Aurora Cannabis CEO Steps Down as Firm Cuts 500 Jobs and Reduces Spending
Aurora Cannabis Inc. co-founder Terry Booth is the marijuana industry’s latest executive casualty.
The struggling Alberta-based cannabis firm announced Thursday that Booth -- who co-founded the company in 2013 and helped build it into the second largest player in Canada (behind Canopy Growth Corporation) -- had stepped down as chief executive officer of the multinational marijuana firm.
Booth is supplanted by Aurora executive chairman Michael Singer, who will serve as interim CEO.
His departure comes less than two months after Aurora’s chief corporate officer Cam Battley was reportedly ousted from company. The company’s former chief of global business development, Neil Belot, also exited Aurora in December.
In a press release announcing his “retirement,” Booth said he was “proud and humbled” to have led the Canadian-based cannabis firm over the last seven years.
"While there is still much work to be done, the timing is right to announce my retirement with a thoughtful succession plan in place and the immediate expansion of the Board of Directors,” he said via the release.
Moving forward, Booth will serve as a “senior strategic advisor” to the board and remain a director.
Additionally, Aurora has appointed two new independent board members -- Lance Friedmann and Michael Detlefsen – as the company expands its board to include seven independent directors.
Friedmann spent 25 years with Kraft Foods and Mondelēz International, and Detlefsen is the managing director of Pomegranate Capital Advisors, an active investor advisory firm that operates across multiple industries.
Aurora’s executive moves are just one part of a sweeping financial revitalization plan that includes large-scale layoffs, upwards of $750 million in write-downs and asset impairment charges, and drastic cost-cutting measures aimed at accelerating the company’s “path to cash flow break even.”
In an effort to firm up its cost structure, the company will eliminate the equivalent of 500 full-time positions, including 25% of its corporate roles.
Meanwhile, Aurora said it would reduce capital expenditures to below $100 million for the second half of fiscal 2020. Simultaneously, the company also renegotiated its debt agreements, however it must achieve positive EBITDA (earnings before interest, taxes, depreciation and amortization) by the first quarter of fiscal 2021.
“We are pleased to have reached an agreement with our syndicate of banks to provide Aurora with additional financial flexibility aligned with our focus on achieving near-term profitability and providing the Company with options to refinance the facility at maturity,” chief financial officer Glen Ibbott said via the release.
In a note to investors, Cowen analyst Viven Azer maintained an outperform rating on Aurora and said the company is “well positioned to benefit from the growing medical and adult-use cannabis industry in Canada.”
“Debt has been refinanced, meaningful cost reductions have been announced, and expectations are being reset on revenue progression,” she wrote.
Aurora will report its second quarter fiscal 2020 earnings next week, and the company expects net cannabis revenues to exceed $50 million during the quarter.
According to a February 2020 investor deck, Aurora has the ability to make 150,000 kg of cannabis per year across 11 production facilities. The company is active in more than 20 countries.
The company's U.S.-listed stock was down more than 15% at the closing bell on Friday. Shares fell as much as 19% earlier in the day.
Industry Headwinds Lead to Layoffs
Aurora Cannabis is the latest high-profile cannabis firm to announce a key executive change in recent months.
Last week, MedMen co-founder Adam Bierman stepped down as CEO and relinquished all of his Class A voting super shares. That move came about two months after MedMen slashed nearly 200 jobs (about 15% of employees) and unveiled drastic cutbacks as it seeks profitability.
Meanwhile, Canada’s Sundial Growers also announced a number of moves last week, including the departures of CEO Torsten Kuenzlen and COO Brian Harriman. Those departures follow recent layoffs that impacted about 10% of the company’s workforce.
In early January, Toronto-based Supreme Cannabis Company announced the departure of CEO Navdeep Dhaliwal. Colin Moore, the former president of Starbucks Coffee Canada, was named Interim CEO while the company works to identify a new leader.
Also in January, Tilray – which recently said it would cut 10% of its workforce -- named former Revlon general manager Jon Levin as its COO and appointed former Molson Coors executive Michael Kruteck as its CFO.
Around the same time, Aphria Inc. named former Hain Celestial founder Irwin Simon as its permanent CEO (he had been serving as interim CEO).
In December, Canopy Growth Corporation named former Constellation Brands CFO David Klein as its new CEO after co-founder and co-CEO Bruce Linton was ousted last July.
Also in December, Cronos Group Inc. parted ways with COO David Hsu and chief commercial officer William Hilson.
“Industry-wide management changes are a telling sign that the industry has matured some (though not fast enough), and gotten competitive enough that founder-led strategies aren't going to cut it in a capital constrained backdrop,” Azer wrote in a note to investors following Aurora’s announcement.
Layoffs in the marijuana industry are widespread, impacting a variety of businesses. Seattle-based online cannabis resource Leafly recently cut 54 positions, according to GeekWire, and Colorado-based CBD manufacturer Mile High Labs eliminated 20, according to the Denver Post.
California’s Caliva also recently laid off 200 workers and pulled its products from the Eaze online marketplace in favor of a direct-to-consumer model.
Speaking to THCnet this week, Arcview Ventures CEO Jeffrey Finkle said he believes the industry bottomed out in January after a “massive correction" in the second and third quarters of 2019.
“We were in this world where money was abundant and nobody had to think about it,” he said. “But that’s changed. The boards of these companies are insisting on better governance and making them articulate a path to profitability.”
Despite the considerable amount of positions that have been eliminated over the last few months, the cannabis industry is expected to contribute 414,000 full-time jobs to the U.S. economy by 2021, according to a 2018 report from Arcview's market research division. An estimated 211,000 employees currently make up the U.S. cannabis workforce, according to Leafly.