Aphria CEO, Co-Founder To Stand Down; Q2 Revenue Surges, But Trails Consensus

Aphria Inc APHA, which recently came under fire from short sellers, reported a management shakeup alongside its second-quarter results Friday. 

What Happened

Aphria confirmed speculation of a management shuffle. 

The stock plunged about 23 percent Dec. 3 after two short-sellers deliberated on what they see as red flags at the company. 

CEO Vic Neufeld and co-founder Cole Cacciavillani will relinquish their positions after nearly five years, Aphria said Friday. 

The two will serve on the board, assisting recently appointed independent Chair Irwin Simon and President Jakob Ripshtein to ensure a smooth transition until a new CEO is appointed, the cannabis company said. 

Aphria reported a 63-percent year-over-year jump in net revenues to CAD$21.7 million ($16.4 million), thanks to adult-use sales following the approval of recreational marijuana in Canada.

The top-line missed the consensus estimate of C$28.8 million, based on Bloomberg's database.

Aphria sold 3,408.9 kgs of cannabis in Q2, up from 1,778.2 kgs in Q1. The cost per gram jumped from $1.30 in Q1 to $1.76.

Margins declined due to lower effective selling prices in the adult-use market as well as temporarily lower yields and higher production costs, Aphria said. 

Net income climbed from CAD 5 cents per share to CAD 22 cents per share, reflecting gains primarily from its divestitures of positions in Hiku Brands and Liberty Health Sciences.

The adjusted EBITDA loss for both cannabis operations and international operations widened, dragged by lower margins.

Why It's Important

Following the plunge in shares in December, Aphria received a hostile bid from Green Growth Brands Inc GGBXF Dec. 27, valuing the former at C$2.8 billion ($2.1 billion). Aphria responded by saying the offer significantly undervalued the company.

What's Next

Aphria said it now expects to generate the first sales from its new facilities in calendar 2019 pending approval by Health Canada.  The nnualized harvest is expected to rise from 35,000 kgs now to 255,000 kgs by the end of the calendar year, the company said. 

The NYSE-listed shares of Aphria shares, which plunged to an all-time intra-day low of $3.75 Dec. 6, have since recovered and closed Thursday's session down 3.09 percent at $6.58.

The shares were seen losing an incremental 3.8 percent to $6.33 in premarket trading Friday. 

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