Aurora Cannabis CEO and founder Terry Booth stepped down on Thursday, announcing his retirement at the same time the company introduced a “business transformation plan” that entails laying off some 500 full time employees.
Booth will stay on as a strategic advisor and Michael Singer, executive chairman, will serve as interim CEO until the company finds a permanent replacement for Booth.
“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. These changes, along with the financial transformation which we are undertaking, should clearly demonstrate to investors that Aurora has the continuity, strategic direction and leadership it needs to transition from its entrepreneurial roots to an established organization well positioned to capitalize on a global growth opportunity,” Booth said in a statement.
Shares of Aurora ($ACB), which trades on the New York Stock Exchange, halted in midday trading on Thursday in anticipation of the news, and plummeted close to 13 percent after the bell, before paring some of those losses.
Booth’s departure comes less than two months after Chief Corporate Officer Cam Battley, the face of the company, resigned in late December. Aurora also added two new, independent board members: Lance Friedmann, a veteran of Kraft Foods and Mondelez International, and Michael Detlefsen, managing director of Pomegranate Capital Advisors.
“We are excited to welcome Lance and Michael, and eager to leverage their extensive, consumer packaged goods experience,” Singer said on a call with analysts after the announcement. “These decisions at the executive and board levels are designed to provide our stakeholders comfort that we have carefully planned for this transition and have the support of the whole organization for the business shifts we are about to execute.”
Among the measures Aurora announced to turn around its finances and restore investor confidence were layoffs of some 500 employees, including about 25 percent of its corporate staff, and the reduction of corporate selling, general and administrative expenses to a range of about C$40 million to C$45 million. Aurora reported C$81 million in SG&A last quarter. Aurora also announced its lenders peeled about C$141 million off a credit facility, thereby renegotiating covenants analysts were all but certain Aurora would trip.
“We see this as a reset of the company and also quite frankly a reset with our investors and broader capital market,” CFO Glen Ibbott said on a call with analysts after Aurora made the announcement.
In conjunction with the leadership shuffle, Aurora released preliminary financial results for the second quarter of fiscal 2020. Aurora is expected to officially report earnings after market close on Feb. 13. The projections show a long road to recovery for the cannabis giant, which doesn’t expect to see many results from these efforts until the end of the fiscal year, and aims to achieve positive EBITDA by fiscal 2021. Furthermore, executives said they expect net revenue will remain flat within the range of C$50 million to C$54 million from the second to the third quarters of 2020.
Shares of Aurora have plunged some 74 percent in the last 12 months amid choppy market conditions for the cannabis sector. Like many other Canadian cannabis companies, Aurora bet big on Canada’s recreational cannabis roll out. Disappointing sales exacerbated by regulatory bottlenecks plus a stubborn illicit market meant Aurora over-promised and under-delivered time and time again.
Of course, Aurora isn’t the only cannabis company to feel the burn when overly ambitious spending meets the lethargic roll out of legal markets. Many other high profile companies have begun cutting costs and cutting heads — and it seems no one is safe. Adam Bierman, high profile CEO of the biggest name in U.S. cannabis, MedMen, stepped down from the company last week after layoffs and restructuring. Tilray ($TLRY) cut staff by 10 percent as part of a restructuring effort, Motley Fool reported. And Sundial Growers and TerrAscend announced management shuffles last week.