Aphria Earnings: Positive EBITDA

Aphria reported earnings today, slashing forecasts for the year, reporting a 46% increase in revenue: $29.0 million. In a sector fairly populated with cash burning, loss-making firms that are overproducing, Aphria is the unicorn that reported positive adjusted earnings. Here are the stats:

• Revenue for adult-use cannabis: $29.0 million, an increase of 46% from the previous quarter
• Net cannabis revenue: $33.7 million, an increase of 9% from the previous quarter
• Net revenue:$120.6 million in the second quarter, an increase of 457% from the prior-year quarter
• Net loss: $7.9 million, however, reported positive adjusted EBITDA of $1.9 million
• Cash: $497.7 million

Needless to say, these are strong numbers for a large company, and it’s good to see that there is at least one firm that is strategic about its growth. With about $500 million in cash, the firm has enough runway to survive any future downturn in the sector.

CFO Carl Merton also told analysts on the conference call that the firm is looking at returning money to shareholders in the form of dividends. With three consecutive quarters of positive adjusted EBITDA, the goal now is “to both internally finance future growth initiatives and, in the future, being in the position to provide an annual return to our shareholders through dividends,” Merton said.

Aphria cut down its revenue forecast to $575 million to $625 million, down from the $650 million to $700 million.

Shares traded down after the report, and the stock closed at $6.49, down 8.59% in Canadian markets.

Bank Earnings

JP Morgan reported earnings today, posting a strong quarter for the firm, marking the best and most profitable year for any bank in US history. Several other banks are set to report earnings this week, which will be an important measure of the US economy’s health.

Despite lower interest rates that have eaten firms’ profit margin on lending, banks seem to be doing well for themselves.

For JPM, here are the stats:

• Net income rose to $8.52 billion, or $2.57 a share, from $7.07 billion, or $1.98, a year earlier. This beats the analyst estimate of $2.36 per share.
• Consumer-banking posted a 3% increase in revenue
• Net charge-offs surged 21% to $1.49 billion from $1.24 billion a year earlier.
• Net interest income: $14.2 billion for the quarter, $57.2 billion for the year

On the fixed-income trading desk, revenues took a turn for the better, reporting $1 billion higher than analyst estimates. This is a major comeback for the desk, that had its worst quarter last year when market swings pushed revenues down to their lowest since the financial crisis.

The first phase of the US-China trade deal has reduced market uncertainty, boosting profits for consumer and corporate clients for banks.

“The U.S. consumer remains in very strong shape, both from a credit perspective, and spending sentiment,” Chief Financial Officer Jennifer Piepszak told analysts. Among corporate clients “sentiment is at least certainly better than it was six months ago. So we have a constructive outlook as we’re heading into 2020.”

The stock closed at 138.80, up 1.17%.

Amazon & FedEx

A relationship counsellor often gives the following advice when it comes to fixing problems in a relationship: it will take work. Often before “the work” is put in towards fixing a relationship, it can be a good idea to “take time off from each other”. Such is the case for the relationship between Amazon and FedEx, that is nothing short of a messy divorce that hasn’t been finalised. Yet.

Last year during the holiday season, Amazon banned third-party merchants on its website from using FedEx’s ground network for deliveries, citing performance concerns. Today, it lifted the ban, allowing retailers to use FedEx as their choice of a third party delivery system.

Amazon said in mid-December the ban was due to slipping on-time marks for Prime orders, which generally are guaranteed to arrive within a day or two.

Amazon’s business model heavily relies on Prime, that fronts the shipping cost for consumers during the course of the year, and offers expedited deliver, deals, and access to other services such as music and video in exchange.

Amazon already severed its ties with FedEx last year, that cost FedEx over $900 million in annual revenue.

From the perspective of a third-party merchant, the option was to either use Amazon’s delivery network or UPS’s services during the time FedEx was banned.

With the return of FedEx as an agent, merchants can now enjoy higher margins on the products they sell, and there is renewed hope for a relationship in troubled waters.

FedEx closed at $162.13, up 10.40% from Dec 18