Company Presentation January 2020 - Aphria Inc.
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Company Presentation January 2020
Disclaimer
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: 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 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 and adult-use cannabis; inability to
access sufficient capital from internal and external sources, and/or inability to access sufficient capital on favourable terms; the medical and
adult-use cannabis 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 “Industry trends and risks” in
Aphria’s Management’s Discussion & Analysis dated January 14, 2020. 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
and adult-use cannabis 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.
1
Aphria at a Glance
Aphria (TSX:APHA) (NYSE:APHA) is a leading global CPG and wellness leader
✓ Segmented Brands ✓ Consistent Financial Performance
✓ Product Innovation ✓ Internationally Respected Medical
Platform
✓ Well Capitalized ✓ Physical Infrastructure / Scale
Winning Canada + Focused International Strategy = Global Differentiated Cannabis Wellness Leader
2
Well Positioned to Benefit from Industry Growth Drivers
Conversion from Progress with Legalization of Legalization of
Illicit to Legal Pending U.S. Medical Markets Adult-Use
Legislation and New Research Markets
Uncovered
Formats Safe Banking Act Increasing number Currently only
Access States Act of medical federally legal in 2 countries
Quality Marijuana Reform legal countries Growing opportunity
Price Act New research over next 5 years
published
3
Execution for Success in Canada
Aphria has a deliberate strategy to grow market share across Canada
✓ Focus on strengthening Aphria’s position in Canada
✓ Financial results set us apart from peers – adjusted EBITDA positive in last three quarters
✓ Carefully curated brands and segments
✓ Medical cannabis market backed by clinical research and supporting compassionate care
and veterans
✓ Extensive distribution network in all provinces through partnerships with Shoppers Drug
Mart and Great North Distributors
Duncan
✓ On the shelf of 500+ physical stores and increasing weekly
✓ State-of-the-art facilities Leamington, ON (Aphria One, Aphria Diamond); Duncan, BC
(Broken Coast); Brampton, ON (Avanti)
✓ EU GMP ready for bulk product at Aphria One and for finished product at Avanti
Brampton
Leamington
4
Segmented Approach to Customer Brands
Mainstream ($$) – Relaxers / Novices Mainstream ($$) – Urban Culture
Value ($) – Enthusiasts Premium ($$$) – Connoisseur
Our Brands Have Been Created Through a Thoughtful Research Process, Including Focus Groups, to Cater to Distinct Segments of
Consumers, From First-Timers to the Most Experienced Users and Those in Between
5
Our Products Won 7 Awards in 2019
7 Canadian Cannabis Awards in 2019
Innovation of the Year: Solei Renew CBN Oil
Top Master Grower: Kevin Anderson, Head Grower
Top Hybrid Pre-roll: Sense Pre-roll
Top High CBD Bottled Oil: CBD 25:1 Oil
Top Sativa Dominant Pre-roll: Jean Guy Pre-roll
Top Indica Dominant Pre-roll: Subway Scientist Pre-roll
Top Hybrid Flower: Ruxton (Sour OG)
6
Product Mix Evolution Into Derivative Products Supports Accretive
Margin
TINCTURES
FAST ACTING GUMMIES HARD
SHATTER WAX ENHANCERS CANDY
FLOWER PRE-ROLLS ROSIN VAPES EDIBLE OIL CAPSULES TOPICALS CHOCOLATES BEVERAGE
Robust portfolio of
differentiated brands
Adult Use supports variety of product
categories & formulations
✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓
without cannibalization.
Portfolio shifts from flower to
Medical non-inhalable alternatives in
dose controlled formats.
✓ ✓ ✓ ✓ ✓ ✓
CBD-focused portfolio,
clinical trials in place to
Wellness support claims focused
around largest opportunities.
✓ ✓ ✓ ✓ ✓
Global scope.
✓ In-Market
✓ Summer 2020
✓ Fall 2020
✓ Winter 2020
✓ Fall/Winter
2020/2021
Margin accretive portfolio as product mix shifts from flower to derivative products
▪ Leverages in-house extraction R&D expertise
▪ Utilizes significant extraction capacity via Extraction Centre of Excellence
▪ Value-engineering across the supply chain drives COGS down
7
Extensive Distribution Model in Canada
▪ Canadian retail pharmacy chain with more than 1,300
▪ Agreement with Great North Distributors (Southern stores in nine provinces and two territories
Glazer’s Wine & Spirits subsidiary)
▪ Aphria was the first licensed producer to partner with
▪ Two way exclusivity agreement (manufacturer and Shoppers
customer) for adult-use cannabis products throughout
Canada
▪ Provides access to Aphria’s products through
Shoppers’ wide reaching ecommerce platform
▪ Extensive distribution network covers 99.8% of
Canadian population Longer term – Potential to dispense in stores
throughout Canada
Partner of choice for leading cannabis distribution players in Canada
8
Retail Rollout
Sales / Current Announced
Province / Population Capita Retail Retail Retail Model for Physical
✓ National distribution on all Territory (thousands) (CAD$) Stores(1) Stores and Online Distribution
recreational brands Newfoundland Physical - Private
529 58 26 26
and Labrador Online - Public
✓ SKUs available for all Prince Edward
151 101 4 4 Public
Island
types of consumers: New
Nova Scotia 951 69 13 13 Public
users, occasional users,
and heavier illicit New
767 49 21 21 Public
Brunswick
consumers
Quebec 8,298 23 23 43 Public
✓ Adding a new Quebec Ontario 14,071 15 24 75
Physical - Private
Online - Public
regional brand
Manitoba 1,335 42 23 40 Private
✓ Achieved 13.9% market
Saskatchewan 1,151 33 35 51 Private
share in Ontario
Physical - Private
Alberta 4,244 46 278 319
Online - Public
✓ Currently 500+ stores in British Physical - Public & Private
4,922 10 85 151
Canada and expected to Columbia Online - Public
grow to 3000+ Physical - Public & Private
Yukon 40 106 4 4
Online - Public
Northwest
✓ New license procedure in Territories 45 61 6 6 Public
Ontario goes active in April Nunavut 38 - - - -
which will significantly
increase store count Canada 36,540 25 542 753
Well Positioned to Continue to Penetrate the Strong Growth in Brick and Mortar in 2020
Sources: Statistics Canada and Wall Street Research.
1) Latest data available per province / territory.
9255,000 kg Licensed Annual Canadian Production
State-of-the-art, purposely built facilities
Aphria One Aphria Diamond Broken Coast
Leamington, ON Leamington, ON Duncan, BC
1,100,000 sq. ft. 1,300,000 sq. ft. 45,000 sq. ft.
110,000 kg/year 140,000 kg/year 5,000 kg/year
Industrial Scale Cultivation and Automation
10Derivatives Strategy Initially Focused Around Vapes
20%-30%
Vapes’ projected share
of the adult-use Partnership with Manufacturing and
Canadian market PAX labs to provide distribution
premium cannabis agreement with
extracts in pods dosist
First Rec 2.0 Products Shipped December 17, 2019
Sources: Aphria internal models.
11Targeting a $200B+ Disruptive Global Opportunity
Figures in USD
$18B
Estimated Canadian
cannabis opportunity
$200B
Estimated global
cannabis opportunity
$50B $150B
Adult-Use and Medical
Medical cannabis Adult-Use
cannabis Medical only
Adult-Use and Medical (U.S.)
Medical only (U.S.)
Sources: Wall Street Research.
12Focused Global Strategy
Canada Germany LATAM
Canadian adult-use market One of most sought after Population:
opportunity of $6B+ by 2024 cannabis ready markets ~18x the Canadian market (650+
MM)
Launched vape portfolio in Population:
December 2019 ~2.3x the Canadian market Market Opportunity:
(83MM) ~54x+ the Canadian medical
EU GMP ready for bulk market due to payor
product at Aphria One and for Market Opportunity: reimbursement opportunity
finished product at Avanti ~6x+ the Canadian medical
market due to payor Leverage lower wage and
reimbursement opportunity production costs
German medical market is Brazil approved sale of medical
larger than the Canadian adult- cannabis in December 2019
use + medical market
combined
13Comprehensive Strategy to Win Germany
Multi-faceted German strategy with domestic cultivation, GMP ready facilities in Canada for
export and import license and large distribution infrastructure
Canada Germany Malta
Neümunster
Bad Bramstedt
Valetta
Densborn Densborn
Brampton
Leamington
Leamington cultivation Bad Bramstedt storage Valetta processing / distribution
Aphria One EU GMP ready for bulk and State-of-the-art GMP ready cannabis vault in Bad Bramstedt for import EU GMP lab ready for incremental
packaged products of cannabis flowers and oil from Canada, Australia and Denmark processing which provides access to
international markets
Brampton processing Densborn distribution Neümunster cultivation
Avanti facility EU GMP ready for oils Purchased CC Pharma in 2019, a Granted 5 / 13 lots for medical
and resins leading importer and distributor to cannabis cultivation, the maximum
more than 13,000 (out of ~19,000) output from the German tender
pharmacies in Germany process
Only licensed producer with the
permission to grow all three strains of
medical cannabis
14LatAm: Infrastructure and Strategy
▪ Regional hub for South America Adult-Use and Medical
▪ Cultivation license through Colcanna Medical only
Colombia ▪ Partnership with Colombian Medical Federation
(community of over 70,000 doctors and professionals)
▪ Wholly-owned subsidiary ABP S.A., a pharmaceutical import and
distribution company
Argentina ▪ Recent government approval of insurance bulk purchasing
▪ Partnership with Hospital Garrahan (running clinical study focused
on children with epilepsy)
▪ Approved sale of medical cannabis in December 2019
Brazil ▪ Option to purchase and right of first offer & refusal on a license
▪ Exclusive supply agreement with Insumos
Paraguay Medicos, S.A., to provide medical cannabis
15Aphria Financials at a Glance
Largest Cash Balance In The Cannabis Industry Quarterly Adult-Use Sales (CAD$)
Without The Dilution Of A Strategic Partner
29.0
✓ Secured $80 million credit facility to support long-
term growth objectives on November 30, 2019
✓ Raised USD$350 million through a convertible
notes offering in April 2019 20.0
18.5
✓ ~$497 million cash & marketable securities as of
November 30, 2019
Already Achieved Positive Adjusted EBITDA
with Strong Growth Prospects Going Forward 7.2
✓ Third consecutive quarter of positive adjusted
EBITDA
✓ Adult-use cannabis growth of 45% quarter-over- Q3 19 Q4 19 Q1 20 Q2 20
quarter
Well Positioned to Continue to Penetrate the Strong Growth in Brick and Mortar in 2020
16Capital Allocation
Strong liquidity Continuous cost
with ~$497M management to
cash(1) increase profitability
Focus on
Repatriated cash by sustainable and Disciplined
profitable growth spending and
divesting non-core assets
to create value for capital allocation
shareholders
Note: All dollars in CAD unless otherwise stated.
1) As of November 30, 2019.
17Good Corporate Citizenship
✓ Aphria’s social impact strategy formalized to guide company’s investments in
and commitment to community, social and environmental impact while
helping to drive overall business objectives and results.
✓ Established Aphria’s Values, as well as a framework that allows activities to
be tracked, managed, measured and reported on the shared value being
delivered.
✓ Entered into a charter agreement with Drug Free Kids Canada to help
educate Canadians on youth drug-use prevention.
✓ Administered the creation of custom-made cannabis oil for Jorja Emerson, a
little girl in the UK battling life-threatening epilepsy to ensure she receives
uninterrupted treatment.
✓ Launched Aphria’s social impact campaign, Plant Positivity, to increase
awareness about the power that plants have to improve people’s everyday
well-being.
✓ Developed and launched a robust education campaign with stakeholders and
retailers for patients & consumers.
✓ Environmental, Social and Governance (ESG) Benchmarking underway.
✓ Community engagement activities around the world, including in LATAM
where we worked with the Universidad de Caldas to complete a
Sociodemographic characterization and needs assessment.
Committed to reporting on CSR & Sustainability
initiatives end of FY2020
18Our Values
Why Values We Put People First We Respect
Matter the Earth
Values are essential to developing a shared We’re committed to the needs of our patients As a conscientious company, we pride ourselves
language to define the standards of behaviour in and consumers whether they are looking for on providing a natural product for our patients
our company. They drive and define culture and natural options for medical needs, exploring the and consumers. We’re committed to ensuring that
decision-making across all parts of the business. options in wellness, or seeking alternatives to our actions and those of our employees have a
their lifestyle. We’re driven by a desire to help positive impact on the environment around us, no
At Aphria, we’re proud of who we are, what we
stand for and where we’re going, together. others live their best life. matter where we operate.
We Lead By Example We Take
We’re passionate about pushing our industry Responsibility to
forward. Our commitment to innovation means
we’re always on the lookout for new
Heart
opportunities, that we attract those who share
We believe it is our responsibility to protect the safety
our outlook, and
of our employees, patients, consumers, and society.
that we never stop focusing and imagining on
Our partnerships and programs reflect our ongoing
what’s coming next.
commitment to the safety of our communities through
education, responsible use, and meaningful corporate
citizenship.
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