Aurora(ACB) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Aurora Cannabis reported a net revenue of $75.1 million for Q1 fiscal 2024, up from $50.1 million in the same period last year, marking a significant growth across all business units [18][19] - The company achieved the highest adjusted EBITDA of $2.2 million in three years, demonstrating a positive trend in financial performance [18][28] - Adjusted gross margin for medical cannabis was 61%, consistent with the target range but down from 67% a year ago due to a higher volume of lower-margin international bulk exports [20] Business Line Data and Key Metrics Changes - The global medical cannabis business generated $41.6 million in revenue, with international medical revenue reaching $16.2 million, up 40% year-over-year [18][20] - Consumer cannabis net revenue was $13.2 million, reflecting a 5% increase from the previous year, despite a partial quarter of sales for a popular product [21] - Bevo, the plant propagation business, contributed $19.9 million in net revenue, an 85% sequential increase, marking its best quarter to date [22] Market Data and Key Metrics Changes - The Australian medical cannabis market is estimated to be about the same size as the Canadian medical market, around $400 million in annual revenue, with expectations for rapid growth [32][50] - Aurora's leadership in the medical cannabis market is supported by strong gross margins and market share positions in Canada, Europe, and Australia [28] Company Strategy and Development Direction - The company is focused on diversifying revenue streams beyond cannabis, with significant investments in plant propagation through Bevo, which is expected to double its revenue and cash flow in the next two to three years [9][10] - Aurora plans to introduce approximately 75 new products to the Canadian market in the coming quarters, aiming to enhance its product assortment and patient experience [12][28] - The company is committed to achieving further cost efficiencies, targeting an additional $40 million in annual savings during fiscal 2024 [16][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in generating positive free cash flow in calendar 2024, supported by improved operational efficiencies and a strong product pipeline [24][28] - The company is optimistic about the potential regulatory changes in Europe, particularly in Germany and France, which could significantly expand the medical cannabis market [15][50] - Management highlighted the importance of maintaining high-quality standards and EU GMP certification as a competitive advantage in international markets [34] Other Important Information - Over the past three years, Aurora has reduced its convertible debt from $531 million to approximately $63 million, showcasing prudent fiscal management [11] - The company has closed less efficient operations, including the Aurora Nordic facility and the US CBD business, which is expected to positively impact cash flows and margins [24] Q&A Session Summary Question: Growth in Australia and its impact on international medical cannabis segment gross margin - Management noted that the Australian market is growing rapidly, but margins may be lower compared to other markets due to less integration [32][33] Question: Magnitude of margin improvements in medical cannabis - Management indicated that margin improvements will be driven by transitioning services to Canadian facilities, which are more efficient [36][39] Question: Bevo's revenue comparison to prior owners - Management stated that Bevo's revenue has increased significantly since acquisition, with current run rates in the $45 million to $50 million range [40] Question: Future SG&A spending - Management confirmed the target of keeping SG&A below $30 million while continuing to invest in R&D and innovation [43][46] Question: Legalization of recreational cannabis in Australia - Management expressed that while there are discussions around legalization, it is not actionable at the moment, and they see significant upside in the medical market [48][50] Question: Sustainability of growth in Australia compared to Israel - Management highlighted differences in market size and regulatory stability, expressing more optimism for sustainable growth in Australia [53][56]