Greetings, and welcome to Aurora Cannabis Inc. Fiscal First Quarter 2026 Results Conference Call. [Operator Instructions] The conference is being recorded today, Wednesday, August 6, 2025. I would now like to turn the conference over to your host, Kevin Niland, Senior 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 first quarter 2026 period ending June 30, 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 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 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-and-answer session with our covering analysts. With that, I'll turn the call over to Miguel. Please go ahead.

Thanks, Kevin. We're executing our strategy within global medical cannabis and delivering strong results through sustained profitable growth. Our financial performance demonstrates Aurora's differentiated platform that is supported by a strong and flexible balance sheet. We hold a sizable cash balance, which increased to $186 million at quarter end, and our cannabis business is debt-free. Importantly, we have no intention or need to raise capital through an at-the-market or ATM program as some competitors are doing, which is dilutive to shareholders. These attributes position us very well relative to the industry. Turning now to key highlights from first quarter 2026 relative to the year ago period. First, net revenue rose 17% to $98 million, which included global medical cannabis revenue increasing 37%. International revenue grew 85%. Second, adjusted gross margin improved 1,000 basis points to 52% as we benefited from higher cannabis margins. And finally, adjusted EBITDA more than doubled to $11 million. We also generated positive free cash flow of $9 million. Aurora is a leader in global medical cannabis, the industry's highest margin segment. We are best positioned to deliver high-quality products to patients worldwide. Our products meet and exceed the highest international standards through our unparalleled scientific knowledge, genetics, breeding and regulatory expertise. With leading market positions in Canada, Australia, Germany, Poland and the U.K., we also quickly capitalize on new medical cannabis opportunities as they emerge in other markets. We are the largest Canadian exporter of high-quality medical cannabis with multiple GMP-certified facilities, representing 90% of our annual manufacturing capacity. It is these world-class manufacturing facilities, which give us the flexibility and consistency of supply to successfully compete in the rapidly expanding high-margin international medical cannabis market. Aurora's differentiation is also reflected through our lower production costs made possible by our focus on yield improvement and…

Thank you, Miguel. Our strong quarterly performance underscores the effectiveness of our medical cannabis strategy and reflects consistent execution against our stated plan that is delivering sustained profitable growth. Let's now delve deeper into Q1 2026 before discussing our Q2 2026 outlook. First, net revenue of $98 million represented 17% growth, supported by net revenue from our global medical cannabis, plant propagation and consumer cannabis segment. Second, quarterly profitability consisted of consolidated adjusted gross margin at 52%, an incredible 1,000 basis points higher with adjusted gross profit of $49 million, a 42% increase. Both our global medical cannabis and consumer cannabis segments generated higher margins than the year ago period. Third, adjusted EBITDA grew 209% to $10.8 million from $3.5 million in the year ago period. And fourth, we generated free cash flow of $9.2 million, representing a 42% increase from the year ago period and ended the quarter with $186 million in cash and cash equivalents and no cannabis business debt. In medical cannabis, net revenue rose 37% to $64.8 million due to 85% growth internationally, combined with continued strong contributions from Canadian medical. Medical cannabis comprised 66% of net revenue compared to 57% in the year ago period and approximately 91% of adjusted gross profit. Adjusted gross margin for medical cannabis was 69%, up from 67%. Several factors drove the year-over-year increase, including larger revenue contributions from higher-margin international markets, sustainable cost reductions and improved efficiency in our production operations, including sourcing for Europe from Canada. Consumer cannabis net revenue was $7.9 million, down from $11.5 million. The year-over-year change was the expected result of our continued decision to focus on portfolio optimization and prioritize sales to our higher-margin medical cannabis business. Adjusted gross margin for consumer cannabis was 33% compared to 20% in the year ago period.…

Thanks, Simona. Our industry leadership in global medical cannabis and our high level of operational execution have positioned Aurora for sustainable, profitable growth in fiscal year 2026 and beyond. Global medical cannabis is estimated to become a $5 billion- plus global market. So there's considerably more room to grow, particularly in Europe and Australia. We have built strong competitive barriers around the world through our scientific expertise, proven ability to navigate complex international regulatory frameworks while continuing to innovate and expand our product portfolio. These attributes sets us apart and are delivering consistent revenue generation, positive adjusted EBITDA and positive free cash flow. Thank you, operator. Please open the lines for questions.

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

Glad to hear your voices and great quarter.

Thank you Derek.

I just want to touch a little bit on the higher SG&A in the quarter, Miguel, maybe just add some color to, I think the [PR] you called out freight and logistics and some M&A-related charges. And then maybe how should we look at that, I guess, the $37 million level of expenses as a percentage or as a percentage of revenue going forward?

Yes. Great. Let me start, and then I'll let Simona dive into the details of it. So the first part of it is there are variable costs when we increase revenue. And so when you see things like shipping and logistics, that's all connected to selling more cannabis and the variable costs that are connected to it. The second part is around MRA. There are -- as we've been integrating MRA into our system, whether it's from a financial services standpoint, inventory management, ERP and other types of investments, there are costs. Some of that is onetime. But let me turn it over to Simona so she can talk a little bit about the modeling going forward.

Yes. Thanks, Miguel. So to add a little bit more to that, as our revenue has grown, the variable costs grow with that and now being a full year or full quarters of MedRelief costs, that's reflecting in the current quarter versus the prior year's quarter. So that's also a reflection of that. And as we think about SG&A moving forward, we do believe that these levels are the appropriate level of adjusted SG&A. Now keeping in mind if revenue continues to significantly increase for those variable costs, distribution costs will also go up.

Okay. And then one last one for me before I requeue. It seems like -- I mean, clearly, everybody is trying to get into Europe now because of the higher margin profile. I guess Number one, have you seen, I guess, a step-up in the competition there? And two, I guess, how do you view sort of the margin structure or profile evolving over the coming years?

Yes. I mean it was a record quarter of Canadian exports this past month and as we talked about as a leader in it. I think each of the 3 big countries in Europe are a bit different. So let me give you a bit of an expanded answer. When you look at Poland, Poland is a very challenging environment in order to get your projects registered. It takes a long time, takes a lot of work. And obviously, you have to have all the right GMP certifications. We've been able to navigate. It is still a very consolidated market. And while people are trying to get in Poland, you've got 4 companies that probably do about 80% to 90% of the business, and that's probably going to continue. And Poland is a great market. I'll do Germany last. When you look at the U.K. The U.K. is not only about getting products into it, and it's nice because the U.K. allows other products other than flower and oil, but you also have to be able to navigate a pretty sophisticated distributor and clinic network. So just having flower or just having products to export is only sort of part of the puzzle for the U.K. Now Germany is obviously the largest and has some of the better pricing, but you've got sort of 3 things going on in Germany. First is you really have to have feet on the ground to maximize your margin. You can export bulk flower into Germany and do okay, particularly at the lower price tiers. We're operating at sort of the core and premium price tiers. But really to maximize the margins in Germany, you need to have a selling organization. You need to be able to connect with both wholesalers, distributors pharmacists and now more so than ever telemedicine. And so because of that, while it's a little bit more of a diluted market than maybe it was a couple of years ago, it's still a very challenging market if you want to maximize your margin profile there.

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

So looking at the balance sheet, the Bevo liabilities look like they moved to current, which appears to be related to a covenant breach for not providing audited financials. So I guess what's going on there? How does it get remedied with the lender? And how does it impact your audit process?

Yes. So it doesn't impact our audit process. I'll start with answering that question. So this is related to Bevo's loan facilities, which they're working through the covenant issues. And as we have to consolidate from an accounting standpoint, the financials, we moved the loan from the long term to current as needed from an accounting purpose. So that's just an accounting treatment, but Bevo's working through the loan mechanisms now. So there are no concerns on our end from that, and we feel very strongly about our business in Bevo.

Yes. I mean I guess, Bill, the only thing I'd add is given the size of it and given that it's an [ABL-based] loan and the way it's set up, we think this is going to be resolved quickly. It's not a big deal. It just wasn't by the time we posted this, so we had to post that debt as current. But fully expect this will be handled in the near term, and you'll see it be treated as it has been historically.

Okay. Good to hear. And then on the 2Q guidance, last quarter, when you gave the guidance for 1Q, you said adjusted EBITDA would be positive and directionally, it'd be, I think you said lower than 4Q. I don't think I heard the directional commentary for the 2Q guide. Is there any color on how you're looking at 2Q relative to 1Q on adjusted EBITDA?

Yes. So we expect it to continue to be positive at the adjusted EBITDA, and we expect it to grow versus the current quarter.

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

Miguel, regarding your comments on Germany in terms of potential regulatory changes there, do you have any sort of color in terms of when do you think that could happen? And would you anticipate the impact there to be similar to what we saw in Poland?

Yes. So what we saw was a note put out, as you well know, from the new government, particularly the health minister around potential questions. The way what we'll see in the process for Germany would be probably at the end of the year call it, November, December, we would know more about what they're interested in. Now it's coalition government. The outgoing government was very pro-cannabis. Some of the issues that they've really highlighted have been focused on the rec-like aspects of that deschedule. And while there were a couple of things on the medical side, the more restrictive a market like that gets, a better it is for a company like Aurora. And I know that sounds sort of odd. But if you look at Poland as an example, when they change their provisions around telemedicine, to a lesser extent, the product registration, expertise and experience in the market, GMP production, history with the registration does benefit those companies that are a little bit more prepared. So we'll see with Germany -- I mean it's a big market. It continues to grow. Cannabis is -- medical cannabis is very mainstream. There are workarounds even if they were to talk about things like shipping through the mail, there's courier services. We have direct distribution in certain circumstances. So we'll see. But I don't think you would see the same sort of impact of what you saw in Poland because it's just a bigger, broader system and it doesn't sort of lend itself there. So more to follow by the end of the year. But when things get tighter, those companies that have a lot more experience navigating this typically do better.

And just on Poland, you mentioned that the headwinds there, they have been resolved. But are you back to the same levels in terms of volume in that market and demand and sales as you were before those regulatory changes?

Yes. I mean I would say we are back. So there's a couple of things going on in Poland. First is maybe the market had a little bit of compression. It's hard to give you a definitive answer because there's not any syndicated data for Poland. It feels like the market may have gotten a little bit smaller before it's going to continue to grow. It feels like we have grown market share. I will say, though, it is still a market that rewards quality and premium products. As we mentioned in our prepared remarks, we launched some of what's the highest potency flower that's ever been launched in Poland, and it's been a wild success. So while it's a little bit harder to get in, there's a couple more hurdles to get into, it still is a market like others that rewards great products and sort of great execution. So we're pleased with Poland. We think that situation, at least for us, has resolved itself, and we're excited about it.

[Operator Instructions] Our next question comes from Pablo Zuanic with...

Miguel, can we talk about supply chain? Right now, I don't know if you can disclose this, but what you sell is pretty much 100% Aurora products? Or are you expanding significantly your purchases from third-party suppliers? Other companies in Canada, several are increasing capacity. What can you comment on that?

Yes. Thank you, Pablo. So 90% of what we produce is GMP or TGA, GMP or both. So we are, I think, one of the largest, if not the largest, exporter of medical cannabis out of Canada. So that continues to be a strength. Secondly, we have invested a significant amount of money into our own facilities significantly increasing yield, potency and introducing new cultivars. So even with the same footprint through our genetic system that we think is one of the best in the world, we're able to improve our overall piece. We also, as you well know, have a GMP facility in Germany that we're continuing to expand upon. So that's the foundation of where we're at. We've also been very successful developing an effective third-party network, buying situationally where we need products, both GMP products for international shipment as well as GACP for domestic. We think that works really well for us right now, and we have a lot of flexibility. As you well know, we have $186 million on the balance sheet. So if we needed to do something around expansion of cultivation, we could. But right now, the system that we're running works really, really well for us, having the facilities in Canada and the one in Germany.

Right. And look, the second question is a bit of a 2-part question. But what we've seen in other markets like Australia, and we're beginning to see in the case of I think the U.K., it's even more vertical integration downstream, right, like producers, distributors taking control of clinics, in some cases, having a lot of cloud with the pharmacies. I'm not so sure about the regulatory aspects of that. But is there an opportunity for Aurora where in Australia, Germany, the U.K. or other markets? Or are you going to stick to your knitting of mostly being a producer of brands and distributing them only?

Yes. I mean it's a great point to the evolution of the development of the value chain. We have a clinic in Australia. Obviously, we have a long history with working with clinics, particularly in Canada, where we're the largest medical cannabis company by far. I think there's sort of 2 ways to go at that. One is having your own clinics or downstream, as you would describe it infrastructure. And secondly, is doing what is very common in pharmaceutical or in CPG, which is having trade programs or alignment programs with those third parties. And that's what we've done. We've -- in the U.K., in Germany, particularly with telemedicine and in Australia, we've created very, what I would describe as modern trade programs that create incentives and alignment for those partners to work with us. I think the good news is our products are really sought after because of the premium nature and our reputation. So the combination of giving them access to that and the innovation around it as well as creating traditional trade program incentives is really the model we're working right now. If that -- if there's other ways to get there, we'll look at it. But with the growth that we've had in all of those markets, it appears to be a good model for us.

We have reached the end of our question-and-answer session. I would now like to turn the floor back over to Miguel Martin for closing comments.

Well, I want to say thank you to all of our shareholders and everybody that's on this call. We're very excited about this quarter. We're even more excited about the future for Aurora Cannabis and look forward to sharing that with you. Thanks, everyone. All the best.

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