Aurora Cannabis Inc.

Good morning, everyone, and welcome to the Aurora Cannabis First Quarter Fiscal 2021 Conference Call for the three months ending September 30, 2020. This call is being recorded today, Monday, November 9, 2020. Listeners are reminded that certain matters discussed in today's conference call or answers that may be given to questions asked could constitute forward-looking statements that are subject to the risks and uncertainties relating to Aurora's future financial or business performance. Actual results could differ materially from those anticipated in the forward-looking statements. The risk factors that may affect results are detailed in Aurora's annual information form and other periodic filings and registration statements. These documents may be accessed via the Cedar, and Edgar databases. Since we are conducting today's call from our respective remote locations, there may be brief delays, crosstalk, or other minor technical issues during this call. We thank you in advance for your patience and understanding. I would now like to introduce Mr. Miguel Martin, Chief Executive Officer for Aurora Cannabis. Please go ahead, Mr. Martin.

Thank you, operator, and good morning, everyone, and thank you for your interest in Aurora. Since being appointed CEO in late September, I've established the tactical plans to succeed, and I've been working with our team on executing these plans. We intend to demonstrate that Aurora can be a profitable, growth-oriented leader in the global cannabinoid market. I would therefore like to spend our time today discussing the execution steps we're making in our business, as well as our go-forward strategy. But first, let me comment briefly on the recent quarter. Q1 can best be characterized as a transitional period. While there remains a significant opportunity available to Aurora in the Canadian consumer segment, the other legs of our business are performing well. We remain the leader in the high-margin Canadian medical market, and our international medical business saw 41% net revenue growth this quarter. Our CBD brand, Reliva, is the number one ranked brand by Nielsen in the U.S. CBD sector, and most importantly, our platform provides us with significant optionality As you can see from our earnings release, our quarterly results were generally in line with our previous expectations, with cannabis net revenues of $67.8 million and an adjusted gross margin of 52%, excluding ramp-up costs at Nordic. SG&A, excluding restructuring items, was $43 million, which was consistent with our run rate target of the low $40 million range. Finally, as it relates to Q1, we demonstrated progress with respect to narrowing our adjusted EBITDA loss to $10.5 million. This marked the third consecutive quarter of adjusted EBITDA trending toward breakeven. As you know, as part of our business transformation plan, we've made some very tough decisions and done a lot of hard work over the past year with respect to right-sizing our cost structure. This includes taking the largest cut to G&A of any Canadian LP. For context, we cut quarterly SG&A from $100 million to approximately $43 million per quarter and sharply reduced our CapEx. Under my leadership, we will continue our focus on fiscal prudence. I can say without hesitation that our entire company is in a different mindset now than we were previously, and I've empowered all levels of the company to look for opportunities for profitable growth and further cost efficiencies. For example, we have demonstrated the capacity to make difficult financial decisions, such as in June, where we were one of the first cannabis companies to take the step to write down our inventory and re-cost our trim. I also think we have a real opportunity to better align production costs to sales and shift costs from fixed to variable. In doing so, we will manage our working capital investment more effectively so that we can get to cash flow positive generation more quickly. This longer term cash flow objective goes beyond simply reaching positive adjusted EBITDA, our goal for the second quarter. Our expectation for the second quarter and demonstrates our leadership in differentiating Aurora and setting the standard for building a value-creating global cannabis company. Back in June, we announced the closure of five cultivation facilities across our network, and I can confirm that a few of those facilities are now shuttered. But aligning production costs for sales encompasses more than that. Specifically, our Aurora Nordic One facility, which is a new EU GMP-certified production facility located in Denmark, will allow us to more efficiently distribute products in Europe and around the world and better allocate production here in Canada. Before I discuss the performance of our business segments, and in particular our Canadian consumer segment, let me briefly address our recent capital raise under the ATM.

The $280 million that we raised recently through our previous ATM was a responsible decision in today's challenging environment.