Aurora Cannabis Inc.

22 results conference call. At this time all participants are in listen only mode. A question and answer session will follow the formal presentation. Please note, participants are limited to one question at a time. If you would like to ask a follow up question, please re-enter the queue. Should you require operator assistance during the conference, please press star and then zero on your telephone keypad. As a reminder, This conference is being recorded. I would now like to turn the conference over to your host, Anath Krishnan, Vice President of Corporate Development and Investor Relations. Please go ahead, sir.

Thank you, Denise, and we appreciate you all joining us this afternoon. With me today are CEO Miguel Martin and CFO Glenn Ibbitt. After the market closed, Aurora issued a news release announcing our financial results for the third quarter of fiscal 2022. The release and accompanying financial statements and management discussion and analysis are available on our IR website and via CDAR and EDGAR databases. In addition, you can find the supplemental information deck on our IR website. Listeners are reminded that certain matters discussed on today's conference calls could constitute forward-looking statements that are subject to risks and uncertainties related to our future financial or business performance. Actual results could differ materially from those anticipated in these forward-looking statements. The risk factors that may affect actual results are detailed in our annual information form and other periodic filings and registration statements. These documents may be accessed via CDAR and EDGAR. Following prepared remarks by Miguel and Glenn, we will conduct a question and answer session for our analysts. However, we ask you to limit yourselves to one question and then return to the queue. With that, I will turn over the call to Miguel. Please go ahead.

Thank you, Anand. In an environment defined by political upheaval, record-setting inflation, and market volatility, we are intent on controlling what we can control and delivering on our target of reaching a profitable adjusted EBITDA run rate by the first half of fiscal 2023. In fact, I'm very pleased to tell you that our plan is working, and we're in a better position to hit this goal than we were a quarter ago. The foundation of our confidence is our global medical cannabis business, which is both defensible and stable, with margins that exceed 60%. These are highly desirable characteristics in today's volatile economic environment. And in addition to being the number one Canadian LP in terms of medical cannabis revenue over the last 12 months, the business continues to grow in other parts of the world, especially in Europe and Australia this quarter. The second reason for our confidence is cost savings, and we're pleased to have identified additional opportunities. Recall from last quarter, we said we'd achieve the higher end of our targeted $60 to $80 million savings annually by the first half of fiscal 2023. Today, we are announcing that we've identified an additional $70 to $90 million of savings within that same timeframe for a total of $150 to $170 million of savings annually. Importantly, our total cost savings won't impact planned growth investments, but we expect them to materially reduce our cash needs. Our third reason is the balance sheet, which remains among the strongest in the industry and puts Aurora in a position of strength, particularly in challenging times. We currently have approximately $283 million in cash, inclusive of our early repurchase of $141 million in convertible debt. further strategic and value-accretive opportunities, and about $190 million U.S. remaining under our ATM program. Fourth, OKO, our science and innovation business, is one of the largest catalogs of high-quality genetics and IP in biosynthesis available for licensing. OKO represents a capital-like, long-term revenue growth opportunity that we believe makes Aurora unique and can drive success by enabling our licensing partners to deliver a continuous stream of innovation to the market. Let's take a deeper dive on our medical business. During Q3, international medical revenue was up 55% compared to last year, but down from Q2 because of our large shipment to Israel last quarter, which we did not expect to recur this quarter. As you know, predictability of revenue, especially in developing markets, can be affected by regulatory complexities, such as timing of government approvals and import permits. We are currently selling medical cannabis products in seven EU countries, Germany, Malta, Poland, Czech Republic, UK, Denmark, and France, and are either the market leader or in the top three in all of those countries. We estimate today there are around 150,000 patients in the EU. But if it were to reach similar adoption levels as Canada, i.e. 1% of the population, the patient pool could expand to 3.5 million patients. In Poland, revenues grew threefold year over year as we followed up last quarter's record-breaking shipment with another strong quarter. We have established a leadership position in the Polish flower market with an estimated 70% share and expect this success to continue as we launch new cultivars in Q3 accompanied by a marketing push. In the UK, our revenues increased 60% compared to Q3 last year. Growth was driven by a rapid increase in patient numbers. as more evidence has come out and more physicians prescribe cannabis. While there is no reimbursement currently, which is a barrier to growth, we have not seen any pricing erosion. We are also preparing to launch extracts in Q4 and have already completed the first delivery to our import partners. In Germany, we had two of the top three best-selling products in dry flour for all of calendar 2021 and currently estimate we are number two in market share. Our market share is growing steadily in the extract markets thanks to new product innovation. While growth in patient numbers is moderated due to slow prescriber adoption, Germany remains the largest market in the EU with 83 million citizens, and we are bullish given the new coalition's plans to legalize adult rec cannabis and improve medical patient accessibility. In France, we have completed three shipments to date for the pilot program, where we are the exclusive supplier of dry flowers. Early estimates have us generating revenue as early as March 2023. In the Netherlands, we partnered with one of 10 license holders to sell legally produced cannabis in approximately 10% of the country's coffee shops. The Netherlands is roughly half the size of Canada, which recall is a $5 billion retail market. And like France, we expect sales here to begin in calendar 2023. Finally, in Australia, our revenues rose 300% year over year, driven by record numbers of patients. Through our exclusive supply agreement with MedRelief Australia, we offer medical patients an EU GMP certified range of products, including dry flower and recently released vapes. Let me reiterate that we believe that the cannabis growth story over the next several years will center on international medical and recreational. While the EU is currently a medical-only market, several governments have announced plans for recreational schemes, most notably Germany. The EU cannabis market is expected to be $6 billion by 2025, and we expect to grab a sizable market share given our regulatory expertise, compliance protocols, testing, and science. These attributes will put us in the pole position for success. Turning now to the Canadian medical market, we not only have a competitive advantage, but our direct-to-consumer approach drives our industry-leading margins. Overall revenue was mostly flat in Q3 compared to Q2, although our market share expanded 200 basis points to 26%. We attribute these share gains to the best-in-class patient, clinician, and physician service we offer, along with the launch of a number of premium products and innovations. our insured patients made up 79% of our domestic medical sales, up from 73% in Q2. This is a key to stability, and we believe bodes well for the future. The infrastructure to acquire, retain, and move the patient through the process requires significant resources and experience. And the truth is that a lot of that same infrastructure and know-how of patients in the Canadian market is directly applicable to our success in other key markets as such as UK, Germany, and France. Regarding Canadian adult rec, our Q3 revenue reflects persistent macro challenges, including excess inventory and pressure on older SKUs. As we have said before, these dynamics are unsustainable, but we have the scale and resources to navigate through this industry consolidation. In the meantime, our focus remains on maximizing profitability by leveraging low-cost production and further rationalizing facilities that no longer make sense. And we have also entered higher margin categories. From April to July, we plan to launch 40 new products, which we expect to benefit both rec and medical channels. These include our first infused pre-rolls and hash offerings, brand new cultivars from our breeding program, and a bevy of new vape, edible, and concentrate flavors. Our full year 2022 innovation calendar includes a significant number of new products, and we have established a regular cadence of new product innovations. Finally, I want to conclude with our recent accretive acquisition of Thrive. Thrive is most widely known for its award-winning flagship recreational brand, Greybeard Cannabis Company, which was recognized as the number one brand recommended by Canadian bud tenders in 2021. This transaction will place the talented management team who thrive in charge of our Canadian REC business, which we expect will drive improvements in our cultivation practices and premium product offerings. This team have been able to build a profitable premium business with limited resources that will immediately contribute to either that or our bottom line. And with that, I would now like to turn the call over to Glenn.