Greetings and welcome to the Aurora Cannabis Inc. Fourth Quarter 2024 Results Conference Call. All participants will be in a listen-only mode and a question-and-answer session will follow the formal presentation. This conference is being recorded today, Thursday, June 20, 2024. I would now like to turn the conference over to your host, Kevin Niland, Director of Strategic Finance and Investor Relations. Please go ahead, sir.

Hello, everyone, and thank you for joining us. On the line with me are Miguel Martin, CEO, and Simona King, CFO. This morning, we filed our 2024 fiscal year and fourth quarter financials for the period ending March 31, 2024, and issued a news release containing both our annual and quarterly results. Our financial statements, MD&A and this news release are available on our IR website and also accessed via SEDAR+ and EDGAR. In addition, you will find a supplemental information deck on our IR website. For today's conference call, listeners are reminded that certain matters could constitute forward-looking statements that are subject to risks and uncertainties related to our future or financial or business performance. Actual results could differ materially from those anticipated in those forward-looking statements. The risk factors that may affect actual results are detailed in our annual information form and other periodic filing and registration statements. These may be accessed or may similarly be accessed via SEDAR+ and on EDGAR. Following prepared remarks by Miguel and Simona we will conduct a question-and-answer session with our covering analyst. With that, I'll turn the call over to Miguel. Please go ahead.

Thank you, Kevin. We are very pleased to report that 2024 was our strongest ever fiscal year. I'll highlight some specific metrics related to our performance momentarily, but more generally we believe our accomplishments can best be attributed to the following. First, our business model is centered on our medical cannabis leadership within nationally legal markets. Aurora's frontline positioning in the industry's highest margin segment is the direct result of the competitive advantage we built through a manufacturing network of indoor EUGMP certified facilities that serve the diverse needs of our patients across the world. Second, our financial discipline, which has been demonstrated primarily by increasing our adjusted gross margin, already among the highest in the industry, through sustainable cost reductions, consistently generating positive adjusted EBITDA, and bolstering our balance sheet by maintaining a healthy cash balance and substantially reducing debt. All of these factors support our goal of achieving positive pre-cash flow by the end of this calendar year. Turning now to some highlights for fiscal 2024. First, net revenue rose 21% on a trailing 12-month basis. Second, adjusted gross margin was 49%. Third, we had positive adjusted EBITDA in each of our four fiscal quarters, marking the first time in Aurora's history that we reported positive adjusted EBITDA on an annual basis. Fourth, we ended the year with a very sound balance sheet, characterized by about $180 million in cash on hand with plenty of firepower as needed. With this momentum, we're in a strong position as we head into fiscal year 2025. Now let's look more deeply into Q4, beginning with our global medical cannabis business, which increased 20% compared to the year ago quarter and delivered 68% of our total revenue and 90% of our adjusted gross profit. In Canada we grew revenue by nearly 10%…

Thank you Miguel. And good morning, everyone. I'm very excited to be here as the newest member of Aurora's leadership team. Since joining in February, I have been focused on determining how I can best leverage my deep knowledge and experience in the pharmaceutical and biotech industries to contribute to the company's next phase of growth. I also look forward to sharing the company's progress with our analysts and investors over the coming quarters. Thanks to our outstanding people, 2024 was Aurora's strongest fiscal year ever. As we look towards the new fiscal year, we intend to build on our prior accomplishments by further strengthening our business through sound execution of our medical cannabis strategy and delivering sustainable improvements to our financial performance. Let's now review our results for the fourth quarter, which ended on March 31, before providing some commentary on our expectations for the first quarter of fiscal year 2025, which ends on June 30. In the fourth quarter of fiscal year 2024, we delivered revenue growth of 5% over the prior year period to $67.4 million. This growth notably included a 20% increase in sales from our high-margin global medical cannabis segment, resulting in net revenue of $45.6 million. On profitability, consolidated adjusted gross margin was 49%, resulting in adjusted gross profit of $33.3 million compared to $31 million in the year ago period. Driven by our focus on leadership in global medical markets, medical cannabis represented 68% of total net revenue for the fourth quarter and 90% of total adjusted gross profit. This marked an increase from 59% in the year-ago period for net revenue and 75% for adjusted gross profit. Adjusted EBITDA was $1.9 million for the quarter, which marked our sixth consecutive quarter of positive adjusted EBITDA and a record $12.8 million for the…

Thanks, Simona. We've certainly proven ourselves to be strong and resilient, despite the challenges we have faced. And at the same time, we have been successful in attracting fresh talent to our organization including new leadership and Board members with pharmaceutical and CPG experience. We've also made substantial progress in rightsizing this business over the past four years. This reset has made us leaner and more agile, has enabled us to focus squarely on the most attractive segment of our industry, medical cannabis. The medical cannabis sector continues to grow rapidly, and Aurora is well positioned to benefit from these positive changes. We are excited to see patient access increase globally and are encouraged by the evolving regulatory environments in key international markets. For these reasons, we are confident in our future and our ability to achieve positive free cash flow by the end of this calendar year. And with that, operator, please open the lines for questions.

Thank you. At this time, we'll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Matt Bottomley with Canaccord Genuity. Please proceed with your question.

Good morning everyone. Good morning everyone. I guess for my question then, we can keep it maybe more general to any markets where this is specific. But I'm just curious, on the international front, what you can see that's actually trackable right now and the visibility you have of potentially an increased cadence on revenues. I know there's typically some variability there. But I'm most interested in Germany and some of the narrative around doctors may be more willing or able to prescribe cannabis now and if there's anything that's been tangible that can be seen. So it doesn't really necessarily just have to be Germany, but any commentary on international markets and what you can see with respect to traction being gained that might be tangible in your results in several quarters from now.

Sure, Matt. Well good morning and thanks for the question. So as you know and others know, syndicated data typically that we see in other industries is not available. What we do see is that the regulatory agencies have certain reporting mechanisms, and I'll go into the ones that we know. You start with the tonnage or the licenses that through the permitting process that come through and you can typically see that 90 days in arrears. Then in Germany particularly you can all see manufacture shipments by the government that go in. Now none of the licensed producers can be the pharmacist. So it is LP to wholesale, but there is no way to return it. So there is no -- you don't have to sort of net out returns like maybe you do in Canadian consumer. And we get that quarterly in Germany. It's a little more opaque in Poland usually get something about every six months. And then for Australia, the TGA, the regulatory agency there provides market shares of manufacturer shipments to wholesale not wholesale to pharmacy, on a quarterly basis. And it is a panel in Australia that only represents probably 20% to 22% of the pharmacies and those shipments. So it is representative of that panel. Now specifically for Germany, we've seen the most sort of tangible or affect of the regulatory changes has been the ease in which patients can get prescriptions and through electronic means and even through vehicles that don't even have to be in Germany, call it telemedicine. We've seen this rapid increase in the number of patients getting prescriptions. Now the net effect on volume, I think we have to wait a little bit. I know that there’s been a lot of conjecture about are you going to see that market double, triple or whatnot? I think it is early to get there, we’re definitely going to see an increase because of the access -- increased access and prescriptions of patients but it's going to probably take a quarter for that data set to sort of catch up and see what the shipments are. Beyond that, if you look at the other countries, there are not as predictable or transparent shipments with the possible exception of the UK, you see something in the UK quarterly similar to what you see in Germany. I don't know Matt does that answer your question?

No, that's great. I appreciate that. I know it is something that from a lot of US operators, there is a lot of data that you can subscribe to out there. So I'm just curious as international becomes irrelevant now just to sort of keep an eye on those things. I appreciate it. And I just wanted to ask one more -- quick one more of a housekeeping I apologize if this was kind of in the prepared remarks already. But if you look at the difference from the profitability, and I understand the comments on the cash flow, but from your adjusted EBITDA contribution, everything on a sequential basis was largely flat except [VIVO] (ph) slightly up. So can you just maybe give me a little more color on what the drivers was for the slight sequential downtick in the adjusted EBITDA in absolute dollars?

Yes. Simona, do you want to grab that? I mean I'm happy to but do you want to go ahead?

Yeah. Let me do that. So yes, Matt to give a little bit more perspective and context on the adjusted EBITDA for Q4, a couple of factors have come into play and contributed to that. And we view this as a temporary situation. So as you may recall, the acquisition of MedReleaf Australia occurred in February. So we had a partial quarter, this fourth quarter of Australia. So as a result of that, we've seen an incremental SG&A following this acquisition, as we now fully own the company. And we also saw revenue -- incremental revenue from customers. However, we have not been able to fully recognize that incremental revenue to customers as we're working through our inventory that's currently in the channel. And we actually expect to see that full benefit come through after Q1 fiscal year 2025. And then on top of that, due to the [tightening] (ph) of gross profit from our plant propagation business as you know it.

Okay, got it. Appreciate all that everyone.

Thank you. Our next question comes from the line of Frederico Gomes with ATB Capital Markets. Please proceed with your question.

Hi, good morning. This is Eric Livshits on for Frederico Gomes. Thank you for taking my question. So just on the SG&A front. Obviously, it ticked higher this quarter due to those integration costs related to MedReleaf. I'm just wondering if you could provide just some more insight into the nature of these costs and when you would expect SG&A to normalize? Thank you.

Yes. I mean I will start and then Simona can pick it up. I think the guidance that we have given in the past did not include running MedReleaf Australia which is quite a significant piece of business. So you do have some integration costs, but you are going to have ongoing costs running that substantial business. And so we do expect our SG&A to go up. I think from an integration standpoint, you'd see us work through integration costs call it, probably by the end of the summer. But beyond that, we will have a bit of a higher SG&A line than we've had in the past because we are now running that business over there, and there's SG&A costs connected to it.

So yes, maybe may add a little bit more, Miguel. So I know in the past, we talked about adjusted SG&A baseline around the $30 million per quarter impact and that did not include incremental SG&A coming from any future acquisitions. So as we've seen with MedReleaf Australia, we have taken on partial costs for Q4, and that's reflected in our financials. And as we continue with the follow-on quarters, we do expect that to go up slightly. And we continue to manage our SG&A and general expenses very, very carefully. So this is really a reflection of taking on additional business, which we see of course, as we will take on the full benefit of that revenue to customers in the follow-on quarters post -- after we work through our inventory that will definitely have an impact to our EBITDA throughout the quarters.

Great. Thank you. I’ll hop back in the queue.

Thank you.

Our next question comes from the line of John Zamparo with CIBC. Please proceed with your question.

Thank you, good morning. I wanted to follow-up Australia and just want to better understand your -- the start to that market with MedReleaf Australia. The contribution in the quarter from that deal, I think was just under $3 million. That seems to apply around $20 million annually. I understand that's a pretty small sample size, but it's also meaningfully below the 2023 results. So is there anything to on that? And do you still expect that business to contribute to what it did previously?

Yeah, John. I mean we do expect it to contribute – I guess a couple of things. So previously, when we were the manufacturer, we sold to our customer which was MedReleaf Australia. And there was revenue recognition at that point. In the transition of the quarter, we recognize revenue when it's sold to the pharmacy. So it's a consignment model there with the wholesale partners. So there's a timing point in that quarter where you are not seeing full revenue recognition of that business. So we expect the quarter that we are in, that we are seeing now, where we have almost complete revenue recognition in the future quarters being significantly stronger, not only from a timing standpoint, but also because that market is growing. So right now, MedReleaf Australia is the Number Two based on that sample size that I spoke about earlier. The Number Two manufacturer were launching products right now. We are one of the few in that market with a gummy they call it a pass deal and with the vape cartridge. So we are very bullish on that market. But you've got a bit of a timing point in the quarter we just reported because of the consistent and the revenue recognition, but also you've got a growing market. Simona anything you want to add about that?

I think you covered it well Miguel.

John, anything else still on that – that I can add?

No, that’s helpful. Thank you.

You bet, thank you.

Thank you. [Operator Instructions] Our next question comes from the line of Pablo Zuanic with Zuanic Associates. Please proceed with your question.

Thank you. Good morning everyone. Miguel, let me just stay with Germany. I understood the color you gave in terms of the lack of data. But back in April, at the Benzinga conference, some operators there were talking about sales doubling for them right, in terms of our shipments to pharmacies. So you are vertically integrated in Germany, you have local manufacturer, also import from Canada. You have your own wholesale distribution. And then of course, you also have your sales organization, right? So you probably have good visibility in terms of what you are sending to a pharmacy market. So at least if you can quantify or give some color another way in the middle of June, in terms of whether have you seen volumes double or triple or pretty flat? That's the first question. And the second part, which is really related to that. Just talk about any issues from a demand or supply perspective? And what I mean by that, on the supply side, are there bottlenecks right? We are hearing that pharmacies cannot cope with a large number of scripts. So talk about any supply side bottlenecks. And on the demand side, help me reconcile the ratios that we look in the US versus Germany, right, in the US, Pennsylvania, Florida, 3.5% to 4% of population, it is in the medical program. In Germany, the numbers are not exact, but we calculate 0.3%, right? So sometimes we say, well, the market could grow ten times. But the reality is that it's very different for a doctor, even in Germany with a change in the narcotic law to write an Rx prescription versus what we call in the US recommendation, right? So from a demand perspective, just help us understand what's the real comparison. If we do 0.3%, Germany versus 3.5% in the US, is that the right comparison when we try to assess demand. Thank you. I know that’s a lot there. Thanks.

It's okay. We don't see doubling, and we probably have one of the largest sales organizations. We have GR resources on the ground. We talk to the government. We see all the same syndicated data. So a doubling of a business, the size of Germany right out of the gate within six months of de-scheduling, I think is unrealistic. That being said, a market that size growing 20% to 30%, call it annually at a minimum is significant because one of the things that you talked about the US, you talk about Canada, one of the things about medical cannabis is that business is really broken up amongst probably at best six to seven LPs to 80%, 90% of the business. So like in Canada and the REC business, you've got to get to about 30, 40 companies to get to 60% of the business. So it's a concentrated benefit. So Pablo, the first point I would say is -- it's early to understand what's the impact of de-scheduling. But it's not double, but it could be 20% to 30% every three months to six months, we'll know more in a little bit. On supply and demand, one of the most important things that is happening in Germany that is allowed -- as you're allowed to ship cannabis as you are other pharmaceutical products through the mail. And so the historical delivery of that product through a brick-and-mortar pharmacy as opposed to some of these very large pharmacies that ship through the mail is allowing supply to get there, and the government through their work with the IMCD has plenty of access to cannabis. Now one of the things that is a significant limiter, not only in Germany but all around the world is the incredible precision that, that product…

Thank you. That’s a great color. Can I just have a quick follow-up. I mean, when you look at the rescheduling process in the US, how could Aurora benefit or participate in that market if we see rescheduling or you don't really see it if it's on legalized at the federal level? Thanks.

No. I mean we -- so Aurora is the largest Canadian medical company by far. We have a 31% share of that overall business. We've been at it 10 years we interact with regulatory agencies all around the world. And as we mentioned, we have some of the largest EUGMP pharm grade production facilities. We also have one of the largest genetic facilities on Vancouver Island in cannabis in the world. So we've long held the position and I think we've been proven right that the US will be medical first. We also believe that the FDA will regulate cannabis like they regulate almost everything between toothpaste and tobacco. And in that, it will be a science-based process. Aurora being one of the largest in North America, largest in the world will clearly have significant advantages in order to navigate that system. And just because we don't hold an entity today in the US has no bearing upon that, and everything that we do in Germany, Poland, Czech Republic and Australia, would those very and organized regulatory regimes will benefit us in the US with the FDA. So we are very confident that when the US legalizes, we'll be in a great position.

Thank you.

You’re welcome.

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Martin for any final comments.

Well, I just want to thank everyone for being on the call. We are very excited about the future for Aurora and medical cannabis, and we look forward to communicating with that as we go forward. All the best, then we appreciate it. Thank you.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.