Aurora(ACB) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total net revenue increased by 30% in Q2, reaching $63.4 million compared to $48 million in the same period last year [18][19] - Adjusted EBITDA grew to $3.4 million, marking a $9.6 million improvement year-over-year and the highest result on record [7][18] - Adjusted gross margin held steady at 51%, with medical cannabis adjusted gross margin at 63% [19][20] Business Line Data and Key Metrics Changes - Medical cannabis segment revenue rose by 42% to $43.8 million, with international medical revenue up 126% to $18.4 million [18][19] - Canadian medical cannabis revenue increased by 11% to $25.4 million [19] - Consumer cannabis net revenue decreased by 8% to $12 million, attributed to the exit from the U.S. CBD business and timing of new product launches [20] Market Data and Key Metrics Changes - In Canada, Aurora maintained its leadership position in the medical cannabis market, benefiting from a broad product assortment and innovation [8][9] - In Germany, Aurora is one of only three companies with a production facility, and the market is expected to expand significantly with potential de-scheduling of cannabis [11][48] - In Poland, Aurora held the number one market position by volume in Q2, leveraging regulatory expertise [11] - Australia is anticipated to become the largest medical cannabis market outside the U.S., with significant sales volumes driven by clinician education [12][43] Company Strategy and Development Direction - The company is focused on innovation and plans to launch a steady stream of new products in Canada, which will also inform international market launches [9] - Aurora aims to achieve positive free cash flow in calendar 2024, supported by a strong balance sheet and reduced debt [8][16] - The company is diversifying its business model by leveraging Bevo's plant propagation business, which is expected to double revenue and EBITDA over the next two to three years [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing disruption in the Canadian marketplace and the potential for growth in medical cannabis [8][9] - The company is optimistic about the legislative changes in Germany that could expand the medical market significantly [48] - Management emphasized the importance of maintaining profitability and focusing on high-margin medical cannabis products [56] Other Important Information - The company has reduced its debt by approximately $531 million over the last three years, with plans to pay off the remaining convertible senior notes by the end of fiscal Q4 [17][26] - The company is committed to achieving $40 million in annualized savings by the end of the fiscal year [16][22] Q&A Session Summary Question: Update on Bevo's revenue doubling target - Management refrained from providing specific guidance but expressed confidence in Bevo's potential for expansion based on early market feedback [28][30] Question: Strategic fit of Tasty's launch - Management explained that Tasty's is designed to leverage existing resources without detracting from higher-margin medical cannabis, focusing on high potency infused pre-rolls and vapes [32][34] Question: Exit from the Netherlands and update on France - Management cited production cost advantages and regulatory challenges as reasons for exiting the Netherlands, while providing an update on the pilot program in France [37][39] Question: Australia's potential as a large medical market - Management highlighted the nascent nature of the Australian market and provided insights into market size projections based on prescription data [42][44] Question: German market outlook and recreational cannabis - Management expressed optimism about the medical market in Germany and the potential for legislative changes, while noting that recreational cannabis developments may take longer [46][48] Question: Improvement in gross margins - Management attributed margin improvements to higher medical cannabis sales and operational efficiencies, alongside increased yields from production [51][53]