PREMIUM MEDICAL CANNABIS POWERED BY SUNLIGHT - Aphria
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PREMIUM MEDICAL CANNABIS
POWERED BY SUNLIGHT
Q2 2018
Investor Presentation
PREMIUM January 10, 2018
MEDICAL CANNABIS
POWERED BY SUN
DISCLAIMER
This documentation is a presentation (the “Presentation”) of general background information about Aphria Inc.’s (“Aphria”) activities current as of January 10, 2018, unless stated otherwise. It is information in a
summary form and does not purport to be complete. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or
needs of any particular investor. These should be considered, with or without professional advice, when deciding if an investment is appropriate.
This Presentation does not constitute or form part of any offer for sale or solicitation of any offer to buy or subscribe for securities nor shall it or any part of it form the basis of or be relied on in connection with, or
act as any inducement to enter into, any contract or commitment whatsoever. Recipients of this Presentation who are considering acquiring securities of Aphria are reminded that any such purchase or subscription
must not be made on the basis of the information contained in this Presentation but are referred to the entire body of publicly disclosed information regarding Aphria.
The information contained in this Presentation is derived solely from management of Aphria and otherwise publicly available information concerning Aphria and does not purport to be all-inclusive or to contain all
the information that an investor may desire to have in evaluating whether or not to make an investment in Aphria. The information has not been independently verified and is subject to material updating, revision
and further amendment, and is qualified entirely by reference to Aphria’s publicly disclosed information.
No representation or warranty, express or implied, is made or given by or on behalf of Aphria or any of its affiliates, directors, officers or employees as to the accuracy, completeness or fairness of the information or
opinions contained in this Presentation and no responsibility or liability is accepted by any person for such information or opinions. Aphria does not undertake or agree to update this Presentation or to correct any
inaccuracies in, or omissions from, this Presentation that may become apparent. No person has been authorized to give any information or make any representations other than those contained in this Presentation
and, if given and/or made, such information or representations must not be relied upon as having been so authorized. The information and opinions contained in this Presentation are provided as at the date of this
Presentation. The contents of this Presentation are not to be construed as legal, financial or tax advice. Each prospective investor should contact his, her or its own legal adviser, independent financial adviser or
tax adviser for legal, financial or tax advice.
Certain statements in this Presentation may constitute forward-looking information, including future-oriented financial information and financial outlooks, within the meaning of applicable securities laws. Forward-
looking information may relate to Aphria’s future outlook and anticipated events or results and may include statements regarding Aphria’s financial results, future financial position, expected growth of cash flows,
business strategy, budgets, projected costs, projected capital expenditures, taxes, plans, objectives, potential synergies, industry trends and growth opportunities. Often but not always, forward-looking information
can be identified by the use of words such as “anticipate”, “believe”, “expect”, “project”, “estimate”, “likely”, “intend”, “should”, “could”, “may”, “might”, “target”, “plan” and other similar expressions or
variations (including negative variations) of such words and phrases. Forward-looking information contained in this Presentation is based on certain assumptions regarding expected growth, results of operations,
performance, industry trends and growth opportunities.
While management considers these assumptions to be reasonable, based on information available, they may prove to be incorrect. Forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of Aphria to be materially different from any future results, performance or achievements expressed or implied by the forward-looking
statements. These risks, uncertainties and other factors include, but are not limited to risks associated with general economic conditions; adverse industry events; marketing costs; loss of markets; future legislative
and regulatory developments involving medical marijuana; inability to access sufficient capital from internal and external sources, and/or inability to access sufficient capital on favourable terms; the medical
marijuana industry in Canada generally, income tax and regulatory matters; the ability of Aphria to implement its business strategies; competition; crop failure; currency and interest rate fluctuations, and the other
risks discussed under the heading “Risk Factors” in Aphria’s Annual Information Form dated January 10, 2018. The foregoing factors are not intended to be exhaustive.
Although Aphria has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors
that cause actions, events or results to differ from those anticipated, estimated or intended. Forward-looking statements contained herein are made as of the date hereof and Aphria and its directors, officers
and employees disclaim any obligation to update any forward-looking statements, whether as a result of new information, future events or results or otherwise. There can be no assurance that forward-looking
statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, you should not place undue reliance on forward-looking
statements due to the inherent uncertainty therein. All forward-looking information is expressly qualified in its entirety by this cautionary statement.
Forward-looking information and other information contained herein concerning management’s general expectations concerning the medical marijuana industry are based on estimates prepared by management
using data from publicly available industry sources as well as from market research and industry analysis and on assumptions based on data and knowledge of this industry which management believes to
be reasonable. However, this data is inherently imprecise, although generally indicative of relative market positions, market shares and performance characteristics. While management is not aware of any
misstatements regarding any industry data presented herein, industry data is subject to change based on various factors.
This Presentation may not be reproduced, further distributed or published in whole or in part by any other person. Neither this Presentation nor any copy of it may be taken or transmitted into or distributed in any
other jurisdiction which prohibits the same except in compliance with applicable laws. Any failure to comply with this restriction may constitute a violation of applicable securities law. Recipients are required to
inform themselves of, and comply with, all such restrictions or prohibitions and Aphria does not accept liability to any person in relation thereto.
APHRIA INC. | Q2 INVESTORS PRESENTATION 1
Investment
highlights
License to sell
medical marijuana
High growth provides critical
barrier to entry
potential
Largest
footprint in Low costs
the industry underpin
attractive cash
flow potential
Established Significant near
operations and and mid-term
experienced opportunities for
management growth
Well
capitalized
APHRIA INC. | Q2 INVESTORS PRESENTATION 2
Highly experienced
management team
Vic Neufeld Cole Cacciavillani John Cervini
Chief Executive Officer Co-Founder & Co-Founder &
VP. Growing Operations VP. Infrastructure + Technology
20+ Years in pharma 35+ Years in agri-business 20+ Years in agri-business
CEO of Jamieson Laboratories 1993-2014 Greenhouse industry pioneer and veteran Fourth generation greenhouse grower
Demonstrated vision, growth & performance First-hand knowledge of Aphria’s greenhouses Proven growth and expansion track record
Seed shares represent ~ 15% of outstanding float
APHRIA INC. | Q2 INVESTORS PRESENTATION 3
Aphria at a glance
BRANDS
• Aphria • hiku
GROWING
• [Recreational brand] • Rx Princeps
• Broken Coast • Tokyo Smoke
OPERATIONS
Leamington, ON (387 acres)
Talbot Street campus (87) INNOVATION INVESTMENT
Mersea Road campus (300) • Edibles • Althea
• Nutraceuticals • CannaRoyalty
• Soft gels • Green Acre Capital
Duncan, BC (5 acres)
• Topicals • Green Tank Holdings
Broken Coast • Hiku Brands Company
• Vape pens
• Liberty Health Sciences
• MassRoots
• Resolve Digital Health, Inc.
• Scientus Pharma
• Tetra Bio-Pharma
SCIENCE TECHNOLOGY
• CannPal • Agrinomix
• Medlab (Australia) • Bewhere
• Tetra Bio-Pharma • Resolve Digital Health
APHRIA INC. | Q2 INVESTORS PRESENTATION 4
One of the lowest cost producers
in the Canadian industry
4.00
3.50
3.00
2.23 2.13
2.50
1.85 1.73
2.00 1.67 1.61
1.45
1.31
1.50 1.11 0.95
1.00
0.50
0.00
Q2 - 17 Q3 - 17 Q4 - 17 Q1 - 18 Q2 - 18
Cash All-in
All-in costs equal to cost of sales (excluding any fair value of biological assets adjustments) divided by grams sold in quarter.
Cash costs equal to cost of sales less amortization reported in cost of sales, all divided by grams sold in quarter.
APHRIA INC. | Q2 INVESTORS PRESENTATION 5
Unique drivers
of cost savings
CAPEX benefit
NEW GREENHOUSE BUILD
OR RETROFIT
$55 square foot THEM APHRIA
INDOOR GROW
$250 - $300 square foot
Production Costs
FERTILIZER SAVINGS ELECTRICAL SAVINGS =
• Aphria’s cost - $0.005 / L • Aphria’s annual electrical
costs $5.50 / sq. ft.
• Competitor’s fertilizer
cost - $0.22 / L • Indoor grower’s annual
electrical costs $65.00 / sq. ft.
• Aphria’s costs are
2% of our competitors • Aphria’s costs are
8% of our competitors*
3X – hours usage 2X – light density 2X – Cooling
* - Ontario based APHRIA INC. | Q2 INVESTORS PRESENTATION 6
Focus on quality
and safety
Our Seed-to-Sale Certified quality promise
is our commitment to protecting the health
and safety of Canadians by ensuring that
we only sell clean, safe and pure cannabis
100% of the time. No exceptions.
Our comprehensive quality management
program has over 500 steps and was
adopted from the highly restricted and
regulated NHP and OTC industries and go
above and beyond the GPP requirements
of the ACMPR.
APHRIA INC. | Q2 INVESTORS PRESENTATION 7Ample capacity to
meet growing demand
APHRIA INC. | Q2 INVESTORS PRESENTATION 8GrowCo
Strategic relationship with
Double Diamond Farms
Created GrowCo (51% owned by Aphria,
•
49% owned by Double Diamond)
To purchase 100 acre farm owned by Double Diamond
•
Almost 32 acres of state-of-the-art, Dutch style newly built
•
greenhouses plus 72,000 square feet of infrastructure
(first planted crop will be cannabis)
Supply agreement to supply at least 120,000 kgs of dried
•
cannabis to Aphria
Requires $80 - $100 million in capital to purchase farm
•
(at appraised value) plus retrofits for growing cannabis, funded by
$20 million in seed capital by the Parties. Remainder to financed
by loans from a commercial lender, with Aphria to lend any shortfall.
APHRIA INC. | Q2 INVESTORS PRESENTATION 9Overview of
Broken Coast
Established in 2015, Broken Coast is a profitable
Licensed Producer based in British Columbia with
a proven track record of premium cannabis production
ESTABLISHED BRAND AND HIGHLY-REGARDED LOYAL AND RAPIDLY GROWING
PREMIUM PRODUCT REPEAT CUSTOMER BASE
•
Consistently top ranked on well-known review •
Over 10,000 registered
site Lift.co; has won multiple product and patients with 1,000 net new
customer service based awards at the applications each month
Canadian Cannabis Awards
WELL-POSITIONED FOR FUTURE
EXTENSIVE STRAIN LIBRARY RECREATIONAL MARKET
•
World-class bank of genetics with •
Plans for over 10,500 kg
+1,000 seeds available for commercialization of premium indoor
production capacity
PROPRIETARY HYDROPONICS PROCESS
•
Fully licensed, purpose-built, indoor facility
with a highly automated grow system
LOW-COST, INDOOR CULTIVATION
•
High margin production with all-in cost
per gram1 of $2.20
POSITIVE ADJUSTED EBITDA SINCE 20151
1
Non-GAAP measure defined in the Company’s Management Discussion & Analysis APHRIA INC. | Q2 INVESTORS PRESENTATION 10Proforma market All calculated values used within the below
charts are based on cumulative totals from each
company’s financials for their respective most recently
positioning
reported operating periods available on SEDAR as
of January 10, 2018. Proforma numbers are, in part,
based on management’s estimate of Broken Coast’s
revenue and adjusted EBITDA for the
period ending Dec 31, 2017.
TRAILING REVENUE (C$000s)
$70,000
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
$0
COMPETITOR #4 COMPETITOR #3 COMPETITOR #2 APHRIA PROFORMA COMPETITOR #5 COMPETITOR #1
Trailing revenue represents the last twelve months revenue derived from each Company’s ongoing regular business activities and does not include interest income or fair value changes in investments
TRAILING ADJUSTED EBITDA (C$000s)
$15,000
$10,000
$5,000
$0
-$5,000
-$10,000
-$15,000
-$20,000
COMPETITOR #1 COMPETITOR #2 COMPETITOR #4 COMPETITOR #3 APHRIA COMPETITOR #5 PROFORMA
Adjusted EBITDA is a non-GAAP measure defined in the Company’s Management Discussion & Analysis. Trailing adjusted EBITDA represents the
last twelve months adjusted EBITDA derived from each Company’s ongoing regular business activities and does not include interest income
or fair value changes in investments
APHRIA INC. | Q2 INVESTORS PRESENTATION 11Overview of
Nuuvera
Established in 2017, Nuuvera is an international company
with a global strategy built on anticipating future markets
and establishing the infrastructure and partnerships to
serve them with medical-grade cannabis.
CAPITALIZES ON GLOBAL FOOTPRINT ADDS HIGHLY-EXPERIENCED,
GLOBAL MANAGEMENT TEAM
• International partnerships, supply
and sale agreements • International bench strength
• Maritimes MOU • Strong relationships and expertise
in international markets
ACQUISITION DELIVERS COMPLEMENTARY
CORE COMPETENCIES
• Extraction capabilities, distillation,
cannabinoid purification and
formulation expertise
• Supply chain efficiencies
• Enhanced product
development capabilities
APHRIA INC. | Q2 INVESTORS PRESENTATION 12Capitalizing on Nuuvera’s
existing global footprint
Aphria becomes global medical
cannabis leader with presence in
GERMANY URUGUAY
11 countries – and counting: • Shortlisted by BFARM for a contract Supply agreement
to grow, process, store and deliver up (30kgs/month of
to 6,000kg of cannabis CBD isolate)
• Supply relationship with significant
LESOTHO
pharmaceutical distribution company
Supply agreement
servicing over 13,000 pharmacies
(100kgs/month of extract)
(1,200kgs initial order)
ITALY ISRAEL
Owner of Italian subsidiary with Established presence
1 of 7 import/distribution license and relationships
CANADA
SPAIN UNITED KINGDOM
Cultivation & sale licenses
• LOI for JV with local partner, Cafina, Import agreement for
230,000kg capacity
included supply agreement pharma-grade CBD isolate
(into 30kg/month)
• LOI to acquire GMP facility
UNITED STATES
Investments in Liberty Health Sciences
MALTA CANADA
• LOI for JV with local partners MOU for New Brunswick
(2,500kg)
• LOI for acquisition of GMP facility
AUSTRALIA
• 25% ownership in Althea Company Pty Ltd.
including supply agreement
• Supply agreements with Medlab Clinical
APHRIA INC. | Q2 INVESTORS PRESENTATION 13Leveraging two-pronged
sales strategy
Unique cost structure
enables Aphria to capitalize
on wholesale advantages
RETAIL WHOLESALE
Strong distribution foundation
•
• Sale of bulk product to other
H.C. Licensed Producers and
Increasing patient sales
•
Licensed Dealers
Highly profitable
•
• (~50% margin but no costs
(~ 70% margin with
below the line)
30% costs below the line)
APHRIA INC. | Q2 INVESTORS PRESENTATION 14Investment
highlights
License to sell
medical marijuana
High growth provides critical
barrier to entry
potential
Largest
footprint in Low costs
the industry underpin
attractive cash
flow potential
Established Significant near
operations and and mid-term
experienced opportunities for
management growth
Well
capitalized
APHRIA INC. | Q2 INVESTORS PRESENTATION 15APPENDIX A
Financials
APHRIA INC. | Q2 INVESTORS PRESENTATION 16Q2 Results
Q2 - 2018 Q1 - 2018
Revenue (000’s) $ 8,504 $ 6,120
Kilograms sold 1,237.0 852.0
“All-in” cost of goods sold / gram $ 2.13 $ 1.61
Cash cost to produce / gram $ 1.45 $ 0.95
(Aphria’s definition)
Adjusted gross margin 68% 78%
APHRIA INC. | Q2 INVESTORS PRESENTATION 17Reconciling net income
and earnings per share
(Quarter 2 - ended November 30, 2017)
(Unaudited - In thousands of Canadian dollars)
Revenue $ 8,504
Production costs 2,746
Gross profit before fair value adjustments 5,758
Fair value adjustment on sale of inventory 2,671
Fair value adjustment on growth of biological assets (3,115)
Gross profit 6,202
Under IFRS margins
Expenses
General and administrative 1,973 are 72.9% after excluding
Share-based compensation
Selling, marketing and promotion
2,200
2,819
non-cash IFRS adjustments
Amortization 276 Gross Margins are 67.7%
Research and development 80
7,348
Income of operations (1,146)
Other Items 7,898
Net Income before income taxes 6,752
Income taxes 297
Net income $ 6,455
Weighted average number of common shares – basic 138,839,530
Earnings per share – basic $ 0.05
APHRIA INC. | Q2 INVESTORS PRESENTATION 18Equity
STRONG WELL-CAPITALIZED
BALANCE SHEET
(Quarter 2 - ended November 30, 2017)
STRONG BALANCE SHEET
WITH $171.9 MILLION • Working capital: $178.8 million
IN CASH AND NEAR
CASH POSITION •
Inventory: 2,346 Kilograms (or kilogram equivalents)
CAPITAL STRUCTURE
Amount Percentage Expiration
Common Shares Outstanding 151,871,247 93.1% -
Stock Options @ $0.60 2,500,000 1.5% June 2, 2019
Stock Options @ $0.85 - $1.19 855,000 0.5% October 2017 to September 2020
Stock Options @ $1.20 - $1.67 621,669 0.4% November 2018 to June 2021
Warrants - RTO @ $1.50 2,880,550 1.8% December 2, 2019
Warrants - Bought Deal @ $1.75 387,503 0.2% December 10, 2018
Warrants @ $3.14 200,000 0.1% September 26, 2021
Stock Options @$3.00 - $9.05 3,886,367 2.4% November 2, 2019 to June 2022
Fully Diluted Shares as at November 30, 2017 163,202,336 100.0%
Bought Deal closed January 8, 2018 8,363,651
Shares issued on purchase of Broken Coast 14,373,675
Shares issued on purchase of Nuuvera 34,202,113 Fully Diluted
Fully Diluted Shares 220,141,775
APHRIA INC. | Q2 INVESTORS PRESENTATION 19Percentage of cash deployed
on OPEX cash burn
48.7%
25.4%
22.3%
13%
1.3%
APHRIA COMPETITOR #1 COMPETITOR #2 COMPETITOR #3 COMPETITOR #4
OPEX cash burn represents the net amount of cash used in order to fund the Company’s ongoing regular business activities
The Percentage of cash deployed on OPEX represents the net amount of cash used to-date in order to fund the
Company's ongoing regular business activities as a percentage of the total cash deployed
All calculated values used within the table above are based on cumulative totals from each company's first publicly reported financials
through their most recently reported operating period available on SEDAR as of January 10, 2018
APHRIA INC. | Q2 INVESTORS PRESENTATION 20You can also read
