Aphria Inc. Just Kicked Off Cannabis Earnings Season With A Bang

Yesterday, Aphria Inc. (APHA.TO) (APHA) traded higher after it reported second quarter financial results for the period that ended in November 30^th. The announcement comes a few weeks after the company announced a merger agreement with Tilray (TLRY) and we are bullish on the growth prospects that is associated with the combined company.

The second quarter was a period of strong growth for Aphria and this is a trend that we expect to continue. Below, we highlighted some of the most important announcements from the second quarter and believe that our readers should be aware of these developments:

• Aphria generated more than $160 million of revenue and $72.1 million of it was from the sale of recreational cannabis. This was a record amount of recreational cannabis sales for the company and the seventh consecutive quarter of growth
• The amount of cash it costs to produce each gram of dried cannabis fell by 9% from the prior quarter and came in at $0.79. This was the fifth consecutive quarter the cost per gram has declined for the company
• The average selling price of recreational cannabis increased to $4.29 from $4.15 per gram. The increase is primarily related to the mix of products that were sold
• Aphria reported that adjusted EBITDA increased by $2.6 million when compared to the prior quarter
• As of November 30^th, Aphria had $320 million of proforma cash to fund planned growth projects in Canada and abroad.
• During the quarter, the company reported a $70 million improvement of free cash flow
• The quarter only included five days of net beverage alcohol revenue from SweetWater and we expect this asset to serve as a growth driver in future quarters

One of the most attractive aspects of the Aphria story is related to the leverage that it has to strategic international markets: During the quarter, the company reported several key updates on its international business and below, we highlighted what we consider to be the most important developments:

• Aphria completed its first EU-GMP shipment of dried cannabis and cannabis oil to Germany. We expect the international side of the business to show strong growth in 2021 and beyond
• The company received an import permit for the first EU-GMP shipment of cannabis oil for sale and distribution in Malta
• Aphria completed the first shipment of medical cannabis to Canndoc to sell in Israel
• The company executed a supply agreement with ODI Pharma AB to expand into Poland

A Growth Story that is Just Getting Started

Overall, the second quarter was a period of strong growth for Aphria and we expect this trend to continue on a going forward. The company has reported a substantial improvement in the international business and we are impressed with how it has capitalized on Canada’s recreational cannabis market.

Since the earnings report only included five days from Sweetwater, we expect Aphria to report strong growth in the current quarter. The report also does not take the merger agreement with Tilray into account and if the transaction is approved, we expect the combined company to be one of the world’s largest cannabis companies.

If you are interested in learning more about Aphria’s earnings or the planned merger with Tilray, please send an email to support@technical420.com with the subject “Aphria” to be added to our distribution list.

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Michael Berger is Managing Partner of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.

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