestitures.

Adjusted EBITDA



              
                ($ thousands)                                                            
     
     December 31, 2020           September 30, 2020  
     
     December 31, 2019 (3)(4)

    ---


              Net (loss) income from continuing operations                                                                (292,788)          (107,160)                            (1,302,175)



              Finance costs                                                                                                  18,872              14,691                                  23,833



              Interest (income) expense                                                                                     (1,865)            (1,267)                                (1,997)



              Income tax expense (recovery)                                                                                   3,167                 611                                (25,136)



              Depreciation and amortization                                                                                  24,883              22,444                                  26,757

    ---


              
                EBITDA                                                                                         (247,731)           (70,681)                            (1,278,718)



              Changes in fair value of inventory sold                                                                         5,942               3,304                                  13,223



              Unrealized gain on changes in fair value of biological assets                                                 (6,262)            (5,407)                                (7,932)



              Share-based compensation                                                                                        5,987               6,861                                  19,694



              Acquisition costs                                                                                                                  1,104                                   2,059



              Foreign exchange loss (gain)                                                                                      527             (7,427)                                    961



              Share of loss from investment in associates                                                                       117                 373                                   1,930



              Government grant income                                                                                      (23,678)



              Losses (gains) on financial instruments (1)                                                                    17,309               7,366                                 166,877



              Losses (gains) on deemed disposal of significant influence investment                                                              1,443



              Gains (losses) on disposal of assets held for sale and property, plant, and equipment                         (3,317)                922



              Restructuring charges                                                                                                                210



              Onerous contract provision                                                                                      2,000



              Impairment of deposits, inventory, investment in associate,                                                   232,304               4,041                               1,012,049
    property, plant and equipment, intangibles, and goodwill

    ---


              
                Adjusted EBITDA (2)                                                                             (16,802)           (57,891)                               (69,857)

    ---


     
     (1) Includes fair value changes on
              derivative investments, derivative
              liability, contingent
              consideration, and (gain) loss on
              the modification of debt. Refer to
              Note 20 of the Financial
              Statements.



     
     (2) Adjusted EBITDA is a non-GAAP
              financial measure and is not a
              recognized, defined, or
              standardized measure under IFRS.
              Refer to "Cautionary Statement
              Regarding Certain Non-GAAP
              Performance Measures" section of
              the MD&A.



     
     (3) Previous reported amounts have been
              restated to adjust for the change
              in accounting policy for inventory
              costing relating to by-products
              and the allocation of production
              management staff salaries. Refer
              to Note 2(e) of the unaudited
              Condensed Consolidated Interim
              Financial Statements for a
              reconciliation on the change in
              accounting policy.



     
     (4) As a result of the Company's
              divestment of its wholly owned
              subsidiaries ALPS and AHE, the
              operations of ALPS and AHE have
              been presented as discontinued
              operations and the Company's
              results have been retroactively
              restated, as required. Refer to
              Note 11(b) of the Financial
              Statements for information about
              the divestitures.

Included in the three months ended December 31, 2020 Adjusted EBITDA loss is $0.8 (three months ended September 30, 2020 - $43.3 million) legal settlement and contract termination fees and $2.1 million (three months ended September 30, 2020 - $4.1 million) related restructuring charges, severance and benefits associated with the business transformation plan. Excluding these impacts, Adjusted EBITDA loss is $13.9 million (three months ended September 30, 2020 - $10.5 million).

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SOURCE Aurora Cannabis Inc.