Aphria Building A Gold Plated Balance SheetFrom Grizzle on December 2nd
https://grizzle.com/aphria-apha-80-million-credit-facility-diamond/ Bottom Line:
Aphria has truly been the cannabis turnaround story of the last twelve months.
This time last year investors were questioning if the stock would even survive after a short attack and persistent rumours about insider dealing drove the stock down more than 50%.
The company’s cash hoard was also dwindling and they were down to 6 months of cash left at a burn rate of more than $60 million per quarter.
Fast forward to today and we are looking at the third strongest balance sheet in Canadian cannabis and the longest cash runway among similarly sized peers.
Including today’s $80 million capital raise, Aphria now has almost two years of runway to turn a profit.
A two-year window puts Aphria ahead of its two biggest rivals, one of which was the previous industry leader.
Canopy Growth has 1.6 years left even with the C$2+ billion cash pile from Constellation Brands while Aurora Cannabis has a runway of only 6 months and will likely need to do another debt or equity raise in 2020.
Aphria also has the lowest corporate overhead per gram of the three, meaning less revenue growth is needed to start turning a profit.
On the cost side, Aphria meets or beats the growing cost of any similar-sized competitor even with growth initiative inflating costs at the moment.
A cost advantage means they could potentially be the last company standing if a price war broke out among the big guys, selling similar quality cannabis.
Investors who are interested in big growth potential while limiting their risk, now need to give Aphria a long hard look.
With a strong balance sheet, massive scale and the lowest growing costs among large-cap peers, Aphria legitimately has the potential to become the new industry bellwether.
What a difference 12 months can make.
DETAILS OF THE NEW DEBT FACILITY
Following the recruitment of several new members of senior management and the re-election of the company’s board of directors, Aphria Inc. (TSX: APHA; NYSE: APHA) today announced a new round of fundraising.
The company just raised $80 million through a senior secured credit facility via subsidiary Aphria Diamond. The facility features a three year term to come due in 2022 and is expected to have pricing of around 5% per year.
Aphria Inc. owns a 51% stake in Aphria Diamond through a partnership with Double Diamond.
The subsidiary just landed its Health Canada licensing last month, doubling the company’s production capacity with another greenhouse in Leamington, Ontario.
The site features 1.3 million sq. ft. of production space and is estimated to hit a growing capacity of 140,000 kg of product annually. A first harvest from the site is projected to hit provincial markets in March.
Aphria’s interim CEO Irwin D. Simon commented on the credit facility news this morning:
We are pleased to have secured a term loan that will repatriate a portion of our investment in Aphria Diamond, to be strategically deployed by Aphria. This loan strengthens our balance sheet without being dilutive, and positions Aphria Diamond for success as we expand into new categories and growth opportunities in cannabis to enhance value for shareholders long term.
Increased cash flow has been a major concern for the industry in the wake of two solid weeks of disappointing quarterly reports from a number of major licensed producers posting major losses.
In contrast to most North American producers, Aphria only saw a 2% revenue decline but an 8% bump in overall cannabis sales in the latest quarter.
The company reported $126.1 million in revenue for fiscal Q1 2020, which ended in August, with a profit of $45 million and adjusted EBITDA of $1.03 million.
In other news, Aphria took home seven trophy wins from the Lift & Co Canadian Cannabis Awards ceremony last month, including wins in the Master Grower and Innovator of the Year categories.
Aphria additionally recruited Denise Faltischek from Hain Celestial, a natural products company, to serve as Chief Strategy Officer back in November. In this new role, Faltischek will oversee international strategy as well as run the company’s medical operations.
YES, WE HAVE GOOD THINGS GROWING
Enjoy The Weekend
CentreIce