Q3 2018 INVESTOR PRESENTATION A Global Cannabis Leader April 16, 2018
This documentation is a presentation (the Presentation ) of general background information about Aphria Inc. s ( Aphria ) activities current as of April 16, 2018, unless stated otherwise. It is information in a summary form and does not purport to be complete. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. These should be considered, with or without professional advice, when deciding if an investment is appropriate. This Presentation does not constitute or form part of any offer for sale or solicitation of any offer to buy or subscribe for securities nor shall it or any part of it form the basis of or be relied on in connection with, or act as any inducement to enter into, any contract or commitment whatsoever. Recipients of this Presentation who are considering acquiring securities of Aphria are reminded that any such purchase or subscription must not be made on the basis of the information contained in this Presentation but are referred to the entire body of publicly disclosed information regarding Aphria. The information contained in this Presentation is derived solely from management of Aphria and otherwise publicly available information concerning Aphria and does not purport to be all-inclusive or to contain all the information that an investor may desire to have in evaluating whether or not to make an investment in Aphria. The information has not been independently verified and is subject to material updating, revision and further amendment, and is qualified entirely by reference to Aphria s publicly disclosed information. No representation or warranty, express or implied, is made or given by or on behalf of Aphria or any of its affiliates, directors, officers or employees as to the accuracy, completeness or fairness of the information or opinions contained in this Presentation and no responsibility or liability is accepted by any person for such information or opinions. Aphria does not undertake or agree to update this Presentation or to correct any inaccuracies in, or omissions from, this Presentation that may become apparent. No person has been authorized to give any information or make any representations other than those contained in this Presentation and, if given and/or made, such information or representations must not be relied upon as having been so authorized. The information and opinions contained in this Presentation are provided as at the date of this Presentation. The contents of this Presentation are not to be construed as legal, financial or tax advice. Each prospective investor should contact his, her or its own legal adviser, independent financial adviser or tax adviser for legal, financial or tax advice. Certain statements in this Presentation may constitute forward-looking information, including future-oriented financial information and financial outlooks, within the meaning of applicable securities laws. Forward-looking information may relate to Aphria s future outlook and anticipated events or results and may include statements regarding Aphria s financial results, future financial position, expected growth of cash flows, business strategy, budgets, projected costs, projected capital expenditures, taxes, plans, objectives, potential synergies, industry trends and growth opportunities. Often but not always, forward-looking information can be identified by the use of words such as anticipate, believe, expect, project, estimate, likely, intend, should, could, may, might, target, plan and other similar expressions or variations (including negative variations) of such words and phrases. Forwardlooking 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 results, 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 marijuana; inability to access sufficient capital from internal and external sources, and/or inability to access sufficient capital on favourable terms; the medical marijuana 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 Risk Factors in Aphria s Annual Information Form dated July 12, 2017. 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 marijuana 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. Q3 2018 INVESTOR PRESENTATION 2
Aphria is a worldwide leader in the production, distribution and supply of high-quality cannabis. ORIGINAL GREENHOUSE GROWERS: Rooted in our founders multi-generation expertise in commercial agriculture, we know how to grow and we know how to grow to scale. FROM CANADA, REACHING THE WORLD: Based in Leamington, Ontario, our expanding footprint reaches across Canada and in legal cannabis markets around the world. QUALITY IS IN OUR DNA: We are setting the standard for pharmaceutical-grade, safe, clean and pure cannabis products. WE HAVE A GOOD THING GROWING. Q3 2018 INVESTOR PRESENTATION 3
Creating shareholder value ONE OF THE LARGEST FULLY-FUNDED PRODUCTION CAPABILITIES OF 225,000 KG ANNUALLY 1 10 CONSECUTIVE QUARTERS OF POSITIVE ADJUSTED EBITDA 3 SIGNIFICANT CASH AVAILABLE FOR DEPLOYMENT DOMESTICALLY OR INTERNATIONALLY LOW COST PRODUCER AT $0.96 PER GRAM 2 ONE OF THE LARGEST INTERNATIONAL FOOTPRINTS WITH A PRESENCE IN MORE THAN 10 COUNTRIES 1 Once Aphria One and Aphria Diamond are Health Canada approved 2 All-in cash costs equal to cost of sales (excluding any fair value of biological assets adjustments) divided by grams sold in quarter (Q3 2018) 3 Non-IFRS measure (see Q3 2018 MD&A) Q3 2018 INVESTOR PRESENTATION 4
Growing is our roots, but we ve built a world-class organization upon that foundation OUR ROOTS Original greenhouse growers The Aphria Know-How System A WORLD-CLASS ORGANIZATION State-of-the-art production and processing Network for cross-canada supply and distribution International expertise and expanding footprint in high-value legal markets In-house development of portfolio of adult-use brands High-value strategic investments and partnerships OVER 60 YEARS OF EXPERTISE IN AGRICULTURE AND LARGE-SCALE GREENHOUSE GROWING Q3 2018 INVESTOR PRESENTATION 5
Aphria expands leadership in medical cannabis around the world UNITED KINGDOM GERMANY ITALY CANADA SPAIN ISRAEL URUGUAY LESOTHO AUSTRALIA Q3 2018 INVESTOR PRESENTATION 6
State-of-the-art Canadian production and processing facilities APHRIA ONE Leamington, Ontario (Talbot Road) 87 acre site APHRIA DIAMOND 4 Leamington, Ontario (Mersea Road / Double Diamond) 100 acre site BROKEN COAST Duncan, BC 5 acre site AVANTI LAB Brampton, ON PREMIER GREENHOUSE DESIGN USFDA GMP-CERTIFIED 1,000,000 sq. ft. 300,000 sq. ft. operational Fully-funded additional 700,000 sq. ft. on track, expected first sale in January 2019 PREMIER GREENHOUSE DESIGN 1,300,000 sq. ft., plus 72,000 sq. ft. of infrastructure for future builds PREMIUM INDOOR CANNABIS PRODUCTION 104,000 sq. ft. 26,000 sq. ft. operational 18,000 sq. ft. expansion to be completed soon 60,000 sq. ft. expansion expected to be completed in 2019 THE ONLY CANADIAN CANNABIS GMP-CERTIFIED LAB Cannabis products will be processed under a GMP license for export internationally 4 Currently under construction. Pending Health Canada license. Q3 2018 INVESTOR PRESENTATION 7
Ample capacity to meet growing global demand 225,000 kg COMBINED ANNUAL PRODUCTION TOTAL ANNUALIZED PRODUCTION CAPACITY BROKEN COAST 2,500 kg (Present) 5,500 kg (2019) ONE OF THE LARGEST FULLY-FUNDED PRODUCTION CAPABILITIES IN THE INDUSTRY IN EARLY 2019 30,000 kg (Present) 100,000 kg (2019) APHRIA ONE 120,000 kg (2019) APHRIA DIAMOND 32,500 kg (Present) 225,000 kg (2019) TOTAL Q3 2018 INVESTOR PRESENTATION 8
Gateway to the world with Aphria International GERMANY Supply agreement with the sixth largest parallel importer and pharmaceutical distribution company with access to over 13,000 pharmacies in three different countries ITALY One of seven import licenses, and will supply the market through off-take agreements originating in Canada and Lesotho through its European GMP medical cannabis hub in Malta MALTA Subsidiary ASG Pharma, a high-capacity GMP lab in Malta, is planned to be a hub for the production and distribution of oil-based medical cannabis products to European medical cannabis markets. UNITED KINGDOM Import agreement for pharma-grade CBD isolate LESOTHO Off-take agreement with Verve Dynamics Incorporated, a licensed cannabis grower in the Kingdom of Lesotho. AUSTRALIA 33% ownership in Althea Company Pty Ltd., a licensed producer of medical cannabis in Australia Supply agreements with MedLab and another Australian company for use in clinical drug trials. ISRAEL Established presence and relationships Q3 2018 INVESTOR PRESENTATION 9
A worldwide leader in low-cost production 4 2 0 0.95 Q1 2018 1.61 1.45 Q2 2018 2.13 0.96 Q3 2018 1.56 Cash cost to produce All-in cost of goods sold Competitor - average 5 All-in costs equal to cost of sales (excluding any fair value of biological assets adjustments) divided by grams sold in quarter. Cash costs equal to cost of sales less amortization reported in cost of sales, all divided by grams sold in quarter. 5 All competitor calculated values used within the table above are based on reported financial statements for comparative operating periods available on SEDAR as of April 16, 2018 applying Aphria s definitions for All-in costs and Cash costs, as described above Q3 2018 INVESTOR PRESENTATION 10
Industry-leading cost-savings, powered by sunlight THEM APHRIA CAPEX BENEFIT New greenhouse build or retrofit $55 sq. ft. Indoor grow $250 - $300 sq. ft. 3X hours usage 2X light density 2X Cooling PRODUCTION COSTS FERTILIZER SAVINGS Aphria s cost - $0.005 / L Competitor s fertilizer cost - $0.22 / L Aphria s costs are 2% of our competitors ELECTRICAL SAVINGS Aphria s annual electrical costs $5.50 / sq. ft. Indoor grower s annual electrical costs $65.00 / sq. ft. Aphria s costs are 8% of our competitors* = * Ontario based Q3 2018 INVESTOR PRESENTATION 11
Quality is in our DNA OUR PRODUCTION Aphria One is GMP-certified to the standard established by the United States FDA for Active Pharmaceutical Ingredients and Finished Pharmaceuticals OUR LABS Avanti Lab is the only Canadian cannabis GMP-certified lab ASG Pharma, our Malta-based lab and EU production and distribution hub, holds EU GMP certification OUR PROMISE Our Seed-to-Sale Certified QM program has over 500 steps and goes above and beyond the requirements of the ACMPR Q3 2018 INVESTOR PRESENTATION 12
An established and expanding multi-channel supply network MEDICAL (CANADA) APHRIA.CA (Direct to Consumer) SHARE OF VOLUME (@ 225,000 KG) JULY 18 JULY 19 38,000 kg 11,000 kg EXPORT (APHRIA INTERNATIONAL) 7,000 kg 72,000 kg ADULT-USE (CANADA) PORTFOLIO OF ADULT-USE BRANDS Retail Partners: WHITE LABEL ADDITIONAL IN-HOUSE DEVELOPED BRANDS 180,000 kg 142,000 kg LICENSING DEALS BULK / WHOLESALE Q3 2018 INVESTOR PRESENTATION 13
Thoroughly researched and developed adult-use brands The development of our diverse brand portfolio started more than a year ago and is grounded in expertly-researched consumer insights and designed to meet the needs of Canada s most profitable consumer segments APHRIA PORTFOLIO OF BRANDS MEDICAL ADULT-USE PORTFOLIO OF ADULT-USE BRANDS LICENSING DEALS PARTNER BRANDS* ANTICIPATE LICENSING IN FISCAL 2019 ADDITIONAL IN-HOUSE DEVELOPED BRANDS Q3 2018 INVESTOR PRESENTATION 14
Innovation-driven science and partnerships GROWING PORTFOLIO OF VALUE-ADDED PRODUCTS TO SERVE DIVERSE USER PREFERENCES: Vape pens Edibles Coming soon: In-house Roastery at Aphria One Nutraceuticals Soft gels Topicals STRATEGIC PARTNERSHIPS IN LEADING CANNABIS R&D: Tetra Bio-Pharma Biopharmaceutical leader in cannabinoid-based drug discovery and development PPP001 Drug study is currently in Phase 3 Medlab (Australia) Australian-based biotechnology company TGA & HREC approved, nano particle cannabis mucosal spray trial in advanced cancer pain. TGA drug validation models in final stages, expecting first dose to patients in 1 month Animal Health Study (Australia) Q3 2018 INVESTOR PRESENTATION 15
Unparalleled experience from the top down Our founders expertise in agriculture and ongoing involvement in day-to-day operations sets us apart Vic Neufeld Chief Executive Officer 20+Years in pharma CEO of Jamieson Laboratories 1993-2014 Demonstrated vision, growth & performance Cole Cacciavillani Co-Founder & VP. Growing Operations 35+Years in agri-business Greenhouse industry veteranand pioneer Expertise in how best to use nature s light in tandem with proprietary growing techniques and technologies Responsible for the Aphria Know-How System John Cervini Co-Founder & VP of Infrastructure 20+Years in agri-business Fourth-generation greenhouse grower Significant experience in greenhouse growing technology and greenhouse expansions Proven track record with a focus on product safety, product traceability and standardized industry procedures. OUR DEEP AGRICULTURAL ROOTS AND PROVEN TRACK RECORD IN PLANT AND PRODUCTION-RELATED EXPERTISE UNIQUELY POSITIONS APHRIA TO BE AN INDUSTRY LEADER IN CANADA AND AROUND THE WORLD. Q3 2018 INVESTOR PRESENTATION 16
Over 300 employees power the Aphria engine, delivering value across the organization 20 20 21 96 32 Processing Growing Patient Care Science & Quality Executive & Management Marketing & Business Functions Finance 48 91 Q3 2018 INVESTOR PRESENTATION 17
History of strong financial performance Year-over-year revenue growth 100% Consecutive quarters of positive EBITDA 10 Strong margins (YTD) 74.1% Q3 2018 INVESTOR PRESENTATION 18
Financials Q3 2018 INVESTOR PRESENTATION 19
Q3 2018 Results Q3-2018 Q2-2018 Revenue 10,267 8,504 Kilograms sold 1,428.1 1,237.0 All-in cost of goods sold 1.56 2.13 Cash cost to produce 0.96 1.45 Adjusted Gross margin 77% 68% Q3 2018 INVESTOR PRESENTATION 20
Reconciling net income and earnings per share QUARTER 3 - ENDED FEBRUARY 28, 2018 Unaudited - in thousands of Canadian dollars Revenue $ 10,267 Production costs 2,355 Gross profit before fair value adjustments 7,912 Fair value adjustment on sale of inventory 3,443 Fair value adjustment on growth of biological assets (4,101) Gross profit 8,570 Operating expenses: General and administrative 2,794 Share-based compensation 5,959 Selling, marketing and promotion 2,991 Amortization 755 Research and development 110 12,609 Income of operations (4,039) Other Items 21,055 Net Income before income taxes 17,016 Income taxes 4,072 Net income $ 12,944 Weighted average number of common shares basic 161,120,698 Earnings per share basic $ 0.08 UNDER IFRS MARGINS ARE 83.5% AFTER EXCLUDING NON-CASH IFRS ADJUSTMENTS GROSS MARGINS ARE 77.1% Q3 2018 INVESTOR PRESENTATION 21
Equity STRONG WELL-CAPITALIZED BALANCE SHEET STRONG BALANCE SHEET WITH $173.7 MILLION IN CASH AND NEAR CASH POSITION ($120.6 MILLION NET OF COMMITMENTS) QUARTER 3 - ENDED FEBRUARY 28, 2018 TOTAL PERCENTAGE (FULLY DILUTED) Common shares outstanding 177,697,791 80% Options - $0.60 - $22.89 7,304,147 3% Warrants - $1.50 - $3.14 2,301,872 1% Fully Diluted shares as at February 28, 2018 187,303,810 Shares issued on purchase of Nuuvera 31,226,910 14% Nuuvera options rolled - $2.52 - $14.38 1,280,330 1% Nuuvera warrants rolled 1,668,232 1% Fully Diluted Shares 221,479,282 100% WORKING CAPITAL: $210.9 MILLION INVENTORY: 2,838.8 KILOGRAMS (OR KILOGRAM EQUIVALENTS) Q3 2018 INVESTOR PRESENTATION 22