Aurora Cannabis Inc.

Greetings and welcome to the Aurora Cannabis Inc. 4th 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 Nyland, 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 four quarter financials for the period ending March 31st, 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. You can also access via CDAR Plus and Anchor. 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 financial or business performance. Actual results could differ entirely 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 filings and registration statements. These may be accessed, or may similarly be accessed via CDAR Pro, and on ACAR. Quality and prepared remarks by Miguel and Simona, looking to build up the question and answer session without covering others. 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 will 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 EU GMP 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 free 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 profits. In Canada, we grew revenue by nearly 10% due to higher sales to insurance-covered patients and upheld our number one position in medical cannabis while growing our market share. We attribute our growth to a broad and attractive product assortment, positive sales mix, and most importantly, product innovation. The Canadian medical market has experienced a lot of disruption over the past several years, which is all the more reason why our focus on serving insured patient groups is supported by a continuous pipeline of exciting next-generation cultivars, is critical to both holding and growing our market share. However, we are also encouraged to be seeing increased interest from unions and other entities that are considering adding medical cannabis as a benefit to their members, along with more clinical trials being conducted by the traditional medical establishment. Both of these developments could expand the addressable usage market rather meaningfully. Recall that only about 1% of the Canadian adult population are medical cannabis patients, so there's plenty of upside opportunity. Excellence in Canada has also enabled us to learn and become adept at navigating other nationally legal cannabis markets with great flexibility, while making thoughtful investments based on opportunity size and overall economics. Whereas in some international markets, we are the manufacturer, wholesaler, and sales organization, In others, we are the manufacturer and partner with world-class wholesalers and sales organizations. Our leadership positioning across several countries in Europe and in Australia stems directly from what we've learned in over 10 years of medical cannabis experience in Canada, and we are able to leverage our world-class manufacturing in Canada to ship EU GMP products around the world. International medical cannabis grew nearly 40% during Q4, as I will now explain. Let's first discuss Australia, where we experienced significant sales growth. Recall that in February, we acquired the remaining 90% equity interest in MedRelief Australia, which holds the number two position in the rapidly growing $400 million Australian dollar market, the largest medical market in the world outside of North America. This transaction positions us to deliver increases to our profitability in Australia, through higher revenue contributions and higher gross margins. The Australian market is a clinician-led product distribution model that closely aligns with our operational success. The high regulatory standards of the Therapeutic Goods Administration, which is responsible for regulating the supply, manufacturing, and advertising of therapeutic goods, makes it challenging for new entrants. While providing an advantage to companies like Aurora that are dedicated to quality and compliance, and are able to meet those requirements. In March, we became one of the first Canadian licensed producers to receive good manufacturing practice certification from the TGA for our largest Canadian manufacturing facilities, River and Ridge, strengthening our dedication to supporting the continued growth and development of the Australian medical cannabis market. Being one of the select few Canadian LPs with EU GMP and TGA GMP certified facilities, With close to 90% of our annual production coming from these facilities, Aurora is uniquely positioned to be able to pursue new growth opportunities in Australia, as well as other key global markets. In addition to adding to our range of dried flour, the license also granted us approval to broaden our product offerings to include pastilles or gummies, oils, and our newly launched resin cartridges. Following this landmark certification, we announced the expansion of MedRelief Australia's portfolio with the introduction of a new range of premium dried flower products and resin cartridges manufactured at our EU GMP and TGA GMP certified facilities. The new dried flowers are proprietary cultivars grown exclusively by Aurora, while another previously existing proprietary cultivar has been relaunched under the Aurora brand. The new resin cartridge products are offered by our Aurora and IndiMed brands and are full spectrum, ensuring a comprehensive cannabinoid profile for a more effective and balanced experience. We are excited to be offering an expanded range of innovative and differentiated products that cater to the market demand for a range of options without compromising on quality. MedRelief Australia now focuses on three core brands. Craft Plant, offering a handcrafted premium range of products. Aurora, for innovative and affordable options. And Indomed, providing a company-funded concession range, supporting access to individuals who may not be able to avail of this treatment through self-paid channels. Moving on now to New Zealand, we celebrate our first shipment of Aurora-branded premium dried flowers during the first quarter of fiscal year 2025. representing a significant milestone in medical cannabis accessibility for the country. The initial product portfolio includes cultivars grown exclusively by us, with each strain meticulously bred and cultivated to address a variety of patient needs. We view New Zealand as an emerging market poised for growth where we can leverage symmetry with our leadership in Australia. Let's now delve into our European operations. In Germany, we believe that the official passing of the Cannabis Act and descheduling of cannabis has fueled the expansion of medical cannabis. The country is already our largest European market, and we are currently one of only three companies with a domestic cultivation facility. We hold the number two market share for flowers, the number one market share for self-payers, and have three of the top ten cultivars by volume sales. With cannabis descheduling, more patients gain access to treatment, reinforcing our dedication to patient outreach and comprehensive access to quality medical cannabis. The reclassification of cannabis as a non-narcotic should also inspire more patients to actively consult with their physicians, facilitating greater access, education, and awareness for medical cannabis. All in all, this change presents long overdue reform in favor of a more accessible medical cannabis market and commitment to patients. In Poland, our second largest European market, we are the number two cultivar and number two market position by volume. We grew sales during Q4 compared to the year ago period and remain excited by the opportunities this growing market presents. In the UK, patients are responding favorably to the launches of our next generation cultivars, which has led to a significant increase in sales in the final two quarters of this fiscal year. We also partnered with Script Assist, a cutting edge prescription platform that now includes our extensive range of medical cannabis products from our portfolio. In doing so, we can further improve the landscape in the UK by providing patients with access to premium, high-quality products, along with valuable information to guide them through their medical cannabis journey. In Switzerland, where we first launched in Q2, we are becoming the trusted favorite for patients and are currently widening distribution channels in the country. In total, medical cannabis adjusted gross margin reached 66%, the highest level we have ever achieved as we benefited from sustainable cost reductions and improved efficiency in manufacturing operations. This is an increase from the comparable prior year quarter and substantially above our 60% target. Turning back to Canada, our focus on portfolio optimization and strategic allocation of products to higher margin medical markets resulted in an expected revenue decline in the consumer cannabis business. This was coupled with a decrease in adjusted gross margin because of a less favorable product mix. Finally, our investment in the controlled environment agricultural industry through Bevo resulted in strong revenue for Q4, not only slightly from the year-ago quarter due to the seasonality of this business. Recall that approximately 65% to 75% of plant propagation revenue is earned in the first half of the calendar year, as orders are fulfilled. The Bevo team is utilizing our former cannabis facilities to enter the profitable cultivated orchid market, while our current vegetable and plant propagation business already generates a steady, predictable financial performance, albeit on a seasonal cadence. Over the next several years, we think our shareholders will benefit from the value creation coming from this segment, as we expect the acceleration of Bevo's business plan to drive revenue and adjusted EBITDA growth. These achievements were made possible through the efforts and dedication of our team, who enable everything we do. On that note, let me now take this opportunity to introduce Simona King, our new CFO, who brings over 20 years of global finance experience at Fortune 500 pharmaceutical and biotech companies. Her wealth of knowledge in highly regulated healthcare spaces is already proving to be an asset to Aurora as we pursue our purpose of opening the world to cannabis. And with that, I would now like to turn the call over to Simona for a detailed financial overview.