To kick off the
trend analysis of this set of graphs we have Aurora first up for Gross
Margin Versus SGA.
I did have to decide about how I wanted to handle their $10.6 million G&A Q1-Q3 F2019 adjustments being dumped into the Q4 F2019 expense category in their MDA. I had two choices:
Leave the Q4 as was presented, which understates
Q4 and overstates Q1-Q3, or
Change Q4 to what they indicated in narrative of
MDA and leave Q1-3 OVERSTATED.
Because I don’t
have the Q1-3 changes and I KNOW Q4 was overstated by $10.6 million I decided
to go with #2, as it is the most recent earnings AND they told me the
vs SGA: Peer Analysis
the highest Gross Margin in the industry in absolute terms, a function of the
highest sales and the highest GM% of its peers. They also boast the second highest
SGA at $24 million less than CGC, which they pull off despite more sales than
combination leaves them with a Delta of $28 million.
vs SGA: Trend
this past Q, Q1-3 evidenced VERY similar aggregate SGA.
In some Q’s
Selling was higher, notably in last Q before Adult rec (Q0-3 above) when it was
$29 million. Then it reduced to as low
as $16 million in March 31/19 Q (Q0-1).
But in Q4 (Q0 above) it almost doubled to $31 million. [Note: Aurora knew they wouldn’t be +EBITDA as
soon as they got off the checkbook on Selling expenses in Q4.]
been steadily building each Q: $36M, $44M, $51M and $53M this past Q. Again, I
added $10.6 million to their reported figure to get Q4. This would have ben spread over Q1-3 as
All in SGA
hit a peak in the recent Q at $83 million.
This leaves a Delta of $28 million. The Delta has been decreasing over the period in review and did reduce $3 million QoQ.
In order to erode that Delta they need a combination of the below:
More sales with same GM%
A higher GM%
At the current
GM% of 56% they would need incremental sales of $50 million to erase this deficit.
get to +EBITDA without first eliminating this deficit. With the $28 million deficit,
IMO they look to be 2-3 Q’s away from +EBITDA especially of wholesale sales are
has no position in ACB and does not intend to take one in the next five days.
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