Aurora Cannabis' Q2 2026 Earnings Call: Contradictions on SG&A Expenses, Germany's Regulatory Shifts, and International Market Challenges

Business Commentary:

• Revenue Growth and Global Medical Cannabis Market Domination:
• Aurora Cannabis reported net revenue of $90 million for Q2 2026, up 11% year-on-year.
• Growth was driven by record global medical cannabis revenue, which increased by 15%, and record international revenue, up by 22%.

• The company's leadership position in global medical cannabis markets, particularly in Europe and Australia, contributed to this growth.

• Adjusted Gross Margin Expansion and International Revenue:

• Aurora's consolidated adjusted gross margin improved by 700 basis points to 61%, with medical cannabis achieving 69%.
• This increase was supported by higher margins from international sales, which now make up 94% of adjusted gross profit.

• The company's vertically integrated model and operational efficiencies, including EU GMP certified facilities, enhanced its gross margin.

  

• Adjusted EBITDA Improvement and Profitable Growth:

• Aurora's adjusted EBITDA rose more than 52% to $15 million, exceeding top-line growth by a factor of five.

• The increased profitability was attributed to operational efficiencies, strategic investments in growth markets, and a strong focus on medical cannabis.

• Market Leadership and Regulatory Expertise:

• Aurora maintained its position as Canada's largest medical cannabis company and leading exporter, with market leadership in Germany, Australia, Poland, and the U.K.
• The company's expertise in global regulatory environments and proven commercial execution are key factors for its market leadership and ability to capitalize on emerging markets.

Contradiction Point 1

SG&A Expenses and Revenue Growth

It involves the company's expectations for SG&A expenses as a percentage of revenue, which can impact investor expectations and financial planning.

Can you explain the higher SG&A expenses, particularly freight/logistics and M&A charges? Should we view the $37 million expense as a percentage or as a percentage of revenue moving forward? - Derek J. Lessard (TD Cowen)

2026Q2: The $37 million level of adjusted SG&A expenses is appropriate given current revenue levels. Future increases in variable costs are expected if revenue continues to rise. - Simona King(CFO)

What factors contributed to the higher SG&A expenses in the quarter, specifically related to freight, logistics, and M&A charges? How should we interpret the $37 million expense level as a percentage of revenue going forward? - Derek J. Lessard (TD Cowen)

2026Q1: There are variable costs associated with increased revenue, including shipping and logistics. The $37 million level of expenses is appropriate for current revenue levels, but higher variable costs can be expected with further revenue growth. - Miguel Martin(CEO & Executive Chairman)

Contradiction Point 2

Regulatory Changes and Market Impact in Germany

It concerns expectations and preparedness for regulatory changes in Germany, which can significantly impact market operations and competitive positioning.

Are you gaining advantages as competitors struggle to ship products to Germany? - Bill Kirk (ROTH Capital Partners)

2026Q2: Germany is challenging for EU GMP certification, but our Canadian and German facilities are fully certified. This consistency in high-quality certified product supply is valued by regulators and stakeholders, creating an advantage. - Miguel Martin(CEO & Executive Chairman)

When might regulatory changes in Germany take effect, and would the impact mirror that in Poland? - Frederico Yokota Choucair Gomes (ATB Capital Markets)

2026Q1: Regulatory changes could be discussed by the end of the year. Germany's broader medical cannabis system makes it less susceptible to the type of regulatory impacts seen in Poland. Aurora's experience and expertise in navigating these changes could lead to further market consolidation. - Miguel Martin(CEO & Executive Chairman)

Contradiction Point 3

International Market Growth and Competitive Pressure

It involves differing perspectives on the growth and competitive pressures in international markets, which are crucial for understanding the company's expansion strategies and market positioning.

Did the halt in cannabis import permits affect operations in Germany? - Frederico Yokota Choucair Gomes(ATB Capital Markets)

2026Q2: We have strong relationships with regulators and a good staging of permits. - Miguel Martin(CEO)

Can you explain the temporary decline in international markets, particularly in Poland? - Derek J. Lessard(TD Cowen)

2025Q4: We view the decline in Poland as temporary due to regulatory changes affecting prescriptions. Key launches of high-quality cultivars are expected to grow market share. - Miguel Martin(CEO)

Contradiction Point 4

Impact of Budget Changes on Medical Cannabis in Canada

It addresses the company's stance on proposed budget changes, which could affect patient care and market dynamics.

What is the impact of proposed budget changes for Canadian medical cannabis veterans? - Frederico Yokota Choucair Gomes(ATB Capital Markets)

2026Q2: We're disappointed by the changes without industry consultation. Lowering reimbursement rates could disrupt patient care, and we're evaluating the impact. - Miguel Martin(CEO)

Are you constrained by supply as international markets expand? - Frederico Yokota Choucair Gomes(ATB Capital Markets)

2025Q4: We have no current supply constraints, thanks to yield improvements and investments in facilities. Strong partnerships with third parties support scheduling demand, and no significant supply barriers are anticipated. - Miguel Martin(CEO)

Contradiction Point 5

German Market Production and Supply Chain

It directly impacts the company's production strategy and supply capabilities in the German market, which is a key growth driver for Aurora Cannabis.

What led to the decision to invest in the German production facility? - Derek Dougherty (TD Cowen)

2026Q2: The German facility mirrors our Canadian practices and genetics. It's a standalone production facility and a showcase for regulators and stakeholders. We're happy with the energy costs and have seen positive benefits from its existence. - Miguel Martin(CEO)

What are your observations on patient and sales growth in Germany, and potential cost savings from domestic cultivation? - Derek Lessard (TD Cowen)

2025Q3: Patient growth is strong, though difficult to quantify precisely due to lack of syndicated data. We're launching the first German-grown cultivar, benefiting from lower transportation costs, although energy costs offset some savings. - Miguel Martin(CEO)