Q2 2026 Aurora Cannabis Inc Earnings Call

Speaker #1: Greetings and welcome to Aurora incorporated . Fiscal second Quarter 2020 results . Conference call . All participants will be in a listen only mode .

Operator: Greetings, welcome to Aurora Cannabis Inc. fiscal Q2 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, November 5, 2025. I will now return the conference over to your host, Simona King, Chief Financial Officer, Aurora Cannabis. Please go ahead.

Speaker #1: A question and answer session will follow the formal presentation . The conference is being recorded today , Wednesday , November 5th , 2025 .

Speaker #1: I would now like to turn the conference over to your host Simona King Chief Financial Officer , AURORA CANNABIS INC . Please go ahead .

Speaker #2: Hello and thank you for joining us . With me is Miguel , executive chairman and CEO . Earlier this morning , we filed our financials for the fiscal second quarter 2026 period ending September 30th , 2025 .

Simona King: Hello, thank you for joining us. With me is Miguel Martin, Executive Chairman and CEO. Earlier this morning, we filed our financials for the fiscal Q2 2026 period ending 30 September 2025, and issued a news release containing these results. This news release, along with our financial statements and MD&A, is available on our IR website as well as via SEDAR and EDGAR. We have also posted an investor presentation to our IR website for reference purposes. Our discussion today serves as a reminder that certain matters could 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 in those forward-looking statements. Risk factors that may affect actual results are detailed in our annual information form and other periodic filings and registration statements.

Speaker #2: And issued a news release containing these results . This news release , along with our financial statements and MDMA , is available on our IR website , as well as via Cedar and Edgar .

Speaker #2: We have also posted an investor presentation to our IR website for reference purposes . Our discussion today serves as a reminder that certain matters could constitute forward looking statements that are subject to risks and uncertainties relating to our future financial or business performance .

Speaker #2: Actual results could differ materially 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 .

Speaker #2: These documents may similarly be accessed via Theater and Edgar . Following our prepared remarks , we'll conduct a question and answer session with our covering analysts .

Simona King: These documents may similarly be accessed via SEDAR and EDGAR. Following our prepared remarks, we'll conduct a question-and-answer session with our covering analysts. With that, I'll turn the call over to Miguel. Please go ahead.

Speaker #2: With that , I'll turn the call over to Miguel . Please go ahead .

Speaker #3: Thanks , Simona . Aurora's sustained strategic focus on global medical cannabis , the highest margin segment of the industry , combined with exceptional operational execution , has once again delivered standout financial results .

Miguel Martin: Thanks, Simona. Aurora's sustained strategic focus on global medical cannabis, the highest margin segment of the industry, combined with exceptional operational execution, has once again delivered standout financial results. This performance is further reinforced by a strong cash position and the absence of cannabis business-related debt. In our view, Aurora is highly differentiated for the following reasons. First, we are Canada's largest medical cannabis company. Second, we are Canada's leading exporter of medical cannabis with world-class GMP facilities in Canada and Germany that enable us to supply global markets with high-quality premium products. Third, we are market leaders in Germany, Australia, Poland, and the UK, the four biggest nationally legal medical cannabis markets outside of Canada. Fourth, we are best positioned to gain a strong foothold in emerging markets as they develop, drawing on our proven successful commercial execution and global regulatory expertise.

Speaker #3: This performance is further reinforced by a strong cash position and the absence of cannabis business related debt . In our view . Aurora is highly differentiated for the following reasons .

Speaker #3: First , we are Canada's largest medical cannabis company . Second , we are Canada's leading exporter of medical cannabis with world class GMP facilities in Canada and Germany that enable us to supply global markets with high quality , premium products .

Speaker #3: Third , we are market leaders in Germany , Australia , Poland and the UK . The four biggest nationally legal medical cannabis markets outside of Canada .

Speaker #3: And fourth , we are best positioned to gain a strong foothold in emerging markets as they develop . Drawing on our proven successful commercial execution and global regulatory expertise .

Speaker #3: We will explore these themes in greater detail momentarily . But first , here are key highlights from Q2 2026 compared to Q2 2025 .

Miguel Martin: We will explore these themes in greater detail momentarily, but first, here are key highlights from Q2 2026 compared to Q2 2025. Net revenue rose 11% to CAD 90 million, which included record global medical cannabis revenue increasing 15% and record international revenue increasing 22%. Consolidated adjusted gross margin improved 700 basis points to 61% as we benefited from higher cannabis margins due to increased international revenue. Note that we had originally set a 60% adjusted gross margin target for our medical cannabis business and have consistently exceeded that target over the last 3 years, reaching 69% during the Q2. Finally, adjusted EBITDA rose more than 52% to CAD 15 million, exceeding our top-line growth by a factor of 5.

Speaker #3: Net revenue rose 11% to 90 million , which included record global medical cannabis revenue increasing 15% and record international revenue increasing 22% . Consolidated adjusted gross margin improved 700 basis points to 61% .

Speaker #3: As we benefited from higher cannabis margins due to increased international revenue . Note that we had originally set a 60% adjusted gross margin target for our medical cannabis business and have consistently exceeded that target over the last three years , reaching 69% during the second quarter .

Speaker #3: And finally , adjusted EBITDA rose more than 52% to 15 million , exceeding our top line growth by a factor of five . Stepping back from the quarter , we have grown our net revenue over the last five years from 68 million to 90 million , with adjusted EBITDA increasing 73 million from -58 million to a positive 50 million .

Miguel Martin: Stepping back from the quarter, we have grown our net revenue over the last 5 years from CAD 68 to 90 million, with adjusted EBITDA increasing CAD 73 million from CAD -58 to +50 million. These results illustrate our continued focus on profitable and sustainable growth. Over the past decade, we have built a competitive moat that continues to fuel international revenue gains and adjusted gross margin expansion, momentum we expect to sustain well into the future. Traction in global medical cannabis is a long-term proposition, and through our investment in science, technology, and people, coupled with supporting patient access and physician engagement, we have built the foundation for continued success. The capital we've invested in our European and Australian GMP-certified manufacturing and distribution facilities positions us to lead amongst the select few cannabis companies with both regulatory certifications that most markets require.

Speaker #3: These results illustrate our continued focus on profitable and sustainable growth over the past decade . We have built a competitive moat that continues to fuel international revenue gains and adjusted gross margin expansion momentum .

Speaker #3: We expect to sustain well into the future . Traction in global medical cannabis is a long term proposition , and through our investment in science , technology and people , coupled with supporting patient access and physician engagement , we have built the foundation for continued success .

Speaker #3: The capital we have invested in our European and Australian GMP certified manufacturing and distribution facilities positions us to lead amongst the select few cannabis companies , with both regulatory certifications that most markets require .

Speaker #3: 90% of our annual manufacturing capacity is within multiple GMP certified facilities and our products comply with these increasingly stringent international standards . Beyond manufacturing , our own products , we are also able to distribute them Compliantly and profitably around the world .

Miguel Martin: 90% of our annual manufacturing capacity is within multiple GMP-certified facilities, and our products comply with these increasingly stringent international standards. Beyond manufacturing our own products, we are also able to distribute them compliantly and profitably around the world. We view vertical integration as a structural advantage for us, primarily for 2 reasons. First, we sell medical products and consistency of supply is critical. Being out of stock or substituting cultivars due to fragmented sourcing is neither optimal for prescribers nor patients. Longevity with cultivars, quality, and reliability build confidence with both constituencies. Second, we have lower production costs than others, made possible by our focus on yield, potency improvement, and operational efficiencies. At our manufacturing site in Germany, we're doubling production as we prepare for further growth in the market and adjacent countries.

Speaker #3: We view vertical integration as a structural advantage for us, primarily for two reasons. First, we sell medical products and consistency of supply is critical.

Speaker #3: Being out of stock or substituting cultivars due to fragmented sourcing is neither optimal for prescribers nor patients . Longevity with cultivars . Quality and reliability build confidence with both constituencies .

Speaker #3: Second , we have lower production costs than others made possible by our focus on yield , potency , improvement , and operational efficiencies at our manufacturing site in Germany , we're doubling production as we prepare for further growth in the market and adjacent countries .

Speaker #3: This investment will allow us to significantly increase capacity while also targeting yields and operational efficiencies to more closely align that facility with our Canadian sites .

Miguel Martin: This investment will allow us to significantly increase capacity while also targeting yields and operational efficiencies to more closely align that facility with our Canadian sites. The bar for recertification keeps rising, especially in Germany, and we are pleased to have been recently GMP certified for another 3 years. Having EU GMP production in Central Europe provides regulators and stakeholders the ability to depend on the same genetics and product consistency that we have in Canada. Let's now dive into a discussion on individual medical cannabis markets. Australia is our largest medical cannabis market outside of Canada, where we currently hold the second-largest share. The Australian market offers one of the broadest ranges of product formats beyond North America, allowing us to fully leverage our diverse portfolio. Over the past 2 years, it has experienced rapid expansion, now representing a CAD 1 billion market opportunity, according to the Penington Institute.

Speaker #3: The bar for recertification keeps rising , especially in Germany , and we are pleased to have been recently been GMP certified for another three years , having GMP production in Central Europe provides regulators and stakeholders the ability to depend on the same genetics and product consistency that we have in Canada .

Speaker #3: Let's now dive into a discussion on individual medical cannabis markets . Australia is our largest medical cannabis market outside of Canada , where we currently hold the second largest share .

Speaker #3: The Australian market offers one of the broadest ranges of product formats beyond North America , allowing us to fully leverage our diverse portfolio .

Speaker #3: Over the past two years , it has experienced rapid expansion . Now representing a 1 billion market opportunity , according to the Penington Institute .

Speaker #3: Turning to Europe . Germany is the largest market and growing with expanding mainstream acceptance . We increased our revenue during the second quarter , supported by a broad set of core and premium products , and are gaining share based upon our strong reputation amongst wholesalers , distributors and pharmacists .

Miguel Martin: Turning to Europe, Germany is the largest market and growing, with expanding mainstream acceptance. We increased our revenue during Q2, supported by a broad set of core and premium products, and are gaining share based upon our strong reputation amongst wholesalers, distributors, and pharmacists. Imports, as reported by the German regulators, has increased rapidly from 8 metric tons in 2018 to 72 metric tons in 2024 and is currently on track to more than double in 2025. The new German government is exploring changes to the descheduling of cannabis first enacted about 18 months ago, with the potential for modifications to the current telehealth framework. We support reasonable access to high-quality medical cannabis and await further details of the proposal. We are confident in our ability to adapt to potential changes in the telehealth framework, drawing on our successful experience in Poland.

Speaker #3: Imports . As reported by the German regulators , has increased rapidly from eight metric tons in 2018 to 72 metric tons in 2024 , and is currently on track to more than double in 2025 .

Speaker #3: The new German government is exploring changes to the descheduling of cannabis , first enacted about 18 months ago with the potential for modifications to the current telehealth framework .

Speaker #3: We support reasonable access to high quality medical cannabis and await further details of the proposal . We are confident in our ability to adapt to potential changes in the telehealth framework .

Speaker #3: Drawing on our successful experience in Poland , however , modifications to home delivery regulations could present greater challenges , particularly for patients in rural areas .

Miguel Martin: However, modifications to home delivery regulations could present greater challenges, particularly for patients in rural areas. Ultimately, we believe that established operators with a proven track record like Aurora will be able to successfully navigate any potential regulatory changes. Germany is also carefully observed across Europe, and its potential impact on neighbor European countries is significant. Let's now discuss Poland, where we are already the established leader in advancing medical cannabis. This market size has more than doubled from a little over 2 tons annually in 2023 to approximately 5 tons in 2025. Further growth is expected following the increase in annual import limits. We generated robust revenue growth during the Q2 as we benefited from our launch of two proprietary cultivars a few months ago. To our knowledge, these are the highest potency medical cannabis products available in the country.

Speaker #3: Ultimately , we believe that established operators with a proven track record like Aurora will be able to successfully navigate any potential regulatory changes .

Speaker #3: Germany is also carefully observed across Europe , and its potential impact on neighbor European countries is significant . Let's now discuss Poland , where we are already the established leader in advancing medical cannabis .

Speaker #3: This market size is more than doubled from a little over two tons annually in 2023 to approximately five tons in 2025 . Further growth is expected following the increase in annual import limits .

Speaker #3: We generated robust revenue growth during the second quarter as we benefited from our launch of two proprietary cultivars a few months ago . To our knowledge , these are the highest potency medical cannabis products available in the country .

Speaker #3: We look forward to continuing to deliver a sustained pipeline of innovative , high quality and premium products for the Polish market . All manufactured in our GMP certified Canadian facilities .

Miguel Martin: We look forward to continuing to deliver a sustained pipeline of innovative, high quality, and premium products for the Polish market, all manufactured in our GMP certified Canadian facilities. Poland's regulatory standards include a lengthy registration process, which has concentrated 80% to 90% of the market share in four cannabis companies, including Aurora. We have a dedicated commercial and regulatory team on the ground there focused on executing on our growth strategies while also maintaining solid relationships with the regulatory authorities, which has enabled us to navigate the shift in prescriptions from telehealth platforms to clinics. Our experience and expertise in the market have benefited us compared to others as we were better prepared to succeed in this evolving marketplace. Success in both Germany and Poland will influence surrounding countries. As medical cannabis succeeds, more countries will establish their own frameworks.

Speaker #3: Poland's regulatory standards include a lengthy registration process , which is concentrated 80 to 90% of the market share , in for cannabis companies , including Aurora .

Speaker #3: We have a dedicated commercial and regulatory team on the ground . There , focused on executing on our growth strategies , while also maintaining solid relationships with regulatory authorities , which has enabled us to navigate the shift in prescriptions from telehealth platforms to clinics .

Speaker #3: Our experience and expertise in the market have benefited us compared to others , as we were better prepared to succeed in this evolving marketplace .

Miguel Martin: Our facility in Leuna, Germany, and our regulator engagement across the EU represent differentiated advantages for us to capitalize on these opportunities. The UK is an exciting and growing market where we are expanding our distribution and clinic relationships through new partnerships and successfully launched proprietary cultivar-specific inhalable cannabis extracts, also known as vapes, that are performing well. The UK permits products other than dried flour and oil, which has enabled us to expand the variety of high-quality medical cannabis available. There is also a strong subset of prescribing physicians and lighter competition in the premium and super premium segments where we operate. Let me now talk about other opportunities across Europe where there is already broad support for legalization of medical cannabis. In Spain, applications are very restricted, but slowly opening up, which we view positively. In France, we have partnered with the government since the start of its tender.

Miguel Martin: A permanent medical framework is expected to take shape in 2026, and we stand ready to serve patients from day 1. Both Switzerland and Austria are now online, while Turkey and Ukraine are showing positive developments for medical cannabis as well. Interestingly, more than half of EU member countries are integrating medical cannabis into healthcare, including reimbursement, so the momentum is promising. These developments are leading towards greater international alignment on regulatory approaches, an obvious advantage for compliant EU GMP-certified companies like Aurora. Physicians and patients increasingly recognize and appreciate our medicinal quality, and our Leuna facility in Germany has provided us with the opportunity to host regulatory and governmental visits. Turning to Canada, we are number 1 in medical cannabis and the largest provider to Canadian veterans. Net revenue grew year over year as we benefited from higher revenue from both insurance-covered and self-paying patients.

Positions and patience, increasingly recognize, and appreciate our medicinal quality and our loaner facility in Germany has provided us with the opportunity to host Regulatory and governmental visits.

Miguel Martin: While the overall market is relatively steady, we have grown market share as we have benefited from investments in world-class talent, facilities, and experience. Our priorities remain enhancing our online marketplace, product innovation and increased product assortment, operational excellence, and of course, ensuring a high-quality patient experience, especially for our veteran communities. To sum up, we are pleased to have reported yet another great quarter at Aurora that illustrates our steadfast execution of our strategic priorities. We feel confident about our future because we believe we are ideally positioned for profitable growth as the leader in global medical cannabis. Let me now turn the call over to Simona for a detailed financial overview of fiscal Q2, followed by a discussion of our fiscal Q3 outlook.

Turning the Canada. We are number 1 in medical cannabis and the largest provider to Canadian veterans. Net revenue, grew year-over-year. As we benefited from higher revenue from both insurance, covered and self-paying patients.

While the overall Market is relatively steady, we have grown market share, as we have benefited from investments in world-class Talent facilities and experience.

Our priorities remain enhancing our Online, Marketplace product Innovation and increased product, assortment operational excellence. And of course, ensuring a high-quality patient experience, especially for our veteran communities

To sum up. We are pleased to have reported yet another great quarter at Aurora that illustrates our steadfast execution of our strategic priorities. We feel confident about our future because we believe we are ideally positioned for profitable growth. As the leader, in global medical cannabis.

Simona King: Thank you, Miguel. The profitable growth achieved in Q2 is a strong testament to the strength of our medical cannabis strategy and our consistent ability to translate vision into results. Let's review Q2 2026 compared to the prior year quarter and then discuss our Q3 2026 outlook. First, net revenue of CAD 90.4 million represented 11% growth, supported by significant contributions from our global medical cannabis and plant propagation segments. Second, consolidated adjusted gross margin rose to 61%, 700 basis points higher, while adjusted gross profit increased to CAD 51.8 million, a 22% increase. Both our global medical cannabis and consumer cannabis segments generated higher margins than the prior year quarter. Third, adjusted EBITDA grew 52% to CAD 15.4 million from CAD 10.1 million.

Let me now, turn the call over to Simona for a detailed Financial overview of fiscal Q2 followed by a discussion of our fiscal Q3 Outlook.

Thank you. Miguel the profitable growth achieved in Q2 is a strong Testament to the strength of our medical cannabis strategy and our consistent ability to translate Vision into results.

Let's review Q2 2026 compared to the prior year quarter and then discuss our Q3 2026 Outlook.

Significant contributions from our Global medical cannabis and plant propagation segments.

Second Consolidated, adjusted gross margin Rose to 61% 700 basis points higher while adjusted gross profit increased to 51.8 million 822% increase.

Both our Global medical cannabis and consumer cannabis segments generated higher margins than the prior year quarter.

Simona King: Fourth, we ended the quarter with CAD 142 million in cash and cash equivalents and no cannabis business debt. In medical cannabis, net revenue rose 15% to CAD 70.5 million due to 22% growth internationally, combined with continued strong contributions from Canadian medical. medical cannabis comprised 78% of net revenue, compared to 76% in the prior year quarter, and approximately 94% of adjusted gross profit. Adjusted gross margin for medical cannabis was 69%, up from 68%, driven by increased revenue in higher margin international markets. consumer cannabis net revenue was CAD 6.9 million, down from CAD 10.4 million. The year-over-year change was the expected result of our continued decision to prioritize sales to our higher margin medical cannabis business. Adjusted gross margins for consumer cannabis was 27%, compared to 15% in the prior year quarter.

Third, adjusted ibida, grew, 52% to 15.4 million from 10.1 million.

And forth. We entered the quarter with 142 million in cash and cash equivalents and no cannabis business debt.

In medical cannabis, net revenue Rose, 15% to 70.5 million due to 22% growth internationally combined with continued. Strong contributions from Canadian Medical.

Medical cannabis, comprised, 78% of net revenue compared to 76% in the prior year quarter and approximately 94% of adjusted gross profit.

Adjusted gross margin for medical cannabis was 69% up from 1668 percent driven by increased Revenue in higher margin, International markets.

Consumer cannabis, net revenue was 6.9 million down from 1 0. 4 0.

The year-over-year change was the expected result of our continued decision to prioritize sales to our higher margin medical cannabis business.

Simona King: The margin increase was due to sales of higher margin products and cost improvements through spending efficiency. Bevo's plant propagation net revenue increased to CAD 11.6 million, up 34% from CAD 8.6 million in the prior year quarter. This improvement is due to higher orchid sales, which is an exciting and evolving market in North America that offers strong margins. Adjusted gross margin for plant propagation revenue was 10%, compared to 19% in the prior year quarter. This decrease is from costs incurred related to inventory write-offs caused by non-recurring quality issue, as well as some surplus crops that were not sold during the first quarter of fiscal 2026. Consolidated adjusted SG&A increased 12% to CAD 35.5 million compared to the prior year quarter and supported year-over-year net revenue growth of 11%.

Adjusted growth margins for Consumer cannabis was 27% compared to 15% in the prior year quarter.

The margin increase was due to sales of higher margin products and cost improvements through spending efficiency.

People's plan propagation, net revenue, increase to 11.6 million up, 34% from 8.6 million in the prior year quarter.

This Improvement is due to higher Orchid sales which is an exciting and evolving Market in North America that offers strong margins.

Adjusted growth margin for plant, propagation Revenue was 10% compared to 19% in the prior year quarter.

This decrease is from costs incurred related to inventory, write-offs caused by non-recurring quality issue, as well as some Surplus crops that were not sold during the first quarter of fiscal 2026.

Simona King: The increase relates to higher freight and logistics costs, notably from increasing sales to Europe and investments in our commercial teams in Europe and Australia. Adjusted EBITDA increased to CAD 15.4 million from CAD 10.1 million. The 52% improvement from the prior year quarter was due to a substantial increase in gross profit resulting from higher net revenue before fair value adjustments required under IFRS. Adjusted net income was CAD 7.1 million compared to CAD 3 million in the prior year period. The improvement relates to an increase in adjusted gross profit before fair value adjustments of CAD 9.2 million, partially offset by an increase in adjusted SG&A of CAD 3.8 million. Our balance sheet remains one of the strongest in the global cannabis industry.

Consolidated adjusted SG&A increased 12% to $35.5 million compared to the prior year quarter and supported year-over-year net revenue growth of 11%.

The increase relates to higher Freight than the logistics costs, notably from increasing sales to Europe and investments in our commercial teams in Europe and Australia.

Adjusted EBA increased to 15.4 million from 10.1 million.

The 52% improvement from the prior year's quarter was due to a substantial increase in growth profits, resulting from higher net revenue before fair value adjustments required under IFRS.

Adjust the net income was 7.1, million compared to 3 million, in the prior year period.

The Improvement relates to an increase in an adjusted gross profit. Before fair value, adjustments of 9.2 million partially offset by an increase in adjusted sgna of 34.8 million.

Simona King: We held CAD 142 million in cash and cash equivalents as of 30 September, our cannabis operations are completely debt-free. Our plant propagation business holds non-recourse debt that is secured by a significant fixed asset base held at Bevo. Free cash flow was -CAD 42.3 million compared to -CAD 26.4 million in the prior year quarter, reflecting the expected cash outflows that typically occur in Q2 of the fiscal year, as referenced in our last earnings call. Let me now provide some thoughts on what we expect for Q3 2026, which ends on 31 December. Consolidated net revenue is expected to increase year-over-year, driven primarily by 8% to 12% growth in our global medical cannabis segment.

Our balance sheet remains 1 of the strongest in the global cannabis industry. We held 142 million in cash and cash equivalents as of September 30th and our cannabis operations are completely debt-free.

Our plan propagation business holds non-recourse debt that is secured by a significant fixed asset base held at BO.

Free cash flow was -42.3 Million compared to -26.4 million in the prior year. Quarter reflecting the expected cash outflows that typically occur in the second quarter of the fiscal year as referenced in our last earnings. Call.

Let me know provide some thoughts on what we expect for Q3 2026, which ends on December 31st.

Simona King: Plant propagation revenue is expected to perform in line with traditional seasonal trends as 25% to 35% of revenues are normally earned in the H2 of the calendar year. Consolidated adjusted gross margins are expected to remain strong, driven primarily by industry-leading margins in our cannabis business, with plant propagation adjusted gross margins expected to mostly perform in line with historical trends. Continued strength in our adjusted gross margins and higher global medical cannabis revenue should lead to year-over-year annual adjusted EBITDA growth. Finally, free cash flow is expected to be positive in Q3 2026 due to continued strong performance and improved operating cash use. Thank you for your time. I'll now turn the call back to Miguel.

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

Consolidated, adjusted, gross. Margins are expected to remain, strong driven primarily by industry-leading margins. In our cannabis business, with plant propagation adjusted gross margins.

Expected to mostly perform in line with historical trends.

Continued strengthen our adjusted gross margins and higher Global medical. Cannabis Revenue, should lead to year-over-year, annual adjusted EPA dog Road.

And finally, free, cash flows expected to be positive in Q3 2026 due to continued, strong, performance and improved, operating cash sheets.

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

Miguel Martin: Thanks, Simona. The global medical cannabis market is expected to exceed CAD 9 billion, and we have built a strong competitive position around the world based upon our proven commercial execution, combined with our regulatory and scientific expertise. Our near decade of investment in march to profitability has given us a considerable head start in fully capitalizing on this opportunity. We are fully committed to strengthening our leadership position in Canada, Europe, and Australia through consistent revenue generation and positive adjusted EBITDA growth. These advantages are the building blocks to enhance long-term value for our shareholders. We look forward to sharing further developments and strategic plan updates with you. Operator, please open the lines for questions.

Thanks Simona. The global medical cannabis Market is expected to exceed 9 billion dollars and we built a strong competitive position around the world based upon our proven commercial execution, combined with our Regulatory and scientific expertise,

Our near-decade of investment in March to profitability has given us a considerable head start in fully capitalizing on this opportunity. We are fully committed to our leadership position in Canada, Europe, and Australia through consistent revenue generation and positive adjusted EBITDA growth.

These advantages are the building blocks to enhance long-term value for our shareholders. We look forward to sharing further developments and strategic plan updates with you, operator. Please open the lines for questions.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Your first question comes from Bill Kirk with ROTH Capital Partners. Please go ahead.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line of in the question queue. You may press star 2 to remove yourself from the queue so far. This is confusing speaker equipment and maybe necessary to pick up your handset before pressing the star key.

Bill Kirk: Hey, good morning, everybody. Miguel, you talked about the previous goal of 60% medical gross margins and obviously how you're running, you know, well above that at 69% recent quarters. What do you think a realistic goal is? I guess why are the margins structurally better than you expected? Is it less competition than you envisioned? Is it better demand for your offerings? Or is it maybe surprises in the cost to produce?

Your first question comes from Bill Kirk with Wolf Capital. Go ahead.

Miguel Martin: Well, good morning, Bill Kirk. It's a bit of all of the above. Let me start where you ended. Our production costs continue to go down. Yield in genetics and what we're getting out of our facilities has created an advantage. I think the second part is increasingly business outside of North America or in Europe or in different parts of the world where you do have higher margins. Now the discrepancy between the target and where it's at, we do see different markets getting a little bit more expensive, whether that's funding for partners in the distribution network or telehealth or even on the clinic side, you know, we are seeing some investments. I think it's a mix of all the above. Lastly, and you did mention it, is execution.

Hey, good morning everybody. Um, Miguel you talked about the, the previous goal of 60% medical gross margins and obviously how you're running, you know, well above that at 69% in recent quarters, what, what do you think a realistic goal is? And I guess why, why are the margins structurally better than you expected? Is it, is it less competition than you envisioned? Is it is it better demand for your offerings or is it maybe surprises uh in the cost to produce?

Uh well good morning bills. It's a bit of all of the above. So let me start where where you ended um our production costs continue to go down uh yield in genetics. And and what we're getting out of our facilities has created an advantage. I think the second part is increasingly, um, business, um, outside of North America or

Or in Europe or in different parts of the world where you do have higher margins. Um, now the discrepancy between the Target and where it's at, we do see different markets, getting a little bit more, um, expensive whether that's funding for partners in the distribution Network or Telehealth or even on the clinic side,

Miguel Martin: We are finding efficiencies in our execution using common medicinal cultivars around the world, gives us production efficiencies. The execution that we have of similar, you know, execution, say, in Poland, Germany, and the UK creates some efficiencies. I think all of that comes together, you know, for these industry-leading margins.

Bill Kirk: Thank you. You mentioned the production assets in Germany as an advantage.

you know, where I see some Investments, but I think it's, it's a mix of all the above. And then, lastly, we did mention it is execution. We are finding efficiencies in our execution, using common medicinal cultivars, around the world gives us production efficiencies, the execution that we have of similar, um, you know, execution saying in Poland, Germany and the UK, create some efficiencies. So I think all of that comes together or, you know, for these industry-leading margins.

Miguel Martin: Yeah.

Bill Kirk: Right now, are you enjoying those advantages with competitors maybe having some difficulties getting some product through Portugal into Germany? I guess, what's the status of some of those delays and investigations that folks are experiencing in that route to Germany?

Miguel Martin: Yeah. I mean, the first thing is, as you mentioned, you know, Germany is a very difficult place to get certified product into, and increasingly so. It's an EU GMP standard, with audits. We just had ours, as we mentioned, so we're good for 3 years. Others, you know, have had different issues. I'm not here to sort of speak negatively about that situation. I can tell you, though, that our Canadian facilities and the German facilities that are certified are solid. That, you know, vertical integration that we have, you know, growing the vast majority of the products we sell in certified EU GMP facilities creates an advantage for us. I mean, there's no disruption, and as we mentioned in our comments, it is lost. This is medicine. For patients and practitioners, they value that consistency of high-quality certified supply.

Thank you. And then you mentioned the production Assets in Germany as an advantage, right? Right now, are you enjoying? Are you enjoying those advantages with competitors? Maybe having some difficulties getting some product through Portugal into Germany. And I guess, what? What are the, what's the status of some of those delays and investigations? That folks are experiencing in that in that route to Germany.

Yeah, I mean the first thing is, as you mentioned, he, you know, Germany is a very difficult place to get um, certified product into and increasingly so. So it's an EU GMP standard uh with audits. We just had ours, as we mentioned. So we're good for 3 years. Others, you know, have had different issues. I'm not here to sort of speak.

Miguel Martin: More and more so are the regulators and other key stakeholders. I think that advantage is gonna continue to grow for us and not only be in Germany, but also be in other markets.

Bill Kirk: Thank you. If I could sneak one more in for Simona. There was a big drop in accounts payable in Q2 from Q1. As far as I can tell, it's the lowest absolute level in a long time. Why the change quarter over quarter in accounts payable, and why so low?

Continue to grow for us and and not only be in Germany, but also be in other markets.

Simona King: Yeah. Thank you for the question. Typically what we see in Q2, a lot of outflows, cash outflows occur in that quarter as a result of various activities that historically have occurred in Q2. That's the reason that the accounts payable has gone down. Again, this is in line with historical trends that we generally see in Q2 of a fiscal year.

Thank you. And if I could sneak 1 more in for Simona there, there was a big drop in accounts, payable in 2q from 1 q. And as far as I can tell, it's the lowest absolute level in a long time. So, why why the change quarter over quarter in accounts payable and, and why it's so low

Yeah, thank you for the question and typically, what we see uh in Q2 um a lot of uh uh outflows cash outflows occur in that quarter, as a result of various activities that, uh, historically have occurred in Q2. So that's the reason that the accounts payable have has gone down. And and again, this is in line with historical trends that we generally see in in the second quarter of a fiscal year.

Operator: Next question, Fredrico Gomez with ATB Capital Markets. Please proceed.

Fredrico Gomez: Thanks. Morning. Thanks for taking my questions. First question is on the proposed change to the budget in Canada regarding the, I guess, the price ceiling for reimbursement for medical cannabis veterans. How do you see that? What could be the impact to your business in Canada? Thanks.

Next question for the retail Gomez with ATB Capital Market 3463.

Hi. Thanks morning. Thanks for taking my questions. Um, first question is on the proposed, change the budget in Canada regarding the uh,

Miguel Martin: Yeah. Good morning, Fred. Let me first say that, you know, this came out last night. We're disappointed that the federal government has proposed these changes without consultation from the cannabis industry or medical cannabis companies like Aurora. You know, importantly, veteran patients depend on a clinically supported system that ensures for them safe, consistent access to their cannabis medications. This potential lowering of the reimbursement rate puts that entire support system at risk to disrupt continuity care, clinical oversight, or even push patients to higher-risk alternatives. Given the newness of this announcement and really the uncertainty of the timelines of implementation and lack of consultation, which hasn't happened yet, we're in the process of evaluating the impact and our next steps, and it'd be premature for me to comment. You know, it's early days.

Uh, I guess the price ceiling for reimbursement for for medical cannabis, veterans. So, uh, how how do you see that? What could be the impact to your business? In Canada? Thanks.

Yeah, good morning, Fred. So, let me first say that, you know, this came out last night, but we're disappointed that the federal government has proposed these changes without consultation from the Cannabis industry or medical cannabis companies like Aurora, you know, importantly veteran, patients depend on a clinically supported system that ensures for them. Safe. Consistent access to their cannabis medications lowering in this potential lowering of the reimbursement rate. Puts that entire support system at risk to disrupt continuity care, clinical, oversight, or even push patients to higher risk Alternatives. So, given the newness of this announcement

Miguel Martin: It just came out last night and, you know, a lot's gotta happen till we see where this lands.

And really, the uncertainty of the timelines of implementation and lack of consultation, which hasn't happened yet. We're in the process of evaluating the impact of our next steps, and it would be premature for me to comment. But, you know, it's early days. It just came out last night, and a lot's going to happen until we see where this lands.

Fredrico Gomez: Perfect. Thank you.

Miguel Martin: You're welcome.

Fredrico Gomez: Second question. Did you see any impact in Germany regarding that period in which, I think they halted the cannabis import permits there because they had reached their quota? You know, was that, did you see any impact in the market or for Aurora specifically? Secondly, just to follow up on Germany, could you comment on pricing, price compression in that market? Thanks.

Miguel Martin: Yeah. I mean, what you're referencing is that the German government had hit their import limit, and they had to get, you know, which is very common. You know, it happens throughout, you know, throughout the years. They wanna raise the overall limit. It was about a 3- or 4-week process. Didn't disrupt us. You know, we have a great relationship with the regulators and the staging of our permits for that market. You know, we're fine. Starting back in January, it'll go back to the higher number and everything should be there. Can't, you know, speak to others. In terms of pricing in Germany, like a lot of markets, we're seeing compression mostly on the value side. We operate mostly in the core and the premium piece.

Perfect. Thank you. Um, I guess second question. Um, did you, did you see any impact, uh, in Germany, regarding that, that period in which, I think they, they halted the Cannabis import permits there because they had reached their quota, and it was that, uh, you see an impact in the market or or are specifically and secondly, just to follow up on Germany. Uh, could you comment on on pricing uh, price compression in that market? Thanks?

Yeah, I mean so what you're referencing is that the German government had hit their import limit, um, and they had to get, um, you know, which is very common, you know, and it happens throughout, you know, throughout the years, they want to raise the overall limit. And so it was about 3 or 4 week process didn't disrupt us. Um, you know, we have a great relationship with the regulators and the staging of our permits,

Miguel Martin: Baseline pricing for where we operate really hasn't been that affected. Now, as I mentioned, you know, with Bill's question, with the implementation of, you know, telehealth and some other sort of aspects of that distribution chain, there are some additional costs that are coming in on that side. You know, overall, we've been pretty happy with the way the pricing has landed for core and premium products.

Um for that market you know we're fine and and starting back in January it will go back to the higher number and and everything should be there. Um can't you know speak to others in terms of pricing in Germany like a lot of markets we're seeing compression mostly on the value side and so we operate mostly in the core and the premium piece and so Baseline pricing for where we operate. Really hasn't been that effective. Now, as I mentioned, you know, with Bill's question,

With the implementation of, you know, a tella health, and some other sort of aspects of that distribution chain. There are some additional costs that are coming in on that side. Um, but you know, overall, we've been pretty happy with the way, the pricing is landed for core and premium products.

Fredrico Gomez: Perfect. Thank you very much.

Miguel Martin: You're very welcome, Fred. Thank you.

Perfect, thank you very much.

Operator: Next question, Derek Zasara with TD Cowen. Please go ahead.

You're very welcome, Fred. Thank you.

Derek Zasara: Yeah. Good morning, everybody, and congrats on a very solid quarter there. Miguel, just a question on the German investment that you recently announced. Curious what you're seeing in the market that led to that decision.

Next question, Derek, discard the TV cow, and please go ahead.

Miguel Martin: Yeah. Well, good morning, Derek. I assume you're talking about the Leuna production facility.

Yeah, good morning everybody. And congrats on a, on a very solid quarter there. Um, Miguel just a question, uh, on the, the, the German investment, uh, that you recently announced curious what you're seeing in the market that led to that decision

Derek Zasara: Yes.

Yeah. Well, good morning Garrick the I assume you're talking about the loin and production facility.

Miguel Martin: Yeah. You know, we've got two very large EU GMP facilities in Ontario. We built a facility in Leuna, Germany, you know, for indoor GMP, similar genetics, similar setup to what we do in Canada. We've been really happy with it, and thus the announcement to double production. Even, you know, with a bit of higher energy costs, it's still a very, you know, compelling proposition to have that facility straight up producing. We added, you know, upgrades to very innovative, you know, lighting and irrigation systems to mirror what we're doing in Canada. Again, being able to use the same, you know, world-class practices and genetics in that facility, doubling the overall production in there. Importantly, having, you know, an EU GMP-certified modern indoor facility in mainland Europe has been great.

Yes.

Have that facility straight up producing. So we added, you know, upgrades

Miguel Martin: We've had delegations from countries that are in the cannabis system. We've had delegations from countries that are not in the cannabis system. Regulators and a lot of other, you know, key stakeholders visit that facility, and it's been very additive for us. We, we like it. It works as a standalone production facility, it works even better as sort of a showcase of everything that we're doing in that key market.

Derek Zasara: Okay. Maybe just, one question on Australia. Looks like, you know, sales, were a little bit softer in the quarter.

to very Innovative, you know, lighting and irrigation systems to mirror what we're doing in Canada, again being able to use the same. You know, world-class practices and genetics in that facility doubling the overall production in there and importantly, having a, you know, an EU GMP certified modern indoor facility in Mainland Europe, has been great. We've had delegations from countries that are in the Cannabis system. We have a delegation from countries that are not in the Cannabis system, uh, regulators and a lot of other, you know, key stakeholders visit that facility and it's been very additive for us. And so we like it. Um, it works as a standalone production facility, but it works even better as sort of a Showcase of everything that we're doing in that key Market.

Derek Zasara: Can you just maybe talk about that?

Miguel Martin: Yeah. Australia is the only market we have where, you know, a majority of our sales are in the value segment. That goes back to the history of, you know, the company before we bought the remaining 90%. The majority of those sales are in a concession system for value products. That's a market where it's been inundated with a lot of value products, and so that's had a bit of an impact on our business there. We are transitioning that market to the same world-class core and premium products we sell everywhere else, and we're very bullish on that. It's gonna take a little bit of time before that portfolio, you know, is properly allocated, you know, to value being a smaller segment and to core and premium. We're still very bullish on it.

Okay. And uh, maybe just, uh, 1 question on a Australia looks like, uh, you know, sales, uh, were a little bit softer, uh, in in the quarter, just maybe talk about that.

Yeah, so Australia is the only Market we have where, you know, our majority of our sales are in the value segment. And that goes back to the history of, you know, the company before we bought the remaining 90% and that was the majority of those sales are in a concession system, uh, for Value products, that's a market where it's been inundated, uh, with a lot of value products. And so, that said, a bit of an impact on our, on our business. There, we

We are transitioning that market to the same world-class core and premium products, we sell everywhere else and we're very bullish on that. Um, but it's going to take a little bit of time before that portfolio.

Miguel Martin: It's the biggest market outside of Canada. There are advantages there, because you can sell other formats beyond flower and oil. We've launched edibles and some other things there. We're, we're bullish on it. It's just, you know, as we work through this transition in the portfolio, there's been a little bit of pressure.

Derek Zasara: Okay. Thanks, Miguel.

You know, is properly allocated, you know, to Value being a smaller segments, and, and decor, and premium. Um, we're still very bullish on it. It's the biggest Market outside of Canada. There are advantages there, um, because you can sell other formats Beyond, uh, flour and oil, um, and we've launched Edibles and some other things there. So we're we're bullish on. It's just, you know, as we work through this transition and the portfolio, there's been a little bit of pressure.

Miguel Martin: Thank you, Derek.

Okay. Thanks. Miguel.

Thank you, Derek.

Operator: Once again, if you would like to ask a question, please press star one on your telephone keypad. Next question comes from Pablo Zuanich with Zuanic & Associates. Please go ahead.

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

Pablo Zuanich: Thank you, and good morning, everyone. Miguel, you know, two questions related, and the same type of question related to the UK and Poland. I think you said you were the market leader in both markets. Do you need to invest downstream there? For example, you know, buying clinics or online pharmacies or brick-and-mortar pharmacies in the UK. It seems that that market is forward integrating like Australia, and that may be necessary to win in that market, but correct me if I'm wrong. In the case of Poland, is downstream integration even a possibility or the regulations do not allow that? If you can talk about that, please. Thank you.

Next question, comes from Pablo zoo with Zoo, Nick and Associates. Please go ahead.

Thank you and good morning everyone. Um, uh, Miguel, you know, 2, questions related, uh, and the same type of question related to the UK and Poland. I think you'll see you when the market leader in both markets, uh, do you need to invest Downstream there? Um, for example, you know, buying clinics or or online, pharmacies, or bring a motor pharmacies in the UK, it seems that the market is 41 in integrated like Australia and that may be necessary to win in that market, but correct me if I'm wrong and in the case of Poland is Downstream integration even a possibility or or the real

Miguel Martin: Sure. Good morning. We're not the market leader in the UK, just for clarification. We're, you know, we're one of the top companies, but not the market leader. Let me talk about Poland first. Poland, we're not allowed to be the wholesaler-distributor. We can be the manufacturer. There are some companies that also own or have relationships with clinics. As the telehealth system in Poland changed, clinics became very important. We partner, you know, with clinics and we continue to look at that. You know, each and every market we do look at, do we need to own pieces of that vertical structure or can we partner? There are a lot of great partners out there that want premium, high quality, you know, products from Aurora.

Relations. Do not allow that. If you can talk about that, please. Thank you.

Sure, uh, good morning, we, we're not the market leader in the UK, just for clarification. We're, you know, we're 1 of the top companies, but not the market leader. Um, let me talk about Poland first so Poland, uh, we're not allowed to be the wholesaler distributor.

Miguel Martin: We have a lot of advantages in being able to do that. Right now in Poland, we're the manufacturer. We've got a very substantive team on the ground, from selling to prescribing physicians and interacting with key stakeholders. We are not the wholesaler, and we work with clinics. In the UK, similar situation. You know, to your point, clinics are very important as a way to onboard and connect with patients, both those coming into the system. Today, we produce the products. We have a very strong network of partnering wholesalers that's actually expanding, and we have a network of clinics that serves it. If it looks like there's an opportunity to change that and, you know, actually acquire one part of that vertical, we will.

Um, so we can be the manufacturer. Um, there are some companies that also own or have relationships with clinics as the tea health system in Poland, uh, changed clinics. Uh, became very important and so we partner um, you know, with clinics and and we continue to look at that, you know, each and every Market we do. Look at do we need to own pieces of of that vertical structure? Or can we partner and there are a lot of great Partners out there that want premium high-quality, you know, products from Aurora. So we have a lot of advantages, um, in being able to do that. So right now in Poland, where the manufacturer? We've got a very substantive team on the ground from selling, uh, to prescribing Physicians.

And interacting with key stakeholders. We are not the wholesaler. Um and we work with clinics in the UK um, similar situation. Um, you know, to your point clinics are very important uh as a way to onboard and connect uh with patients, both those coming into the system. So today uh we are the, we produce the products, we have a very strong network of part.

Partnering wholesalers. That's actually expanding

Miguel Martin: You know, in some cases, you don't want to compete against, you know, your customers, and so I think you sort of have to be careful. We're very flexible. We have different models in different countries, depending on what works for us. Obviously, by our margin structure and the results, it's working, but we stay flexible.

Pablo Zuanich: Thank you. That's good color. Look, I mean, just to follow up in terms of the timeline for the potential changes in Germany and Australia. In the case of Germany, the way I understand it, the cabinet already approved the changes that have been proposed. Now that has to go through parliament. What's the timeline there? How long could that take? The same question regarding Australia. The TGA is going through a consultation period. How long could that take? I'm not asking in terms of how things play out, but, you know, what are the key milestones that we should be looking for? Thank you.

Different countries depending on what works for us. Obviously by our margin structure and the results. Um, it's working but we stay flexible.

Miguel Martin: Well, I mean, it's a proposal in Germany from the health minister. Needs a lot of alignment from a lot of different constituencies. In terms of timing, we'll know more at the end of this month in terms of what gets put forward. There is going to be a lot of debate on it. You know, you are going to go into the spring until you know anything about where that is going to land. As we've talked about, there's two parts of it. The first part, you know, has a lot less impact, which is a change in the telehealth components, not dissimilar to Poland. The second component, you know, potentially around the, you know, prohibition of delivery of these products, which is completely contrary to how all other medical products are delivered and the impact to rural patients, that is going to be the more controversial one.

Thank you, that's good. Caller look, I mean, just to follow up in terms of uh, the the timeline for the potential changes in Germany and Australia. In the case of Germany, the way I understand it. The cabinet already approved the changes that have been proposed now that has to go through Parliament. What's the timeline there? How long could that take and the same question regarding in Australia? The TGA is going to be consultation period. How long would that take? I'm not asking in terms of how things play out, but you know, what are the key Milestones that we should be looking for? Thank you.

Well, I mean, it's a proposal in Germany from the health Minister needs. A lot of alignment from a lot of different constituencies. So in terms of timing, we'll know more at the end of this month. Uh, in terms of what gets put forth, there's going to be a lot of debate on it. Um, so you know, you're going to go into the spring until you know anything about where that's going to land. As we've talked about, there's 2 parts of it. The first part, you know, has a lot less impact, which is a change.

Miguel Martin: We'll see, but, you know, end of November, then, you know, into the spring in terms of Germany. In Australia, there really isn't a timeline. You've got, you know, two regulatory agencies that are looking at a variety of different things. I will say we recently saw an interest by the regulatory authorities in Australia start testing products and looking at, you know, some of the adulteration that may be happening in that market to these medical products. As a company, you know, who takes our regulatory responsibilities and production responsibilities seriously, we look forward to that. Australia's a little bit more open-ended, but you're not hearing things, you know, that would have, say, the same impact on the prohibition of, you know, of delivery through the mail like you hear in Germany. Got it. Thank you. Thank you.

In the tea health components, not dissimilar to pollen the second component, you know, potentially around the, you know, prohibition of delivery of these products, which is completely contrary to how all of their medical products are delivered, and the impact to rural patients. That's going to be the more controversial 1. So we'll see. But, you know, the end of

November. Um then you know, in the spring and in terms of Germany,

In Australia, there really isn't a timeline. You've got, you know, 2 regulator agencies that are looking at a variety of different things. I will say we recently, uh, saw an interest by the regulatory authorities in Australia started, testing products, and looking at, you know, some of the adulteration that may be happening in that market to these Medical Products. Um, and as a company, you know, who takes our regulatory responsibilities and production responsibly seriously, we we look forward to that. So Australia is a little bit.

More open-ended. Um, but you're not hearing things, you know, that would have say the same impact on the prohibition of, you know, of of delivery through the mail like you hear in Germany.

Got it. Thank you.

Operator: I would like to turn the floor over to Miguel for closing remarks.

Thank you.

Miguel Martin: Well, listen, we're really excited and about communicating this quarter to everyone and sharing the work that we're doing, and obviously we'll continue to do that. We wanna thank everyone for their interest in Aurora, and we wish everyone a great day. All the best.

I would like to turn the floor over to Miguel for closing remarks.

Operator: This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.

Well listen we we're really excited and and about communicating this quarter to everyone and sharing, uh, the work that we're doing. And obviously, we'll continue to do that. We want to thank everyone uh, for their interests, uh, in Aurora. And we wish everyone a great day all the best.

This includes today's teleconference, you may disconnect your line at this time and thank you for your participation.