Aurora Cannabis Inc. Stock

Hello, and welcome to the Annual General Meeting of Aurora Cannabis Inc.

I will now turn today's meeting over to Michael Singer, who will act as Chairman of the meeting. Michael, the floor is yours.

Thank you. My name is Michael Singer, and I am the Lead Independent Director of Aurora Cannabis Inc. I welcome you all to our Annual General Meeting for the company's financial year ended March 31, 2026. I will act as Chairman of this meeting. Joining me today is Miguel Martin, Executive Chairman and Chief Executive Officer; and Nathalie Clark, General Counsel and Corporate Secretary at Aurora.

I now call the meeting to order and will commence with the formal proceedings to appoint a recording secretary and a scrutineer for the meeting. I appoint Nathalie Clark to act as Recording Secretary for the meeting and Megan Tang of Computershare Trust Company of Canada as scrutineer for this meeting. This meeting is being held in a virtual-only format, which is being conducted via live audio webcast. In terms of formal procedures at today's meeting, as Chairman of this meeting, I will propose motions and in accordance with the articles of the company, no motion proposed by me need be seconded.

We will conduct the votes on the matters before us by a poll on the virtual platform. On a poll, every shareholder entitled to vote on the matter has 1 vote for each share entitled to be voted on the matter and held by that shareholder. The poll will be open for all resolutions at the same time. This will allow you to choose to vote on each resolution immediately or wait until the conclusion of discussion on each resolution prior to casting your vote.

Due to the format, there will not be an opportunity to address the meeting in real time during the formal proceedings. However, registered shareholders or duly appointed proxy holders will be able to enter questions to be addressed during the Q&A session following conclusion of the formal portion of the meeting. As is the case with an in-person meeting, due to time constraints, we may not have time to address all questions through the platform and ask that you follow up with our Investor Relations team if your question is not answered today. There is an online presentation that you will be able to view during the course of the meeting, and viewers are asked to please refer to the disclaimer with regards to forward-looking statements as set out in the presentation.

In addition, certain matters discussed during this meeting that are not statements of historical fact could constitute forward-looking statements, which are also subject to risks and uncertainties related to our future financial or business performance. Viewers and listeners are cautioned not to place undue reliance on these forward-looking statements. These forward-looking statements are based on the company and its management's good faith assumptions relating to the financial, market, regulatory and other relevant environments that will exist and affect the company's business and operations in the future. Actual results could differ materially from those anticipated if these forward-looking statements and the risk factors that may affect actual results are detailed in our annual information form and other periodic filings and registration statements. These documents may be accessed via SEDAR and EDGAR.

I now declare the polls open on all resolutions. The notice calling this meeting and all proxy-related materials were delivered to shareholders by notice and access with the materials posted on the company's website. All registered and beneficial shareholders received a notice and access notification. I have a declaration as to the notice and access meeting mailing for this meeting, which is available for inspection by any shareholder. In view of this, I will dispense from calling for a reading of the notice, and I will ask the recording secretary to file the declaration of the notice and access meeting mailing with the minutes of the meeting.

Does the recording secretary have the scrutineer's report on attendance?

Yes, I do. The scrutineer's preliminary written report on attendance states as follows: 0 shareholders in person representing 0 shares, 146 shareholders by proxy representing 16,639,239 shares, 146 total shareholders holding 16,639,239 shares. Total shares represented 61,956,924 shares. The percentage of outstanding shares represented at the meeting is 26.86%. This attendance meets the quorum requirement for the meeting.

Thank you, Nathalie. The notice of the meeting having been given as required and a quorum being present, I declare this meeting to be duly called and constituted for the transaction of business.

The minutes of the last Annual General Meeting of the company held on August 8, 2025, are filed in the company's record book. I now put forward a motion that the reading of the minutes of the last Annual General Meeting of the company be dispensed with and that the minutes be taken as read and approved. May I please have a motion that the minutes be taken as read, approved and adopted as tabled?

So moved.

Thanks, Miguel. Motion carried. I will now table the financial statements for the company's financial year ended March 31, 2026, the report of Ernst & Young LLP and the related management's discussion and analysis thereon. These financial statements have been filed by the company on SEDAR.

I would like to propose that we dispense with reading the financial statements. Please note that there will be a Q&A session after the formal portion of this meeting to discuss the company's financial situation and prospects. May I please have a motion that we dispense with reading the financial statements?

So moved.

Thanks, Miguel. Motion carried. Accordingly, I confirm that the financial statements of the company for the year -- financial year ended March 31, 2026, the report of the auditor and related management's discussion and analysis thereon have been submitted and shall be included by the recording secretary as part of the formal records of this meeting.

The next item of business is to fix the number of directors for the ensuing year. Management proposes to fix the number of directors to be elected to the Board at 5. I move that the number of directors for the ensuing year be fixed at 5.

I will now call for a vote on the motion before the meeting. If you are a shareholder or a voting delegate who is using the virtual platform to vote on this matter, you may do so now. If you have previously voted on this matter and do not wish to change your vote, no further action is required. Would all voting delegates please enter your votes in the system.

[Voting]

The next item of business is the election of directors for the ensuing year. Management proposes to nominate 5 persons for election to the Board. These persons are all described in the proxy materials, and all of the nominees have agreed to stand for election. The company's articles include advance notice provisions, which provide for advanced notice to the company in circumstances where nominations of persons for election to the Board are made by shareholders of the company. The company has not received notice of any nominations and as such, any nominations other than the nominations disclosed in the proxy materials for this meeting may be disregarded.

Therefore, I nominate the following 5 persons as directors for the ensuing year. Miguel Martin, myself, Michael Singer, Chitwant Kohli, Norma Beauchamp and Rajesh Uttamchandani. The 5 persons nominated are management's nominees for election as was stated in the information circular for this meeting. I move that the nominations be closed.

I now call for a vote on the motion before the meeting. If you are a shareholder or a voting delegate who is using the virtual platform to vote on this matter, you may do so now. If you have previously voted on this matter and do not wish to change your vote, no further action is required. Would all voting delegates please enter your votes in the system.

[Voting]

The next item of business is the appointment of the auditor for the ensuing year. The company proposes that Ernst & Young LLP be appointed as auditor of the company for the ensuing year. I now ask for a vote on the motion that Ernst & Young LLP Chartered Professional Accountants, with offices at Suite 1900, 1133 Melville Street, Vancouver, British Columbia be appointed as auditor of the company.

I now call for a vote on the motion before the meeting. If you are a shareholder or a voting delegate who is using the virtual platform to vote on this matter, you may do so now. If you have previously voted on this matter and do not wish to change your vote, no further action is required. Would all voting delegates please enter your votes in the system.

[Voting]

The next item of business to consider is the nonbinding advisory vote on executive compensation, also known as say-on-pay, as described in the information circular. To pass, the resolution must be greater than 50% majority of the votes cast by shareholders voting in person or by proxy here at the meeting.

I now call for a vote on the motion before the meeting. If you are a shareholder or a voting delegate who is using the virtual platform to vote on this matter, you may do so now. If you have previously voted on this matter and do not wish to change your vote, no further action is required. Would all voting delegates please enter your votes in the system.

[Voting]

I will pause briefly and ask that all shareholders and voting delegates finish voting on all items presented as we will be closing voting shortly.

Thank you. I confirm that voting has been closed. I will pause briefly again to allow our scrutineer to advise if sufficient votes have been cast in favor of the items that were presented today. I have received the results of the votes on each item of business. The scrutineer confirms that the company has received sufficient votes in favor of each item of business to carry each motion. Full voting results will be available on SEDAR after this meeting.

As all the business for this meeting has been concluded, I declare this meeting terminated. Thank you for attending. We will now move to the informal part of the meeting, and I will turn it over to Miguel Martin.

Fiscal 2026 was a strong year for Aurora. Net revenue meaningfully exceeded our outlook. Adjusted EBITDA was above the midpoint of our guided range. We improved adjusted net income by more than $12 million and closed the year with $165 million of cash with no debt.

At a high level, our results reflect the business that is becoming more focused, more resilient and better positioned to convert global medical cannabis demand into long-term shareholder value. This performance was driven by 2 strategic pillars: our leadership in medical cannabis across nationally legal markets and our continued discipline in financial management. First, we are anchored by our leadership in medical cannabis across nationally legal markets. More than a decade ago, we anticipated that medical cannabis was poised to be the most attractive and durable segment of this industry, and we invested accordingly, building the science, infrastructure and regulatory capabilities that allow us to serve patients with consistency, quality and scale.

Today, Aurora is one of Canada's largest global medical cannabis companies, a leading exporter of medical cannabis and a trusted supplier to international markets through our world-class GMP-certified facilities. We are a market leader in Canada, Germany, Australia and Poland, the 4 largest nationally legal medical cannabis markets. Most of our production capacity operates within GMP-certified facilities that meet strict international standards. Only a small group of producers, including Aurora, hold the certification required to ship directly into European and Australian medical markets. Our integrated manufacturing and distribution model also helps lower production costs through higher yields, improved potency and ongoing operational efficiencies. Second, we remain highly disciplined in our financial management. Cost efficiencies enabled us to expand our annualized adjusted gross margin and increase adjusted EBITDA while maintaining a strong balance sheet. This discipline positions Aurora well for the future as we continue to navigate evolving industry dynamics.

Here are some highlights from fiscal year 2026. First, net revenue rose 11% to $321 million, driven by double-digit growth in global medical cannabis. This exceeded the top end of our guided range by $8 million. Notably, about 55% of our net revenue was generated outside of Canada. Second, adjusted gross margin rose to 64%. This reflects the benefits of our investments in the value chain, science and plant genetics as well as operational efficiencies and capacity improvements. Third, adjusted EBITDA grew 32% year-over-year, reaching $54 million. And finally, we ended the year with one of the strongest balance sheets in the industry with $165 million of cash and cash equivalents with no debt. These results give us confidence as we move into fiscal 2027, but they also underscore the importance of maintaining our leadership in global medical cannabis as competition, regulation and pricing dynamics continue to evolve.

We believe Aurora is uniquely qualified to adapt to these industry changes. Rising global GMP standards, heightened competition in Europe and the reduction in VAC reimbursement in Canada, all require us to rely on the same capabilities that helped establish our leadership in medical cannabis: genetics, GMP-compliant manufacturing, commercial execution, operational expertise and product innovation. In fiscal 2027, we are making targeted investments to capture market share, increase our GMP capacity, pursue margin-accretive targets and broaden our existing international leadership. This strategy is best evidenced by our recent acquisition of Safari Flower Company, an established EU GMP certified cultivator and manufacturer that strengthens our position as one of the largest Canadian exporters of medical cannabis. This transaction was accretive to our adjusted EBITDA results during the first quarter, and it provides us with incremental EU GMP capacity that will help us maximize the opportunities in the growing high-margin international market.

As we progress through fiscal 2027, we look forward to providing updates on how Aurora is progressing in our strategy to drive the business to new records for revenue and adjusted EBITDA and generate sustained shareholder returns over the long term. Thank you for your time and for your continued support of Aurora. We would now be happy to move to our Q&A session. In addition to responding to questions submitted through the platform, we will also address common themes we have received through our Investor Relations mailbox.

Thank you, Miguel. I'm going to start with the most common questions we received from our shareholders. I also cite questions received through the virtual platform during our AGM today.

First question we'd like to start with today. Based on fiscal year 2026 has reported record performance, what can investors expect in 2027?

Fiscal 2027 is being shaped by changes in Canadian medical and the planned exit from the lower-margin Canadian consumer business that can be partially offset by international growth as we demonstrated in Q1. We are purposely investing in our international business to support growth in our most profitable markets. This includes our new wholly owned subsidiary, Safari Flower Company, a trusted cultivator and manufacturer of high-quality medical cannabis. This acquisition provides incremental capacity to supply the growing international markets.

Our fiscal first quarter performance was in line with expectations with net revenue of $67.6 million, international medical cannabis net revenue growth of 17% to $43 million and consolidated adjusted gross margin of 58% at the high end of our annual guidance range. We expect international medical cannabis to continue to grow, supported by continued momentum in Germany and other regulated markets. For the fiscal second quarter, we expect revenue and adjusted EBITDA to be sequentially higher than Q1, and we remain focused on sustained double-digit revenue growth, strong margins and higher EBITDA contributions over time.

The second question is, as a shareholder, why should I look to continue to invest in your company, especially given the significant reductions in our share price?

Aurora is focused on the most attractive and durable part of the cannabis sector, global medical cannabis, where regulatory complexity, quality standards and GMP requirements create meaningful barriers to entry. We hold leadership positions in Canada and key international markets, including Germany, Poland, Australia and New Zealand.

Our integrated EU GMP supply network is a key competitive advantage as we expect GMP standards to become increasingly stringent, a trend we believe favors experienced and established operators like Aurora. We have the ability to ship directly to key international markets and continue supporting the growing patient demand in the years ahead. With nearly $150 million in cash and no debt, Aurora has the financial flexibility to invest behind growth, expand capacity and pursue disciplined, accretive opportunities that can create long-term shareholder value.

Our third question relates to capital allocation. Based on a significant cash balance, how do you plan to deploy this capital? And how is the strategy expected to add shareholder value?

Our capital allocation strategy remains disciplined and focused on strengthening Aurora's leadership in profitable global medical cannabis markets. We intend to deploy capital where it supports strategic and accretive growth including increased cultivation capacity, EU GMP expansion, targeted site improvements and selective M&A opportunities.

The Safari Flower Company acquisition is a recent example of this approach. It added incremental EU GMP capacity, strengthened our export position and was accretive to adjusted EBITDA in our first fiscal quarter of 2027. Our strong cash balance and debt-free position allow us to be patient and opportunistic while ensuring any investment or acquisition aligns with our strategy and leaves Aurora in a stronger financial position.

Thanks, Miguel. Our final question relates to international markets. Your guidance referenced international growth will partially offset the decline in Canadian medical revenue. What markets will this growth come from? And what are the key drivers of this growth?

International growth is expected to be led by Germany, our largest and fastest-growing international market, where we continue to hold leading share and benefit from strong demand for premium and core medical cannabis products.

We're also encouraged by Poland, where Aurora holds the #1 market share position, supported by strong execution, recent import limit increases and a loyal patient base. Australia and New Zealand remain important markets with opportunities to expand our mix towards core and premium products, broaden our product formats and benefit from new leadership and distribution agreements. Across Europe and other emerging regulated markets, including the U.K., France, Ukraine, Switzerland, Spain and Austria, we believe Aurora's EU GMP capacity, regulatory expertise, genetics and integrated supply chain are portable advantages that support long-term growth.

We have now concluded our question-and-answer session, and thank you for attending and participating in the meeting. If you have any additional questions and would like to follow up on any questions presented to the meeting, which were not addressed, please e-mail our Investor Relations team at [email protected]. Thank you very much.

This now concludes the meeting. You can now disconnect.

Thank you. All participants will be in a listen-only mode, and a question and answer session will follow the formal presentation. This conference call is being recorded today, Wednesday, August 5th, 2026. I would now like to turn the conference over to your host, Kevin Nyland, Director of Strategic Finance and Investor Relations. Please go ahead, sir.

Hello and thank you for joining us. With me are Miguel Martin, Executive Chairman and CEO, and Simona King, CFO. Earlier this morning, we filed our fiscal first quarter, 2027, financials for the period ending June 30, 2026, and issued a news release containing our quarterly results. Financial statements, MD&A and news releases are available on our IR website and can also access via CDAR Plus and ACAR. In addition, you will find a supplemental information deck on our IR website. Please note that we present our financials in accordance with IFRS and in Canadian dollars. Throughout our discussions we will be referring to both GAAP and non-GAAP adjusted results and encourage you to review the reconciliation contained within the press results from their GAAP, the corresponding non-GAAP measures.

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 in charity from those anticipated in those 4-0 statements. Risk factors that may affect actual results are detailed in our annual information form and other periodic filings and registration statements. Documents may similarly be accessed via CDAR Plus and ADKAR. Following our prepared remarks, we'll conduct a question and answer session with our covering elements. With that, I'll turn the call over to Miguel. Please go ahead.

Thanks, Kevin. Aurora has become synonymous with medical cannabis in nationally legal markets because we spent years building the infrastructure, scientific capability, and regulatory expertise required to deliver reliable, scalable, and consistently high-quality products to patients. A dedicated focus on medical cannabis enables us to maximize opportunities in the industry's most attractive, durable, and profitable segment, and should help us maintain and expand our leadership over time. We are already a leading exporter and hold top-tier market share positions in Canada, Germany, Poland, and Australia. We are also well positioned to export to other countries as the regulatory environment continues to open. We prioritize expanding our manufacturing capacity to support growth in the estimated $9 billion global medical cannabis market. There are only a handful of companies like Aurora that have the capabilities and certified pharmaceutical grade facilities required to reliably produce and sell directly into European and Australian medical channels. Our integrated approach to manufacturing and distribution reflects disciplined operational and financial management that drives lower production costs through strong yields, higher potency, and continued operational efficiency.

Our cost base is structured to support top-line growth, and our continued investment in international expansion helps offset the near-term headwind in revenue and gross profit contributions to our business, stemming from the reduced VAC reimbursement rate in Canadian Medical. We continue to prioritize and maintain a strong balance sheet with ample cash and no debt. This gives us greater flexibility to navigate regulatory and competitive developments across Canada, Europe, and other key international markets, and lets us deploy capital thoughtfully to stay ahead of our competition. Here are some of the key highlights from this quarter. First, international medical cannabis net revenue rose 17% to $43 million, driven by strong performance in Germany. Notably, about 64% of our total net revenue was generated outside of Canada, up from 50% last year. Second, our acquisition of Safari Flower Company and the recently announced certification of its EU GMP facility adds critical manufacturing capacity to serve the growing, profitable international medical cannabis markets.

Third, adjusted gross margin was 58% at the high end of our expected annual range as we from strong contributions from international markets. And finally, we ended the quarter with nearly $150 million in cash, cash equivalents, and short-term investments with no debt. Our operational network is clearly a core differentiator for Aurora, further supported by the recently completed acquisition of Safari Flower Company and the investments we have made in genetics and plant science. As international medical cannabis markets continue to evolve, EU GMP certification remains a critical enabler for global service. strategy and supports long-term profitable growth. Our investment in plant science and genetics has helped deliver meaningful reductions in the cost per gram to manufacture. Genetic differences alone can drive a yield improvement of up to 40% on the same cost base, a critical advantage in a capital-intensive business. Consistency is equally important, particularly in highly regulated medical markets, where product variability can disqualify items from market access altogether.

Safari is an established EU GMP certified cultivator and manufacturer operating a 59,000 square foot purpose-built indoor facility in Ontario that strengthens our position as one of the largest Canadian exporters of medical cannabis. The acquisition gives us incremental EU GMP capacity that aligns with our existing low manufacturing network, strengthening our ability to meet the growing international demand for high-quality EU GMP products. This transaction was accretive to our adjusted EBITDA results during the first quarter, and we intend to apply our plant science and operational expertise to drive incremental benefits through increased yields, lower manufacturing costs, and additional supply of EU GMP flour to maximize the high-margin opportunities in Europe and other key international markets. Now let's discuss our key medical canvas markets individually. Germany is our largest and fastest growing international market. It's also one of the most rigorous markets with strict GMP standards required for access. We view these attributes as a competitive advantage rather than a barrier and one that has helped us build a stellar reputation with wholesalers, distributors, and pharmacists.

The market is structured around flower and oil, and unlike in other countries, Germany maintains meaningful separation between premium, core, and value-tier pricing. We operate primarily in the premium and core segments, which represent the majority of our volume, with all three segments continuing to grow. As new competitors enter Germany and pricing pressure increases, we've maintained our leading market share. by adjusting pricing where appropriate and broadening our product line to include more value options. We also expect GMP standards to become increasingly stringent, a trend we believe favors experienced and established operators like Aurora. Our EU GMP certified facilities and integrated supply chain allow us to ship directly to Germany and continue supporting growing patient demand in the years ahead. Our leadership showed through this quarter with two of our proprietary cultivars continuing to rank in the top five by sales. Clear evidence of our brand equity that we've developed since first entering Germany in 2018.

We're one of only three active in-country producers of medical cannabis holding a production and R&D license under German cannabis law, giving us a strong foundation to directly serve the growing medical markets across Europe. To capture incremental share in this growing market and augment our EU GMP production, we are in the final phase of our expansion plans for our learning facility. These investments should increase product quality through the same industry-leading genetics and operational playbook that has helped deliver incremental margin gains. The project is nearing completion and combined with the rollout of our proprietary cultivars is expected to double the site's annual flower output. The The German market has built a very mature and integrated medical cannabis framework. They have a well-developed physician and pharmacy-led network that supports patient access, which is further supported by proper manufacturing and distribution capacity, GMP-level standards, and strong regulatory oversight. All those points to a system that's solid, well thought out and highly integrated.

We continue to monitor the regulatory and legislative environment in Germany, and while there's been lots of discussion regarding potential changes, we believe that we have the skills and capabilities to navigate any potential revision successfully and come out stronger on the other side. Similar to how we successfully navigated the changes in Poland last year. Speaking of Poland, we hold the number one market share position, supported by strong commercial execution. We are encouraged by recent increases in annual import limits and the strong, loyal patient base, which strengthens our growth outlook for this key, highly regulated market. Success in Germany and Poland positions us well for other areas. emerging regulated markets, such as France, Ukraine, Switzerland, Spain, and Austria, as our capabilities are portable. We will continue to focus on cultivation and wholesale, where we believe the greatest margin opportunity exists, rather than downstream channels like retail or telehealth. These sit outside our core competencies of weaving ever-increasing regulatory standards into our operations.

Our well-established leadership in Australia is allowing us to shift our sales mix towards core and premium products, reflecting growing demand from both prescribing physicians and patients for higher-tier options. Australia also offers one of the broadest product format ranges outside of North America, giving us the opportunity to fully leverage our diverse product portfolio beyond flour and oils. We are also encouraged by the growth we are seeing in New Zealand, another highly regulated market where patients are responding favorably to our growing product assortment. Finally, let's turn to Canada. The first quarter marked the onset of revisions to the federal reimbursement program, which took effect April 1st. As expected, this external regulatory shift impacted both our top line and adjusted gross profit. However, we are encouraged by our continued strong margins in our global medical cannabis business that supported the of consolidated adjusted gross margins of 58%, which are at the higher end of our targeted range. depleting margins along with our historical ability to grow share in this business should therefore remain intact. Against this backdrop, we expect to expand share with new patients continue to enter the market.

The revenue and adjusted EBITDA impact reflected in our first quarter performance and reaffirmed annual guidance is primarily a function of industry-wide changes and not a reflection of underlying demand or our competitive position in the long term. In our view, we have the capability high-quality products, financial resources, and resilience to successfully navigate this headwind and deliver profitable growth while continuing to invest in growing international opportunities. Finally, let me address the changing U.S. regulatory landscape. We're watching developments in the U.S. closely, particularly as recent uplisting activity and potential rescheduling create new possibilities. see three areas of opportunity for us. Expanded research collaboration following federal rescheduling, potential partnerships leveraging our GMP and medical grade manufacturing standards, and longer-term import-export possibilities between the U.S. and the international medical markets we already serve. That said, we are encouraged by this renewed momentum and look forward to further regulatory clarity from the U.S. administration in the coming months. Let me now turn the call over to Simona.

Thank you, Miguel. Our quarterly performance reflects the strategic decisions we have made to reallocate our resources to focus on global medical cannabis opportunities. While some of the year-over-year comparatives may appear less favorable, the results themselves are in line with our expectations, and we are purposely investing in our international business through strategic sales initiatives and EU GMP capacity expansion to support growth in our most profitable markets. Let's now review our fiscal first quarter 2027 compared to the prior year and I will then reaffirm our fiscal year 2027 outlook. Net revenue was 67.6 million, which is inclusive of a 17% increase in international medical cannabis. growth was offset by the expected changes in Canadian medical net revenue and the planned exit from our lower margin Canadian consumer cannabis business. Consolidated adjusted gross margin held strong at 58%, coming in at the high end of our annual guidance range. The change versus the prior year was primarily due to the expected changes in Canadian medical pricing, offset by strong international performance. Consolidated adjusted SG&A was reduced from $36.1 million in the prior year to $35.1 million this quarter.

This $1 million reduction was driven primarily by lower general and admin spending, offset by slightly higher selling costs. Adjusted EBITDA was $3.4 million compared to $10.8 million in the prior year, while adjusted net income was $3.8 million compared to $6.6 million last year. The year-over-year changes primarily reflect lower adjusted gross profit before fair value adjustments, partially offset by improved SG&A performance and an increase in other income. Our balance sheet remains one of the strongest in the global cannabis industry. We held close to $150 million in cash, cash equivalents, and short-term investments with no debt. We have ample liquidity and can be opportunistic with respect to investing in ourselves as needed, while also pursuing additional acquisitions. Pre-cash flow was an outflow of $5.8 million compared to an inflow of $6.8 million from the prior year. due to a reduction in gross profit before fair value adjustments of $9.7 million.

Let me now reaffirm our outlook for fiscal 2027 ending March 31, 2027. It reflects the important steps that we've taken to strengthen the business and drive growth in the attractive global medical cannabis market. Recall that we viewed this as a transitionary year and we remain optimistic in our long-term trajectory. fiscal 2027 is being shaped by changes in Canadian medical that can be partially offset by international growth, as we demonstrated in Q1. purposely investing in our international business to support growth in our most profitable markets. This includes our new wholly owned subsidiary, Safari Flower Company, a trusted cultivator and manufacturer of high quality medical cannabis, which provides incremental capacity to supply international markets such as Germany, Poland, and the UK. For the fiscal second quarter, we expect revenue in adjusted EBITDA to be substantially higher than in the fiscal first quarter. Thank you for your time. I'll now turn the call back to Miguel.

Thanks, Simona. We've established one of the most attractive medical cannabis growth businesses in the world. by a sizable footprint across all major countries and regions. To accelerate our global momentum, we are deploying targeted investments to rapidly expand GMP capacity, push a steady cadence of new product launches, seize additional market share, and reinforce our leadership position. These actions are engineered to deliver a sustained double-digit revenue growth, maintain superior margins, and drive higher EBITDA contributions over the coming years.

Thank you all for your time today and for your continued confidence in Aurora. 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. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. ask that you limit yourself to one question so that others may have the opportunity to do so as well. If you would like to ask a follow-up question please rejoin the queue.

One moment please while we poll for questions. Our first question comes from Bill Kirk with Roth Capital Partners. Please proceed with your question.

Good morning, everybody. I was hoping Miguel and Simona if you could give us some more details or specifics on the expectation for sequential revenue growth and the EBITDA improvement that you expect off 1Q and in particular are there any markets where you're confident that that growth is going to be driven from or any cost savings opportunities? that you have on the horizon that gives you that sequential improvement confidence.

Great, and good morning, Bill. Let me start and I'll let Simona pick up the backside of it. I think overall it's going to be similar to what you've seen. So the same markets where we see opportunities and we see growth will continue to be there. Obviously, there's a bit of a reset as it pertains to VAC, but we expect to grow share off of that. As you move offshore, you know, We see opportunities in Poland and Germany and Australia and New Zealand. Clearly, Germany being the biggest is the most sort of obvious place for it. And as we said in our prepared remarks, we continue to find significant opportunities there because of the scarcity of high-quality GMP flour, which is something that really we excel at.

And so I think it's more of the same, so there won't be any real big surprises. And on the cost side, we continue to look for efficiencies. The biggest do come from our genetic work and the production efficiencies we get out of our facilities. So as we said and we've said in the past, some of those genetics can yield up to 40% increase. and also have improvements in quality and potency and Terp scores and things like that that allow you to garner some higher economics. But, Simone, anything you want to add to that? No.

I think you covered it, Miguel, and maybe to reiterate that we're very encouraged by the strong growth that we're seeing in Germany. And we're happy to, especially in Q1, deliver on the high end of our guidance range with our adjusted growth margins being at 58%. So, again, reflecting on what Miguel said that we see continued efficiencies in our manufacturing network.

Perfect. And as a follow-up, on that manufacturing network, you talked a lot about the importance of EU GMP and your medical standards and quality. What do you think about the U.S. growers who are confident they can export into international markets? And would you think of them as potential extra competition? in those markets, or would they be potential partners that you could help access your international supply chain?.

You know, listen, I think it's a little early. Obviously the regulatory construct that the MSOs and the SSOs operate in is totally different than what we see, say, in Germany or Poland or New Zealand. And that's not to take anything away from them, because I think there's some very strong operators there. What I do know is that we've been in Germany since 2018, and it's difficult. And it's not just the regs that exist today. As we've said, those standards continue to tighten. And so I think whether you come from the U.S. or you come from Canada, it's a challenge in order to get product consistently in there.

The other thing, you know, for us, which is a big advantage, is we grow almost everything that we sell. So we control that network all the way through as opposed to, say, third-party purchases or other aspects on it. And in terms of partnership, as we said in our comments, we absolutely believe that there will be opportunities to partner. Our almost decade-plus of large-scale GMP manufacturing in a pharmaceutical setup for these countries lines up very well for what we're starting to see from the rescheduling regulations coming out of the U.S. So we're hopeful, just like we partner with folks in Canada. and internationally, that that would also extend to the U.S. Thank you. That's perfect. I'll jump back in the queue. Thank you, Bill.

Our next question comes from Fabrico Gomez with ATB Capital Markets. Please proceed with your question.

Hi, good morning. Thanks for the question here. I guess I want to talk about your Germany because, you know, Miguel, you mentioned that, I guess, your senior expect to see continued pricing pressure there. Can you talk about the magnitude of that price pressure that you're seeing and you know our prices coming down? and I mean, steadily every quarter, and that being lumpy and varied according to the availability of supply. And then the second point in Germany is just, you know, potential revisions there in terms of the regulatory framework. If you could just talk about how you think the regulatory environment in Germany is going to evolve and how Aurora is positioned to,.

to potentially benefit from that. Thank you. Of course, and good morning, Fred. I think, so first let me talk about pricing in Germany. So, as we mentioned in our prepare to march, there really are three distinct, sort of quality tiers in Germany that are very articulated, and we like that in a market. So you've got premium, core, and value. All of them are required to be GMP, so they hold a higher standard than maybe a non-GMP market. We see most of the pricing pressure in the value segment, as to be expected.

And actually, when you look at core and premium, because of the increasingly challenge that comes with these GMP standards getting more stringent, we see that pricing's been held up quite well there. So I think while you always are sort of seeing something in the value segment, on the higher ends you don't, and we also see, since it's such large self-payer market that you don't see some of the pressure on the reimburse side you know as maybe the the reimbursement rates would change like you see in Canada the VAC system. So I think we're pretty confident in that piece of it. And overall, when you think about some of the noise that we've heard from potential legislation, we'll know a lot more in the coming months. But usually when these things happen, it benefits those companies that have the sort of wherewithal and the persistence to stick through it. Obviously, the most obvious example. as Poland when they made some changes in the telehealth platform there which you're well aware of we saw a short-term dip And then for those companies like Aurora that were able to pivot and handle the regulatory changes, there was actually growth opportunities. And so if there were changes to the telehealth provisions in Germany, which seem a little less likely on some of the more severe ones, but we'll see, I think companies like Aurora actually stand to gain because it makes it that much more difficult. difficult for those that haven't dealt with it or are not prepared to manage it.

Thank you, appreciate that. You're very welcome, Fred. Our next question comes from Ryan Neal with TD Cohen. Please proceed with your question.

Hey everyone, this is Ryan on for Derek and thanks for taking my questions. Just to start in the domestic market, can you isolate the impact of the lower reimbursement rates on revenue, gross profit and EBITDA and have you seen any further changes in patient behaviour or pricing since the initial adjustment?.

Let me take the second part of it. I'll let Simone pick up the first part. We've seen very little changes. I mean, because for the VAC patient, there is very little difference for them. Most of, if not the entirety of the pricing change happens. has been handled by the LPs that service those critical patients. So from a format choice and selection and cadence and everything, it's pretty much unchanged. But, Simona, maybe you want to take the first part?.

Yes, so we have seen an impact in Canadian medical on our revenues versus the prior quarters. That's a result of the reimbursement impact coming into effect on April 1st, a 30% reduction in reimbursement rates. And so that is as expected as we discussed last quarter, where we're anticipating these changes. And this is how Q1 has come in. It's coming.

our expectations. Great. And then just as a follow-up, how is the integration of Safari progressing and do you see any expected accretion and synergies in fiscal 27? And are there any updates on sort of the operational or genetic improvements there?.

Yes, I mean, you know, we saw contributions this quarter. We don't break out each of the facilities, and we're very pleased with the integration. I think, you know, the fact they just received their GMP certification, which is valid for three years, you know, was very exciting for us, and we're thrilled. So more to follow in the coming quarters in terms of... of what it means, but early days on Safari are very encouraging. Great. Thanks, Ariku. Thank you, Ryan.

As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. Our next question comes from Pablo Zuanek with Zuanek & Associates. Please proceed with your question.

Thank you and good morning everyone. Good morning. Miguel, in my opinion, the industry did a very good job over the last four or five years in Canadian medical. The penetration with veterans, according to the numbers that I see, went from around 4% to 8% over a four-year period. How much higher can that go? What would you think is the natural cap on that percentage? Is there room to tailor that much further? Thank you.

Paul, I think it's a difficult one because it's really, you know, that behavior is really an interaction between that patient, the doctor, and then coming to the LP. I think clearly, you know, we've seen through our interactions with the veterans and everything that we owe them that they're seeing a strong benefit from that cannabis component. as they leave the service. We're also seeing new patients join that system on a very regular basis, and those patients are all across different age spectrums and gender and different sort of indications. And so, hard to say what is the cap, as you talked about, four to 8%. I think the system, though, healthy and we see an opportunity for us to grow share in that because of the great service that we do offer them the other part about that which is very interesting is the portability of those insights because you know that veteran interest in medical cannabis is not solely you know a Canadian condition we see interest you know across the board whether it's in up the U.S. or in New Zealand and Australia. And those veteran communities are very well connected because in many cases they serve with each other in those different markets. So we're excited, you know, beyond just what we're seeing in Canada from those learnings and those insights.

But again, the portability of that, because it's a very specific sort of activity and service level required to take care of that critical patient. So I think there's benefits across the board, even those outside of Canada.

Thank you. Just a quick follow up. You know, obviously you've been, you are the first or you've been among the first in entering a lot of these overseas markets. But in the case of the UK, and correct me if I'm wrong, I think you've been slower than other people, right? And that market has very quickly vertically integrated downstream LPs controlling online pharmacies, clinics, etc. Can you talk more about, you know, am I right? You've been slow in the UK, and can you still catch up there? Thank you.

Yes, with all due respect, I wouldn't describe it as slow. I don't think we've been slow at all. Our real sort of focus is on the genetics, the development, and the manufacturing of these medications. And in the UK, you're right, there's been a lot of movement on the clinic side and on the pharmacy side. Those are not areas of focus for us. But as the regs have started to change in the UK through interactions we have with the MHRA, we feel very confident about our position there. What we do know is that the UK is, once again, a place where high-quality premium medical products are valued, particularly in the self-payer market.

And Aurora having, you know, some of the largest supply of those GMP products for that market, I think, will be just fine. So I think, you know, as things sort of ebb and flow, you can't look at things in the short term. I think you have to look at things in the long term. And I think we've proven across, you know, almost 12-plus countries that, very stringent standards benefit us, and we're seeing that in the U.K., and we think that will play out over the coming quarters.

Thank you. You're very welcome. Our next question comes from Ryan Neal with TD Cohen. Please proceed with your question.

Hey everyone, just one more for me. Curious if you have any color on recent progress in Australia as you transition to more of the core and premium offerings there and how that's evolved in recent months.

You know, right, it's a great question. I think that, you know, what we're seeing in Australia is a very interesting dynamic because it allows more than flour and oils, and we're seeing a lot of quality. Having been there, you know, for almost a decade and, right, predominantly focused in what they call the concession market, which is a bit of the value market, we're starting to see. strong progress in the Quorum Premium, and it's a country where cannabis is moving pretty quickly, and so we're excited about that as well. Right next to it is New Zealand, and I know that wasn't your question, but there's a lot of efficiencies and synergies in having success in Australia, and New Zealand's a bit more difficult from a regular... regulatory standpoint, which lines up well for us. So I think when you combine the two, we're very encouraged about what the opportunities there are. And it's also a wonderful jumping off spot for that part of the world as medical cannabis gains more sort of mainstream acceptance. So we're bullish on both the opportunities that present themselves in that market, what it means for us in markets next door.

Great. Thanks, everyone.

Thank you, Ryan. We've reached the end of our question and answer session. I would now like to turn the floor back over to Mr. Martin for closing comments.

Operator, thank you very much, and our appreciation to everyone's coverage of Aurora. We're incredibly excited about the future, and we look forward to sharing that with you in the coming quarters. All the best. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

Welcome to the Aurora Cannabis fiscal year and fourth quarter 2026 results conference call. [Operator Instructions] This conference call is being recorded today, Thursday, June 11, 2026. I would now like to turn the conference over to your host, Kevin Nylund, Senior Director of Strategic Finance and Investor Relations. Please go ahead, sir.

Hello, and thank you for joining us. With me is Miguel Martin, Chief Executive Officer, and Simona King, Chief Financial Officer. Earlier this morning, we filed our fiscal year and fourth quarter 2026 financials for the period ended March 31, 2026, and issued a news release containing both our annual and quarterly results. Our financial statements, MD&A, and news release are available on our IR website. They can also be accessed via SEDAR+ and EDGAR. In addition, you will find a supplemental information deck on our IR website.

Our discussion today serves as a reminder that certain matters could constitute forward-looking statements or are subject to risks and uncertainties relating to our future financial or business performance. Actual results could differ materially from those anticipated in these forward-looking statements. Risk factors that may affect actual results are detailed in our annual information form and other periodic filings and registration statements. These documents may similarly be accessed via SEDAR+ and EDGAR. Following our prepared remarks, we'll conduct a question-and-answer session. With that, I'll turn the call over to Miguel. Please go ahead.

Thanks, Kevin. Fiscal 2026 was a strong year for Aurora. Net revenue meaningfully exceeded our outlook. Adjusted EBITDA was above the midpoint of our guided range, and we improved adjusted net income by more than $12 million. I'll walk through the key financial metrics in a moment, but it's important to underscore that our performance is driven by two strategic pillars.

First, we are anchored by our leadership in medical cannabis across nationally legal markets. Over a decade ago, we anticipated that medical cannabis was poised to be the most attractive and durable segment of this industry, and we invested accordingly, building the science, infrastructure, and regulatory capabilities that allow us to serve patients with consistency, quality, and scale. Today, Aurora is one of Canada's largest global medical cannabis companies, a leading exporter of medical cannabis, and a trusted supplier to international markets through our world-class GMP-certified facilities.

We are a market leader in Canada, Germany, Australia, and Poland, the four largest nationally legal medical cannabis markets. The majority of our manufacturing capacity is produced within our EU GMP and TGA GMP-certified facilities, operating under strict international standards, and only a small group of producers, Aurora among them, hold the certifications required to ship directly into European and Australian medical markets. Our integrated model of manufacturing and distribution also drives lower production costs through higher yields, potency improvements, and ongoing operational efficiencies.

Second, we remain highly disciplined in our financial management. Cost efficiencies enabled us to expand our annualized adjusted gross margin and increase adjusted EBITDA while maintaining a strong balance sheet. This discipline positions Aurora well for the future as we continue to navigate evolving industry dynamics that we will discuss in greater detail shortly.

Here are some highlights from fiscal year 2026. First, net revenue rose 11% to $321 million, driven by double-digit growth in global medical cannabis. This exceeded the top end of our guided range by $8 million. Notably, about 55% of our net revenue was generated outside of Canada. Second, adjusted gross margin rose to 64%. This reflects the benefits of our investments in the value chain, science, and plant genetics, as well as operational efficiencies and capacity improvements. Third, adjusted EBITDA grew 32% year over year, reaching $54 million. And finally, we ended the year with one of the strongest balance sheets in the industry, with $165 million of cash and cash equivalents with no debt.

As the industry evolves, maintaining our leadership in global medical cannabis requires even greater focus, especially as competition and pricing intensify. In the fiscal fourth quarter, we took deliberate steps to sharpen that focus by initiating our exit from certain markets within the lower-margin Canadian consumer segment, which we expect to complete by the end of September. While this transition carried one-time cash impacts during the quarter itself, it positions us to reprioritize resources, allowing us to maximize the opportunities in the more profitable global medical cannabis space. We also divested our lower-margin plant propagation business by selling our controlling stake in Bevo. Together, these actions allow us to deploy capital more effectively and enhance profitability over time.

In April, we acquired Safari Flower Co., an established Canadian-based EU GMP-certified cannabis cultivator and manufacturer, for approximately $26.5 million. This acquisition marks an important milestone as we continue to purposefully invest in expanding our EU GMP capacity to help grow by supplying flower in the expanding international markets. In our view, Canada remains the best place to grow high-quality premium GMP flower in the world. Safari Flower's 59,000 square foot indoor cultivation and manufacturing facility in Ontario is closely aligned with our existing cultivation and manufacturing sites, strengthening our position as one of the largest Canadian exporters.

We intend to leverage our extensive plant science and operational expertise to increase the supply of high-quality EU GMP manufactured flower, which further enhances our leadership in these expanding, high-margin, and highly regulated markets. Our investments in plant science will provide us with new disease-resistant cultivars that deliver higher yields per square foot and consistently achieve high potency results, driving a 40% increase in EU GMP capacity over the last five years. This enhanced supply chain that we control and manage will be a key part of our future. It will enable us to capture greater international market share while delivering superior value to our most respected patients worldwide. We expect Safari to deliver positive adjusted EBITDA contributions in fiscal year 2027 with incremental benefits in fiscal year 2028 and beyond.

Last month, we announced the expansion of our medical cannabis portfolio across Canada, Europe, Australia, and New Zealand, reinforcing our medical-first strategy and our leadership in regulated international markets. These launches span dried flower, pre-rolls, and edibles and are all designed to meet clear patient and prescriber demand for high-quality, consistent, and reliable products. What's important here is that these innovation launches are not one-off events. They reflect the strength of our global GMP supply network and our ability to deliver at scale. From the broadened offerings in Canada, Germany, and Poland to expanded formats in Australia and New Zealand, we're deepening our presence in the markets that matter most.

Now let's discuss the dynamics of our individual medical cannabis markets. Germany was the biggest contributor to our double-digit international revenue growth in fiscal 2026 as we benefited from strong commercial execution and a well-established reputation with wholesalers, distributors, and pharmacists. While we continue to offer a broad mix of core and premium products, we've also expanded our lineup to include more value-focused options without compromising on quality. As new competitors enter the market, we are seeing increased price pressure, though so far it is largely concentrated in the value segment. Because the core and premium categories represent most of our volume, we have held our leading market share, but we continue to monitor conditions closely and have adjusted pricing where appropriate.

Our diversified product portfolio, strong brand equity, and disciplined pricing strategy position us well to maintain leadership even as competition evolves. This is best evidenced by two of our proprietary cultivars ranking #1 and #3 by sales this quarter. We are one of three active in-country producers of medical cannabis, carrying a production and R&D license under the German cannabis law. Because of this, we are in a strong position to serve all medical markets in Europe. To drive more EU GMP production and gain incremental share in this rapidly growing market, we undertook a major expansion at our facility in Leuna, which will increase capacity, improve product quality, and drive cost efficiency. Our intention is for this site to mirror the performance of our Canadian sites based on the same industry-leading genetics and product standards. Leuna's expansion will be completed in the first half of fiscal year 2027, and combined with the introduction of our proprietary cultivars, is expected to double its annual flower output.

In Australia, we continue to hold a key leadership position. We are actively working to shift our sales mix towards core and premium products in response to the growing interest by both prescribing physicians and patients for a variety of premium products. Australia already offers one of the broadest product format ranges outside of North America, providing us with the ability to fully leverage our diverse portfolio beyond flower and oils.

In Poland, we hold the #1 market share position, supported by strong commercial execution and our ability to have successfully navigated the shift from telehealth-driven prescribing to clinic-based prescribing. After Germany, Poland was the second largest contributor to our growth in international markets in fiscal year 2026. We've maintained strong relationships with regulators throughout this transition, and recent increases in the annual import limits further strengthen our growth outlook. We are confident in our ability to sustain this leadership position. Our highly skilled local team continues to engage effectively with key stakeholders, and our expanding portfolio of high-quality medical cannabis products ensures we can meet evolving patient and prescriber needs.

Across other parts of Europe, we are encouraged by the potential developments in markets such as France, Ukraine, Switzerland, Spain, and Austria. Our success in entering new jurisdictions stems from the stringent and ever-increasing regulatory standards woven into our operations, coupled with the strength of our GMP-certified product portfolio, which positions us to move quickly and compliantly as new markets come online.

I do want to briefly address the recent cannabis rescheduling developments in the United States. If enacted, this would represent a meaningful step towards modernizing U.S. cannabis policy and aligning it more closely with international regulatory frameworks. We are encouraged by the direction of the process and are considering reevaluating our U.S. strategy. As one of Canada's largest exporters of GMP-manufactured medical cannabis, we believe that with our operational, commercial, and regulatory expertise, we are uniquely positioned to react and benefit from the opportunities of further medical cannabis market expansion at the federal level in the United States. That said, due to the current regulatory uncertainty that remains, we have nothing definitive to announce at this time, and look forward to further updates from the U.S. administration in the coming months.

Finally, turning to Canada, medical cannabis net revenue grew annually due to higher sales from insured patients who benefited from a broader portfolio assortment. For many years, our medical platform in Canada has been characterized by dependable market share, high barriers to entry, regulatory expertise, investment in technology and distribution, and an unwavering commitment to science, testing, and compliance. Historically, our direct-to-patient model, which does not rely on provincial wholesalers or private retailers, has allowed Aurora to achieve sustainable gross profit margins.

However, with changes to the federal reimbursement program effective April 1st, we expect that this external regulatory change will both impact our top line and adjusted gross margins beginning in fiscal year 2027. We recognize the near-term impact of the shift in pricing and believe that we have the capabilities, financial resources, and resilience to successfully navigate this change while continuing to invest in growing international opportunities. Let me now turn the call over to Simona.

Thank you, Miguel. Let's review our fiscal fourth quarter 2026 compared to the prior year quarter, and then discuss our fiscal year 2027 outlook. First, net revenue increased 10% to $84.8 million, driven by 14% growth in global medical cannabis revenue, including a 90% increase internationally. 58% of our total net revenue was generated outside of Canada during the quarter, reflecting the continued shift in our business as we extend our presence internationally. Second, we delivered industry-leading adjusted gross margins of 60% thanks to our continued focus on global medical cannabis and our operational improvements that are supporting lower manufacturing costs. Third, adjusted EBITDA was $9.2 million in line with our implied quarterly range, and adjusted net income was $5.6 million.

In medical cannabis, net revenue rose 14% to $77.5 million, inclusive of 19% growth internationally, setting a new record for Canadian and international. We benefited from increased distribution in Germany and growth in Poland, which combined with continued strong contributions from Canadian medical related to a broader product assortment. Medical cannabis comprised 91% of net revenue compared to 88% in the prior year and the majority of our adjusted gross profit. Adjusted gross margin for medical cannabis held strong at 66%, and we did see a decrease from the prior year due to the sale of lower-margin products and strategic price reductions in certain markets. Our investments in the value chain, operations, science, and genetics provide us with an important advantage, allowing us to maintain strong margins in these competitive and dynamic markets.

Consumer cannabis net revenue was $3.6 million, down from $8.2 million. The year-over-year decrease is the result of our intention to wind down this segment as we allocate cannabis flower to the higher-margin medical cannabis segment. Adjusted SG&A increased to $40.3 million, up from $35.4 million. The year-over-year change primarily reflects a $1.9 million expected credit loss related to the insolvency of two customers, with the remaining increase driven by inflation-related labor costs to support international revenue, and additional professional fees associated with public company requirements. Adjusted net income was $5.6 million compared to $15.3 million in the prior year. The $9.7 million decrease primarily relates to an increase in adjusted SG&A of $4.9 million, a decrease in foreign exchange gains and interest income of $10.3 million, and $4.5 million...

Our balance sheet remains one of the strongest in the global cannabis industry. We held approximately $165 million of cash, cash equivalents, and short-term investments, and no debt. We also have access to a shelf prospectus filed on February 14th of this year through which we can issue a variety of securities during the 25-month period that remains effective. We also have an at-the-market program that allows us to issue up to $100 million of common shares. We have ample liquidity and can be opportunistic with respect to investing in ourselves if needed, while also pursuing additional acquisitions. Free cash flow was $0.3 million compared to $5.2 million in the prior year, decreasing $4.9 million primarily due to a decrease in gross profit before fair value adjustments of $5.3 million.

Let me now provide our outlook for fiscal year 2027, which ends on March 31, 2027. Our expectations reflect the strategic actions we've taken to strengthen the business, specifically our exit from the low-margin Canadian consumer and plant propagation businesses. These decisions allow us to allocate resources towards evolving and more profitable global medical cannabis markets. We believe this is our highest return opportunity to create value.

While we remain optimistic in our long-term trajectory, fiscal 2027 will be a reset year, shaped by changes to reimbursement pricing in Canadian medical that can only be partially offset by international growth. Over the next few quarters, we are purposely investing in our international business to drive sales initiatives and EU GMP capacity expansion to support growth in our most profitable markets. Total net revenue is expected to decline and be more in line with our cannabis net revenue results in fiscal year 2025, following the changes in Canadian medical, partially offset by international growth driven by Germany and Poland.

Adjusted gross margins are expected to be in the mid to high 50s, driven by higher revenue contributions from Europe and exiting from the lower-margin businesses. These benefits will partially offset lower margins in Canadian medical following the reduction to the reimbursement rate. Adjusted SG&A is expected to remain broadly in line with the prior fiscal year. Adjusted EBITDA is expected to vary quarter over quarter, leading to lower annual adjusted EBITDA compared to the prior fiscal year. This change in expectations is due to the revision in reimbursement pricing that drives lower net revenue and adjusted gross profit contributions. Thank you for your time. I'll now turn the call back to Miguel.

Thanks, Simona. We have built one of the most attractive global medical cannabis growth platforms in the world, anchored by a sizable footprint in Canada, Europe, Australia, and New Zealand. Our performance in fiscal year 2026 demonstrated the strength, durability, and scalability of our operating model developed and executed by a talented global team.

While the operating and competitive environment is evolving, we are taking decisive action now to lay the foundation for our next phase of growth. To do so, we plan to leverage the same capabilities that built our leadership position so that we can ultimately generate new records for revenue and adjusted EBITDA. The targeted investments we are making today in market share, GMP capacity, product innovation, and international expansion are designed to position Aurora among the few companies equipped to navigate increasing GMP standards and deliver sustained long-term growth. Throughout the year, we look forward to providing updates in converting the growing $9 billion global medical cannabis opportunity into sustained shareholder returns. Operator, we're now ready to take questions.

[Operator Instructions] Our first question comes from the line of Derek Lessard with TD Cowen. Please proceed with your question.

I just maybe wondering if we can touch on the annual guide to begin with. Clearly, there's no real operational challenges expected. So the lower expectations seem to be tied to the lower reimbursement in Canada. Just wondering if you're able to isolate sort of that impact specifically on your revenue and your gross profit or even the lines, perhaps margins as well?

Yes, listen, it's a great question. I think, you know, let me start and let Simona sort of finish up on it. Specifically, the VAC change, which was effective April 1, is about a 30% reduction in the reimbursed rate for those products. And so, you know, right off the top, you sort of face that, you know, those products are sort of evolving, and that benefit is sort of evolving. But that's a big chunk. I mean, that isolated on that piece of the revenue is about a 30% hit to the top line reimbursement, which blows through. Obviously, you know, getting out of consumer, while, you know, really doesn't have a profitability impact, has a revenue impact and somewhat similar with Bevo. So I think, you know, all of those are there. But, you know, and the offset is the continued growth in international. But Simona, anything else on the modeling?

Yes, I mean, it's just to elaborate a little bit and reinforce Miguel's statement is that we do not break out adjusted gross margins in our medical businesses between Canada and international. But the change in the reimbursed pricing in Canada is a driver of our margin expectations that lead to high 50s, and why we still believe that international markets continue to be strong. And so we're purposely investing in our international business as well to drive that growth in what we see in Europe and the other regions outside of the continent.

And I guess the only other point on the Canadian medical part and the margin guidance, I think, is a big part of the modeling is we still expect to be able to grow share. So, you know, the overall, you know, pool and that benefit and the patients coming into it, you know, continue to be solid and steady. It's just the reimburse rate. So the historical ability to grow share of that business should still remain.

Okay, that's fair. And maybe just spending a little bit of time on the recent Safari Flower acquisition and more specifically, how should we be thinking about it in terms of... I guess the accretion in fiscal '27, some potential synergies, and I guess more broadly around the current integration progress.

Well, I think the most important point is the importance of Germany. So Germany is the largest and fastest, you know, sort of growing by, you know, tonnage market in the international market. And obviously us and everybody else is talking about Germany. Germany is incredibly strict when it comes to the GMP standards and your ability to get qualified medical products into it. Safari fits directly in that. They were GMP. They adopt some of the same standards we do. They operate in Germany today, both as a cultivator and as an operator in that market.

And so I think the way to look at it for Safari is as we just sort of gotten into it and you know it is absolutely accretive from the get-go and we think there's a lot of upside. So in terms of synergies, you know, if you think about their cultivation and their overall operations, it allows you to produce a significant amount of GMP flower for that market which has been steady and growing, and we think the standards there continue to sort of get tougher, so we like it a lot. And I think we'll know more, we've just only been in there a couple months, but there's a lot to like there. Introducing our genetics, introducing some of our proven cultivation practices, and the operations that we have in Germany all make that sort of a multiplier for what they were already doing at a pretty high level.

Thanks for that, Miguel.

Thank you. Our next question comes from the line of Frederico Gomes with ATB Capital Markets. Please proceed with your question.

I have a question on the U.S. and obviously I heard your comments, Miguel. But we've already got medical cannabis rescheduling there and I guess your focus is medical. So I'm thinking if you wanted to, you could probably already enter medical-only markets and you would have no issues with your listing. So how should we think about that in terms of big picture here? What would be your strategy if you were to actually enter the U.S. market?

Good morning, Fred. It's a great question. I think we're about two months away from seeing the promulgation of some of these regs. Obviously, the announcement that we saw the U.S. entity up-listing is encouraging, particularly with the New York Stock Exchange. And we've heard conversations of U.S. entities exporting out of the U.S. into international that we service. So we're looking at it. There is sort of the potential opening that if the U.S. is exporting medical products in the cannabis space from the U.S. to say Europe, it potentially could go the other way.

Clearly there's sort of three buckets I would describe. First is the opening to research, which hasn't been talked a lot about, but we think is a significant component to the federal, you know, de-schedule to Schedule III. And we're excited about that and potentially working with some U.S. entities on that. And with a decade plus of medical experience, you can imagine that a lot of those entities, whether, you know, at the university level or in the private sector, would be deeply interested in a company like Aurora as a partner on the research.

Secondly, you know, would be the potential partnership. Again, applying the GMP and medical sort of grade standards of production and delivery to patients, and there's been some early announcements, you know, in the U.S. around CBD and potential, you know, pathways there for the Medicare and Medicaid system. And then lastly, like I said, is the potential import and export of that. Now, the specific point of acquiring medical-only assets in the U.S. for a NASDAQ-listed entity we'll sort of see. But in the interim, there's a lot. But I think in the short term, in the next two months, as we see the promulgation of some of the... and the regulations were there, and importantly, the 280E conversation doesn't affect us. I know that's a big part of what's going to happen there and SAFER Banking and other aspects. But companies like Aurora have sort of a clean run at it as we see the regs come out.

Thank you. I appreciate that. I'll jump back in the queue.

Thank you, Fred.

Thank you. Our next question comes from the line of Bill Kirk with Roth Capital Partners. Please proceed with your question.

I was hoping to keep the reimbursement conversation going. I guess, what change in consumer behavior have you seen so far? I think we're a couple months in. So what change have you seen so far? Are patients trading down to lower-priced products or have they been trading down to lower-priced products? Have the producers effectively just lowered price to offset the lower reimbursement and therefore keep out-of-pocket costs unchanged? I'm just trying to figure out the mechanism of the lower reimbursement and why things need to change when there still is a substantial reimbursement.

Well, Bill, and good morning. You know, it's early days in this. The effective change was only in April 1st, but as of right now, the patient patterns don't, you know, seem to be changing. So the way it, you know, historically works, and as you know, the vast majority of this system is in the veterans' benefit. The veterans have a prescription, they have an allocation, and pre-April 1st, that reimbursement rate was at about a 30% higher. That's the reimbursement rate to the licensed producer. I can only speak to what we've done, which is continue to offer the same service. So in terms of choice of medications, which is really driven by the conversation, not between us and them, but between them and, you know, their physician, we haven't seen a lot of changes. Whether that's been in format, whether that's been in, you know, price point, and we'll have to sort of, you know, keep seeing where it goes, but it's predominantly the reimbursement rate, you know, that, you know, has changed.

Okay. And then going back to the U.S. portion of the conversation, you touched on it, Miguel, but would you expect a market to emerge for exporting product into the U.S.? In that context, why would it be different than Canada? Why would the U.S. consider importing products when Canada doesn't really import products?

Well, I think we have to see the regs. I think my point was more that, you know, as we've heard conversation that a U.S. entity might ship, say, GMP flower or compliant medical products into Europe, there are, you know, opportunities potentially for it to come back. But, yes, you're correct. Right now in Canada, there is a prohibition on products coming into the market. So maybe that ends up being the case that it's only a one-way stream. I think given the economics and the price per gram that you see in a medical market, say in Poland, Germany, U.K., and Australia, they're plenty compelling, and the pricing that we see in the U.S. probably doesn't make it as compelling a financial opportunity.

I think the research is a huge one and really opens up a lot of things for the industry. I think the genetics and manufacturing practices, and this is no disrespect that in the U.S. companies, the Canadian companies on the medical side producing in a GMP facility for over a decade, there's disadvantages to that. The advantages of the genetics, the cultivation practices, all of that, and I think that is clearly applicable in a federal medical construct in the U.S. And so the potential import of flower from, I don't know, Germany or some European entity in the U.S. is the least of the sort of economic opportunities, I think, for the Canadian LPs.

If I can keep going, I think I know the answer, but are there any U.S. GMP growers or GACP growers?

Yes. Yes. Now the standards, so I mean, I think everyone is aware, GACP varies a bit. GMP has some nuances, particularly in cannabis. Now in pharmaceutical GMP it's very prescriptive, but due to the evolving nature of this agricultural product, we do see some differences. But yes, there are certified GMP facilities. And yet it's not as prevalent and it's not as consistent in the application in say Germany or Poland, and just to be specific, those countries audit our facilities. So those are German auditors coming to Canada to audit a Canadian facility. So it is their standard, not our standard, or say an American standard in the question that you're posing. So it does require a bit of navigation.

Perfect. That's exactly what I was looking for. Thank you.

You're very welcome, Bill.

Thank you. Our next question comes from the line of Pablo Zuanic with Zuanic & Associates. Please proceed with your question.

Miguel, can you just give a general outlook for the German medical market? I mean, imports in the first quarter were down sequentially. Your thoughts there would help. And the second question, it's a bit of a two-part question. I guess I'll let you answer the first question first. Let's start with that.

Okay, so in Germany, you know, it is a very healthy market. It's a very large market, right? We like it for a lot of reasons. First, there is not as much pricing pressure at the top. So there is a recognition of premium and core medical products, not just, say, discount products that you see in certain markets. So that's one. Secondly, the ecosystem between the direct-to-patient delivery through the mail, a very well-developed telehealth system, proper manufacturing, GMP standards, strong regulators, all speak to a very solid, well-thought-out, integrated medical cannabis system. And like we said, pricing at the bottom is a bit compressed. But overall, Pablo, where we sit in it, we see growth.

We also, as you know, have a production facility in Germany, so have a lot of investment in that market. There is potential legislation that we'll know more about in the fall. It really falls in sort of two potential areas. We'll have to see where it lands in terms of one is the potential reduction in aspects of the telehealth requiring some version of a face-to-face interaction. We've seen that in Poland. We've been able to navigate it well and come out the other side in a strong way. The other aspect we think is a bit less likely, but we'll have to see, is a potential prohibition on the delivery of medical cannabis products through the mail like it is today. So more to follow on that, but I think it's a great market. It's a very highly regulated market, what we like. And I will say, we do think the GMP standards are going to continue to tighten which will make it... But overall, we've seen growth in that market and we see that continuing.

Thank you. And then look, this is a two-part question. One, you know, if you want to do a post-mortem or lessons learned from your acquisition in Australia of MedReleaf, I see the numbers are down, although now you're breaking Australia and New Zealand. So I don't know if the numbers are comparable. Not sure what happened exactly in the fourth quarter there, but any postmortem you can give. And then as you think of acquiring downstream assets in Europe, if you were to, right, that's an assumption, where would that make sense and where would it be allowed? Because the rules vary in terms of how much you can control downstream. Thank you.

Yes, I mean, I think in Australia, it's early days. I mean, you know, we like that acquisition. It's a big market. It's a different part of the world. As you mentioned, New Zealand's also quite strong. It is a value market. And so I think you have to have a bit of eyes wide open in the overall, you know, economics of a value market. The entity we bought and to this day has one of the key leadership positions in that market. And so with global medical cannabis, you know, there are going to be sometimes when certain markets are down and certain markets are up.

But overall, if you have a big enough network and you have common sort of development, genetics, and a variety of other aspects, you can benefit from it. Now, lately our product launches and the investments that we've made in that market are encouraging patients and physicians starting to see value in more sort of premium products. So I think that would be there. I'm sorry, was the second question, Pablo, was besides Australia and New Zealand?

Yes, the second question, in terms of how, as you see some of your peers acquire downstream assets in the market.

Oh, downstream.

Yes, how do you think about that and where is that allowed because the rules vary by market, right? But speaking about Europe specifically, thanks.

Yes, I mean, listen, I think in this industry you have to be agile. However, Aurora's significant advantage and what we are best at is having this unique genetics facility on the west coast of Canada, which is one of the largest in the world, which has developed world-class, in many cases, patented genetics that not only provide disease resistance, but significant yield and unique product attributes. That's a key advantage for us. Secondly, cultivation. GMP, premium, low-cost cultivation in Canada, which we still consider to be the best place in the world to cultivate these products. And then situationally determine where in the value chain we'll partner.

Now, typically we end at the wholesale level, but in some cases we go beyond. I think downstream as defined as, say, telehealth, retail, and those aspects, those are not our core competencies, and we also don't like to compete against our customers. And so we're focused on the top side of it, which is where, to be honest, we think most of the margin lies and what we're best at. So never say never, but that's really what we've been successful at and what we're focused on going forward.

Miguel, I want to add one more if I may here. My apologies. As the global medical market continues to grow, is there room for more partnerships with some of the strategic, some of the pharmaceutical companies? That was something that was talked about five, 10 years ago. We haven't heard much about that now, but given the way the markets are developing globally, including the U.S., maybe that would start to make sense again. How would you think about that? what I'm saying, does it make any sense? In the end, there's more potential.

Absolutely, I mean, it is easy to forget. These are medical products that are prescribed by a physician that are received by a pharmacy. And the pharmaceutical companies have lived in that world for a long period of time. We have added a lot of pharmaceutical executive knowledge to our company. Simona, who's sitting next to me, came from a pharmaceutical company. Many of our operational people came from a pharmaceutical manufacturing entity. So the development, registration, placement, and interaction with physicians, nurse practitioners, and patients, all are core competencies of a pharmaceutical industry.

And as you well know, the largest deal that's ever been done with cannabinoids was between two pharmaceutical entities, between Jazz and GW Pharma. And so, listen, we have been on that path for a long time and that's now our sole focus in terms of conservative, regulatory-forward medical cannabis regime. And things like research openings in the U.S., the FDA, of these medications for a variety of different indications and conditions all lead it there. So we're excited about it. You know, we know there'll be competition from a lot of different areas. It is a bit nuanced and a bit different for pharmaceutical companies because of the cultivation of a, you know, of a plant in many cases for this organic material, but not dissimilar to other things that they've seen. So we'll see. We've seen a lot of industries be interested in cannabis. We're always, you know... you know, interested in that. But right now we're very focused on the medical cannabis path and we'll see where it takes us.

Thank you.

[Operator Instructions] Our next question comes from the line of Kenric Tyghe with ATB Capital Markets. Please proceed with your question.

Miguel, I hear you on the advantages of genetics and legacy in the international market, specifically Germany, but could you please tease out just how compelling your value proposition and product offering is just in the context of the strategic actions that you're taking, and which could be relevant as a shoring up of defenses for potential U.S. export into the German market. Just want to get a read through there as to the drivers of your strategic actions and how well-motored you think that business is.

Yes, I mean, so first let me talk about the genetics. You know, the genetics are absolutely critical. So with a, you know, sort of a very modern advanced genetic system that we have, and we're one of the only few companies that have been invested in this, you sort of are focused on four key areas. First are the commercial aspects, you know, yield, potency, unique attributes, and that is a significant advantage. We've seen situations where the yield per square meter, which is the same input cost in almost every case, between genetics could be as much as 40%. So if you think about a facility that's producing 20 tons, with almost the same cost structure, you can get it to 28.

Secondly, key attributes beyond potency, whether that's unique terpenes or other forms of that, is uniquely interesting to patients and physicians that are now learning more about a specific indication and a product. And in markets like Germany, we do see a deep interest in those sort of core aspects that you can tease out in a genetics piece. Consistency is a huge part of having a genetic system. And these markets have testing and there are requirements that the product have a high level of consistency as you register it in order to get it into the market. So you think about Germany, if you had variability in your delivery of say potency or CBD or core attributes, you can't get the product into the market. That's another aspect.

Disease resistance is another core component. We've seen that cannabis has a couple of core pathogens that really plague most production facilities. Powdery mildew and HLVd, probably the most common. We've recently announced patented genetics with disease resistance, particularly on powdery mildew that we're excited about. And so I think that is a core advantage.

Now, getting into Germany and places like Poland is not easy and in many cases takes a significant amount of expertise and cost. Every single one of these items have to be registered. You have to provide stability and dossiers in order for the German government to approve by item each of these. And then every single inbound shipment requires a permit and requires those specs to be within a certain range that they test in order to, you know, continue to have access to that market. So, you know, it's not easy. It's the reason why, you know, if you think about Canadian REC, takes about 30 companies to get you to about a 50 share. In Germany, it's about four companies can get you a 50 share. So it's a consolidated piece of business. It takes a lot of expertise. And it is portable, which is an advantage for companies like us. If you can do it in Germany, you have gone a long way to, say, doing it in Poland. And as some of the new countries are coming online, France, you know, and others say Ukraine and Turkey and whatnot, they're adopting many of these standards in the same way. So there's a lot of advantages, but it is not easy, even if you produce high-quality products, to get these products consistently into these highly regulated markets.

Thank you, appreciate the insight there and just a quick follow-up with respect to pricing dynamics. You called out taking some strategic pricing action but also just more broadly how are you thinking about the pricing outlook for Germany given the compression we've seen in the last let's call it 18 months which certainly accelerated over the last 12. Are we getting there? Do you think there's still a lot of room with respect to pricing? How should we think about pricing dynamics in Germany over the next year?

Yes, I mean, I think, you know, from where we sit, which most of our businesses in the core and premium pricing, it's solid. You know, it's we haven't seen a lot of, you know, compression. Clearly, there is a lot of compression at the value segment. But unlike other parts of the world, the premium and core segment is a pretty significant part of the overall business. So I think you have that. Also you don't, there's really only flower and oil in Germany, so you're not seeing other formats come in that typically have lower margins, I don't know, say vapes and other aspects of it. So it's flower and oil. Most of the compression we see is at the lower value segment. There's still quite a bit of the premium core. And all three segments, in our opinion, for what we do, are growing. And, you know, there's not a lot of syndicated data, import and export, but it's a big market. And so there's growth opportunities in core and premium. And in those places, you know, there's an opportunity to have, you know, strong margins.

Thanks, Miguel. I'll leave it there.

You're very welcome.

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Martin for final comments.

Well, thanks, everyone. You know, we were incredibly excited about the year we had, but more excited about, you know, the year that's in front of us. And we appreciate all the questions and the interest in Aurora, and we'll go from there. All the best. Thank you.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

Greetings, and welcome to the Aurora Cannabis Inc. Third Quarter 2026 Results Conference Call. [Operator Instructions] This conference call is being recorded today, Wednesday, February 4, 2026. I would now like to turn the conference over to your host, Kevin Niland, Director of Strategic Finance and Investor Relations. Please go ahead, sir.

Hello, and thank you for joining us. With me is Miguel Martin, Executive Chairman and CEO; and Simona King, CFO. Earlier this morning, we filed our financials for the fiscal third quarter 2026 period ending December 31, 2025, and issued a news release containing these results. This news release, along with our financial statements and MD&A available on our IR website as well as via SEDAR+ and EDGAR. We have also posted our 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. 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.

Thanks, Kevin. Our quarterly performance reflects our strong competitive position in the rapidly expanding global medical cannabis market and continued commitment to profitable and sustainable growth. This success is supported by our proven commercial execution and purposeful investments in science, technology and talent. Additionally, our dedicated focus on improving patient access and strengthening physician engagement has contributed significantly to these results in fiscal Q3.

Let's begin with a brief review of the quarter. First, net revenue increased 7%, driven by a record 12% growth in global medical cannabis revenue, including a 17% increase internationally. Notably, more than half of our total net revenue was generated outside of Canada. Second, adjusted gross margin rose 100 basis points to 62%, where we benefited from strong medical cannabis margins of 69%, which was the result of sustained growth in our higher-margin international markets. Third, profitability held strong with adjusted EBITDA of $18.5 million and adjusted net income of $7.2 million. And finally, we generated positive free cash flow of $15.5 million and maintained our strong balance sheet with over $150 million in cash and the absence of cannabis business-related debt.

Unlike most peers, we have focused on medical cannabis as the most promising industry segment for nearly a decade. We have, therefore, deployed considerable resources and investments, providing us with the following competitive advantages. We are one of Canada's largest global medical cannabis companies. We are Canada's leading exporter of medical cannabis. And finally, we are a market leader in the 3 biggest nationally legal medical cannabis markets outside of Canada. Notably, about 90% of our annual manufacturing capacity is produced within Aurora's European and TGA GMP certified facilities and is subject to very stringent international standards. These standards are only increasing, significantly limiting with the number of market participants.

There is a limited number of cannabis companies like Aurora that have regulatory certifications for their manufacturing facilities that permit shipments directly to European and Australian markets. Aurora manufactures most of its own products and distributes them compliantly and profitably. This advantage helps to ensure consistency of supply around the world, critical to both prescribers and patients and achieves lower manufacturing costs through higher yields, potency improvements and other operational efficiencies.

As this industry evolves, maintaining our momentum in global medical cannabis requires an even greater commitment. This entails dedicating our full attention to solidifying and growing our leadership position. Following a strategic review, we have identified the following actions. First, we will begin exiting select markets within the lower Canadian consumer cannabis segment, enabling us to further prioritize allocating products and resources to our higher-margin global medical cannabis business. Since consumer cannabis carries higher sales and marketing expenses than Medical, this will benefit adjusted SG&A and consolidated adjusted gross margins in the coming quarters.

While we expect some onetime costs that will impact cash flow in fiscal Q4, once the initiative is complete, we anticipate higher adjusted EBITDA contributions thereafter. Second, in relation to our plant propagation business, we are divesting our lower-margin plant propagation operations by selling our controlling stake in Bevo to its other principal shareholders. Combined, these actions will allow us to allocate capital more effectively, deliver enhanced profitability, streamline our operations and improve execution quality.

On a related note, today, we filed a prospectus supplement establishing a new at-the-market equity program. The ATM provides us the flexibility to issue and sell up to USD 100 million of common shares from time to time at our discretion. The company intends to use proceeds raised under the ATM program, if any, for strategic and accretive purposes only, including for increased cultivation capacity and potential M&A.

With that, let's now dive into our individual medical cannabis markets. Germany is the largest individual medical cannabis market in Europe and remains closely watched across the region due to its outsized influence on neighboring countries. More than half of EU member countries have already integrated medical cannabis into health care, including reimbursement, which leads towards greater international alignment on regulatory approaches. This provides an obvious advantage for compliant EU GMP-certified companies like Aurora.

The German market is still growing and was the primary driver of our double-digit growth in international revenue. According to German regulatory data, imports reached 72 metric tons in 2024 and are estimated to have more than doubled in 2025. Our successful commercial execution and strong reputation among wholesalers, distributors and pharmacists have enabled us to continue to gain share in this rapidly growing market. We have consistently maintained a broad selection of core and premium products for the German market.

However, more recently, we enhanced our offerings by introducing a new medical cannabis brand that prioritizes affordability and expands patient options without compromising quality standards. While increased competition in Germany has led to some price pressure, namely affecting the value segment as new players enter and grow, our core and premium products, which represent most of our sales volume have remained largely unaffected in terms of baseline pricing. The German government is considering modifications to the current telehealth framework related to cannabis descheduling, but it is still unclear how developments will unfold.

We want to ensure that reasonable access to high-quality medical cannabis for the general public is maintained. But should changes be implemented within telehealth, we will adapt just as we did in Poland. We are currently doubling production at our manufacturing site in Germany, increasing scale will facilitate yield improvements and operational efficiencies, allowing this facility to mirror the performance of our Canadian sites based upon the same industry-leading genetics and product consistency.

In addition to the planned operational improvements, our German site joins our Canadian facilities that were recently GMP certified for another 3 years. This consistent supply of GMP manufactured product is vital as we prepare for further growth in Germany and adjacent regulated markets. Australia remains our largest international medical cannabis market, where we currently hold the #2 share in what could become a $1 billion opportunity according to the Penington Institute.

Notably, most sales in Australia, both for MedReleaf Australia, which we fully acquired 2 years ago and for the market overall are concentrated in value-priced products. This differs significantly from our other national medical cannabis markets where our portfolio is anchored in core and premium offerings with stronger margins. We are actively working to shift our Australian sales mix towards the same world-class core and premium products we offer globally and expand patient access, including through additional distribution agreements.

The Australian market is particularly attractive and positively impacting patient outcomes as it offers one of the broadest product format ranges outside of North America, enabling us to fully leverage our diverse portfolio beyond flower and oils. While we are confident in our ability to successfully elevate the product mix, we are working through some anticipated near-term pressure on both sales and gross profit during the transition.

In Poland, through continued collaboration and effective commercial execution, we gained market share and held the #1 position in calendar year 2025. We are widely regarded as a key partner in advancing medical cannabis in the country and are benefiting from increased annual import limits, including in fiscal Q3, which further supports our continued growth potential. The market has certainly evolved, but we have successfully navigated the shift in prescriptions from telehealth platforms to clinics while maintaining solid relationships with the regulatory authorities.

In our view, we are well positioned to maintain this leadership position in Poland, thanks to our very skilled team engaging with all the key stakeholders and our broadening product portfolio of high-quality medical cannabis products. We recently expanded our product portfolio with the launch of a third proprietary cultivar in Poland, following market success in Canada, Germany and Australia. These new cultivars are grown and manufactured in our GMP-certified facilities using premium hang drying and curing techniques to ensure consistently high-quality standards.

In the U.K., we primarily operate in the premium and super premium segments where there is less competition, but an influx of value products in the market resulted in lower year-over-year sales during fiscal Q3. Our strategy is focused on expanding our distribution and clinic relationships through new partnerships, a critical step to onboarding and connecting with patients.

Turning to Canada. We remain a strong leader in medical cannabis. Net revenue grew year-over-year during fiscal Q3 to a new record, and we gained market share, a key point of differentiation for us in the competitive market. Our priorities are enhancing our online marketplace, product innovation and assortment and ensuring a high-quality patient experience, especially for our valued veteran patients.

In summary, we are reallocating and directing our resources to focus primarily on the global medical cannabis market, where we excel and see runway for growth. This involves gradually scaling back our Canadian consumer cannabis operations and are selling our controlling interest in our Plant Propagation business. We believe this approach will improve our operational efficiency, unlock greater opportunities in both our existing markets and new countries and drive sustainable revenue growth and profitability.

Let me now turn the call over to Simona for a detailed financial review of fiscal Q3, followed by an outlook discussion.

Thank you, Miguel. We are encouraged by our fiscal Q3 results as reflected in our revenue growth, strong adjusted EBITDA, positive adjusted net income and free cash flow. Time and again, we have demonstrated the soundness of a medical cannabis first strategy and our consistent ability to deliver results aligned with our long-term objectives. Let's review fiscal Q3 2026 compared to the prior year quarter and then discuss our outlook for the full year.

First, net revenue of $94.2 million represented 7% growth, supported by record contributions from our global Medical Cannabis and Plant Propagation segments. Second, consolidated adjusted gross margin rose 100 basis points to 62%, while adjusted gross profit reached $55.6 million, a 6% increase. Global medical cannabis held its robust 69% adjusted gross margin. Third, adjusted EBITDA was strong at $18.5 million, combined with adjusted net income of $7.2 million. Fourth, we generated positive free cash flow of $15.5 million. And finally, we ended the quarter with $154 million in cash, cash equivalents and short-term investments and no cannabis business debt.

In medical cannabis, net revenue rose 12% to $76.2 million, inclusive of 17% growth internationally. We benefited from increased distribution in Germany and new product offerings in Poland, which combined with continued strong contributions from Canadian Medical. Medical cannabis comprised 81% of net revenue compared to 77% in the prior year and approximately 95% of adjusted gross profit. Adjusted gross margin for medical cannabis held strong at 69%, driven by high-margin international markets that benefited from sustainable cost reductions, high selling prices and operational efficiencies, including sourcing for Europe from Canada.

Consumer cannabis net revenue was $5.2 million, down 48% from $9.9 million. The year-over-year change was the expected result of the company's strategic shift to focus on portfolio optimization and the allocation of cannabis flower to the highest margin business segments. Adjusted gross margins for consumer cannabis was 28% compared to 26% due to sales of higher-margin products. VIVO's plant propagation net revenue increased to $11.3 million, up 27% from $8.9 million in the prior year. Adjusted gross margin for plant propagation revenue fell to 16% compared to 40%. The decrease was due to increased contract labor and utilities costs as well as inventory write-offs of $1.1 million in the current quarter related to surplus plants.

Consolidated adjusted SG&A increased 14.5% to $35.8 million. The year-over-year change relates to higher professional fees as well as additional headcount and contract labor costs in Europe and Australia that are supporting these growing higher-margin markets. Adjusted EBITDA was $18.5 million compared to $19.4 million in the prior year, with the decrease primarily related to lower adjusted gross profit in the Plant Propagation segment and an increase in adjusted SG&A. Adjusted net income held relatively consistent at $7.2 million compared to $7.4 million in the prior year.

Our balance sheet remains one of the strongest in the global cannabis industry, and our cannabis operations are completely debt-free. Free cash flow was $15.5 million compared to $27.4 million in the prior year quarter, reflecting a decrease in the working capital recovery of $9.2 million. Let me now provide some thoughts on what we expect for our fiscal year 2026 outlook, which ends on March 31. Annual global medical cannabis net revenue is expected to increase year-over-year to between $269 million and $281 million, driven primarily by 10% to 15% growth in the global Medical Cannabis segment.

Plant propagation revenue is expected to perform in line with traditional seasonal trends as 65% to 75% of revenues are normally earned in the first half of a calendar year. Consolidated adjusted gross margins are expected to remain strong as we have benefited from favorable sales mix due to higher global medical cannabis revenue, along with operational efficiencies in our manufacturing sites. And finally, annual consolidated adjusted EBITDA is anticipated to increase year-over-year with an expected range of $52 million to $57 million, representing 5% to 10% annual growth. This expected growth is driven primarily by net revenue increases and industry-leading margins in the global Medical Cannabis business.

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

Thanks, Simona. Our primary objective is to grow our business by capitalizing on the rapidly evolving global medical cannabis opportunity, which is projected to surpass $9 billion, thereby maximizing shareholder returns. We've established a strong competitive position by first building deep regulatory and world-class genetic capabilities, supported by an extensive network of GMP manufacturing facilities and then demonstrating consistent commercial execution excellence.

This approach has enabled us to be a market leader with both health care providers and patients. Through our focused commitment to global medical cannabis, we will reinforce our market-leading presence in Canada, Europe, Australia and New Zealand and expand into additional markets as opportunities arise. We look forward to providing updates on our progress and strategic direction as we advance.

Operator, we are now ready to take questions.

[Operator Instructions] Our first question comes from Kenric Tyghe with Canaccord Genuity.

Congrats on the quarter. I just wanted to follow up on the select market exit in Canada. If we look at the number on the print, you're looking at roughly a $20 million in revenues business on a go forward. Could you sort of speak to what the run rate would look like on a select -- on the exit from those markets? And perhaps also whether there's a point in time whether you could or would essentially fully exit consumer cannabis in Canada.

Thank you for the question. We continue to evaluate exactly what that looks like. I think what we can say though is that those decisions will be beneficial or accretive to our overall financial results. What we've seen is that the reallocation of our resources, particularly that finite high-quality flower into the international market will make a significant difference in our overall financials. And so it's a bit of an evolution for us.

The other point, I guess, I'd make is this isn't anything new. You've seen us continue to prioritize global medical cannabis over the last couple of years and done it very sort of successfully as we've gone through. And so we'll continue to be a bit flexible. Now your point about would we ever get out completely? I think that's something we continue to evaluate. We've been in rec cannabis or consumer cannabis in Canada since day 1. And so we still have that touch point. But again, our focus is profitability and growth. And if that is a decision that looks like it's best suited to be exclusively on the medical cannabis side, it's something we would do.

Great. And just a quick one with respect to Australia. This premiumization strategy or sort of moving up market in Australia. How disruptive is that shift to your presence in the market? And what are your expectations around time line when we can sort of get a better handle on how this will play out and the benefits for that Australian business and what that Australian business will look like once you've sort of high-graded your portfolio in the market.

Yes. I don't think we -- well, thank you for the question. I don't think it's disruptive at all. I mean Australia really started out under a model they call a concession model and a value model for those patients. And as we talked about, it's quite a large and diverse market, and there is an expansion and an interest by both prescribing physicians and patients for a variety of products on the premium side. And as you well know, it's not just flower and oil. So we run globally a premium and core model. So it's not disruptive for us at all, and it's very accretive in terms of margins.

And so we know there's a lot of value flower available in Australia, like other markets, whether it's Germany, Poland, the U.K. or Canada, our sweet spot is the genetics production and delivery of core and premium medical cannabis products. And so it sits right in the middle of all that. So I think it's consistent and not disruptive in any way.

Our next question comes from Derek Lessard with TD Cowen.

A couple of questions for me. Just maybe talk about the strategic decision to exit the Plant Propagation and sort of the timing around the expected close of the transaction?

Sure. I mean I think, again, focus and execution on global medical cannabis is what we've proven we're best at and where the most profitability is. I think consistent with the announcement we made on the consumer business, when we look at our resources and we look at the best use of our time and energy and focus, it really is in that area. And the investment in plant propagation, while interesting for a period of time, continue to evolve in a way that wasn't that. And so we saw a great opportunity in divesting that majority share to the shareholders that already exist there. There are some economics that continue that allow us to participate in the success of that, including earn-outs and the facilities that we've ended in.

But when you look at investment and ROI of our time and resources, clearly with high-growth markets such as Germany and Poland and U.K., it makes absolute sense for us to put all of our time and effort there. And I think if you look at the last quarter and you look at the last couple of years, when we focus on global medical cannabis, the results have always been positive.

Absolutely. Makes sense, Miguel. And maybe just one for Simona. I appreciate the additional full guidance on the year. How should we think about the plant propagation contribution to EBITDA, I guess, for the full year and maybe for Q4?

Yes. And as we continue to finalize the closing conditions and implications to our financials, we will have a better sense of the pro forma in Q4. As a result of this divestiture, we will no longer be consolidating the financial results of the Bevo business, so -- and will be treated as discontinued operations. So that will be the treatment going forward. And so I would say, Derek, the focus really should be on thinking through the implications to the global medical cannabis business and continuing to model and think about Q4 and the future around the strength of that business. So it really is focusing on the global medical side.

Okay. And maybe one last one, I'll sneak one in, switching gears back to Global Medical. Your potential -- sorry, you pointed to Poland as one of the contributors to growth, which is great to see. Just maybe talk about how you've been navigating the pressure there or if anything has changed since last quarter, I think when you guys pointed to additional pressure given the changes in the regs there related to restrictions around the online consultations.

Yes. I mean I think it's a great question. So these regulatory frameworks are evolving, albeit with a pretty specific scientific underpinning. We saw the change in Poland, as you mentioned, and what it required really was to lean back on a strong system, product development, product registration, distribution and specifically having a way to be able to connect to patients through clinics. And we were very quickly able to do that, I think, really built on the background of the strength of the medications and the reputation that we had, having physicians and patients want to get those products.

And so we navigated quickly. Obviously, our results reflect that. That's why we're encouraged by what's happening in Germany with what may land there that we'll be able to do a similar execution. So these regs continue to evolve. You have to be agile, but I think having tremendous relationships with them, we have a very strong GR organization, a very strong regulatory team. And so we are able to work with the regulators as things evolve, and we think that's a strength of ours.

Yes. Great job, everybody. And congrats again on the quarter.

Thank you so much, Derek. We appreciate it.

Our next question comes from Bill Kirk with ROTH Capital Partners.

A point of clarity first. I have year-to-date global medical cannabis at $211 million. The full year guide is $269 million to $281 million. Are those numbers comparable. Because even the high end would imply quarter-over-quarter deceleration in 4Q and the low end would imply a big deceleration. So I guess the clarity point, am I looking at those numbers comparably?

Yes. So let me jump in on that one. So the guidance that we provided is the full revenue for the company, which is inclusive of Bevo in there. And so with this announcement today around the divestiture of our stake in Bevo, that's what we will be working through is the pro forma impact of that in Q4. So again, it's continuing to focus on the -- as we think about the implications for Q4 with those results being removed and shown as discontinued operations, it's really focusing on the medical cannabis, global medical cannabis revenues and trending those out. So keeping in mind that, that full guidance was reflective of total revenue.

Okay. Okay. Because the -- in the press release, it says annual global medical cannabis is expected to be behind $279 million to $281 million. And year to date global medical cannabis is $211 million, right?

Yes. Yes. Just to clarify, that is correct, global medical cannabis. And so yes, we expect a strong quarter in Q4.

Wouldn't that be implied $58 million to $70 million in global medical cannabis, and I think you just did over $75 million. So I think I'm looking at something wrong because that would imply a big deceleration in 4Q global medical cannabis from 3Q, 2Q, 1Q.

Yes, we do expect the ranges that we've provided in the expectations in the press release to be in line where we're projecting the full year to come in at.

Okay. And then the follow-up would be, why do you expect a deceleration in 4Q?

So at this point, we're really focusing on the full year guidance and the ranges that we provided, which we believe will be in line with where we're trending. Taking into account, there could be some headwinds in some of the markets. So again, highlighting that this is a record result for us on a full year basis.

Okay. And then one last one for me. The adjusted gross margin in the wholesale business I think it was 35% in the quarter. It's been higher than the consumer cannabis segment for a while. Why would the wholesale gross margin be higher than the consumer segment gross margin?

Well, for a couple of reasons. One is that, that consumer business, not only for us, but for others is tight. And when you look at fully loaded where you sort of end up in that market, you end up with those type of margins. I mean I think you've seen it in the industry, it's not just us. The wholesale business is pretty good. I mean it's obviously not as good as when you distribute and sell it yourself. And so I think it's just indicative of what it is.

The other aspect on the wholesale business is those products that we sell are not readily available all over the world because of some of the regulatory requirements. So I think it's inherent to what you're seeing overall. And like I said, it's not just us on the consumer side.

Our next question comes from Brenna Cunnington with ATB Capital Markets.

Congrats on the results this quarter. Just looking at the ATM, so you mentioned the funds for this could go to M&A. And so we're just kind of wondering like are there any potential assets that you might be interested? Is it potentially like cultivation capacity expansion opportunities. Or any other top goals for the funds raised from this.

Yes. And thanks for the question and the comment. The -- with over $150 million in cash and then you have this, it really allows us to be opportunistic. Clearly, as you've seen from our announcement, our focus and really what we excel at is around that global medical cannabis point, and there are many sort of aspects to it. Clearly, cultivation of GMP flower and products for the international market are always an area of interest for us.

Beyond the M&A point, we've invested over $40 million internally in significant capacity and quality upgrades in our existing facilities, which has helped us receive that GMP certification for another 3 years at 3 of them. So cultivation, as you mentioned, always of interest to us. But there are other aspects to global medical cannabis that potential -- have the potential as well, whether that's on the distribution side or the clinic side or other aspects.

So it's really to be opportunistic, and we intend to use that clearly not for operations, but for accretive aspects, including M&A. And so I would say it would be consistent with what we're focusing on, but the exact aspects of it and what it might be, we're not in a position to say yet, but we'll obviously update folks as that becomes more specific.

Okay. Perfect. Fair enough. And then just looking at the exit from a lot of the consumer cannabis in Canada, what type of SG&A savings might we see from that?

Yes. I mean we're continuing to value that. I mean I would say you'll see some of that reporting as you see the full year and then into Q4. We definitely think it's going to be a benefit though the other aspect beyond the SG&A savings is taking those inputs, as you heard from the previous question and put them into higher-margin markets.

So the differential between the margins of, say, our consumer business and international markets is significant, and you've seen where the overall margin landed. So I think more to follow on what it is. You heard from Simona's comments about the benefits that we believe financially that will provide us, and we look forward to sharing that with you once those sort of work their way through.

Perfect. And then if I could just sneak in one little last one. So on the international markets, just out of curiosity, are there any other international markets that you may be looking at?

I mean we look at all of them as they come online. We're in 12 countries today. We've got a regulatory team and a product registration process that has allowed us to enter every market that's come online. Typically, we like to have markets that have a science sort of thorough regulatory profile, which we're starting to see in Europe.

So the latest new markets that are bringing medical cannabis on places like Switzerland, Austria, France and some others, we are working to bring our products into those markets. But we're very excited about potential developments in other new countries such as, say, Ukraine and Turkey. And again, we've been very successful because of our stringent regulatory requirements and GMP products to be able to enter them as they come online. So we continue to see global growth. I know there's a lot of interest in the U.S., but we've seen the growth in medical cannabis regulations and overall systems throughout Europe and in parts of -- other parts of the world. And so we'll be there as they come online. And I think we've demonstrated that we can be successful not only launching but also sustaining our business in those markets.

[Operator Instructions] Our next question comes from Pablo Zuanic with Zuanic & Associates.

Miguel, I also want to discuss supply chain. But just first, one question on the U.S. In your opinion, if we get rescheduling as it's been announced, would that allow you to enter the U.S. market? Are we thinking we're going to have a federal legalization of medical cannabis. Will Aurora be able to participate given its expertise or the rescheduling doesn't necessarily mean federally legalizing medical cannabis. What's your opinion on that?

It's early days, Pablo, first and foremost, what the Trump administration announced is very consistent with what we've said is important, medical cannabis first, a regulatory -- strong regulatory approach. And we think that lines up beautifully for a company like Aurora that operates in regulated markets all around the world.

As it's been laid out, and we haven't seen any of the final details of what a Schedule I to Schedule III would look like, it does not allow a Canadian company traded on the NASDAQ to directly go into that market. It does expand research. It does start to open the door for some variety of different things, but we'll have to see what the details look like. But it is a step in the right direction. We're very encouraged by that. But again, it was a very strong medical message. That photoop in the White House with doctors and folks from the medical community really reinforces what we've always believed, which this will be a medical-first opportunity, which is why we think Aurora is so well positioned when we get there.

Look, and regarding supply chain, it's a bit of a 2-part question in terms of understanding what you have right now and then how you're thinking about acquisitions. In terms of what you have right now, for example, you said in the call that most of the products that you sell are own products in your facilities. But does that mean 51%, 90%. If you can give some color in terms of how much you're buying from third parties, that would help. A reminder of what you have in terms of your current facilities and looking back, lessons from the Aurora Sky facility. So that part of question in terms of what you have now.

In terms of buying cultivation capacity, are we talking about indoor versus greenhouse? Are we talking about small little craft growers? Are we talking about just Canadian or maybe other countries? Any color in that sense would help?

Sure. So the majority -- I'm not going to give you a number, but it's closer to 100% than it is to 50% of the products that we sell internationally, we produce, distribute and sell ourselves. A really important dynamic for everybody to understand is the GMP flower dynamic. That standard is getting more challenging. It is difficult. And once you get that certification, which you need to have, say, for Germany, the fastest-growing market in Europe, you have it for 3 years.

So we've got 3 of our largest facilities just received that certification, which is very exciting. And so GMP premium flower, those prices continue to be solid and in some cases, go up and is our focus. In terms of facilities and potential acquisition, we have the benefit of having one of the largest genetic facilities in the world, a facility called Aurora Coast off the West Coast of Canada. Those genetics that are created there that we use ourselves and also sell to others have been successful both in indoor, which is our primary method of current growing as well with greenhouses, which many of our customers use those genetics.

So both work, and you can get GMP certification in both. We obviously have a long history in indoor, but that doesn't mean that we are bound to it. I will say Canada continues to be the best place to grow high-quality premium GMP flower in the world, and we're proud of that, and we continue to see great opportunities to ship it. So it's a big competitive advantage for us to be able to grow that much flower, be one of Canada's, or if not the largest, one of the largest exporters of GMP flower. And that's a core part of why we've been successful and will be successful going forward.

We have reached the end of our question-and-answer session. There are no more further questions at this time. I would now like to turn the floor back over to Miguel Martin for closing comments.

Thank you very much. We are very excited about this quarter and more importantly, very excited about the future of Aurora Cannabis, and we're thrilled to share some color with you here today. We'll continue to update you. We hope everyone is safe and well. All the best.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Greetings, and welcome to Aurora Cannabis Inc. Fiscal Second Quarter 2026 Results Conference Call. [Operator Instructions] The conference is being recorded today, Wednesday, November 5, 2025. I would now like to turn the conference over to your host, Simona King, Chief Financial Officer of Aurora Cannabis. Please go ahead.

Hello, and thank you for joining us. With me is Miguel Martin, Executive Chairman and CEO. Earlier this morning, we filed our financials for the fiscal second quarter 2026 period ending September 30, 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. 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.

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 U.K., the 4 biggest nationally legal medical cannabis markets outside of Canada. 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.

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 $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 second quarter. And finally, adjusted EBITDA rose more than 52% to $15 million, exceeding our top line growth by a factor of 5.

Stepping back from the quarter, we have grown our net revenue over the last 5 years from $68 million to $90 million with adjusted EBITDA increasing $73 million from negative $58 million to a positive $15 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 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. 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 are doubling production as we prepare for further growth in the market and adjacent countries. This investment will allow us to significantly increase capacity while also targeting yield 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 recently been 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 $1 billion market opportunity according to the Pennington Institute.

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. 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. 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 the annual import limits. We generated robust revenue growth during the second quarter as we benefited from our launch of 2 proprietary cultivars a few months ago. To our knowledge, these are the highest potency medical cannabis products available in the country. 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 4 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. And as medical cannabis succeeds, more countries will establish their own frameworks. Our facility in Leuna, Germany and our regulator engagement across the EU represent differentiated advantages for us to capitalize on these opportunities. The U.K. 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 U.K. permits products other than dried flower 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. 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 health care, 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 #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. 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.

First, net revenue of $90.4 million represented 11% growth, supported by significant contributions from our global medical cannabis and plant propagation segment. Second, consolidated adjusted gross margin rose to 61%, 700 basis points higher, while adjusted gross profit increased to $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 $15.4 million from $10.1 million. And fourth, we ended 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 68%, driven by increased revenue in higher-margin international markets. Consumer cannabis net revenue was $6.9 million, down from $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 margin 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. VIVO's plant propagation net revenue increased 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 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 nonrecurring 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 $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 and logistics costs, notably from increasing sales to Europe and investments in our commercial teams in Europe and Australia. Adjusted EBITDA increased to $15.4 million from $10.1 million. This 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 $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 SG&A of $3.8 million. Our balance sheet remains one of the strongest in the global cannabis industry. We held $142 million in cash and cash equivalents as of September 30, and our cannabis operations are completely debt-free. Our plant propagation business holds nonrecourse debt that is secured by a significant fixed asset base held at VIVO.

Free cash flow was negative $42.3 million compared to negative $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 now provide some thoughts on what we expect for Q3 2026, which ends on December 31. Consolidated net revenue is expected to increase year-over-year, driven primarily by 8% to 12% growth in our global medical cannabis segment. Plant propagation revenue is expected to perform in line with traditional seasonal trends as 25% to 35% of revenues are normally earned in the second half 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. And finally, free cash flow is expected to be positive in Q3 2026 due to continued strong performance and improved operating cash yield. Thank you for your time. I'll now turn the call back to Miguel.

Thanks, Simona. The global medical cannabis market is expected to exceed $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 and 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.

[Operator Instructions] Your first question comes from Bill Kirk with ROTH Capital Partners.

Miguel, you talked about the previous goal of 60% medical gross margins and obviously, how you're running well above that at 69% recent quarters. What do you think a realistic goal is? And 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?

It's a bit of all of the above. So 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, where I see some investments. But I think it's a mix of all the above.

And then lastly, and you 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 execution, say, in Poland, Germany and the U.K. creates some efficiencies. So I think all of that comes together for these industry-leading margins.

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

Yes. I mean the first thing is, as you mentioned, Germany is a very difficult place to get certified product into and increasingly so. So it's an EU GMP standard with audits. We just had ours, as we mentioned, so we're good for 3 years. Others 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 vertical integration that we have, 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, is lost, this is medicine. And so for patients and practitioners, they value that consistency of high-quality certified supply. And more and more so, so are the regulators and other key stakeholders. So I think that advantage is going to continue to grow for us and not only be in Germany, but also be in other markets.

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

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

Next question, Frederico Gomes with ATB Capital Markets.

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. So how do you see that? What could be the impact to your business in Canada?

So let me first say that 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. Importantly, veteran patients depend on a clinically supported system that ensures for them safe, consistent access to their cannabis medications. Lowering and this potential lowering of the reimbursement rate puts that entire support system at risk, could disrupt continuity of care, clinical oversight or even push patients to higher-risk alternatives.

So 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 would be premature for me to comment. But it's early days. It just came out last night, and a lot is going to happen until we see where this lands.

Perfect. I guess one other 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. Did you see any impact in the market, or for Aurora specifically? And secondly, just to follow up on Germany. Could you comment on price compression in that market?

Yes. I mean, so what you're referencing is that the German government had hit their import limit and they had to get -- which is very common, and it happens throughout the year as they want to raise the overall limit. And so it was about a 3 or 4-week process. Didn't disrupt us. We have a great relationship with the regulators and the staging of our permits for that market were fine and started back in January, it will go back to the higher number and everything should be there. I can't 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 affected. Now as I mentioned with Bill's question, with the implementation of telehealth and some other sort of aspects of that distribution chain, there are some additional costs that are coming in on that side. But overall, we've been pretty happy with the way the pricing has landed for core and premium products.

Next question, Derek Lessard with TD Cowen.

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.

Yes. I assume you're talking about the Leuna production facility?

Yes.

Yes. So we've got 2 very large EU GMP facilities in Ontario. We built a facility in Leuna, Germany. And 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 with a bit of higher energy costs, it's still a very compelling proposition to have that facility straight up producing. So we added upgrades to very innovative lighting and irrigation systems to mirror what we're doing in Canada, again, being able to use the same world-class practices and genetics in that facility, doubling the overall production in there.

And importantly, having 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 had delegations from countries that are not in the cannabis system. Regulators and a lot of other key stakeholders visit that facility, and it's been very additive for us. And so we like it. It works as a stand-alone production facility, but it works even better as sort of a showcase of everything that we're doing in that key market.

Okay. And maybe just one question on Australia. It looks like sales were a little bit softer in the quarter. Can you just maybe talk about that?

Yes. So Australia is the only market we have where a majority of our sales are in the value segment. And that goes back to the history of the company before we bought the remaining 90%. And the majority of those sales were 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.

But it's going to take a little bit of time before that portfolio is properly allocated to value being a smaller segment and into core and premium. We're still very bullish on it. It's the biggest market outside of Canada. There are advantages there because you can sell other formats beyond flower and oil, and we've launched edibles and some other things there. So we're bullish on it. It's just as we work through this transition in the portfolio, there's been a little bit of pressure.

Next question comes from Pablo Zuanic with Zuanic & Associates.

Miguel, 2 questions related and the same type of question related to the U.K. and Poland. I think you said you're the market leader in both markets. Do you need to invest downstream there? For example, buying clinics or online pharmacies or brick-and-mortar pharmacies in the U.K., it seems that that market is forward 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 the regulations do not allow that? If you can talk about that, please.

Sure. We're not the market leader in the U.K., just for clarification. We're one of the top companies, but not the market leader. Let me talk about Poland first. So Poland, we are not allowed to be the wholesaler or distributor. So 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. And so we partner with clinics, and we continue to look at that. Each and every market, we do look at do we need to own pieces of that vertical structure or can we partner? And there are a lot of great partners out there that want premium, high-quality products from Aurora. So we have a lot of advantages in being able to do that.

So 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 U.K., similar situation. To your point, clinics are very important as a way to onboard and connect with patients, both those coming into the system. So today, we produce the products. We have a very strong network of partnering with wholesalers that's actually expanding. And we have a network of clinics that service it.

If it looks like there's an opportunity to change that and actually acquire one part of that vertical, we will. But in some cases, you don't want to compete against your customers. And so I think you sort of have to be careful. But 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.

That's good color. Look, I mean, just a 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? And 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 what are the key milestones that we should be looking for?

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 in terms of what gets put forth. There's going to be a lot of debate on it. So 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 has a lot less impact, which is a change in the telehealth components, not dissimilar to Poland. The second component potentially around the 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's going to be the more controversial one.

So we'll see, but end of November, then into the spring in terms of Germany. In Australia, there really isn't a timeline. You've got 2 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 to start testing products and looking at some of the adulteration that may be happening in that market to these medical products, and as a company, takes the regulatory responsibilities and production responsibilities seriously, we look forward to that. So Australia is a little bit more open-ended, but you're not hearing things that would have, say, the same impact on the prohibition of delivery through the mail like you hear in Germany.

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

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

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