=Aphria (APHA) reported earnings on Fri 11 Jan 2019 (b/o)

Aphria reports Q2 (Nov) results, misses on revs; Co-founder Cole Cacciavillani and CEO Vic Neufeld to transition out of roles over coming months

• Reports Q2 (Nov) earnings of CC$0.22 per share, may not be comparable to the single analyst estimate of (CC$0.04); revenues rose 154.9% year/year to CC$21.67 mln vs the CC$27.48 mln single analyst estimate. The increase in net income relates to gains on the co's long-term investment portfolio, primarily divestitures of positions in Hiku Brands and Liberty Health Sciences.
  • Initial sales in the newly legalized Canadian adult-use market accounted for over 1,900 kilogram equivalents sold. Medical cannabis sales declined marginally from 1,466.2 kilogram equivalents sold in the previous period to 1,443.6 kilogram equivalents sold in the second quarter. Cannabis oil sales, as a percentage of volume, decreased to 19% of overall sales from 39% in the prior quarter, reflecting the higher percent of dry bud sold in the adult-use market.
• Aphria Chief Executive Officer Vic Neufeld, and Co-founder Cole Cacciavillani, are both nearing the end of their five-year journey with the Company and will transition out of their executive roles over the coming months but remain on the Board. Working closely with Irwin D. Simon, Aphria's recently appointed independent Chair, and President Jakob Ripshtein, Mr. Neufeld and Mr. Cacciavillani intend to complete a smooth and responsible transition to a globally-minded executive leadership team for the long-term benefit of the Company's patients, shareholders, customers, and employees. The Board has requested that, following the transition, Mr. Neufeld and Mr. Cacciavillani continue to apply their knowledge and expertise as special advisors to both the Chair and the President, ensuring a smooth transition of institutional experience and strategic advice until a new CEO is appointed.
• "This is the first quarter to partially include adult-use sales, helping to drive 63% quarter-over-quarter net revenue growth, as did continued strength in sales to the medical-use market. As expected, gross margins declined, reflecting lower effective selling prices in the adult-use market, as well as temporarily lower yields and higher production costs in the quarter as we moved aggressively to build out production facilities and implement new automation processes...A top priority for Aphria is expanding production and automation to secure our long-term cost and scale advantages. The Part IV and V expansions of Aphria One are now complete and awaiting Health Canada approval, while an application for a cultivation licence at Aphria Diamond has been submitted and is awaiting pre-cultivation inspection. Based on this, we now expect to generate first sales from these new facilities later in the calendar year, pending Health Canada approvals, with our annualized harvest reaching 255,000 kilograms, compared to 35,000 kilograms currently, by the end of calendar 2019."

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The leadership transition comes after short sellers Hindenburg Research and Quintessential Capital Management sparked a plunge in Aphria’s shares last month after alleging the company bought assets at inflated prices from insiders. Since their report was released on Dec. 3, the company’s stock has fallen 17 percent.

“We continue to have the greatest pride in what Aphria has achieved, and its future has never looked brighter,” Neufeld said in a statement Friday.

Cacciavillani is Aphria’s second-largest shareholder with about a 2.9 percent stake while Neufeld has about a 0.8 percent holding, according to data compiled by Bloomberg.