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Martin takes the helm on the heels of a series of challenging quarters for the company, as well as mass layoffs, executive shuffles, and the closure of multiple facilities. Aurora coupled the CEO announcement on Tuesday with a fresh warning ahead of its financial results due later this month.
The company said it expects up to $1.8 billion in goodwill impairment charges in Q4 2020. The writedowns are to include an inventory charge of approximately $140 million, and a $90 million asset writedown.
Revenue for the quarter is expected to fall to between $70 and $72 million, including $66 to $68 million in cannabis net revenue. Aurora generated $75.5 million in its prior quarter. The company has sailed past multiple profitability targets, and now expects to achieve positive adjusted EBITDA in fiscal Q2 2021.
“Aurora has done a lot of the heavy lifting,” Martin said in an interview with Yahoo Finance on Tuesday. “They've right-sized the organization with a lot of proper things done on the manufacturing side. And Aurora has got a lot of incredible assets.”
Martin replaces Michael Singer, Aurora’s executive chairman who has filled the CEO job on an interim basis since the departure of company co-founder and CEO Terry Booth in February. Martin joined the company in May as head of U.S. operations, following the announcement of Aurora’s deal to acquire the U.S. CBD brand Reliva, where he served as CEO. Martin was promoted to Aurora’s chief commercial officer in July.
Aurora’s leadership has been a revolving door since the abrupt departure of Cam Battley last December. Battley served as Aurora’s chief corporate officer, and was the de-facto public face of the company.
Singer credited Martin’s “strong commercial background” for his rapid ascent at Aurora, adding that his resume stood out from other candidates. Martin was president of the e-cigarette company Logic Technology and an executive at Altria Sales & Distribution, the sales arm of cigarette giant Altria (MO).
“He really has garnered incredible respect and appreciation from the leadership team [and] from the board,” Singer told Yahoo Finance. “He can hit the ground running. [He’s] very well entrenched within the organization today.”
Aurora also announced on Tuesday that it will pay $30 million to end its deal with the UFC. Aurora and UFC created a brand called ROAR aimed at exploring the pain management, inflammation, injury, exercise recovery, and mental wellbeing of athletes. Aurora said the mutual termination of the partnership will avoid more than $150 million in fees, research costs, and marketing activation expenses over the next five years.
“I've got the greatest respect for the UFC, but that deal was signed at a time in which the U.S. regulatory environment looked a little bit different,” Martin said, referring to the murky status of CBD in the United States. “Many of those arrangements and deals and contemplations were done when the category looked a lot different and the balance sheet looked a lot different.”
Asked about the surging popularity of cannabis priced to compete against the illegal market, Martin said the company continues to see opportunities at all price points. He said vapes, pre-rolled joints, and gummies are the formats he plans to focus on. He suggested rival Canopy Growth’s (WEED.TO) (CGC) major bet on infused beverages is risky, given how little is known about legal cannabis consumers.
“I think with all due respect, you know to Canopy and the others, what we do know is that the consumer is unpredictable,” he said. “Agility and the ability to innovate are core competencies for any company, but particularly for a company like Aurora.”
Aurora said in its news release that it has restructured its credit facilities to improve flexibility as its transition plans unfold. Chief financial officer Glen Ibbott noted Aurora had approximately $160 million cash on hand as of June 30, plus about $275 million available under the company’s existing at-the-market program.
Toronto-listed shares dropped 8.9 per cent to $10.13 at 2:52 p.m. ET on Tuesday. The stock has plunged more than 87 per cent in the past 12 months.
Aurora said it will report its fourth quarter and fiscal year 2020 on Sept. 22.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.