ACB - Earnings call transcript Q2 2022

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Operator

Greetings, and welcome to the Aurora Cannabis Second Quarter 2022 Results Conference Call. At this time, all participants will be in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note that this conference is being recorded. I would now like to turn the conference over to your host, Ananth Krishnan, Vice President, Strategic Finance. you. Thank

begin. may You

Ananth Krishnan

Aurora EDGAR. and fiscal With you via our Miguel and me Ibbott. statements, the are closed CFO, Diego, our MD&A release us results and The financial Martin; for website release, this IR SEDAR Glen for today, market the afternoon. today quarter After on a we you, and news all announcing of appreciate second joining and issued XXXX. Thank available are financial CEO accompanying

In find from are forward-looking on reminded constitute and in can via to Annual are addition, our IR that registration our filings differ future in related may statements. call uncertainties anticipated may that that factors These conference could our periodic discussed performance. statements. deck you accessed risk subject Form actual results results information results supplemental SEDAR a detailed these and business affect documents to and matters EDGAR. and other website. Actual materially are The could also Listeners Information statements today's in risks forward-looking certain those be or

Following Glen, by Miguel conduct will question-and-answer remarks we session. prepared a and

investors, call. submitted to questions For have to prior us we retail compiled the

you limit go ahead, then Miguel. industry we ask With over Miguel. Please to like call to will For back to one question would analysts, and in I yourselves that get that, queue. the turn the

Miguel Martin

Thank Ananth. you,

of adjusted That's are in plan less We with year we're first EBITDA a away. profitability transformation half pleased with fiscal than our the tracking of XXXX. and

why. Here's

competition. growth Canadian twice XX%, and with the medical sequential First, that sales cannabis roughly one number global exceeding and remain we of our LP margins strong

the process number Australia, experience Poland. and And including UK, from roar up significant continue the and see is countries opportunity. We of approach leg profit growth a the to our to in driven Israel,

to rate annualized Second, QX, nearly current we reference will higher million. That report far the million achieved efficiency. million pleased we fiscal now the savings first and And ends is our we is by I'm to the In greater targeted $XX the annually that great XX continue of double we of Company environment our 'XX. half to $XX this the of believe news, run back that $XX rationalize in savings expenses million the to manage the with November. and achieve

none of Importantly, savings plan impact these cost investments. growth will

in and catalogs Third, us our growth and we business we already science strongest business balance as with in of to supports evaluate organic a the capital. remains recently OCO, be innovation structure continue the Fourth, sheet the to Moreover, intend provides of our IP brand. other the as to the largest high use one of one to allocating Bottom-line, has which high our for of capital long this smart biosynthesis launched not more available known and continuous Raf This commercialized for industry, we about. currently quality licensing. really San well licensing. right opportunity a and we're trial the and that is anywhere potency We've cultivars market in already high quality are and as ready growth cultivars than with XX capital LPs, genetics, media our revenue available and own XXX have long-term M&A. market. deliver strategic stream both innovation exclusive else We excited resources to as several

the for attributes open regarded us these regulatory medical recognized put recreationally. Canada. apart for sets is grow team market the us of international which is competition one number I'm the success in are and position pole supported markets by science highly worldwide. the continuing revenue to discuss What now Let's our compliance in medical our expertise globally. protocols, our to from that profitably find and ways proud testing by cannabis internationally These medical and when business,

total offerings any than demonstrated with import look QX, year, this LP agreement the EU, XX% of Poland, country. are the products, in Australian expect Australia's excellent a Chief and as they success acceptance our revenues to kilograms by to and the largest shortly which Israel according anticipate into EU Pharmaceutical by In delivered to range driven regulations. marketing In growth medical the plan market, by growth patient include fivefold, we Australia, authorized international in including We through continue QX UK, Australia. Inspectorate, and new which to strength certified the continues a to as in QX MedRelief in oils, in and qualifies shipments gummies. access to surpass for we To-date, prescribers. dry a and to doctors included year-over-year the patient our launch gels, was and the from more to and stories more to During rapid GMP have XXX patients requirements, and revenues In expectations our ongoing driven patients of soft vapes push. already last expand with XXXX XXXX an exclusive growth Australia, the we compared our revenue continue and we of was flower ease accompanied for continued medical we increase growth of year mainstream increasing numbers. we success compared in exceptional QX offer cultivars are supply doubled with quarter,

We continue built patient a no in in erosion the to with and position numbers segment see have pricing. in already leading growth flower

in drivers earliest and In UK, the all for be Australia would stages we the Germany, the last number in expect While the of of future. year significant extract. to still share its oil the in development, one dry these of all countries we products us are two the Poland more recent market, and and best-selling calendar our for of following growing balance a flour have profit launch number

XX extremely new our coalitions in there to citizens some While to than largest on improved QX, with million rec growth, given softness cannabis competitive accessibility. we the experienced small legalize the some EU and are size plans expected we due remains future pressures patient did adult in and and market Germany market medical bullish

legally secured holders -- all approximately three license flower medical in the the cannabis, of French announced, are XX exclusive puts While in the leadership third program, program. Netherlands, timelines in country. us that and tenders position, cannabis occurs. the our the position be strong supplier in of In where out selling Growery the milestone shipment our we are preparing of one invest available of in shops XXX In dry in dry regulatory medical XX pilot for the very coffee to are when in only having XX produced a pilot yet involved we France, framework flower, we

We calendar is And $X.X to in a recognize beginning overtime, revenue billion market. expect this be XXXX. predicted to

partners to cannabis our continued Israel, We shipping success over there XX million QX. in by in of our

grow As affected partners market the approvals to recognize they we permits. of there, not as Israel by developing and today, committed coming their In do revenue predictability business in the from as Israeli we regulatory in such complexities, our of import quarters. and revenue QX, can expect but be to to remain government timing markets, these of

a and we cannabis our we and be of I hedges next against years story medical will us. in that the be is we and of be in made here, will expect international capabilities, there. regulated believe federally us a mentioned However, domino the I agility Aurora earlier. there is recreational, the of jurisdictions unique growth our clear And effect like of want several structure, Where to money reach multiple because win grows. acceptance will to which in set be

to we XXXX, market ultimately sustained Some at and EU help by $X shareholder as of alone and sizable piece markets will billion develop. cannabis estimates to the expect this. us put drive in grab profitability a generate the to values This

Aurora our advantage profitable segment. most the Turning a medical is to see Canadian as and which now we market, business competitive for

QX year. overall QX, share Our in our medical expanded from up same to importantly, XX.X% Most our patients period insured made although in X.X% compared up QX. revenue our market flat of last sales, up was domestic XX.X% the from in XX.X%, to

medium for patient see with We opportunities programs, experience. some employee to opportunities as pick-up well best-in-class insurance growth our to in share attracting groups, excited market are as

of launched believe appeal innovations a We that and have patients. to products also number will we

the increased is excess chase lot Regarding Canadian has not This any revenue SKUs, going together compression. which ongoing adult share challenges. our is we our view, decline to and price unprofitable unsustainable older of reflects in market at irrational on a macro in rec, inventory are pressure resulted market QX There and cost.

Our entering margins. leveraging and focus is by our have maximize higher profitability low on to facilities how categories production cost that selectively

in pre-rolls vape once to concentrate Drift launch hit QX we program breeding benefit of SKUs, the outlast channels. our consists expect our from Highlights resources And of in both environment. be bevy cultivars market innovation market on current position. which scale In and a consolidates, which new first have medical XX edible include brands, of offering strong pipeline we'll infused March. the We refresh and in our your the rack the new a and flavors to three hash and

financial full innovation like the calendar now SKUs, Our he over his our I to new review. high call and legalization. would significant and XX push provide so successful over innovation includes to most which XXXX potency be would year can since Glen turn

Glen Ibbott

our are afternoon, now of program, business is inherent model ahead the Good executing I'll demonstrate how transformation financials. well QX of review our Miguel. results strengths we fiscal clearly everyone. and XXXX our Thanks which These schedule.

highlights. with begin a let's So key few

million $XXX and sheets cash $XXX perspective. us future. the strongest in perspective of of we debt to of term a in includes to yesterday, M&A one ATM, $XX nearly including to down This approximately as $X LPs, recently million, from the which access have take position among strategic have advantage drawn opportunities meant We a no billion shelf balance Canadian million

through million from is higher, EBITDA moving with and And that from capital quarter cash was and batches right. last begin compared in profitability. sufficient from had $XX.X the continue to million, $XX.X see of have $X million as our business quarter. working provision shipments Our improve provision expected more transformation for current flowing to revenue range. reducing to in to positive a This we past last have reflecting cannabis to progress of we QX the savings fund and In last we been cost in hand to the outside international slight flow year. towards we this used same potency Net loss closer to targeted to X% over recur quarter XX% net million the operating was but milestone, our short, QX $XX.X revenue reduced continues period not than $X.X cash increase P&L. on plan operations by would are million, our

Our with past the over about few QX in also a a well expenditures as robust down These already sizing along enviable medical what quarter-over-quarter cannabis in leadership were This through and diversification broad the consistently rec held to and quarters, group strong large XX%. steady past a has margins margin Clearly, implementation overall as continued continue deliver profile just plan. across for critical EBITA controlled the fraction key will for proceed of of and in reduced to both first XX% driver we business Canadian the be we reaching they R&D SG&A the our our us is positive our from years results profit segments. medical XXXX. half our fiscal further benefited remain and and adult us from distinguishes business medical, of right costs. gross are transformation competitors overall international in

in now address detail. core businesses our of each So more bit let me a

representative Canadian XX% gross roll even in to medical margin as the exceptionally well, million QX really this of $XX.X and performance our million about revenue, gross of about revenue perform consistent to of leading medical market was consumer of Canada businesses and a medical but to sales compared Europe up in in QX generating XX%, retail continues profit. the continued slightly, and Our QX, out. $XX our reflecting XX%

cost medical those segmented and said As into a program. without we with groups, reimbursement those reimbursement our have can previously, patients Canadian two coverage be

Canadian because success in by driven medical patient and them volume is consistent Our reimbursement our high groups, makes cannabis really insured buyers.

patients resulting seen increase. non-reimbursement be sequential channel, able from our to share have medical more channel While patients we to in the market direct overall a some we migration steady sensitive price and an insured revenue attract of have been

million international prior million of and year cannabis be XX% $XX Our Israel. $XX.X export sales medical over the market. the versus use is Israeli reflected XX% to sequentially. medical We revenue QX believed growth largest revenue the slightly in included to

was Excluding Sales Israel recur quarter. revenue medical to do the up provision, million every XX% one-time international not year-over-year. $X.X

just the the $X.X XX% of France in underlying about market the of for sales So XXXX to QX give a you Poland, sense estimated QX, business, impact excluding medical Israel. Germany, international by billion and sequentially. that revenue international size UK, BDS was Israel markets Recall Analytics of and a up in

value important is creation. So long-term clearly, shareholder an driver internationally of leadership Aurora's

to which of QX adjustments decline revenue about our to decline Consumer improve products, in compression XX% and primarily is from reflected in was last intended our compared shift Rafael selling offset to QX by sales profit. the to a Our mix of Aurora premium $XX.X daily velocity XX% the market. quarter. special X% revenue towards XX% price and The revenue, attributed decrease cannabis partially positive consumer Company's brand about our San represented million, gross price average a premium the by price The continues offerings. to pivot reflecting continuing 'XX, as was in core

revenue over the preroll flower mainly new XX% is up QX. launched last our In by Raf cultivars in fact, San driven and quarters, the two

in our gross from our driven from X% bulk downward by which premium margins towards opportunistic the XX% X%. While margins offset last in was XX% we negatively X% This impacting Also by margins quarter. saw partially improvement to next an the by pricing this QX shipboard sales, premium. were quarter increase brands, quarter declined in consumer pressure depress

SG&A restructuring other R&D, $XX.X at in now in included $X.X costs. to well in controlled million and coming which one-time which it approximately million Turning remains QX, includes

$XX.X excluding SG&A So is million, costs. those

progress made and have We they're already not certainly but down driving SG&A, done.

our In QX, adjustment exit million balances. run of of we result by a This million, well below a million the will market. by year. expect inventory facility $XX.X $XX.X recorded the provision net compression price a value clearing $XX consolidation we in non-cash driven as quarterly time we this also fact, be realizable of fiscal In inventory included out provision and obsolete rate

XXXX consolidated to in basis. the adjusted was decrease The $X.X by and we driven revenue gross improvement $X all relatively QX SG&A, steady and million of remained quarter of pulling So compared this last generated together, as EBITDA adjusted a million adjusted million. EBITDA in in loss margins $X.X primarily while loss, on

we It profitability, EBITDA Let's of is see cash lower up as following gross of path cost having Overall, under and million. $XX logistics savings close our million. in savings in executed, savings to to our estimated in be cost The within cash review reflected annualized margins plans, will executed 'XX into structure. the be we remaining program, see fiscal the cost We beginning production and will having QX. goods as to of late QX down, business we transformation those exited implementation adjusted right, of right drawn in beginning approximately SG&A, XX% would our saving next our they're year. show cost $XX XX% cash and executed executed for result that inventory now to now QX expect plans that run

takeaways our way. financial on there well we're from this review. three This my key concludes So, remarks, are

our improved First, sheet balance flow. and cash by supported and remains healthy cash strong, a balance capital working

of XX% finally, sustainable of gross in international, target are with Aurora's and this critical at total high path that range. to and of cost our within $XX to the expect our adjusting million our to annual already positive million adjusted in end clear savings actions XXXX of control. are And differentiating of Canada transformation schedule now our having we businesses of profitability, through quarter. ahead EBITDA This clearly plan a Second, are profit the reinforces our medical first fiscal and half competitors us part from be so delivered $XX

the turn call Miguel. to back I'll Now,

Miguel Martin

Thanks Glen.

final long-term Q&A, progress both. takeaways. we're me is let Aurora EBITDA significant profitability some on Before and making growth, share and on laser-focused

great market medical shows medical getting expertise globally our reductions, promise we high our rec opportunity. revenue cannabis us news which correct, the provide the to rec. In added regulatory players, our which are adds cost our eventually given will fewer will trend with tremendous likely portfolio. innovation the of and of and First, is program to our end and to And science another converting opportunity growth Canada, capital-light

and the he to on-track. from We're continued Ananth sheet us please call time questions questions. Ananth, ask best and I'll before interest has and go retail our for is submit we appreciate positions transformation ever our M&A, from plan firmly our the balance a invited organic turn so stock, We Lastly, take analysts it over to can the growth questions which shareholders. cover that your is in today, been, ahead. few place strategic

Ananth Krishnan

Miguel. Thanks,

to is are stock Our plans reassure the stock regarding perhaps first question the your improve What price price. and shareholders?

Miguel Martin

Well, I we question mean, obviously a a it's get lot.

and the U.S. incredible think of was and go exuberance in understand bit to that time that first little starts a with I foremost, the about you global growth the cannabis business there got back

that a a We off. year have for been the U.S. saying ways is

entire strongly, and we and going in the RAF. with spent U.S. it's be markets with believe decriminalization, focus, with are also that, we'll a Canada in to my and what regulating see to business, Canada working agencies rec in rec towards a That's about pathway seeing it medical in many the the we'll three are I medical and incredibly see as career which regulated product rec is opposed We then know the in a FDA other only I years challenges the I'll and the there. business on around Canada, the the But old. focused people business, business second. talk

many that is marketplaces rational legacy There's XXX you've of we've in spoken a got that's year in ago. and got roughly about. You've as still today LPs your they market twice the as were half business

medical. on people that anybody We inventories turn You've overstepped negative sustainable in key gross that to incredible that be That's have size and right situation quicker a in products. to not so else, now can going than and got around. we've that we almost margins business not having excess had it's rec success

focusing long-term is short-term. for bright. think And long-term cannabis incredibly and is foremost the on versus really the first the I So investors, for

Israel on the are and and time Germany you're on as in markets, If on. Also, companies medical win place. you seeing and look key and where UK after after grow time at seeing and significant big markets France, and such same you're Those cannabis time.

we we've Secondly, we going the things were to said do. done

We balance was And the EBITDA And high XXXX. to progress was of by agricultural are cash the value. second future. has sheet. things setting the quarter another assets products profitable. focused lastly, properly We've benefits, value opportunities. high a guidance in the our improvement bio yet. The margin being monetized this are growth, shareholder capital on significant in EBITDA And always done focused Aurora world. positive be the role genetics are over about were the on good And significant making you a We've the talked And progress. half reaffirming allocating about we fiscal about for we've when We're quarter. that XX% shareholder up talked we been around IP, to position. that all think haven't plays long-term synthetics, last

look understand that the lot a are I view, a there history, the that and I forward that I So, you things think Aurora of you companies understand has. most take at and question look if longer you but see traditionally

Ananth Krishnan

question meet Miguel. to we're that last to stated our you on and track next What to confidence path Our gives pertains our profitability, EBITDA timelines?

Miguel Martin

today XX high Well, if be side you look they've million company cost already we're our going at think we're what to what XX really of I at additional million done. a history that in you we're And if they're seeing saying you're believe looking and of commenting million at anytime, to efficiencies, XX a announcing and is that.

on and not, of When profitable a areas, doesn't upside, can out EBITDA EBITDA as we such there happen Growery have and yet once markets of as at moved quarter. may we've does a early Netherlands, be than would cash we didn't majority do again, less participated progress the of what Canada, have quickly key in made as this where overnight, in, and legally in look business aspects that XXXX. the drag adult so projection, still far, that components those the been we positive even made you is recognize the found, revenue progress such Secondly, investment we position, to deals, innovative rec and can that as consolidate now have

to on know, think, what always you we're track, we keeping we we going in key do the demonstrate I we as that mind and say decisions. do So shareholder we're we're make

Ananth Krishnan

it you the you that That's the Q&A great. to lines. session, concludes to turn retail open phone can over up to Operator,

Operator

you. Thank

session question first Cowen. question-and-answer We will your the Instructions] Our now with phone. Vivien open comes on state Please our question. [Operator from Azer

Vivien Azer

on I and coverage remarks in insurance supply the to but focus so medical strong the Miguel, really for expand appear wanted to and of prepared medical I two Glen that, interesting benefits particular, love would business, very outs And call parts. one on me. results, in your to the the question were So Canadian you during around

scope coverage just opportunities you standpoint? of And or expand can stands it as today? reimbursement on part level the two. the First, insurance set reimbursement then patient What to

Miguel Martin

the a business, And medical expect, but things only is lot a all also we mentioned, have but overall of of in And direct-to-consumer. acquiring And people is really we of these business. First, of let about all It to is it's and revenue key I'm the percentages sophistication. bit business opportunity. cannabis. it's do done flat, to level In address most going DTC really for things customary can know new a a my But business obviously would again, grew walk the And on that of more really a and sort develop is point harder numbers, of share. Canada, in size, the follow-up we your while in macro we've it is Glenn out rack focused DTC really increasing basket to than on older not the good I'll reimbursement through stats, a I I'll all business. components starting sort talk people, that. key of think market patients. you medical been with our as and it I

pretty a dilutive. to of that's have up half the today closest it gets medical market XX.X is of business almost We share that. And 'XX, that, after

that cannabis premium in the particularly First interested have added found patients and we've foremost, and we our of products. portfolio premium products And to are products. significantly

understand that to little would but people with cannabis most overall later medication, it's a coming the bit business. think I

the the physicians consistently only Secondly, the service and but has for patients, not the clinicians, improved.

a you that, And lot so reasons that to grow continue critical share are will of look that there think to in when category. we at

infrastructure through is two I'll that move expensive, is that The an process on you patient amount to why retain that doing the of make and see efforts, is service well. incredibly points medical acquire, requires few other both incredible so competitors the which

part The directly dominating why with about completely is knowledge other in is, other experience in a and and patients it UK same and Germany, key infrastructure and lot such are portable, is as and the Canadian and applicable markets market in we France.

other is set point regulators of common The the understanding. have a

as impact So on an has in markets. other well as Canada Health Europe, Western the regulations and Israel outweighted

So again, business grow but memory, expertise, Canada, all the in not overall portability only in play medical muscle internationally. to

growing pie, things. in the would of mention couple I of Now a terms

call prescriptions You're that the prescription advantage just that the with have and medications period that metrics we the and cannabis longer a starting ladder, longer, expand been type and medications to you medical like on would time, and other see of a what for products that clinical of companies. see trials, be many market peer in advocacy would pie situation. have reviewed the science in for Clearly customary of

that business, And the to there that and union get grow X.X. and portfolio Germany genetics for growth are which and the there quite lastly, own groups we insurers we a our bit so, can seeing We pie Canada so little of is Right science just those is in that think that are system, interest, give that's of then that. to not upside a And is considering other only adult and patients. LPs X% about clearly way. patients, the we population now, of it's those but cannabis in overall to of participates perspective low, in talked companies

metrics Canada is you've pie of key some upside grow both Glen, to in maybe to answer there and on internationally. touched this question. the the So,

Glen Ibbott

the the it's and Thanks, I'd there deliver patients a Miguel. Yes, majority of of profits of and our patients. majority first gross minority the ordering do question. are the Like, say the of great reimbursed all, a

in critical our and Now, war there we've important zone. group. this their responders number Obviously, is them, if you've first you medical a and patients veterans whether of treatment really it's of been significant for highest PTSD, dealing a if the portion country got and the in is a

really of gram been these the of the in some of on front treatment the for a is working This lines up that we're on reimbursed front important in folks reimbursement. coverage of and Through they per reimbursed programs is for, You've lines is qualify for what high you. to single-digits direct They policing. some or healthcare cannabis. are that

become less they the critical city so, right a is medicine, little And this. and really a sensitive price much more in of which getting component

but So, group. financially, for It's them, I think gram. per treatment an drive at they they are great important strictly really repeat orders high dollar average

do that is programs, an support a medical alluding we've they business. told cannabis health And in under accounts. the you technology spending to our of invested This that those benefit programs, have part us offer it, insurance of was as Miguel to, providers key employer option. in that growth or the as the some past and we For employee medical run

the now their directly have infrastructure into system. to We got connect

out patient go work. So, covered directly their have cannabis, not a and of can on pocket order insurance be to through program, medical it the through

positioned if spending account a So $XXX we've become choice. I'd alternative supplier as or a treatments through say year a account, add of you health

in value question. and a provides are difference also us quite So, dear patient the probably highest think opportunity stickiest, continue we best lives. work Thanks to or frankly, patients, which to their reimbursed our that's insured the group, we actually to on and the hearts the near making for an and that for

Operator

from Please comes Michael our question next And you. state Thank your with Sandler. question. Lavery Piper

Michael Lavery

evening. Thank you. Good

but reconcile, up XX% your pricing about on XX% and Can sequentially selling in some looks and we talked dynamics the before pressure you companywide price that How or medical in part is what average international then high like? there? down you quarter, margins touched of were should are help the international how from understand price because what of any was me sequentially. medical sales Was of that the international attractive You've points.

Miguel Martin

was not opposed pressure pressure through we which but point. Michael, as walking low a selling international, I'll Yes, let had destroying it wholesale domestic. numbers, some opportunistic the very from Glen to was sold we it at the product,

had business. in rec We some pressure also the

that margins mix. and incredibly haven't But are the strong. they're And some moved of all offset by international at was really

the don't of countries countries the the setup and the you're to XX and some put segment a mean of the it's And clearly so cannabis much growing and and through interest forward. more a of bring that's process list we same cannabis there. huge more it. thoughtful, end And not a big of challenge the legislative path does really have surprised, because Medical medications there's a I'm being internationally. always is I really pressures, margin on of the not cannabis why, in reason And markets the is fastest ones. And not were contract federal need in market business. all run seeing

on core balanced THC pretty variance will people that's hard. product broad it's And on be handful ago XX% only example, incredibly within agricultural has there XXX, or So XX% me, a products a I levels. as mentioned top requirements internationally. cannabis LPs, but is the excuse have you when a say, XXX there's Germany it a companies an that to in item X% like not only can you and strict have Canada, spec specs really of are both that today potency an there's that year of meet a well, In number

the look They're do is you're time. is, at consistency I in Same international and international seeing And the hard Glen progression margin. not The margins to how companies a growth is anything the where time on are are So winning it. countries And great. missed steady well. after moving. really

Glen Ibbott

or on. great average there's into insights margins No, yes, the specifically in consumer market. selling little about pressure talking about of the margins the price, Mike, bit a

just in medical level couple these Our there's reimbursement of down that as down price to make our that proactively sure first to products Canadian no market and of key average about impediment sort I ordering. veterans a adjusted that responders to came we talked

bulk Internationally, listen, we down though very But markets was the had this sells So, it slightly the the high overall. quarter. some Israeli are velocity, ASP picked actually even come sales. ASP on on up

show up no they're bale of the decreasing are no so, margins a ASP, There just they the There's prices, that in postharvest And but stuff. may selling extremely again handling. way like cannabis. bottling shipping because in our high look is average big they actually they're

So margins fill gram, know, great price even is think though have future the per we'll in think your average you great And down. it's because I selling I question to a our well if the ASP large quite to you bulk on the out the that a bit going in little because for frankly, you we up. impact you'll out, transparency give sales is, ASP of if our pull international

Operator

Thank you.

Our Zuanic Please next question. comes from with state your Pablo Cantor Fitzgerald. question

Pablo Zuanic

Germany, international lines from Because same not complex the about they're hear control won't but it's unique people sounds value when Canada I I he And ground? right? be Or and next that the shipping environments know the switch of regulatory in ability regulatory to that the you're you're yet sales issues going chain more wonder have this Can great, mean, on to only the then on Thank expand supply have and domestic going when own talk That your much grow Do two there, that the to sticky. how I sure unique so you, in if take markets. understand floating you set, of companies, you about talking they will I second they're when other wonder, that as good Colombia shipments you also talk about supplier those that Miguel. because are from another patients. you skill population the along so right. pretty Germany you're points? will I I release. Just patients are they you about really? I'm have to that chain, cheaper control you point, but, to of stickiness brand? to in navigate that selling X.X% is suppose press Israel, your whether, of quarter, buy means buyer from

Miguel Martin

lot happy situation. with we that that I've Israel spent Sure, a unique, of are to. is and time

have right XXX the cannabis So I influence. hub of able a need market. grow the in that is, quality political very locally, a tremendous Israel Cannabis for they now now today not that high really right XX million you've shekels. been X growers, local country it's situation a And people combusted, things. roughly mean, of that going all they've and they in is margin market. an to that including the And is increment you are gram about XXX hold on outsized Israel what a got growers of in a

least LPs why now, the sticky the Because that? what Canadian meet So you're others all markets. referencing right of And Pablo, spec. is that can the and is

in incredibly IMCA, may has which name Now the to Anchat, And strictest that permits CUM lot hard can one brands, Yuval of you what agency can would regulatory testing of not your and is the not meet of goes one into a because thoughtful of so and cannabis the no Israel, agency, But meet. in pesticide barriers a led call is else that wonderful now, through if what be by you the get created right to sees. cold. strictest there's man, is equity. import standard, a very product CS, get hot spec I the hot

because you exception local that there's can there's I'll possible demand, that. a developed something like Canadian such not benefit the you But and because you standard, stickiness such you in get meet themselves there. let can grower your brands the for InterCure, of much LPs get maybe if the haven't as can With product the

internationally, larger I successful a the who we'll not talk if think also stickier. be to have are every growers really majority Israel a time, Israel, about will the of time, which local over wonderful lot percentage, over are quarter, better and is think sales and we why each I get getting in the you're saying like shipment. diversify we not have held early in, we're the ever quarters in a too. to going business. to In record, you have that see the shipped currently Israel. going quarter other the And in to quarter days, your we we're where we're the We largest shipment this had

to and hot go it's So cold. going

conventions, Now stickiness naming Germany packaging pretty is another they and are clinicians picked. requires in filings, Getting into with product and a steady significant Australia a challenge, what and Israel it is one. is in production investment those and of sticky. outside absolutely year-plus

to you takes If case to in it in not process. to months going have Israel. is even thoughtful get SKU be it new France of Australia, a the registered. a X That's X very sort

unique. So is Israel

markets same to categories. companies People the same commitment in a and companies, are I they exceptional Germany, markets strong have common and medical, get on elements. France, product successful, other not those regulatory years all of a it's and on, couple History are And of to that amount and you look on in. that's The think concentration if sticky. at regulated and other unlike the other U.K., that portfolio, return, the absolutely significant excellence a investment takes and cannot of

a think I other is Israel of So all a bit the are but there. markets one-off,

You about degradation also there in because markets margin medical really do don't to as the it. we see no talked these is incentive

Operator

you. question ahead. from Carter Andrew our go Please next And comes Thank with Stifel.

Andrew Carter

ask said instead, you I guess, so I want to ask, about -- Canadian consumer so business. to wanted I the

you medical incremental some to and to positive a What could the it go EBITDA. savings would with with And profitable? XXX% do? you reiterated have have to consumer that be stabilize, focus? You've conversely, or able -- Does just does be business

Miguel Martin

Great question.

as mentioned, So we business Canadian rec completely the is irrational. now, right

core seeing XX% seeing situation right over you're vaccine of inventory now a you're the in like and XX% mandate amount where selling to negative SKUs seeing significant sales. drop that are a You're exceptional you're gross with margin Quebec with seeing

I it's about the market. a are weird there. LPs that XXX So talked

And which were And the that success the of the The so then benefits was companies I who it. arbiter overall was becomes, we the the in there pool, believe, market rec It's of ancillary first in we why recognize stay that always business. Canadian in of and exiting opt issue one out. the share is other not trained. profit question I something are is rec share that the

couple So for I rec a the proper albeit at want to a in business, size reasons. stay of

there. or of a strong in for to and to get not might going sustainable. it's it's months, position. going smaller we're really companies, be take XX And be First, but It that going a group when to it's happens, X

We've i.e., in only the represents about sense. largest when talked a is there going that. some to Secondly, think the that in sales extracts are going in also by the rec that XX% lot there where market U.S. premium all market. staying I there. rec And regulated be of learnings And of legacy market that only is is four Right get XX%, experience and you legacy and places Netherlands we're concentrates, a flower, think with potential, and market market to there in federally all market slowing legal continues the still going the find old. those some you a some to you at are can It's of about into And of there other point now, invaluable where make profitability, be places, that years that, the move.

share least of business regulatory, The share for our by overhead share at some point to we is facilities, fixed efficiencies from having share the of products, other rec medical able genetics being business. overall got and that some

roughly four we now, rec have business. a right. the share right of about Now It's

of is think pool I more profit share important.

but against areas just and chase why don't get it, the all share, out share, Canadian rent which international use and, to you don't and you don't is for medical. more growth you your are those unprofitable you reasons of So spend us unprofitable medical importantly, resources

Operator

ATB Frederico Our next comes from your question. question state Gomes Please Markets. with Capital

Frederico Gomes

Thanks I had on my question. taking a for just your question ATM.

finished cash. in So quarter over you $XXX with guys the million

You the have sheets in sector. one of balance the strongest

those rationale any provide in or you the it more that much about for building chest specific you that Is proceeds? just raising use M&A, Do quarter mind more have on for money after color was it further? could So end? some war

Miguel Martin

to question. things. a your want to couple essentially a Sure. great I just of question. on so Frederico, point tack

time, highlight continue important to be I $XX.X that that of debt. That back there par cash and to of the want as first I when convertible historically, that. below did we're had First, got And important situation. $XX was just storm really thought this sheet? million, that, talked to million to also Company monitor sort was, and think, weather to as is balance of the proper I the mentioned going a I when for we seat, continue that you whole position clearly, bought be I we it go us, also market. Why bought the in important in do convertible opportunistic we to And can the critically it back and we about we'll

the million, a the mentioned restate, said I it for get that of looking be what deals on to specifics We're going on purposes. of on Frederico, always EBITDA are on will You for ATM it strategic and bit be but $XXX accretive it. basis. so think this Everything previously sustainability focused to profitable to the an to is it's consider I'm for sustainably and over company. raising that focus a us utilized We answer we've the being unsatisfying profitable you, and the

EBITDA And that so always is important.

shareholders I to to line, And from day-to-day fraction but that position people program pertains or important But U.S. today of it's and know consider in hear a always were use expect of pay should so they to business. are me think mean to operational to any I for a strategic the U.S. in constantly. cash significant strong as what our is of give the have We're cash purchased the is ago. do ATM looking the at from also want a M&A. assets important I of the for I This not good valuation an a expenses to our restraint, strategic the We upside. hear think it, people particularly indication. operational it year the people

We target. going fast. that potential strong currently. into that's strategic there's we're the purchase to be to moving cash So valuation to be are opportunistic, why position always a things to we're be rationale sensitive and cautious But and and able any sure that, continue want really making price to and

Operator

you. Thank

Zamparo your state Please CIBC. with comes next Our from John question. question

John Zamparo

of license the you for when do this I And wanted material IP started have take a And business? sense and to that and not, monetizing you to if others. your happen? about might ability could to be give the date? specifically, ask us how science new And you program might genetics to that

Miguel Martin

Sure.

it's John, a So question. great

we small that way, to We have started in it, and monetize to a albeit accelerate. expect

around give me So you let some specifics that.

efficient you Cronos. the most both saw partnership thrilled those that pertains as biosynthetic announcement outside the to in plant with biosynthetics, and We're have about it we that. pertain the pathway the the believe assets IP about First, assets and our We plant.

to -- that. compensation there connected there were was So

we sold San sale Rafael. small as as gas continue in looking craft well-known we're high-quality we do of with farm well had craft I is announce people are smaller extremely utilized that and selling and many, have the so now We'll the Secondly, believe Gas. genetics. high-potency that announced as genetics have think marketing to a to a named we'll some genetics a that. and one some the high-quality, many deals companies. ways, you'll for We see XX, largest we We sale and -- the continue grower, of the library which variety which of Farm both the not an North different under into if cultivar genetics, We tool, largest,

continue so We that. to we'll and have grow others to ability for also our and through the economic scale, do facilities

answer the we've So had couple of deals. is short a

profile. their be at already all you made given relevant overall those material to that will other and other of that look we've And look we people you -- significant the OCO, If from clearly, a folks on investments. are they categories brought and where come staff at up margins the piece it's clearly financial

a particular, I'll and deals, the So both genetics is small misconception, let we a will other and protect they add or out. only to piece. cannot genetics amongst there large to me in But announce piece you more say, is that to evolve. thing the We'll today, come as John, where that's untrue. and completely cultivar. domestically continue internationally, own The both that, be are LPs, growers That's big lot a around,

to develop, identify the and we'll law are issue, very are clear very And a And case. able these clearly, that have unique upon is markers and licensing those that of that. strong so we infringing are we we this cultivars genetic on

around as of that's litigation that on we to start for that assets, infringed an some see stream additional biosynthetic Company. those as revenue our believe have and the also You'll well

Operator

you. Thank

next from Tamy question Our Please your comes Capital question. state BMO Chen with Markets.

Tamy Chen

wondering, the on business. I question at was one just consumer

press said Your the just release I sequentially. was down think back, decently. your volumes, consumer I quarters, the two, thinking XX% last holding I'm business And in think was three maybe

in what sequential decline was elaborate So on if could XX% drove wondering I just volume? you the

Miguel Martin

answer Tamy, chase. the So not we're think is I to going simple

going flower, of lose also made and make don't to of that seeing and irrational to an acceleration sense categories on we've particularly money, and out discount not chase. that we're we're certain the determination going get You're pricing,

data, at look you decline I body ASP, that, you the average your if see the and dramatic you segment. that all pricing, you've some and across in value day categories, follow know headset seen particularly key So or the can

And so a again, us. overall as much of focus market share is not for

we're take chase get doing, but I you'll want lot we are like what there. wrong I'm the more, single Ontario didn't in where a to longer not sell quarter, we're that is see saying it's digit not a to it or certain it bit folks opposed and So willing a us And taking going loss and and others cannabis time the our at to margin, going you inventories that's think looking to categories we see see lot are where that. significant problem in these going really to to Listen, lose see for a think but where of giving spend or of certain that there's as most I of in just to because in place, it out to rightsize, people away. that that's stuff why where provinces continue at sell categories negative company. you if accelerated margins, those you're

Glen Ibbott

just as under as Miguel we've places. remarks, is investing a stated And pre-rolls just an using Raf said into I in we saw new got of because -- of some and flower last us. different add over San brands quite to new then lot XX% his a number it cultivars in of of second cultivars I'll And Raf, in at profitable example nice innovation the that. San in I increase in coming, for Tammy, that. an prepared mean right quarters a remarks the two bunch profitable we and launched category.

the focus. that overall, away, what's and us If there is profit means fine, going drive our focused we're are. So profit where gross market pools profitability to that's but share to going

and I that, on what's and market revenue to to we're got profitable side away portfolio trying So strong from the the areas market that the the allow we've winning add medical happening the areas Canadian get the create and company think market that the and quite us in a share in existing here. on focusing what's be in really in really -- consumer driving to

Operator

Thank you.

with your comes from Our Please next question. state question Ladenburg Mattson Glenn Thalmann.

Glenn Mattson

for Thanks question. Hi. the taking

just consumers. So of building on stuff that on some

market of I the turns more fiscal for segment shrinking, around. of profitability you kind of where us your of you still second can So now, what's half you why this sense you move you to kind or when term? the that medium or growing have just you do lay your about give know parts the was continues? maybe first Andrew's over up talked But a see be you the that to how for shaping sense or kind but maybe for new forecast that how idea out irrational like, market you internally, variety of the one that question in general have want long it's into there or markets reasons of for in some like for 'XX, of

Miguel Martin

Sure.

or vaccine is think foremost, store and I in alcohol have let either first in XX% highlight an Quebec They province are Quebec. me a cannabis critical and for in order XX%. to Canadians go sales Glenn, So the down mandate store to

listed. end Now be some by will is the that of of province the the indicated month, stuff

market is So COVID. be impacts impacted next also the three by six because And LPs obviously, of term the defined continued the labor. current months. to by have is Short to

pricing You're seeing of an acceleration downward.

flower. discount in that seeing You're

vapor. in that seeing You're

in segments. the of seeing lot core You're that a

But you're flower for concentrates through made is with by, and defined I and are starting the think LPs like going probably the There's market As we premium it variety decent holding just XX%, and no harvest to and up X mentioned, given entry. resins for went think to a be I I to ago, the with and some a of of some different still know, year this Glen will bright things there is as that's margin be to of And bit that, XX%. the there a challenge. don't on capital, spots, of rosins go LPs, And next to this and repricing. again, X XXX see see months. to absence really only which smaller midsized barriers a we're XXX things,

been the the Now of out Ontario the is Good would I making mention go. also about provinces we've some and Lobos, are Guy of OCS, what encouraged by that heard interim changes. starting CEO to where We've Steve subs

think this healthy different of you're the basis aspects XXX pricing of points margin, about brands normalized, some retail you're of bit and until situation. that points side big We environment. create I seeing XXX sale to a that a not being be acknowledgment or sold negative are going sort have some gets in on at a seeing will But basis irrational

to So to focus of our going pleased on thoughtfulness. this, been that competitors are start our to really I've profitability and hear methodology people and echo some

to of of early they indicators, going us. in do months this to all by and days. not any why XX it's you dissimilar the because around is I Now be Colorado what in turn hope And to saw seem that California ahead

articulate, You're equity in those up brand markets. go seeing scores brands

market be shares premium seeing much relevant. more You're

timing. all much doesn't the and make get different not Canadian rec economics right U.S. plus You're any to know chasing It's probability. think there. seeing And the market, through see to in manufacturers think point get focus is make is of I to a sense. the I you're greater think business growing legacy things going a The now on just big business, I But are just those going is money, there. too too and the a I

in seeing I'm XXX You're basis market in that week. and move to shares move XXX points used a a quarter. seeing

market, that a first, be to need wait And can don't you little you so bit. in

consumer much going take those we're some of we're And to patient would think and internationally, We're as so, spots. both longer there'll bit market on be people going can to our where It's just the And when There'll effort. a rightsizing as there'll that things a come we rec make we have out bring our than and well subset LPs. a smaller to it, of operators, much really be can hope. money. better a be large I focusing and

Operator

And the Miguel turn have you. floor we closing to time today. I'll all Martin Thank for the remarks. questions that's back for

Miguel Martin

on the me with our thank everybody the again, which quarter. for money, pleased in appreciate we've that Well, particularly foremost, present being to raising first the focused provide the and out the We're they to that transformation we the make $XX let really taking quarter. you and we're three, progress that, plan million our compression and quarter has done and is really from Once with itself, last it. our and put in coverage you've We the this medical. everything guidance XX% key positive, stock. $XX focus opportunities seen EBITDA can our three as structure done cost doing We've a sustainably time to components, growth on plan we've on million, markets where that,

appreciate I the All best. in the forward future. So we is and really everyone seeing it. person people in safe look and well, to I hope near

Operator

conference. evening. Thank you. Have This disconnect. good All concludes a may parties today's

Aurora Cannabis (ACB) 11 Feb 222022 Q2 Earnings call transcript