Aurora Cannabis Inc. (ACB) Earnings Call Transcript & Summary

I will pause briefly and ask that all shareholders and voting delegates finish voting on all items presented as we will be closing voting shortly. Thank you. I confirm that voting has been closed. I will pause briefly again to allow our scrutineer to advise if sufficient votes have been cast in favor of the items that were presented today. I have received the results of the votes on each item of business. The scrutineer confirms that the company has received sufficient votes in favor of each item of business to carry each motion. Full voting results will be available on SEDAR after this meeting. As all the business for this meeting has been concluded, I declare this meeting terminated. Thank you for attending. We will now move to the informal part of the meeting, and I will turn it over to Miguel Martin.

Fiscal 2026 was a strong year for Aurora. Net revenue meaningfully exceeded our outlook. Adjusted EBITDA was above the midpoint of our guided range we improved adjusted net income by more than $12 million and closed the year with $165 million of cash with no debt. At a high level, our results reflect the business that is becoming more focused, more resilient and better positioned to convert global medical cannabis demand into long-term shareholder value. This performance was driven by 2 strategic pillars: our leadership in medical cannabis across nationally legal markets and our continued discipline in financial management. First, we are anchored by our leadership in medical cannabis across nationally legal markets. More than a decade ago, we anticipated that medical cannabis was poised to be the most attractive and durable segment of this industry, and we invest accordingly. Building the science, infrastructure and regulatory capabilities that allow us to serve patients with consistency, quality and scale. Today, Aurora is one of Canada's largest global medical cannabis companies, a leading exporter of medical cannabis and a trusted supplier to international markets through our world-class GMP-certified facilities. We are a market leader in Canada, Germany, Australia and Poland, the 4 largest nationally legal medical cannabis markets. Most of our production capacity operates within GMP-certified facilities that meet strict international standards. Only a small group of producers, including Aurora, hold the certification required to ship directly into European and Australian medical markets. Our integrated manufacturing and distribution model also helps lower production costs through higher yields, improved potency and ongoing operational efficiencies. Second, we remain highly disciplined in our financial management. Cost efficiencies enabled us to expand our annualized adjusted gross margin and increase adjusted EBITDA while maintaining a strong balance sheet. This discipline positions Aurora well for the future as we continue to navigate evolving industry dynamics. Here are some highlights from fiscal year 2026. First, net revenue rose 11% to $321 million driven by double-digit growth in global medical cannabis. This exceeded the top end of our guided range by $8 million. Notably, about 55% of our net revenue was generated outside of Canada. Second, adjusted gross margin rose to 64%. This reflects the benefits of our investments in the value chain, science and plant genetics as well as operational efficiencies and capacity improvements. Third, adjusted EBITDA grew 32% year-over-year, reaching $54 million. And finally, we ended the year with one of the strongest balance sheets in the industry with $165 million of cash and cash equivalents with no debt. These results give us confidence as we move into fiscal 2027, but they also underscore the importance of maintaining our leadership in global medical cannabis as competition, regulation and pricing dynamics continue to evolve. We believe Aurora is uniquely qualified to adapt to these industry changes, rising global DMP standards, heightened competition in Europe and the reduction in VAC reimbursement in Canada, all require us to rely on the same capabilities that helped establish our leadership in medical cannabis, genetics, GMP compliant manufacturing, commercial execution, operational expertise and product innovation. In fiscal 2027, we are making targeted investments to capture market share, increase our GMP capacity, pursue margin-accretive targets and broaden our existing international leadership. This strategy is best evidenced by our recent acquisition of Safari Flower Company, an established EU GMP certified cultivator and manufacturer that strengthens our position as one of the largest Canadian exporters of medical cannabis. This transaction was accretive to our adjusted EBITDA results during the first quarter, and it provides us with incremental EU GMP capacity that will help us maximize the opportunities in the growing high-margin international market. As we progress through fiscal 2027, we look forward to providing updates on how Aurora is progressing in our strategy to drive the business to new records for revenue and adjusted EBITDA. And generate sustained shareholder returns in the long term. Thank you for your time and for your continued support of Aurora. We would now be happy to move to our Q&A session. In addition to responding to questions submitted through the platform, we will also address common themes we have received through our Investor Relations mailbox.

Thank you, Miguel. I'm going to start with the most common questions we receive from our shareholders I also like questions are received through the virtual platform during our AGM today. First question, we would like to start with Dave. Based on fiscal year 2026 has reported record performance, I can investors expect in 2027.

Fiscal 2027 is being shaped by changes in Canadian Medical and the planned exit from the lower-margin Canadian consumer business that can be partially offset by international growth as we demonstrated in Q1. We are purposely investing in our international business to support growth in our most profitable markets. This includes our new wholly owned subsidiary, Safari Flower Company, a trusted cultivator and manufacturer of high-quality medical cannabis. This acquisition provides incremental capacity to supply the growing international markets. Our fiscal first quarter performance was in line with expectations with net revenue of $67.6 million, International Medical cannabis net revenue growth of 17% to $43 million and consolidated adjusted gross margin of 58% at the high end of our annual guidance range. We expect international medical cannabis to continue to grow supported by continued momentum in Germany and other regulated markets. For the fiscal second quarter, we expect revenue and adjusted EBITDA be sequentially higher than Q1, and we remain focused on sustained double-digit revenue growth, strong margins and higher EBITDA contributions over time.

The second question is, as a shareholder, why should I look to continue to invest in your company, especially given the significant reductions in our share price?

Aurora is focused on the most attractive and durable part of the cannabis sector, global medical cannabis, where regulatory complexity, quality standards and GMP requirements create meaningful barriers to entry. We hold leadership positions in Canada and key international markets, including Germany, Poland, Australia and New Zealand. Our integrated EU GMP supply network is a key competitive advantage as we expect GMP standards to become increasingly stringent, the trend we believe favors experienced and established operators like Aurora. We have the ability to ship directly to key international markets and continue supporting the growing patient demand in the years ahead. With nearly $150 million in cash and no debt, Aurora has the financial flexibility to invest behind growth, span capacity and pursue disciplined accretive opportunities that can create long-term shareholder value.

Third question relates to capital allocation. Facing a significant cash balance, any plan to deploy this capital? And how is the strategy expected to add shareholder value?

Our capital allocation strategy remains disciplined and focused on strengthening Aurora's leadership in profitable global medical cannabis markets. We intend to deploy capital where it supports strategic and accretive growth including increased cultivation capacity, EU GMP expansion, targeted site improvements and selective M&A opportunities. The Safari Flower Company acquisition is a recent example of this approach. The added incremental EU GMP capacity, strengthened our export position and was accretive to adjusted EBITDA in our first fiscal quarter of 2027. Our strong cash balance and debt free position allow us to be patient and opportunistic while ensuring any investment or acquisition aligns with our strategy and leaves Aurora in a stronger financial position.

Thanks, Miguel. Our final question relates to international markets. Your guidance referenced international growth will partially offset the decline in Canadian Medical revenue, what markets will this growth come from and what are the key drivers of this growth?

International growth is expected to be led by Germany, our largest and fastest-growing international market, where we continue to hold leading share and benefit from strong demand for premium and core medical cannabis products. We're also encouraged by Poland, where Aurora holds the #1 market share position supported by strong execution, recent import limit increases and a loyal patient base. Australia and New Zealand remain important markets with opportunities to expand our mix towards core and premium products, broaden our product formats and benefit from new leadership and distribution agreements. Across Europe and other emerging regulated markets, including the U.K., France, Ukraine, Switzerland, Spain and Austria, we believe Aurora's EU GMP capacity, regulatory expertise, genetics, integrated supply chain or portable advantages that support long-term growth. We have now concluded our question-and-answer session, and thank you for attending and participating in the meeting. If you have any additional questions and would like to follow up on any questions presented to the meeting, which were not addressed, please e-mail our Investor Relations team at ir.auroramj.com. Thank you very much.

This now concludes the meeting. You can now disconnect.