Aurora Exits Low-Margin Canadian Markets to Boost Medical Cannabis Margins

Date of Call: Feb 4, 2026

Financials Results

• Revenue: CAD 94.2 million, up 7% compared to the prior year quarter
• EPS: Not specified (adjusted net income of CAD 7.2 million)
• Gross Margin: 62%, up 100 basis points compared to the prior year quarter
• Operating Margin: Not explicitly provided; adjusted EBITDA margin not specified

Guidance:

• Annual global medical cannabis net revenue expected to increase year-over-year to between CAD 269 million and CAD 281 million.
• Consolidated adjusted gross margins expected to remain strong, benefiting from favorable sales mix and operational efficiencies.
• Annual consolidated Adjusted EBITDA anticipated to increase year-over-year with an expected range of CAD 52 million to CAD 57 million (5%-10% growth).

Business Commentary:

Revenue and Profitability Growth:

• Aurora Cannabis reported net revenue of CAD 94.2 million for Q3, representing a 7% increase year-over-year.
• Adjusted EBITDA was CAD 18.5 million, and adjusted net income was CAD 7.2 million.
• The growth was driven by a record 12% increase in global medical cannabis revenue, including a 17% increase internationally, and strong profitability in higher-margin international markets.

Focus on Global Medical Cannabis:

• More than half of Aurora's total net revenue was generated outside of Canada, with the global medical cannabis segment comprising 81% of net revenue.
• The company emphasized its commitment to profitable and sustainable growth by prioritizing global medical cannabis, supported by its status as a leading exporter and market leader in key regions.

Operational Efficiency and Cost Management:

• Adjusted gross margin rose by 100 basis points to 62%, with medical cannabis margins at 69%.
• The company attributed this to sustained growth in higher-margin international markets and operational efficiencies, including sourcing for Europe from Canada.

Strategic Market Adjustments:

• Aurora announced its decision to exit select markets within the lower Canadian consumer cannabis segment, impacting CAD 20 million in revenues.
• This strategic move aims to prioritize higher-margin global medical cannabis business, reallocating resources and expected to benefit adjusted SG&A and consolidated adjusted gross margins.

Australian Market Strategy and Challenges:

• Australia remains Aurora's largest international medical cannabis market, with the company holding the number two share.
• The company is shifting its product mix towards core and premium offerings, acknowledging anticipated near-term pressure on sales and gross profit during the transition.

Sentiment Analysis:

Overall Tone: Positive

• Management expressed excitement about the quarter and the future, citing 'strong competitive position,' 'record growth,' 'strong adjusted EBITDA,' and being 'well-positioned' for further growth. Statements include: 'Our quarterly performance reflects our strong competitive position...' and 'We’re very excited about this quarter and, more importantly, very excited about the future of Aurora Cannabis.'

Q&A:

• Question from Kenrick Tai (Canaccord Genuity): Could you speak to the run rate of exiting select Canadian consumer cannabis markets and whether you might fully exit consumer cannabis in Canada?
  Response: The company is evaluating the exact impact, but the reallocation of high-quality flower to international markets will significantly benefit financials. A complete exit is a possibility being evaluated, with the focus remaining on profitability and growth.

• Question from Kenrick Tai (Canaccord Genuity): How disruptive is the premiumization/shift upmarket strategy in Australia, and what are the expectations/timeline for benefits?
  Response: The strategy is not disruptive; it is accretive to margins and consistent with Aurora's global premium/core model, leveraging the diverse product format range in Australia.

• Question from Derek Lessard (TD Cowen): Could you discuss the strategic decision to exit the plant propagation business and the timing of the transaction close?
  Response: The divestiture allows the company to focus resources on higher-growth global medical cannabis. The sale of the controlling stake in Bevo is being finalized, with the business to be treated as discontinued operations going forward.

• Question from Derek Lessard (TD Cowen): How should we think about the plant propagation contribution to EBITDA for the full year and Q4?
  Response: With the divestiture, Bevo's results will no longer be consolidated; the focus for modeling should be on the strength of the global medical cannabis business in Q4 and the future.

• Question from Derek Lessard (TD Cowen): How have you navigated regulatory pressure in Poland, particularly changes related to online consultations?
  Response: The company successfully adapted by leaning on a strong system of product development, distribution, and clinic relationships, reflecting its agility and strong regulatory engagement.

• Question from Bill Kirk (Roth Capital Partners): Are the year-to-date global medical cannabis revenue (CAD 211M) and the full-year guidance (CAD 269M-281M) comparable? Why would Q4 decelerate?
  Response: Yes, the guidance is for full company revenue including Bevo. After removing Bevo's pro forma impact in Q4, the global medical cannabis revenue is expected to trend strongly, with the company focusing on full-year ranges rather than quarter-over-quarter deceleration.

• Question from Bill Kirk (Roth Capital Partners): Why is the wholesale business gross margin higher than the consumer cannabis segment?
  Response: The consumer cannabis market is tight with low margins industry-wide. The wholesale business involves selling products that are not readily available globally due to regulatory requirements, leading to higher margins.

• Question from Brennan Cunnington (ATB Capital Markets): What type of assets might the ATM funds be used for, such as M&A or cultivation capacity?
  Response: The ATM program provides flexibility for opportunistic, accretive purposes, including potential M&A and expansion of GMP cultivation capacity or other aspects of the global medical cannabis business.

• Question from Brennan Cunnington (ATB Capital Markets): What type of SG&A savings might we see from exiting consumer cannabis in Canada?
  Response: SG&A savings are being evaluated and will be reported; a key benefit is reallocating inputs to higher-margin international markets, with significant margin differentials expected.

• Question from Brennan Cunnington (ATB Capital Markets): Are there any other international markets you are looking at?
  Response: The company actively pursues new markets as they come online, especially those with science-based regulatory profiles, and is excited about potential developments in countries like Ukraine, Turkey, and others in Europe.

• Question from Pablo Zuanic (Zuanic & Associates): If the U.S. reschedules cannabis, would that allow Aurora to enter the U.S. market?
  Response: Rescheduling is a step in the right direction but does not currently allow a Canadian company to directly enter; details of the final framework are awaited, but Aurora is well-positioned for a potential medical-first regulatory approach.

• Question from Pablo Zuanic (Zuanic & Associates): What is the current supply chain profile (e.g., third-party sourcing) and thoughts on buying cultivation capacity?
  Response: Most products sold internationally are produced, distributed, and sold by Aurora, with GMP flower certification a key focus. Canada remains the best place to grow premium GMP flower; both indoor and greenhouse methods are viable, with acquisitions to be opportunistic.

Contradiction Point 1

Regulatory Challenges and Market Impact in Germany

Contradiction on the impact of temporary import permit halts on business operations.

How have you been handling regulatory challenges in Poland, specifically on online consultation restrictions? - Derek Lessard (TD Cowen)

2026Q3: Aurora navigated the regulatory shift in Poland by leaning on its strong product development, distribution network... This agility and strong regulatory/relationship management are seen as strengths, similar to the approach taken in Germany. - Miguel Martin(CEO)

What market impact did Germany experience during the import permit halt due to quota limits, and how did pricing and price compression evolve? - Frederico Yokota Choucair Gomes (ATB Capital Markets)

2026Q2: The temporary halt on import permits in Germany (a 3-4 week process) did not disrupt Aurora's operations due to its strong relationship with regulators and staged permits. - Miguel Martin(CEO)

Contradiction Point 2

Competitive Position and Value Segment in Australia

Contradiction on company's market position and sales strategy in Australia's value segment.

How disruptive is the premiumization strategy in Australia, and what are the expected timelines and benefits? - Kenrick Tai (Canaccord Genuity)

2026Q3: The shift is not disruptive; it aligns with Aurora’s global premium and core product model. Australia’s market is large and diverse, with growing interest in premium products from physicians and patients. - Miguel Martin(CEO)

What caused the softer sales in Australia during the quarter? - Derek (TD Cowen)

2026Q2: Australia is the only major market where a majority of Aurora's sales are in the value segment, a historical legacy. The market has been flooded with value products, creating pressure. - Miguel Martin(CEO)

Contradiction Point 3

Strategic Focus and Exit Timeline for Canadian Consumer Cannabis

The company's stance on exiting the consumer market shifts from uncertainty to active evaluation.

What is the current run rate of the select market exit in Canada, and is there a specific timeline to fully exit consumer cannabis there? - Kenrick Tai (Canaccord Genuity)

2026Q3: The company is still evaluating the specifics... a complete exit from consumer cannabis in Canada is something they continue to evaluate but is not confirmed. - Miguel Martin(CEO)

What is the status of the Bevo liabilities being reclassified to current due to a covenant breach concerning audited financials, how is the lender being addressed, and what is the impact on the audit process? - William Joseph Kirk (ROTH Capital Partners)

2026Q1: The move to current is purely an accounting treatment for consolidation purposes and does not impact the audit process. Bevo is working through its loan covenants. The issue is expected to be resolved quickly... - Simona King(CFO) and Miguel Martin(CEO)

Contradiction Point 4

Adjusted EBITDA Growth Trajectory

Guidance for EBITDA growth becomes more conservative, indicating potential headwinds.

Does the year-to-date global medical cannabis revenue of CAD 211 million and full-year guidance of CAD 269-281 million indicate a Q4 deceleration and are the figures comparable? - Bill Kirk (Roth Capital Partners)

2026Q3: ...the full-year ranges to be in line with current trends and highlights that Q3 was a record quarter. Headwinds in some markets are being taken into account... - Simona King(CFO)

What is the guidance for Q2 adjusted EBITDA relative to Q1? - William Joseph Kirk (ROTH Capital Partners)

2026Q1: Adjusted EBITDA is expected to remain positive in Q2 and to grow versus the current quarter (Q1). - Simona King(CFO)

Contradiction Point 5

Nature and Duration of Challenges in Poland

Contradiction on whether Poland's market issue is temporary or requires strategic adaptation.

How are you managing regulatory challenges in Poland, especially online consultation restrictions? - Derek Lessard (TD Cowen)

2026Q3: Aurora navigated the regulatory shift in Poland by leaning on its strong product development, distribution network, and physician/patient relationships. The company quickly adapted by connecting patients through clinics. - Miguel Martin(CEO)

Could you elaborate on the Q1 outlook's "temporary decline in some international markets" (specifically Poland) and how increasing competition affects your positioning and potential impacts on revenue/margins? - Derek J. Lessard (TD Cowen)

2025Q4: The decline in Poland is attributed to recent regulatory changes impacting patient access and prescription volumes, but this is viewed as temporary. - Miguel Martin(CEO)