Q1 2026 Aurora Cannabis Inc Earnings Call

Greetings, and welcome to Aurora, cannabis Incorporated fiscal, first quarter 2026 results conference call. All participants will be in a listen-only mode. A question and answer session will follow the formal presentation. The conference is being recorded today. Wednesday, August 6th, 2025 I would now like to turn the conference over to your host. Kevin nylon, senior director of strategic finance and investor relations. Please go ahead, sir.

Hello. And thank you for joining us with me here, Miguel Martin, executive, chairman and CEO. It's Mona King CFO.

Any time this morning, we filed our financials for the first quarter of 2026 period, ending June 30, 2025, and issued a news release containing these results.

This news release along with our financial statements and mdna are available on our IR website as well as via Cedar, plus and Edgar.

Our discussion today gives a reminder that certain matters can 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. Those 4 looking statements risk factors that may affect actual results by the details, in our annual information form and other periodic, filings and registration statements, these documents will be active via Cedar plus and Edgar.

Always prepared remarks by McAllen. Simona will conduct a question after session. When we're covering all this with us, 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 1806 million, a quarter ends 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 relatively industry.

Turning now to key highlights from the first quarter of 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%.

As we benefited from higher cannabis margins.

And finally adjusted ibida 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.

The leading Market positions in Canada, Australia, Germany, Poland, and the UK. We can 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 operational efficiencies. Additionally, we have invested in new cultivation technology to meet product demand, while establishing strong third-party Partnerships that enable us to optimize our production planning to meet demand,

Our ability to generate top tier margins and pricing, is a function of selling high-quality premium products. Portfolio. Mix is also favorably impacting margins. As we are selling more medical cannabis than ever before, which is further benefited by our continued, focus on expansion into key. High margin International markets,

Let's now dive into our Global cannabis business, whether in Australia, Western, Europe or even parts of Eastern Europe. We are executing on what we believe are great opportunities.

There are 2 key factors that set, Aurora apart from our competitors.

First, most markets, require certifications such as TGA gmpp in Australia and EU GMP in Europe that we already have.

Second, we've spent close to a decade investing in the resources and infrastructure required to be successful in these markets.

After Canada, Australia is our next largest single market for medical cannabis and where we hold the number 2. Share, this Market is highly regulated, growing rapidly and attracting new entrance, and we are confident in our positioning. We have great relationships with Distributors and pharmacies and this provides an effective moat for our business. While our own growth is not always linear the nearer. And longer term trajectory is clear based upon expanded, patient accessibility and an expanded array of treatment formats and potency options.

We believe that the Australian Market will not have a large number of operators and in our view, it will remain a Consolidated Market with only a subset of companies. Being a successful like Aurora.

On a related note, we are excited by the opportunities in New Zealand and emerging and growing Market, our regulatory expertise allows us to successfully navigate the complex And Timely product, registration process, which creates a high barrier to entry resulting in a more Consolidated Market than Australia.

Turning to our European markets, beginning with Germany, where we are both growing and gaining market share.

Descheduling in April 2024 has resulted in more patients registered and pharmacies working to support higher prescription volumes. We would characterize Germany as a permissive regulatory regime where there is a clear path for patients to obtain prescriptions, including by telemedicine and shipment of medical cannabis, which is legal through the mail.

With a new government in place, we do expect that there could be some regulatory changes. While it's still preliminary, we do not see any immediate indication of a significant rollback in medical cannabis regulations that would impact our current growth plans.

Ultimately, we believe that established operators with a proven track record like Aurora will be able to successfully navigate any potential regulatory changes and continue to supply German patients in this growing Market.

Germany is being carefully, observed across Europe and its potential impact on neighboring, Western and Eastern European countries is significant. There is already broad support for legalization of medical cannabis throughout the region.

New markets, like Switzerland and Austria are online with France, turkey, and Ukraine showing positive developments from medical cannabis as well.

Recorded our fiscal fourth quarter in June, we discussed temporary headwinds following the regulatory changes that impacted prescription volumes. These headwinds have been resolved. During the first quarter, strong demand has resumed for our high-quality product offerings.

At the tail end of the first quarter, we announced the launch of 2, new proprietary cultivars in Poland marking, the highest potency medical, cannabis products available in the country.

Grown and manufactured in our GMP certified Canadian facilities. These premium medical cannabis products are quickly becoming a new Preferred Choice for Polish patients.

In the UK, we continue to expand our distribution through new Partnerships and successfully launched, proprietary cultivar specific and scalable cannabis extracts these Innovative new product category, represents another step forward and expanding the variety of high-quality medical cannabis available in this growing Market.

Turning to Canadian operations, our Canadian medical, net revenue, grew year-over-year. As we benefited from high revenue from both insurance, covered and self-paying patients. We also continue to lead with this market, with the number 1 market share

Our priorities are investments in our Online Marketplace, through Innovation, increased product, assortment operational excellence and ensuring a high-quality patient experience.

To further support Canadian patients, we recently expanded the eligibility of our medical compassionate pricing program, and for a third consecutive year, we have continued our Strains for Heroes initiative.

Through collaboration with veteran communities and organizations across the country.

In short, we had another successful quarter executing on our strategic priorities and our excited about our future. Let me now, turn the call over to Simona for a detailed Financial overview.

Of fiscal q1, followed by a discussion of our outlook for fiscal Q2.

Thank you. Miguel our strong.

Effectiveness of our medical cannabis strategy and reflects consistent execution against our state of plan that is delivering the same 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 Canada 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, Eva dog. Grew 209% to 10.8 million from 3.5 million in the year ago. Period.

And forth. We generate a free cash flow of 9.2 million representing a 42% increase from the year ago, period and end of the quarter with the 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 profits.

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 margins, 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 1, 1. 5.

The year is year-over-year. Change was the expected result of our continued decision to focus in on portfolio. Optimization and prioritize sales to our higher margin medical canvas system.

Adjusted gross margins for Consumer candidates with 33% compared to 20% in the year ago. Period.

The margin increase was due to sales of higher-margin products and cost improvements to spend efficiency.

Record quarter for the company.

This improvement is due to a combination of organic growth and expanded product offerings.

People historically, delivered higher Revenue in the winter and spring months with about 65 to 75% of plant propagation revenue and up to 80% of iba.com in the first half of the calendar year.

Adjusted growth margin from plant. Propagation Revenue was 6% compared to 18% in the year ago. Period.

The decrease was related to inventory write-off called by a non-recurring quality issue, as well as some Surplus crops that were not sold.

Excluding these non-recurring costs, adjust the gross margin before fair value adjustments. Would have been more in line with historical trends.

Consolidated, adjusted sgma increased. 19% to 37.14 million compared to the year ago, period and supported your regular net revenue. Growth of 17%

The increase relates to higher selling and distribution costs.

As well as incremental costs following that position of American relief, Australia.

Adjusted evaa increased to 10.8 million from 3.5 million.

The 209% improvement from the year-ago period was due to a substantial increase in gross profit, resulting from higher net revenue before fair value adjustments required under IFRS.

Our balance sheet remains 1 of the strongest in the global cannabis industry.

We held 186 million in cash and cash equivalents as of June 30th and our cannabis operations are completely debt free.

Our plant propagation business holds non-recourse debt that that is secured by a significant fixed asset based held at beetle.

Street cash flow was positive, 9.2 million compared to a positive 6.5 million in the year ago, period.

The $2.7 million increase is due to higher net revenue and contribution margin, favorable changes in working capital, and lower capital expenditures.

Let me now provide some thoughts on what we expect for 2 to 2026, which ends on September 30th.

First Consolidated, net revenue is expected to increase year-over-year, driven primarily by 8 to 12% growth in our Global medical cannabis segment.

Second plant, propagation revenue is expected to perform in line with traditional seasonal Trends, as 25 to 30. 35% of revenues are normally earned in the second half of a calendar year.

Third Consolidated adjusted gross margins are expected to increase, driven primarily by 250 to 475 basis points growth in our cannabis business. With planned propagation, adjusted gross margins are expected to mostly perform in line with historical trends.

Improvements in our adjusted gross margins and higher Global medical. Cannabis Revenue should lead to continued. Strong positive, adjusted, keep it down.

And finally, while free cash flow is expected to be positive on an annual basis for the second consecutive year, there will be several significant cash outflows in line with historical trends that will impact free cash flow results in Q2 2026.

Thank you for your time. I'll now turn the call back to Miguel.

Thanks Simona, our industry leadership and 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 continued innovate and expand our product portfolio, these attributes sets us apart and are delivering consistent Revenue generation positive, adjusted up and positive. Free cash flow. Thank you. Operator, please open the lines for questions.

Thank you, we will now be we, we conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2. If you would like to remove your question from the queue,

Goals for questions.

Our first question comes from Derek, lassard, with TD Cohen, please proceed with your question.

Yeah, good morning everybody. Glad to hear your voices and great quarter.

Thank you, Eric.

Um I just maybe just wanted to touch a little bit on the the higher sgna in the quarter. Uh Miguel maybe just add some color to, I think the pr you called out Freight and Logistics and and some m&a related charges and then maybe how should we look at that. Uh I guess the 37 million level of expenses as a percentage or as a percentage of Revenue going forward.

Yeah, great. Let me start. And then I'll let Simona, um, dive into the details though. So the first part of it is, you know, their variable cost when we increase revenue and so when you see things like, you know, 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 you know, as we've been integrating MRA into our system, you know, whether it's from a, you know, a financial services standpoint inventory management, you know, Erp and other types of Investments there are costs. Um, some of that is 1 time, but let me turn it over to Simona so she can talk a little bit about the modeling going forward. Uh, yeah. Thanks. Um, thanks Miguel. So to have a little bit more to that.

You know, it's our Revenue has grown the variable costs grow with that. And, and now, being a full year, a full quarters of Med relief, um, cost that's reflecting the current quarter versus the prior prior Year's quarter. So that's also a reflection of that. And as we think about STNA moving forward, we do believe that these levels are the appropriate level as adjusted as CNA. Now, keeping in mind, is revenue continues to significantly increase but those were cost distribution costs will also go up.

Okay. Thanks for that Samora and Miguel. Um and and 1 last 1 for me before I I recuse seems like I mean clearly everybody's trying to get into to Europe now because of the the higher margin profile, I guess number 1. Have you seen a I guess a step up in in the competition there and and 2 is, how do you view sort of the the margin structure or or profile, um, evolving over over the coming years?

Yeah. I mean, you know it was a record quarter of Canadian exports um, this past month. And and as we've talked about nowhere as a leader in it, I think you know, each of the 3 big countries in in Europe are a bit different. Um, so let me give you a bit of an expanded answer.

When you look at Poland Poland's a very challenging environment in order to get your projects registered takes a long time, takes a lot of work and obviously, you know, 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's a great Market. Um, I'll do Germany. Last when you look at the UK

The UK is not only about getting, um, products into it and it's nice because the UK allows other, you know, products other than flour and oil. But you also have to be able to navigate a pretty sophisticated distributor and Clinic Network. So, just having flour or just having products to export is only sort of part of the puzzle for the UK. Now Germany's, obviously the largest and, and has some of the

The better pricing, but you, you've got sort of 3 things going on in Germany. First is you really have to have feed on the ground, to maximize your margin. You can export bulk flour into Germany and and do okay. Particularly at the lower price tiers. We're operating at 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 um with both wholesalers distributors.

Pharmacists and now more so than ever, tele medicine. And so because of that while it's a little bit more of a of a diluted Market that maybe it was a couple years ago. Um it's still a very challenging Market if you want to maximize your margin profile there,

Thanks for that guys. You got it, Derek, thank you.

Our next question comes from Bill Kirk with Roth.

With your question.

Hi, good morning, everybody. Um, so looking at the balance sheet, the, the bivo liabilities, look like they move to current uh, which which appears uh to be related to a covenant breach uh, for not providing audited financials. So like, I guess what? What's going on there? How does it get remedied with the lender and how does it impact your audit process?

so this is related to people's uh loan facilities which they are working through um through the covenants um Covenant issues and uh as we have to consolidate from a coming standpoint, if the financials we we move the the

The loan from uh, the long-term to current as needed from an accounting. Um purpose. Um, so that's just an accounting treatment but people's working through the, through the loan me mechanisms now. So there are no concerns on our end from that and we feel very strongly about our business. Uh, some people, yeah, I mean, I guess Bill, the only thing on that is given the size of it and given that it's an abl base loan and um and the way it's set up, we think this is going to be resolved you know quickly it's not a big deal. It just wasn't by the time we you know, posted this. So we had to post that debt as current. Um but you know fully expect this will be handled in in the near term and and you'll see it be treated as it has been historically. Okay good. Good to hear. Thank you. And then on the on the 2q guidance, um, you know, last quarter when you gave the the guidance for 1 Q. Uh you know you said adjusted Eva de would be positive and directionally. It'd be I think you said lower than 4 q. I don't think I heard the directional.

Commentary for the Q2 guide: is there any color on how you're looking at Q2 relative to Q1 on adjusted AVA?

Yes. So we

Adjusted and we expected to grow versus the current quarter.

Okay, that's exactly what I was looking for. Thank you, you got it. Thank you, Bill.

Our next question comes from Frio Gomez with ATB Capital markets, please proceed with your question.

Hi morning. Thanks for taking my question. Um,

Let me get regarding your cam comments on Germany, uh, in terms of potential regulatory changes there. Uh, do you have any, any sort of caller, in terms of, uh, when do you think that could happen? Uh, and you know, would you anticipate the impact there to be similar to what we saw in Poland?

Yeah. Well, good morning Fred. Um, so what we saw was a note put out as you well know from the, you know, new government, particularly the health Minister around potential questions. Um, the way, what we'll see in the process from 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 um, was very Pro cannabis

Some of the issues that they've really highlighted have been focused on the wreck like aspects of that descheduled. And while there were a couple things on the medical side, the more restrictive 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, tele medicine,

Into a lesser extent, the product registration, you know, expertise and experience of the market GMP production, you know, 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 very medical. Cannabis is very mainstream. There are you know workarounds even if they were to you know talk about things like shipping through the mail there's Courier Services we have direct distribution in in certain circumstances so we'll see.

Um, but I don't think you would see the same sort of impact of what you saw in Poland, um, because it's just a bigger broader system, and, and it doesn't sort of lend itself there. So more to follow by the end of the year. Um, but, you know, when things get tighter, those companies that, you know, have a lot more experience, navigating this typically do better.

Thanks for that and and just on Poland. Um, you mentioned that the, the headwinds there, uh, they have been resolved, uh, but are you back to the same levels in terms of, you know, volume in that market and demand and sales, uh, as, as you were, you know, before those regulatory changes

What's the highest potency flour? 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, you know, great products and and sort of great execution. So we're pleased with Poland, you know, we think um, that situation at least for us has resolved itself and we're excited about it.

Thank you very much. You're very welcome, Fred. Thank you.

As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad,

Our next question comes from Pablo, zanic, with please, proceed with your question.

Good morning, everyone. Um, 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. Um, other companies in Canada, several that are increasing capacity. What can you comment on that? Thank you.

Yeah, thank you for Pablo and good morning, you know. So 90% of what we, you know, produce is GMP or TGA GMP or both. So you know, we are, I think 1 of the largest, if not the largest exporter of medical canvas 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. Um, potency and introducing new cultivars. So even with the same

Footprint through our genetic system, you know that we think is 1 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 will continue to expand upon. So that's the foundation of of, of where we're at. We've also been very successful developing a, an effective third-party Network buying situationally where we need products. Both GMP products for international shipment, as well as gacp, uh, for domestic. We think that works really well for us right now and we have a lot of flexibility, you know, as you know, well know we have a 186 million dollars 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 um having the facilities in Canada and the 1 in Germany.

Right. And and look the the second question is a bit of a 2-part question. But, um,

You know what we've seen in other markets like Australia, and we're beginning to see in the UK. I think the UK is even more vertically integrated downstream, right? Like producers and distributors taking control of clinics, and in some cases, having a lot of clout with the pharmacies. I'm not so sure about the regulatory aspects of that, but is there an opportunity for Aurora in Australia, Germany, the UK, or other markets? Or are they going to stick to their model of mostly being a producer of brands and distributing them only?

Yeah. I mean, it it's a great point to the evolution of, of the, so development of value chain. We have a clinic in Australia. Um, obviously we have a long history with working with clinics, particularly, in Canada, where we're, the largest, you know, medical canvas company. Um, by far, I think, you know, there's sort of 2 ways to, to go at that 1 is having your own, um, clinics are Downstream, as you would describe at infrastructure and secondly, is, you know, 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 um, you know, in the UK, in Germany, particularly with tele medicine and in Australia, we've created very what I would describe as modern trade programs, that, you know, create an 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 you know, traditional trade program incentives. Um, is really the the model we're working right now. If that, you know, if there's other ways to get there, you know, 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.

Thank you. Thank you, Pablo.

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, uh, that's on this call. We're very excited about this quarter. We even more excited about the future for our 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.