Aphria reports strong performance in Q1 2018, including record revenue and grams … · Aphria...

1

AphriareportsstrongperformanceinQ12018,includingrecordrevenueandgramssold

Loweredcashcostsforthequarter,furtheringcommitmenttobeingalow-costproducerFour-partgreenhouseexpansionontrackforcompletionin2018,poisedtomeetexpected

recreationaldemandLeamington,Ontario–October13,2017–AphriaInc.(“Aphria”orthe“Company”)(TSX:APHorUSOTCQB:APHQF)todayreporteditsresults,forthefirstquarterendedAugust31,2017.AllamountsareexpressedinCanadiandollars.

Q1-2018 Q1-2017$6,120,359 Revenue $4,375,5127,904,441 Grossprofit 3,782,1454,774,197 Adjustedgrossprofit1 3,331,596

78.0% Adjustedgrossmargin1 76.1%15,040,168 Netincome(loss) 895,2691,548,149 EBITDAfromoperations1 1,054,269

Q1-2018 Q4-2017

852.0 Kilograms(orkilogramequivalents)sold 738.3$6,120,359 Revenue $5,717,866$1,548,149 EBITDAfromoperations1 $2,826,667

$0.95 Cashcosttoproducedriedcannabis/gram–usingAphria’sdefinition1 $1.11$1.61 “All-in”costofgoodssold/gram1 $1.67

$118,731,275 Cashandcashequivalents&marketablesecurities $167,257,202$135,127,644 Workingcapital $169,051,562$23,704,138 Investmentincapitalandintangibleassets $31,955,214$20,131,330 Strategicinvestments1 $33,561,864

Operatinghighlights

• EighthconsecutivequarterofpositiveEBITDA.$1.5millioninEBITDAfromoperationsinthequarter,a47%increasefromtheprioryear.

• Firstharvestandfirstsaleofproductfloweredexclusivelyinthenewfacilityexpansion.• Construction on Part III and Part IV expansion progressing as scheduledwith first sale fromPart III

expectedinlateMay2018andfromPartIVinmid-to-lateJanuary2019.Economiesofscaleachievedasaresultofthecompletionoftheseexpansionprojectswill furtherpromoteAphria’scommitmenttobeingoneofthelowestcostproducersintheindustry.

• Improved “all-in” costs to produce dried cannabis per gram from $1.67 to $1.61 in the quarter, adecreaseof3.5%.

• Loweredcashcoststoproducedriedcannabispergramfrom$1.11to$0.95inthequarter,adecreaseof14.4%.

2

• Made the step change in the quarter from a company reporting cumulative losses greater thancumulative net income (deficit) to cumulative net income exceeding cumulative losses (retainedearnings).AphriabecomesoneofonlyafewpubliclylistedLicensedProducersinthisposition.

• Deployedapproximately$20.1millionofcapitalintheformofstrategicinvestmentsincludingadditionalinvestments in Copperstate Farms Investors, LLC, Green Acre Capital Fund I and investments in TSBrandCoHoldingsInc.,HydRXFarmsInc.(d/b/aScientusPharma)andNuuveraCorp.

• Deployedapproximately$23.7millionofcapitalintheformofcapitalexpendituresrelatedtoourPartII,PartIIIandPartIVexpansionprojects.

“Inthefirstquarterof2018,Aphriaincreasedrevenueandgramssold,andloweredcashcosts,inadditiontorecordingoureighthconsecutivequarterofpositiveEBITDA,”saidVicNeufeld,ChiefExecutiveOfficer,Aphria.“Akeydriverofourcontinuedperformancehasbeenourabilitytomaintainleadershipasoneofthelowest-costproducersintheindustry.Aslegalrecreationalcannabiscomesintomarketin2018,lowcostspergramwillbeacritical factor for the entire supply chain.Our proven ability to grow to scalewhile keeping costs low is animportant competitiveadvantage; itpositionsAphria toprofitablymeetprojecteddemand for cannabisanddeliversustainablevaluetoourshareholders.”“Lookingahead,weareontracktomeetcriticalshort-andlong-termgoals:Ourfully-fundedfacilityexpansioniswellunderway,andweexpecttoachievefurthereconomiesofscaleoncetheexpansionprojectsarecompletedin 2018. Additionally, we continue to develop new product innovations and invest in our recreationalinfrastructureandbrand.ThiswillenableustoservegrowingdemandfrommedicalcannabispatientsintheneartermandwilleventuallysupportAphria’spositionasaleaderinCanada’srecreationalmarket,oncefederalandprovincialregulatoryframeworksareinplace,”saidMr.Neufeld.FinancialhighlightsFor the eighth consecutive quarter, the Company reported positive EBITDA. In the quarter, the Companyreported$1.5millioninEBITDAfromoperations,a47%increaseovertheprioryear. TheCompanyremainscommittedtotheresponsibleuseofourshareholders’investmentinAphria.TheCompanycontinuestoinvestinitsrecreationalbrand,continuestoproceeddiligentlyonitscapitalinvestmentplansandcontinuestoexploreotheropportunitiestoincreaseshareholdervalue,includingstrategicinvestments,whileensuringappropriateliquidityriskmitigationstrategiesareinplace.RevenueforthethreemonthsendedAugust31,2017wasapproximately$6.1million,representinga7%increaseoverthepriorquarter’srevenueofapproximately$5.7million,inaquarterinwhichtheCompanywaseffectivelycapacityconstrainedasthefirstsalefromthePartIIexpansiondidnotoccuruntillateinAugust.Further,onakilogramandkilogramequivalentbasis,theCompanyincreaseditssalesby15%,from738.3kgsto852.0kgs.Cannabisoilsales,asapercentageofallrevenue,remainedconstantinthequarterat32%ofrevenue.Grossprofitbeforefairvalueadjustmentsforthefirstquarterwasapproximately$4.8millionwithagrossmarginbeforefairvalueadjustmentsof78%,generatedfrombothretailandwholesaleshipmentsofmedicalcannabis.Thedecreaseinthegrossmarginbeforefairvalueadjustmentsfromthepriorquarterwasafunctionofreplacingsalestoveterans,oncetheirthreegramperdaylimitbecameeffective,withacombinationofretailsalestopatientsandwholesalesalestootherLicensedProducers.

3

Duringthequarter,our“all-in”costsofdriedcannabispergramdecreasedfrom$1.67to$1.60.ThedecreasewaslargelyrelatedtoeconomiesofscaleachievedasaresultofthecompletionofourPartIIexpansion.Similarly,ourcashcostsofdriedcannabispergramdecreasedfrom$1.11to$0.95,forthesamereason.Duringthequarter,theCompanyreportedsignificantactivityasitrelatestoitsstrategicinvestmentportfolio,asfollows: Q1-2018 Q4-2017Foreignexchange(loss)gain $(150,702) 417,165(Loss)gainonmarketablesecurities (1,746,367) 194,633Gainondilutionofownershipinequityaccountedinvestee 7,551,158 --(Loss)gainfromequityaccountedinvestee (8,840,264) 210,400Financeincome,net 479,719 29,765Unrealizedgainonembeddedderivatives 532,750 --Unrealizedgain(loss)onlong-terminvestments 19,081,556 (5,572,278)Total 16,428,131 (4,720,315)ThelargestincreasesinthestrategicinvestmentportfoliorelatetotheincreaseinfairvalueoftheCompany’sinvestmentinCopperstateFarmsInvestors,LLCandtheincreaseinthevalueoftheCompanyinvestmentinitsequity accounted investee, Liberty Health Sciences, Ltd. (“Liberty”). The largest offsetting decrease in thestrategicinvestmentportfoliowastheCompany’sshareofitsequityaccountedinvestee’s,Liberty’s,netlossforthequarter.TheCompany’ssharewas$8.8million,withthevastmajorityoftheloss($8.4million)relatingtoLiberty’slistingfeesaspartofitsreversetakeover,gopublic,transaction.NetincomeforthethreemonthsendedAugust31,2017wasapproximately$15millionor$0.11pershareasopposedtoanetincomeofapproximately$0.9millionor$0.01pershareinthesamequarterinthepreviousyearandalossofapproximately$2.6millionor$0.02pershareinthepreviousquarter.Theincreaseinnetincome forAphria in thequarter is directly related to the net gainson theCompany’s strategic investmentportfoliointhequarter.EBITDA fromoperations for the first quarterwas approximately $1.5million, compared to an EBITDA fromoperationsof$1millioninthesameperiodoftheprioryearandEBITDAfromoperationsof$2.8millioninthepreviousquarter.WehaveAGoodThingGrowing.

###1–Inthispressrelease,referenceismadeto“all-in”coststoproducedriedcannabispergram,cashcoststoproducedriedcannabis,grossprofit

before fair value adjustments, grossmargin before fair value adjustments, EBITDA from operations and strategic investmentswhich are notmeasures of financial performance under International Financial Reporting Standards. Definitions for all terms above can be found in theCompany’sAugust31,2017Management’sDiscussionandAnalysis,filedonSEDAR.

4

AboutAphria

AphriaInc.,oneofCanada’slowestcostproducers,produces,suppliesandsellsmedicalcannabis.LocatedinLeamington,Ontario,thegreenhousecapitalofCanada.Aphriaistrulypoweredbysunlight,allowingforthemostnaturalgrowingconditionsavailable.Wearecommittedtoprovidingpharma-grademedicalcannabis,superiorpatientcarewhilebalancingpatienteconomicsandreturnstoshareholders.Formoreinformation,visitwww.Aphria.ca.Forfurtherinformationpleasecontact:

NinaGodardEdelmanNina.godard@edelman.com416-455-6324VicNeufeldPresident&CEO1-844-427-4742CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: Certain information in this newsreleaseconstitutesforward-lookingstatementsunderapplicablesecuritieslaws.Anystatementsthatarecontainedinthisnewsreleasethatarenotstatementsofhistoricalfactmaybedeemedtobeforward-lookingstatements.Forward-lookingstatementsareoften identifiedby termssuchas“may”, “should”,“anticipate”, “expect”, “potential”, “believe”, “intend” or the negative of these terms and similarexpressions.Forward-lookingstatementsinthisnewsreleaseinclude,butarenotlimitedto,statementswith respect to internal expectations, estimatedmargins, expectations for future growing capacity andcosts,thecompletionofanycapitalprojectorexpansions,anycommentaryrelatedtothelegalizationofcannabisandthetimingrelatedthereto,expectationsofHealthCanadaapprovalsandexpectationswithrespecttofutureproductioncosts.Forward-lookingstatementsnecessarilyinvolveknownandunknownrisks, including,without limitation, risks associatedwith general economic conditions; adverse industryevents;marketingcosts;lossofmarkets;futurelegislativeandregulatorydevelopmentsinvolvingmedicalcannabisoradultuseofcannabis;inabilitytoaccesssufficientcapitalfrominternalandexternalsources,and/orinabilitytoaccesssufficientcapitalonfavourableterms;themedicalcannabisindustryinCanadagenerally, incometaxandregulatorymatters;theabilityofAphriato implement itsbusinessstrategies;competition;cropfailure;currencyandinterestratefluctuationsandotherrisks.Readersarecautionedthattheforegoinglistisnotexhaustive.Readersarefurthercautionednottoplaceunduerelianceonforward-lookingstatementsastherecanbenoassurancethattheplans,intentionsorexpectationsuponwhichtheyareplacedwilloccur.Suchinformation,althoughconsideredreasonablebymanagementatthetimeofpreparation,mayprovetobeincorrectandactualresultsmaydiffermateriallyfromthoseanticipated.Forward-lookingstatementscontainedinthisnewsreleaseareexpresslyqualifiedbythiscautionarystatement.

-30-