Q3 2025 Aurora Cannabis Inc Earnings Call
Speaker Change: Greetings and welcome to the Aurora Cannabis, Inc. third quarter 2025 results conference call. All participants will be in a listen-only mode and a question and answer session will follow the formal presentation.
Speaker Change: This conference call is being recorded today, Wednesday, February 5th, 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.
Speaker Change: Hello and thank you for joining us. With me on the line is Miguel Martin, Executive Chairman and CEO of Simona King CFO.
Speaker Change: This news release along with our financial statements and MV&A are available on our IR website and can also be accessed via CDAR Plus and NCAR.
Speaker Change: For our discussion today, this is a reminder 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 materially from those anticipated in those forward-looking statements.
Speaker Change: The risk factors that may affect actual results are detailed in our annual information form and other periodic filings and registration statements.
Speaker Change: These documents may similarly be accessed via CDAR flow and EDGAR.
Speaker Change: On prepared remarks by Miguel and Simona, we'll conduct a question and answer session by covering analysts. With that, I'll turn the call over to Miguel, please go ahead.
Miguel Martin: Thanks Kevin. We're pleased to report a record third quarter for medical cannabis revenue, net income, adjusted EBITDA, and free cash flow and sincerely thank our team for making these results possible.
Miguel Martin: Our three-pronged strategy serves as our foundation and guides us forward as we seek to further strengthen Aurora Cannabis over the coming years.
Miguel Martin: First, as the world's largest medical cannabis company, we will continue to leverage our EU GMP and TGA GMP manufacturing facilities, unparalleled scientific knowledge, genetics, and regulatory expertise on rapidly evolving global medical cannabis opportunities.
Miguel Martin: Today, we proudly serve patients across multiple countries, including Canada, Australia, Germany, Poland and the UK, with an eye on future opportunities as they emerge.
Miguel Martin: Second, we will work to sustain our medical cannabis margins through operational excellence and our continued focus on the space.
Miguel Martin: And third, we'll look to achieve a steady stream of revenue and adjusted EBITDA contributions and build a track record of positive free cash flow, all while maintaining a strong balance sheet.
Miguel Martin: Our successful execution of the points I just made has enabled us to differentiate ourselves from our peers and achieve the results that we reported today. Here's some highlights from the quarter.
Miguel Martin: Overall net revenue grew 37% driven by 51% year-over-year growth in global medical cannabis.
Within global medical cannabis, international revenue increased 112%.
Miguel Martin: For the second consecutive quarter international revenue surpassed Canadian medical cannabis
Miguel Martin: comprising 60% of global medical cannabis net revenue of 300 basis points sequentially from last quarter. This intentional shift in our business validates how we have capitalized on opportunities across the globe while still maintaining a stable foundation in Canada.
Miguel Martin: Medical cannabis, our flagship business segment, generated 77% of total net revenue and 90% of adjusted gross profit. And while the majority of growth was sourced internationally, Canadian medical increased 6% and we held on to our significant leadership position.
Miguel Martin: Briefly on Bevo, our plant propagation business segment, we generated a revenue increase of 22% year-over-year through organic growth and enhanced facility utilization.
Miguel Martin: both reached all-time highs and we generated $27 million in positive pre-cash flow, another record.
Let's now discuss our Canvas business in greater detail.
Miguel Martin: Our Canadian medical business, which is known for its scientific knowledge and approach to innovation, provides our patients access to a broad selection of superior offerings.
Miguel Martin: Through Aurora Coast, our world-class research and genetics facility, we can harness solutions to provide patients the very best medical cannabis.
Miguel Martin: On that note, we recently announced a series of new cultivars developed at Aurora Coast and grown across our EU GMP and TGA GMP certified facilities.
Miguel Martin: We also partner with several other Canadian licensed producers who grow our cultivars enabling us to create more value.
Miguel Martin: Internationally, our largest market after Canada is Australia. We currently have the number two share in this highly regulated market and we are optimistic about our expanded distribution and broadened product portfolio.
Miguel Martin: Turning to Europe, let's start with Germany, a country that we've been operating in since 2018 and where we continue to maintain a leadership position.
Miguel Martin: Germany has experienced rapid growth since the onset of cannabis descheduling last year as more patients register and pharmacies are in turn expanding to support higher prescription volumes.
Miguel Martin: We are determined to maintain a consistent and reliable supply of our high quality EUGMP manufactured products to our pharmacy partners, and we're doing that through our EUGMP facilities in Canada and in Germany.
Miguel Martin: We also recently announced the launch of our first German cultivated medical cannabis product under the brand Indemed Manufactures locally further cementing our commitment to growth in this dynamic market
Miguel Martin: We strongly believe that the changes in Germany will ultimately reverberate across Europe through expanded acceptance of medical cannabis. Our intention is therefore to gain a strong foothold in these emerging countries through our agility and unique capabilities, including regulatory and cultivation expertise.
Miguel Martin: Let's now discuss two of these markets, Poland and the UK, which both generated record revenue this quarter. Poland is our second largest European market, benefiting from patients seeking high quality medical cannabis.
Miguel Martin: In the UK, revenue increased as a result of our latest product innovations and widened distribution channels.
Miguel Martin: Similar to last quarter and across all international markets, we saw an increase in demand for EU and TGA GMP manufactured flour. This aligns well with 90% of our internal manufacturing capacity being EU and TGA GMP certified.
Miguel Martin: The expansion of our latest genetics offer higher yields and a lower cost per gram to produce, which has given us the ability to significantly increase our output capacity, especially as these new cultivars begin to establish themselves.
Miguel Martin: Now at Canadian REC, while we did see a decline in revenue, this is still an important segment for us, as it is where we gain a lot of consumer insights about products, preferences, pricing, among other things, by maintaining an active presence.
Miguel Martin: We also see interactions between recreational sales and medical sales in our home market.
Miguel Martin: Internationally at some point environments could evolve from medical to rec and if so this would offer us another advantage.
Miguel Martin: We recently announced our latest innovations from our Graybeard, San Rafael 71, and Tasty's brands.
Miguel Martin: With a continued focus on premium science-driven offerings, this expanded lineup represents our commitment to delivering exceptional, high-quality, cutting-edge, and diverse options to consumers so they can enjoy unforgettable cannabis experiences.
Miguel Martin: So to sum up, with only one quarter left to go in the fiscal year, we are pleased to be executing at a high level and intend to finish the year strong through profitable growth. I would now like to turn the call over to Simona for a detailed financial overview.
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Simona King: Thank you, Miguel. We had an exceptionally strong quarter where we reached all-time highs across several key financial metrics. First, net revenue of $88.2 million represented 37% growth, supported by record net revenue of $68.1 million from our global medical cannabis segment.
Simona King: Second, quarterly profitability consisted of record consolidated adjusted gross margin at 65%, 130 basis points higher than last year, resulting in record adjusted gross profit at $56 million.
Simona King: Third, Adjusted EBITDA grew 316% to a record $23.1 million, and this was our ninth consecutive quarter of positive Adjusted EBITDA.
Simona King: Fourth, net income was $31.2 million, another record outcome, compared to a net loss of $18.1 million in the year-ago period.
Simona King: And finally, we ended the quarter with $180.2 million in cash and cash equivalents and no cannabis business debt.
Now let's go into greater detail.
Simona King: In medical cannabis, our key strategic focus, net revenue rose by 61% to $68.1 million, which consisted of 6% growth in Canada and 112% growth internationally.
Simona King: Medical cannabis comprise 77% of net revenue and 90% of adjusted gross profit during the quarter.
Simona King: This marked an increase from 70% of net revenue and 84% of adjusted gross profit from the year-ago period, the result of higher medical revenue and higher medical margins in the current year quarter.
Simona King: The increase in Canadian medical revenue was due to our continued focus on the Canadian patient experience. The commercial collaboration with Vectora Pertin announced earlier in the fiscal year also contributed to this growth.
Simona King: The increase in international medical cannabis revenue was primarily due to the full recognition of revenue in Australia after the acquisition of MedRelief Australia in February 2024 and the rescheduling in Germany. We also experienced higher sales than other European countries.
Simona King: Adjusted gross margin for medical cannabis was 74% up from 63% in the year ago period, both of which far exceeded our 60% target.
Simona King: Several factors drove the year-over-year increase, including larger revenue contributions from high-margin markets, sustainable cost reductions, and improved efficiency in our manufacturing operations with our shift to supplying the European markets from Canada.
Simona King: Consumer cannabis net revenue was $9.9 million, down from $11.6 million in the year-ago period, with adjusted growth margins of 26% compared to 29% due to sales of higher margin products.
Simona King: The year-over-year decline was the expected result of our decision to focus on the higher margin medical cannabis business.
Simona King: Ibbott's plant propagation net revenue increased to $8.9 million, up from $7.3 million in the year-ago period, with adjusted growth margins of 40 percent, up from 28 percent.
Simona King: This year-over-year improvement is due to a combination of increased plant propagation capacity and product offerings.
Simona King: Recall that Bevo historically delivers lower revenue in the summer and fall months with about 25 to 35 percent of plant propagation revenue and up to 20 percent of EBITDA earned in the second half of the calendar year.
Simona King: Consolidated Adjusted SG&A increased by 12.6% to $31.3 million compared to the year-ago period, and supported year-over-year net revenue growth of 37%.
Simona King: Adjusted EBITDA rose to $23.1 million from $5.5 million last year.
Simona King: The record improvement over the prior year period was due to a substantial increase in gross profit resulting from higher net revenue before fair value adjustments required under IFRS.
Simona King: Net income increased to $31.2 million compared to a net loss of $17.1 million for the year-ago period.
Simona King: The increase relates to higher gross profit partially offset with the decrease in elder income.
Simona King: Please note that there may be quarter over quarter variability on this line item because of these inventory adjustments per IFRS.
Simona King: Our balance sheet remains one of the strongest in the global cannabis industry. We held $180.2 million in cash and cash equivalents as of December 31st and our cannabis operations are completely debt free.
Simona King: However, our BVL business holds $57.9 million in non-recourse debt that is secured by a significant fixed asset base held at BVL.
Simona King: Cash provided by Operating Activities was $28.8 million compared to cash used of $5.3 million in the year-ago period.
Simona King: Excluding changes in non-cash working capital and discontinued operations, cash provided by operating activities improved by $25.2 million to deliver $13.8 million in operating cash.
Simona King: compared to cash use of $11.4 million in the prior year period.
Simona King: This improvement reflects a combination of increased net revenue and improved profit margins.
Simona King: Free cash flow was positive $27.4 million compared to a negative free cash flow of $4.7 million in the year ago period.
Simona King: The $32.1 million increase is due to higher net revenue and contribution margin, along with an increase in working capital of $8.2 million.
Simona King: Let me now provide some thoughts on what we expect for next quarter.
Simona King: Continued revenue growth across our cannabis business, supported by year-over-year growth in Europe and Australia.
Simona King: Seasonally higher revenues for Bebo in our plant propagation segment in line with historical seasonal trends.
Simona King: Margins to hold strong and positive adjusted EBITDA to continue, while continued spend discipline on CapEx and expected revenue growth will support improved operating cash use.
Simona King: Operating Expenditure and Adjusted Growth Margins in Line with Previous Results Disciplined Working Capital Management
Miguel Martin: Thank you for your time. I'll now turn the call back to Miguel.
Miguel Martin: Thanks, Simona. By any measure, it was a record-breaking quarter, and we think Aurora's future is incredibly bright. I say that based on a few important points.
Miguel Martin: First, several years ago we made an intentional pivot to align our resources behind a medical cannabis-first growth strategy and concentrate on high margin opportunities outside of North America.
especially as U.S. federal legalization is taking longer to materialize.
Miguel Martin: Second, patient access to medical cannabis continues to grow around the world, creating a stronger secular trend where Aurora is a key beneficiary. In our view, the market could easily exceed five billion in the next few years and we have an important role to play in that opportunity.
Miguel Martin: Third, we are well positioned versus many of our peers through our first mover advantage and key capabilities which gives us a material advantage in existing and new markets.
Miguel Martin: This combination gives us an advantage and allows us to be opportunistic and generate returns that position us to drive long-term shareholder value. And with that, we'd be happy to take your questions. Operator, please open the lines.
Miguel Martin: Thank you. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: Our first question comes from the line of Bill Kirk with Roth Capital Partners. Please proceed with your question.
Bill Kirk: Good morning everybody. Miguel, I had a question, you know, given the inflection in sales here, are you running into any supply constraints in any way or do you still have some room to continue to meet these opportunities and find more growth from here?
Bill Kirk: Yeah Bill, good morning and thanks for the thoughtful question. I think you know you raised sort of two points and first is we feel good about where we are from a supply standpoint.
Now, supplying these international markets
Bill Kirk: is a bit complicated because of the variety of different regulatory challenges in there. It's not just
the certifications.
Bill Kirk: EU GMP and TGA GMP, TGA is the Australian designation that causes some complexities. The other part is the registration process and the testing process.
Speaker Change: So, all of that has to work together in order to consistently supply those four key markets, which are Poland, Germany, France, and Germany.
Speaker Change: Australia and the UK but we feel really good about where we're at in terms of being able to meet that needs and you know we think it's a real core competitive advantage for Aurora.
And then if I can follow up.
Speaker Change: Were there any unique or opportunistic items, maybe load in, in a particular country that benefited 3Q that just aren't as repeatable for 4Q going forward? Is there any way maybe you could quantify if things like that impacted 4Q or 3Q in a positive way?
Bill Kirk: Yeah, no, Bill, we didn't see anything that was sort of, you know, out of the norm. Now, I will say
Bill Kirk: The international mark is because of permitting. They do go a little hot and cold, and I think over a fiscal year, you'll see that smooth out. But there was nothing specific in the quarter that we're reporting that was sort of a one-time or that was sort of out of the norm in terms of what we would see over a broader time period.
Bill Kirk: Wonderful. I'll pass it along. Thank you. Thank you, Bill. I appreciate the questions.
Speaker Change: Our next question comes from Federico Gomez with ATB Capital Markets. Please proceed with your question.
Federico Gomez: Hi, good morning. Thanks for taking my questions. Congrats on the great quarter.
Speaker Change: First question just on competition in these international medical cannabis markets We've seen a lot of other LPs trying to enter those markets and export from Canada How do you see that competition impacting those markets this year? You know, could it impact prices and margins or not? These markets are growing really fast. So You know, how do you look at competition at this point?
Speaker Change: Yeah, Fred, good morning, and thanks for the question. I think, you know, if you compare and contrast North America, where you're competing against hundreds of companies,
Speaker Change: you know, particularly in Canada, in the rack business, we don't see that
Speaker Change: internationally. That doesn't mean they're not some very strong and decent number of competitors, but it is a more consolidated business. And let me sort of take them
Speaker Change: you know sort of in order. Obviously Germany has garnered a lot of attention but because of the requirements of the EU GMP plus the testing
Speaker Change: plus the registration process, you do see more consolidation. So as an example, as you well know, in Canada, the top five rec companies don't even represent 50% of the business.
Speaker Change: and what we see is in most of the big European markets
Speaker Change: You know, the top five companies will represent two thirds or three quarters of the total business.
So it's a more consolidated piece of business.
Speaker Change: those companies like Aurora that have made significant investments both in
Speaker Change: product innovation and registration and on-the-ground infrastructure and it is a you know, it is portable in many cases what you have to do in Germany
Speaker Change: Well, be a little bit different in Poland is the same thing. And so I would say the competition is, you know, no less competitive, but it is from a smaller group of competitors because it is a different skill set than maybe what you would find, say, in Canada.
Thanks for that second question.
Speaker Change: is on capital location, you know, now that you've reached the free cash flow positive, obviously, and generating substantial amount of free cash flow.
Speaker Change: How are you looking at the balance sheet here, your capital allocation options in terms of, you know, growth internationally or maybe in Canada, you know, capacity expansion, et cetera. Just, you know, how do you look at the different options that you have in terms of allocating that capital? Thanks.
Speaker Change: Great yeah I mean listen it's a great question we've worked incredibly hard to have no debt on our cannabis business.
Miguel Martin: and Simona, you know, detailed having, you know, what we think is one of the strongest balance sheets out there.
Miguel Martin: As you well know, it's a very fluid environment and valuations continue, I think, to get more reasonable.
Miguel Martin: expect to be able to use that to be opportunistic as the right, you know, things come to bear. Now, we've also been very cautious and patient, which I think has incredibly benefited us.
Miguel Martin: In this environment, and so anything that we would do, we would love to be accretive from a profitability standpoint and the additive to our core competency roots is really medical cannabis.
Miguel Martin: And so, you know, I think if you look at our overall path of the way we've leveraged the balance sheet and what we've done over the last couple of years, I think you'd see more of the same. And we're proud that that's resulted in the results that we're reporting today.
Thank you. Thanks, Fred.
Speaker Change: Thank you. Our next question comes from the line of Derek Lessard with TD Cowan. Please proceed with your question.
Derek Lessard: Good morning everybody and congrats on a great quarter. I just wanted to hit on your on the margin side of the business and maybe two parts.
Derek Lessard: Starting with the medical, maybe just add some color around that 74% gross margin performance and then kind of get a sense of what your thoughts are on the sustainability of that margin. And then secondly, on the plant propagation side, again, strong results.
Derek Lessard: there, so I just want to get some additional color on the growth.
Speaker Change: Derek let me let me talk a little just broadly about margin and then I'll turn it over Simona who can give you some more details on both of your questions.
I think unlike, say, Canadian RAC
Speaker Change: What you see in Europe, which was obviously a huge part of the revenue increase that we had
Speaker Change: plus the impact on the margin is you don't see as much compression in the medical cannabis space.
Speaker Change: The wholesale list price, or the price in which we sell to our wholesalers, dictates the margin downstream, both from them, from a tax standpoint, and for our pharmacies, which some would describe as our retailers.
Speaker Change: So you don't see a lot of sort of intrinsic compression in baseline pricing and, you know, because it's in a pharmaceutical system, while these margins are high for cannabis, they're not particularly high for pharmaceutical. So I don't think you have that structural piece.
Speaker Change: Secondly, when you have both, you know, an insured NSL patient part, you also have a little more consistency in that. And since we operate mostly
Simona King: In premium and core sections, you're going to see higher margins than you might see, say, in the value segment. But I don't know, Simona, if you want to pick up on that and maybe talk a little bit about Bevo.
Simona King: And then in terms of Bevo, what we've seen with Bevo, and keeping in mind that Bevo is a seasonal business, we've seen growth in Bevo from the prior year quarter, and we've also seen improved margins in the Bevo business due to increased capacity on the production side.
Simona King: So that's helped our overall total company margins go up as well.
Speaker Change: Okay, that's super helpful guys and maybe just one more for me before I requeue on in Germany now that I guess we're about nine months into the Descheduling. What are you seeing? I guess in terms of Patient and sales growth there and and maybe as a follow-up as well. You recently launched your first cultivar Just wondering if you could speak to any of the potential cost savings in terms of you know transportation or anything else
Speaker Change: Yeah, I think so you're right. We're nine months into the de-scheduling that the biggest impact has been patient growth and so their ability to get
Speaker Change: into the system. And we've seen that continue to grow. One of the problems we have in Germany is there's not strong syndicated data.
Speaker Change: IRI Nielsen, or maybe even some other stuff we see in some other markets. So it's hard to give you an exact percentage of what we're seeing in overall growth. I think, you know, it's.
Speaker Change: It's double digit. We see it still growing. I think one of the questions connected to that we get is given where the elections may go in Germany, do we see a real change? We don't. Most of what they've talked about has been on the REC side or the de-scheduling there. So we see Germany, you know, without giving you precision on the growth, continuing to grow. And we see a small subset of companies being able to take advantage of it.
Speaker Change: and we are launching our first cultivar there and we'll be launching many more that, you know, will be some of the best in the world from there. I think, you know, people are excited about a German-grown cultivar being available in that market in other areas.
In terms of overall efficiencies while you do pick up
Speaker Change: you know some because of where it's at and from shipping it is offset a bit by higher energy costs and and some of the other COGS costs that we have there so it's early days for that for that facility it's a very
Speaker Change: Small and what I would say sort of emerging facility as it pertains to our global You know production footprint and so more to follow on Leuna, but we're really excited about having something in Europe That is GMP that can service both Germany and the rest of those GMP markets
Speaker Change: Thanks for that, Miguel. Thanks, everybody. You're very welcome, Derek. Thank you.
Speaker Change: Thank you. Ladies and gentlemen, as a reminder, if you'd like to join the question queue, please press star one on your telephone keypad.
Speaker Change: Our next question comes from the line of Matt Bottomley with Canaccord Genuity. Please proceed with your question.
Speaker Change: Good morning everyone wanted to stick on the sort of the international contribution obviously, you know, it's done very well for you guys.
Speaker Change: and it's something that, you know, more LPs and even some of the MSOs are starting to talk about with respect to those opportunities. So I guess first, and I know you've touched on this a little bit, but maybe sort of two ways to look at it. One is what's kind of the breakdown on average of sort of innovative products there versus maybe more bulk or, you know, flower. I know you guys are more in the higher quality segment of the market, but just trying to get an understanding of the types of products on average that make up your revenues. And then if you could also give any color as to what percentage of your customer patient base there, or maybe just.
your revenues are attributable to patients that have coverage.
Thank you.
Speaker Change: Matt, well good morning and thanks for the question. So let me try to break it down a little bit. You know in Germany it's all flour and oil with exception of a couple of other small products.
Speaker Change: similar situation in Poland. The UK and Australia allow for a broader portfolio so you do see edibles, you do see vape products and a variety of others but regardless of the ability to sell those products in Australia.
Speaker Change: and in the UK, the vast majority of the sales in all those international markets is flour.
Speaker Change: And, you know, from that, it's again the ability to get compliant products.
Speaker Change: into those markets that can, you know, meet the registration, the stability, you know, the testing and all of it. And so I think, you know, as we look at that, you are starting to see some distinction between the value segment.
Speaker Change: and more of where we operate on the top side, you know, which is, you know, people willing to pay for that, for this. Now in terms of segmentation, we, you know, lack
Speaker Change: syndicated data in a lot of those markets. The biggest market in Europe is
Speaker Change: The German market, we are seeing that the fastest growth is happening in the self-payer market and probably today is the majority of sales now, whether that's 51% or 89%. We don't have that type of precision, but we are seeing, you know, expansion and all of that. That being said, you know, the insurance coverage continues to be there and is actually expanding as more and more insurers are getting comfortable with a broadened list of what we call as indications.
Speaker Change: And so I think to be successful you have to do both. Now the good news is that a patient, whether they're a self-payer or in the insured segment, want the same things.
Speaker Change: and the experience that a company like Aurora has with almost a decade of experience in Canada, that really resonates because, you know, unlike other markets, this is a patient going to a doctor.
Speaker Change: and that's why you know you see why we're doing so well in many of these markets and why a smaller subset of companies we believe will be successful long term in those markets.
Speaker Change: Awesome. It may be true to add to that, that these are finished goods products, not, not bulk. And we do believe we have a strong brand reputation in these international markets.
Speaker Change: Okay, got it. And then just a quick one on consumer cannabis, obviously, not not core to the strategy. So not a lot of color on it. But I'm just just curious on on how you look at that, that segment going forward in the more medium term. So we're seeing more decreases in that segment, as you put more supply into, you know, the GMP manufactured products, as you put in your prepared statements, the 26% gross margin, does that flow down to like break even on a cash flow, if you look at kind of at a four wall? And if it does, is there any, you know, sort of indication, you know, from
Unknown Executive, Miguel Martin, Simona King, Kevin Niland, Ananth Krishnan
Miguel Martin: Yeah, let me take the first part and I'll let Simona talk about the modeling on the cash flow piece. I think, listen, I give a lot of credit to the Canadian government. A lot of people are banging on them about, you know, advancements in the five-year plan and all these different things. Canada has done more on REC than anybody else.
Speaker Change: in Canada. And while that would be a significant issue for any company,
Speaker Change: Since we have the opportunity to take those same finite high quality inputs.
Speaker Change: and sell them at a significant profit around the world. It makes the decision very easy for us.
Speaker Change: to focus on that. Now, Canada is getting better. We are encouraged by some of the actions from the provincial folks have taken and you know, it's going in the right direction. We've even seen some price increases, including some that we've taken.
Speaker Change: on some of our products. But again, when you've got these incredibly high value
You know articulated
Speaker Change: Finish Goods, as Simona mentioned, products that you can sell around the world. You don't do that. Now, it's important for us to stay in that market, though, because you learn a lot, and there's a lot of innovation, and there is a lot of connectivity.
Speaker Change: between the Canadian medical and Canadian rec market that will exist at some point in other parts of the world. And so that's why we stay there. I mean, Simona, any comments on the modeling of profitability?
Speaker Change: Yes, I mean as we we mentioned, you know, we're supporting our growing global medical cannabis business and in prioritizing supply towards that which are the higher margins
Speaker Change: But we're still active in the consumer segment and we continue to focus on profitable growth opportunities. And I would say the change in margins from the prior year-ago period is primarily driven by the change in the sales mix and not related to pricing.
Speaker Change: You know, pricing compression has been slowing in the Canadian market as we've seen, but again, that's that's irrational behavior. So sometimes it's hard to predict.
Okay, got it. Thanks for all the details, guys.
Thank you.
Speaker Change: Thank you. Our next question comes from the line of Doug Meehan with RBC Capital Markets. Please proceed with your question.
Thank you. Good morning.
Speaker Change: You did talk about the potential for M&A given better pricing.
Speaker Change: You're knitting with respect to the medical side of the business. Is there?
Speaker Change: Part of your existing portfolio where you do you see a need for a specific type of company or are you talking more about incremental supply for the growth of the market in various countries as they come on?
Speaker Change: Yeah, I mean, Doug, it's a great question. I think first and foremost, we'd love to invest internally, which we've done.
Speaker Change: As Simona mentioned, our cost of production program continues to go down significantly. So we make a significant investment.
in the West Coast. We've made significant investments.
Speaker Change: in our production facilities to not only align with the UGMP, but also the expansion of production. And we also invest, you know, in markets. Now, it's not, you know, it's just almost a year that we made a significant acquisition to the rest of MedRelief Australia, one of the fastest growing markets in the world.
Speaker Change: And that, you know, I think is sort of, you know, indicative of what we like. We've been with that business in Australia since 2017. So we knew a lot about it. We knew a lot about the team down there. And we did that. I think, you know, we've worked incredibly hard to have no debt on our cannabis business.
Speaker Change: and have worked incredibly hard to be profitable. So as things come up, and yes, we see things from a value standpoint, getting more reasonable as time goes along, we have the ability to be opportunistic and we will be. I think, you know, what I would say is
Speaker Change: What you've seen us do in the past is probably indicative of what we're going to do going forward which is can continue to be patient
Speaker Change: but opportunistic when it makes sense and continue to grow a profitable global medical cannabis business which is really what we're best at and I think you know that's been our playbook and it's worked extremely well and I think we'll you know continue with it.
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Speaker Change: Okay perfect and then as a follow-up it's more housekeeping on that taking over of all med relief but would you be able to delineate exactly what the contribution was from full consolidation in terms of absolute growth that this latest quarter versus last year?
Simona, do you want to take that one?
Simona King: Yeah, I guess one way to think about that is, as we have in the prior quarter, so our fiscal year Q2 of 2025 and this quarter, we're able to record the full revenue recognition for the business.
Simona King: where that contribution comes in because of the full revenue recognition coming into play these last two quarters.
Speaker Change: Okay, but you can be more specific than that in terms of a number.
Speaker Change: Yeah, we don't break out the markets like that. Yeah, okay. That's great. Thank you.
Thank you for your question.
Speaker Change: Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Martin for any final comments.
Miguel Martin: Robert, thank you very much. And listen, we want to thank everybody that was on the call today. We are incredibly proud of this quarter, but more importantly, excited about the bright future that Aurora has. We thank everyone, best of all, and we really appreciate your interest and attention to Aurora. All the best.
Speaker Change: Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.