It was late in the evening when Aphria Inc. (NYSE: AHPA) decided to drop its earnings for the fiscal third quarter ending February 2020. Normally, companies will report in the off hours when the numbers are especially dismal, but that wasn’t necessarily the case for Aphria.

The company reported net cannabis revenue of $55.6 million in the third quarter, an increase of 65% from the prior quarter. The total net revenue was $144.4 million in the third quarter, a 96% increase over the same time period in 2019 and a 20% increase sequentially. The revenue beat estimates by $13 million. The net income came in at $5.7 million, or $0.02 per share, which beat analyst estimate by eight cents. The adjusted EBITDA was $5.7 million in the third quarter.  The company ended the quarter with $515.1 million of cash and cash equivalents.

“We are proud of our sustained growth in Canada and continued expansion of our international capabilities,” stated Irwin D. Simon, Chairman, and Chief Executive Officer. “During this unprecedented time, the well-being of our employees, patients, consumers, partners and the communities we operate in is our primary focus. Our facilities, offices and patient care teams remain open and operational to continue to provide our patients and consumers with what we believe is best-in-class care and service with appropriate measures in place to protect the health and safety of employees. As we face uncertain times, I am proud of how the Aphria team has come together to navigate these uncharted waters. Going forward, we believe Aphria continues to be differentiated in the cannabis industry through our brands, cultivation expertise, high-quality standards, cash position, and balance sheet.”

Pulls Guidance

Despite the solid quarter, Aphria said it was suspending its previously announced guidance for revenue, of $575 million to $625 million, and adjusted EBITDA, of $35 million to $42 million, for fiscal 2020. The company said it plans to re-instate its annual guidance once the pandemic stabilizes, which may not be until a point in the company’s fiscal 2021 year.

Prices Fall For Medical

The average retail selling price of medical cannabis (exclusive of wholesale), before excise tax, decreased to $6.41 per gram in the quarter, compared to $8.16 in the prior quarter, primarily related to the implementation of compassionate pricing policy in the quarter. The average selling price of adult-use cannabis, before excise tax, increased to $5.47 per gram in the quarter, compared to $5.22 per gram in the prior quarter, primarily as a result of a change in sales mix.

Customer demand exceeded Ahpria’s supply capabilities in the quarter as a result of the timing of Aphria Diamond’s license receipt and, as a short-term measure, the company purchased wholesale product from other Licensed Producers to supplement its near-term supply capabilities. Wholesale product purchases resulted in a higher cost and less margin opportunity for those sales. During the quarter, sales of purchased cannabis accounted for $20.2 million, with gross profit of $5.1 million and a gross margin of 25.2%.  If the company had been able to utilize cannabis it had grown, at the “all-in” cost of sales of dried cannabis per gram reported this quarter, the Company would have reported an additional $7.6 million of gross margin and adjusted EBITDA.