Greetings. Welcome to Aurora Cannabis Inc. Fiscal Fourth Quarter 2025 Results Conference Call. [Operator Instructions] The conference is being recorded today, Wednesday, June 18, 2025. 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, and thank you for joining us. With me are Miguel Martin, Executive Chairman and CEO; and Simona King, CFO. Earlier this morning, we filed our financials for the full fiscal year, fiscal fourth quarter 2025 period ending March 31, 2025, and issued a news release containing these results. This news release, along with our financial statements and MD&A are available on our IR website as well as via SEDAR+ and EDGAR. Our discussion today gives us a reminder that certain matters could constitute forward-looking statements that are subject to risks and uncertainties relating to our future financial or business performance. Actual results could differ materially from those anticipated in those forward-looking statements. Risk factors that may affect actual results are detailed in our annual information form and other periodic filings and registration statements. These documents may similarly be accessed via SEDAR+ and EDGAR. Following prepared remarks by Miguel and Simona, we'll conduct a question-answer session with our covering analysts. With that, I'll turn the call over to Miguel. Please go ahead.

Thanks, Kevin. We're delighted to share Aurora's results today, showcasing a record-setting year in global medical net revenue, adjusted EBITDA and positive free cash flow. This performance is anchored by a strong and flexible balance sheet, exemplified by a sizable cash balance of $185 million in a debt-free cannabis business. We believe that's a significant advantage relative to the industry. Here are some key highlights from fiscal 2025. First, net revenue rose 27% to a record $343 million, which included global medical cannabis revenue increasing 39%. International revenue generation eclipsed the strong contribution from Canadian medical and comprised over half of total global medical cannabis, up from 41% in fiscal 2024. Second, adjusted gross margin improved to 55% compared to 49% as we benefited from both higher cannabis and plant propagation margins. And finally, we generated record adjusted EBITDA of almost $50 million with record positive free cash flow of about $10 million. Aurora is already the largest company in the world focused on medical cannabis, the highest margin segment of the industry. And we have scientific knowledge, genetics, breeding and regulatory expertise that are second to none. Notably, we are one of the select few cannabis companies with 2 manufacturing facilities certified under both Australian TGA good manufacturing practice and EU GMP standards. These facilities represent 90% of our annual manufacturing capacity, allowing us to be the largest Canadian exporter of medical cannabis. And through our leading market positions in Canada, Australia, Germany, Poland and the U.K., we are best able to capitalize on global medical cannabis opportunities in other countries as they emerge. Let's now dive into our global cannabis business. Beginning with updates to our international operations, where we are experiencing an increase in demand for EU and TGA GMP manufactured flower and particularly high potency THC…

Thank you, Miguel. We are very pleased with our performance in fiscal 2025, characterized by record annual results in global medical cannabis revenue of $244.4 million combined with adjusted EBITDA of $49.7 million and free cash flow of $9.9 million. I would like to thank our team for their many contributions to these excellent results. Our plan for fiscal 2026 is to continue executing on our global medical first cannabis strategy, deliver sustainable improvements in our financial performance and create more value for our shareholders. Let's now delve deeper into Q4 2025 results before discussing our outlook for Q1 2026. First, net revenue of $90.5 million represented 34% growth, supported by record net revenue from both our global medical cannabis and plant propagation segment. Second, quarterly profitability consisted of consolidated adjusted gross margin at 62%, 1,200 basis points higher than the year ago period, resulting in record adjusted gross profit of $54.2 million. All segments generated higher margins than the year ago period. Third, adjusted EBITDA grew 619% to a record $16.7 million from $2.3 million in the year ago period. And fourth, we ended the quarter and fiscal year with $185.3 million in cash and cash equivalent and no cannabis business debt. Medical cannabis, our key strategic focus, net revenue rose 48% to $67.8 million due to 114% growth internationally, combined with continued strong contributions from Canadian medical. Medical cannabis comprised 75% of net revenue compared to 68% in the year ago period and approximately 90% of adjusted gross profit in both periods. Adjusted gross margin for medical cannabis was 70%, up from 66% in the year ago period. Several factors drove the year-over-year increase, including larger revenue contributions from higher-margin markets, sustainable cost reductions and improved efficiency in our manufacturing operations. Consumer cannabis net revenue was $8.2 million,…

Thanks, Simona. Our proven commitment to medical cannabis and our strong execution and seasoned global opportunities resulted in excellent strategic and financial performance in fiscal 2025. Our medical cannabis first strategy is working, providing us with meaningful, high-margin growth opportunities in what we believe is a $5 billion-plus market. We will continue to concentrate primarily on Europe and Australia, which are both vastly underpenetrated. Our focus outside of North America has given Aurora first-mover advantage and has allowed us to build a strong moat backed by scientific expertise and expanding product portfolio, and our ability to navigate global regulatory frameworks. This strategy is supported by our continued strong financial performance serves to further differentiate us from our peers. Aurora is positioned for sustainable profitable growth in fiscal 2026, and we look forward to providing business development updates as we work to create long-term value for our shareholders. Thank you for listening to us this morning, and we would now be happy to answer your questions. Operator, please open the lines.

[Operator Instructions] Our first question is from Derek Lessard with TD Cowen.

Great quarter and great year. Everyone, congratulations. Miguel, I just -- maybe I just want to talk about the Q1 guide on the international side, and I think you did touch on it in your prepared remarks, and you said temporary decline in some markets, which I assume is Poland. Maybe could you add some meat to those bones?

Sure, Derek, nice to talk to you. Yes, I mean, I think we saw some regulatory changes in Poland that affected the ability of our patients to access prescriptions and generally the size of the market. We view that to be temporary. We are excited about the long-term aspects of Poland, coming back. I think there's a couple of things there. One is we have 2 very important launches, which we believe will be some of the highest quality cultivars that Poland has seen, which will allow us to grow our market share and regain business that way. And secondly, we do see positive developments with the regulators in Poland, embracing a very thoughtful long-term approach. And so we view that as a temporary disruption. Germany continues to deliver at a high level, it is a growth market for us, not only growing overall, but also from a market share standpoint. And the U.K., which is the other key market of size in that part of the world is also growing.

Awesome. That's a good color there. And maybe one last one for me before I requeue. And again, you touched on it, but it does feel like there's a bit more incoming competition into the international space these days. So maybe talk about how you feel about, I guess, you're positioning and any initial pressures on either the revenue or the margin structure at this point?

Yes, it's a great question. These markets, whether it's Australia or Western or even parts of Eastern Europe, are great, high-margin markets, and we've seen other competitors taken interest in them and try to get into them. Now they're not easy to get into. Most of them require GMP certification, which is a very challenging certification to get Australia, as we mentioned, has their own certification protocol called TGA. So first, there's a barrier in terms of that. Secondly, you have to have resources and infrastructure in those markets, which we have. We've been almost a decade in Australia. We've got almost 6, 7-plus years in Germany. We have a production facility there. So while there is a lot of interest because of the growth and size of those markets, they're not easy to execute in. And so I think while there are a lot of people looking at it, it still is a small subset, and it is a concentrated piece of business from a market share standpoint, much more so than what we see in Canada.

Our next question is from Bill Kirk with ROTH Capital Partners.

So I had a question on gross margin. I mean obviously, it's already industry leading. I think it was said each segment gross margin is still expanding, where do you think margins can go? And maybe what would be the major drivers to get there?

Yes. Bill, let me make a top line comment, and then I'll let Simona dive down into it a little bit. So yes, and we appreciate your comment on margins. It's something we work hard at, and it's an industry that doesn't talk a lot about gross margins. But clearly, if you're going to focus on free cash flow, which we had a record quarter, and you have to focus on gross margins. So I think there's 2 drivers for us. One is the cost of production, and we think we have some of the most compelling production costs out there, particularly for GMP products that allow us to start that process at a low point. Secondly, because we sell so much premium products, and the quality of our products are so high. We're able to garner what we think our top-tier margins and pricing, particularly to wholesale, which is our customer. So I think those are the big drivers. But Simona, any other pieces you want to unpack?

Yes. No. Thanks, Miguel. And to add a little bit more. And so we focused over the years on yield improvement and cost efficiencies in our operations. So that's definitely contributed to our improved margins over the quarters and compared to last year as well. And the other part that's impacting our margin in a favorable way is our portfolio mix where we're selling more and more in the medical cannabis space and especially in the international market, which have higher margins. And so putting these 2 factors together has contributed to the increase that you've seen over the quarters, and also on an annual basis, and we provide this breakdown in terms of margin impact coming from our medical cannabis and the other business segments that we have. So we believe these margins will continue to be strong.

And then, Miguel, when you were talking about Germany, you mentioned the key was remaining in stock. And so I guess my question is, have you experienced out of stocks there? And if you have what could sales have been if supply better met demand in Germany? And there was a separate comment about increasing capacity. And I was just wondering if the 2 are related.

Yes. I would -- I mean, listen, it is easy to forget that this is medicine, and medicine needs to be in stock for our patients and for our prescribing physicians. We've not had issues. It's something that we really focus on. The comment that you heard us talk about with RAC reallocating these inputs. Most of the products that we sell, we sell globally. And so the great products that we developed in Canada, we're able to launch around the world. Said differently, we advantage those markets, in -- particularly, our medical markets over RAC and so we've not seen an out of stock, but it is a key component to growth, both prescribing physicians and patients advantage those brands that are in stock. It is a hard thing to do when you see rapid growth in a market like Germany, and it's something that we work really hard at, and we think is a point of differentiation for us.

Our next question is from Frederico Gomes with ATB Capital Markets.

First question, just going back to that comment about supply. I guess, are you in any way constrained by supply as those international markets growing, and if you project continued growth over the next year. So do you anticipate that you would have to meaningfully expand your own cultivation, or would there be any interest, I guess, in you doing that? Or is the strategy to maybe get that additional supply from third parties' cultivators.

Yes. Fred, we've not had to date any sort of supply constraints. So Simona mentioned our yield improvements. We've been able through our genetic facility out of coast to develop proprietary cultivars that significantly have improved our deals at our own facilities. If you look at some of our CapEx usage and our investment a lot of that has gone into whether it's new lighting or nutrient systems or upgrading our current facilities to meet those demands. As we've announced previously, and you mentioned in your question, we've also announced some very strong partnerships with third parties that allow us to schedule that demand. So we feel good about where we're at. We'll continue to look at opportunities, but it has not impeded our ability to service any of our patients internationally.

Perfect. And then my second question, just a big picture here in terms of international markets that could become more meaningful over the coming years. I know that you are in Australia, Germany, Poland and U.K., so the big markets. But -- in terms of new markets opening up, do you see anything happening near term? And if so, which markets are we looking at?

Yes. I think in the short term, is defined by, say, the next year or so, it's going to be the expansion of the current markets. There were questions about the new government in Germany, their take on medical cannabis. And we've not seen any indication that there's going to be a roll back there. So we see Germany, which is the largest continuing to grow at a rapid rate. As we mentioned, our view on the Poland situation is that it's temporary and that, that market will advantage high-quality cultivars like the ones we're launching. And the U.K. is going to continue to expand, which is a nice market because it's going to also launch other formats much easier there, which we've done with our inhalable extracts. You mentioned Australia. Australia is going to continue to grow right next to it is New Zealand, and there's a lot of efficiencies in there. And beyond that, we are seeing new markets come online like Switzerland and Austria. We've talked a little bit about some interest from countries like Ukraine. But short term, we'll be these big, large markets continuing to grow and opportunities to grow share. Because of the -- sort of unique interest in that GMP flower, which is a limited commodity, but we continue to see positive developments internationally all around the world with governments looking at medical cannabis.

Our next question is from Matt Bottomley with Canaccord Genuity.

And congrats on a very strong fiscal year. Just first as sort of a follow-up question to Simona, some of the other comments you had on margins. Apologies if I missed this in the prepared remarks, but I'm trying to get an indication on a quarter-over-quarter basis, it looks like the shift in revenues was mainly just more plant propagation less adult use relative to last quarter, everything else kind of flat. So just trying to get a better indication of why adjusted EBITDA kind of took a step back there. And then just a secondary question on Australia, if I have time after that.

Sure. Well, Simona, why don't you take the first one, and I'll be happy to answer Australia unless it's a modeling question.

Sure. So to provide a little bit more context on the adjusted EBITDA margin. What we've also seen in Q4 is an increase in adjusted SG&A and that to an increase in of course supporting their revenue side and -- but also expected year-end expenses that we don't expect them to be recurring. So the increase in SG&A has also impacted our adjusted EBITDA margin. But of course, that's been offset by the increase in overall net revenue and adjusted gross margin impacts that we saw in Q4.

Okay. Got it. And then, yes, I guess, more broadly, just on Australia. So we heard a little bit about some of the issues in Poland from some of your peers when they had reported earlier in the prior weeks and months. So Australia, we're getting a lot of positive commentary there. So just given that you have the #2 market share, can you just give us an indication on how much there is growth just relative to the strong performance versus or in addition to just the growth prospects there? Obviously, it's a very relevant market going back to the early days of the Canadian LPs. And it seems like the traction is starting to gain there. So maybe just a little more macro commentary on usage or what doctors are doing there would be helpful for our modeling.

Yes. I mean, I think overall, we see Australia growing. It's hard without syndicated data to understand exactly. So it's hard for me to give you a percentage, but we don't see anything sort of structural changing. Now with all new regulatory environments, you're going to see scrutiny in different areas. And so it's not going to be a straight line, say, quarter-over-quarter. But it is a market where we think you can garner large market share. So said differently, it's not a market where you're going to be sort of susceptible for 1,000 players coming in. You have to have feet on the ground, you have to have a relationship with the distributors. You have to have a relationship with the pharmacies. And the pharmacies, particularly have a lot of influence, particularly with the patients in that category. So we like that market a lot. I think your other point of sort of inflection for Australia is the introduction of other formats beyond flower and oil, and we've seen that as we've launched pass deals whereas they're known in the North America gummies. And we also see other items such as inhalables coming online. And so that all comes together, I think, for a subset of companies to be very successful in a growing market. And then it's also one where we don't see a tremendous amount of sort of price compression. There's definitely a lot of input coming in on the low end, but there's good pricing at the middle and on the premium side. And as I mentioned earlier, don't go to sleep on New Zealand. I know it's smaller, but there is a lot of opportunity there. It is a very, very long and challenging registration process and one that we've been working on for a while. And so that is probably going to be an even more consolidated market in terms of market share, but it's got a long history with medical cannabis and is a really good market. So the combination of the 2, while challenging from a distance standpoint and the amount of investment you have to make, we think is -- will be a very, very strong markets going forward.

[Operator Instructions] Our next question is from Pablo Zuanic with Zuanic and Associates.

Miguel, just one quick question in terms of Germany. When we compare with some of the U.S. states, 4% population penetration in the case of Germany, only probably 0.4%. What do you think are the structural impairments on the demand and supply side for Germany to continue to grow in terms of penetration? 0.4% still seems very low to me with the potential that we see in other U.S. states. But just talk about the impairments -- the structural impairments.

Yes. Pablo, it's a great question. It's an interesting one because if you look at the way you would describe it, structural impediments. At face value, Germany doesn't have a lot of them. They've got a permissive regulatory regime. You have a relatively easy ability for patients to get prescriptions. There was a very strong telemedicine program there that allows the shipment of medical cannabis through the mail throughout Germany. I think it's probably 3 primary areas. One is education. It is a strict market in terms of what you can communicate and how you can communicate it is the first one. Secondly, it takes a while, particularly in that market for doctors to get educated on the category. And therefore, since you need a specific prescription for a specific item get there. And then I think third is because it is very difficult in that market to have anything other than flower and oil. Some of the other formats, even though there are some inhalables registered aren't there. So you are correct that 0.4% is less than the 1% of Canada. But again, Canada has got almost 8 years on Germany from a timing standpoint. And people should remember the size of the German economy and how quickly cannabis has grown there, and we don't see any step backs on medical cannabis. So while the overall penetration number may be low, I think it is one of the countries globally that everybody should keep an eye on. And as I mentioned in my prepared remarks, there are a lot of eyes on Germany from other European countries, both in Western Europe and in Eastern Europe. So it has a tremendous amount of influence. And by all accounts, the medical cannabis system is going very well, and we think will continue to influence its neighbors.

And just one quick follow-up. Obviously, you have a very strong sales force talking to the doctors there, a very pharmaceutical medical approach. But I could maybe argument that the way the market is developing, it's more from the cash payers, more call it -- maybe is through the RAC. And maybe the way to go-to-market there and promote your products is very different in that case. That sales force is less of a strength. Can you talk about that, how you balance it to the cash payers versus the ones that are more influenced by the doctors?

Yes. I mean, so you're describing what you had there, we would call that segment of self-payers. So self-payers and the reimbursed. And yes, the self-payer segment does operate a little bit differently. We have resources on both sides of that. But at the end of the day, whether you are paying for the medication yourself or whether you are coming into a reimbursed model, a doctor has to prescribe it, and there has to be a certain amount of education. And we think there's a lot of overlap there. I think secondarily, because we operate in Canada, in both medical and RAC environments, and we are utilizing the same products, both in Canada and Germany, it gives us a significant advantage because we know those products well. We've interacted with doctors and patients in Canada, and we can translate that into Germany and the best-selling Canadian products that we have are the ones that we're launching in Germany, and that's going very well. So it's a great point in terms of the different ways you have to execute, but we've been successful on both sides of it.

With no further questions, I would like to turn the conference back over for closing remarks.

Thank you very much. We appreciate that. It was a great year for Aurora, and we are terribly excited about the year in front of us. We appreciate your interest, and we look forward to updating everyone as we move forward. Thank you. All the best.

Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.