Aurora Cannabis (TSX:ACB) reported fourth-quarter financial results on Thursday. The transcript from the company's fourth-quarter earnings call has been provided below.
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The full earnings call is available at https://viavid.webcasts.com/starthere.jsp?ei=1755257&tp_key=1374b91449
Summary
Aurora Cannabis Inc. reported a strong fiscal year 2026 with net revenue increasing by 11% to $321 million, largely driven by international medical cannabis sales.
The company achieved a 64% adjusted gross margin and a 32% growth in adjusted EBITDA, reaching $54 million, ending the year with $165 million in cash and no debt.
Strategic initiatives included exiting the lower-margin Canadian consumer segment and acquiring Safari Flower Co. to expand EU GMP capacity, enhancing international market reach.
Management highlighted competitive advantages in genetics, production capabilities, and regulatory compliance, particularly in the German market.
The company expects fiscal year 2027 to be a 'reset year' due to changes in Canadian reimbursement rates, with a focus on international market growth, particularly in Germany and Poland.
Full Transcript
OPERATOR
Greetings and welcome to the Aurora Cannabis Inc. Fiscal year and fourth quarter 2026 results conference call. 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, Thursday, June 11, 2026. I would now like to turn the conference over to your host, Kevin Nyland, Senior Director of Strategic Finance and Investor Relations. Please go ahead sir.
Kevin Nyland (Senior Director of Strategic Finance and Investor Relations)
Hello and thank you for joining us. With me is Miguel Martin, executive chairman and CEO Simona King, CFO. Earlier this morning we filed our fiscal year fourth quarter 2026 financials, the period ending 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, can also be accessed via SEDAR+ and EDGAR. In addition, you will find the Supplemental Information deck on our IR website.
Our discussion today serves as a reminder that certain matters could constitute forward looking statements 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 for our covering analysts. With that, I'll turn the call over to Miguel. Please go ahead.
Miguel Martin (Executive Chairman and CEO)
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.
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 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 fuel growth by supplying flower and 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 and 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 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 and 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 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 number one and number three by sales this quarter. We are one of three active in country producers of medical cannabis carrying a production and R and 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 Loina 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. Lorian'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 flour and oils. In Poland we hold the number one market share position supported by strong commercial execution and our ability to Having successfully navigated the shift 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 annual import limits, further strengthening 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 product 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 US 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 US 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 US 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 through 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 1, 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 Simone.
Simona King (Chief Financial Officer)
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 19% 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 expand our presence internationally. Second, we delivered industry leading adjusted gross margins 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 adjustment. Net income was 5.6 million in medical cannabis net revenue rose 14% to 77.1 million inclusive of 19% growth internationally, setting a new record for Canadian and international net revenue. 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 international shift to wind down the segment as we allocate cannabis flour to the higher margin medical cannabis segment adjusted SGA 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, increased headcount 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 SGMA of 4.9 million, a decrease in foreign exchange gains and interest income of 10.3 million and 4.5 million respectively. 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 perspective filed on February 14th of this year to which we can issue a variety of securities during the 25 month period that it remains effective. We also have an at the market program that allows us to issue up to US$100 million of common shares. We have ample liquidity and can be opportunistic with respect to investing in ourselves as 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 arises from the low margin Canadian consumer and plant propagation businesses. These decisions allow us to reallocate resources towards evolving and more attractive global medical cannabis market. We believe this is our highest return opportunity to create value. While we remain optimistic in our long term trajectory, this fiscal 2027 will be a reset year shaped by changes to reimburse prices 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 through strategic sales initiatives and EU GMP capacity expansion to support growth in our most profitable market.
Total net revenue is expected to decline and be more in line with our cannabis net 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 higher 50s driven by higher revenue contributions from Europe and benefit from the lower margin businesses. These benefits will partially offset lower margins in Canadian medical following the reduction to the reimbursement rate.
Adjusted SGA 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 reimbursed pricing that drive lower net revenue and adjusted gross profit contribution. Thank you for your time. I'll now turn the call back to Miguel.
Miguel Martin (Executive Chairman and CEO)
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. As we progress 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
Thank you. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation will indicate your line is in the question queue. You may press star 2 if you'd 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. We ask that you each keep to one question and rejoin the queue for any follow up questions. Thank you.
Our first question comes from the line of Derek Lessard with TD Cowan. Please proceed with your question.
Derek Lessard (Equity Analyst at TD Cowan)
Yeah, good morning everybody and congratulations on a great year. Miguel and team.
Miguel Martin (Executive Chairman and CEO)
Good morning, Derek. How are you doing?
Derek Lessard (Equity Analyst at TD Cowan)
Very good, thanks. So I just may be 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 EBITDA
Miguel Martin (Executive Chairman and CEO)
lines, perhaps margins as well. Yeah, listen, it's a great question, I think. Let me start and I'll 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 right off the top you sort of face that 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 flows through obviously, you know, getting out of consumer while, you know, really doesn't have a profitability impact as 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 Simone, anything else on the modeling?
Simona King (Chief Financial Officer)
Yeah, I mean just to elaborate a little bit and reinforce Miguel's statement is that we do, 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 us to the mid to high high 50s. And while we'll still believe that international margins continue to to be strong and so we're purposely investing in our international business to drive that growth in what we're seeing in Europe and the other regions outside of Canadian medical.
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 the overall pool and that benefit and the patients coming into it 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.
Derek Lessard (Equity Analyst at TD Cowan)
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?
Miguel Martin (Executive Chairman and CEO)
Well, I think the most important point is the importance of Germany. So Germany is the largest and fastest sort of growing by 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've just sort of gotten into it and it is absolutely accretive from the get go and we think there's a lot of upside.
So in terms of synergies, 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 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.
Derek Lessard (Equity Analyst at TD Cowan)
Thanks for that, Miguel.
Miguel Martin (Executive Chairman and CEO)
Thank you so much, Derek.
OPERATOR
Thank you. Our next question comes from the line of Frederico Gomez with ATV Cormac. Please proceed with your question.
Frederico Gomez
Good morning, guys. Thank you for the question here. I have a question on the US 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 US Market?
Miguel Martin (Executive Chairman and CEO)
Thank you. Well, good morning, Fred. You know, 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, you know, of a US entity uplifting, you know, is encouraging, particularly with the New York Stock Exchange. And we've heard conversations of US entities exporting out of the US into international markets that we service. So we're looking at it. You know, there is sort of the potential opening that if the US Is exporting medical products in the cannabis space from the US 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 deschedule to Schedule 3, and we're excited about that and potentially working with some US Entities on that. And with a decade plus of medical experience, you can imagine that a lot of those entities, whether 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 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 in the US around CBD and potential 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 US 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 regulations, we're there. And importantly the 280e conversation doesn't affect us. And I know that's a big part of what, you know, what's going to happen there and safer banking and other aspects.
But you know, companies like Aurora have sort of a clean run at it, you know, as we see the regs come out.
Frederico Gomez
Thank you, I appreciate that. I'll hand back to you.
Miguel Martin (Executive Chairman and CEO)
Thank you, Fred.
OPERATOR
Thank you. Our next question comes in line of Bill Kirk with Ross Capital Partners. Please proceed with your question.
Bill Kirk
Hey, good morning everybody. I was hoping to keep the reimbursement conversation going. I guess what change in consumer behavior have you seen so far? Right. 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 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.
Miguel Martin (Executive Chairman and CEO)
Well, Bill and good morning. You know, it's early days in this. The effective change was only in April 1, but as of right now, the patient patterns don't seem to be changing. So the way it historically works, and as you know, the vast majority of this system is in the veterans benefit. So the veterans have a prescription, they have an allocation. And pre April 1, 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 their position, we haven't seen a lot of changes whether that's been in format, whether that's been in price point, and we'll have to sort of keep seeing where it goes, but it's predominantly the reimbursement rate that has changed.
Bill Kirk
Okay. And then going back to the US Portion of the conversation, you touched on it, Miguel, but would you expect a market to emerge for exporting product into the US and in that context, why would it be different than Canada. Why would the US consider importing product when Canada does doesn't really import product?
Miguel Martin (Executive Chairman and CEO)
Well, I think we have to see the regs. I think my point was more that as we've heard conversation that a US entity might ship say GMP flower or compliant medical products into Europe, there are 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 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, UK and Australia, they're plenty compelling. And the pricing that we see in the US 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, it's, you know, and this is no disrespect that in the US 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, you know, the cultivation practices, the, all of that. And I think that is clearly applicable in a, you know, federal medical construct in the US and so the potential importing of flour from, I don't know, Germany or some European entity in the US is the least of the sort of economic opportunities, I think for the Canadian LPs.
Bill Kirk
And if I can keep going, like, I think I know the answer. But are there any US GMP growers or GACP growers?
Miguel Martin (Executive Chairman and CEO)
Yes, yes, now the standards. So I mean, I think everyone is aware, you know, 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. It's not as prevalent and it's not as consistent in the application in say Germany or, 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 American standard in the question that you're posing. So it does require a bit of navigation.
Bill Kirk
Perfect. That's exactly what I was looking for. Thank you.
Miguel Martin (Executive Chairman and CEO)
You're very welcome, Bill.
OPERATOR
Thank you. Our next question comes from the line of Pablo Zwanek and associates. Please proceed with your question.
Pablo Zwanek
Thank you and good morning everyone. Miguel, can you Just give a general, your 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 it is a
Miguel Martin (Executive Chairman and CEO)
very healthy market, It's a very large market. 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, 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 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 seen 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.
Pablo Zwanek
Thank you. And then look, this is a two part question. One, if you want to do a post mortem or lessons learned from your acquisition in Australia of Medrelief, 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? Right. Because the rules vary in terms of how much you can control downstream.
Miguel Martin (Executive Chairman and CEO)
Thank you. Yeah, I mean, I think in Australia it's early days. I mean, 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 economics of a value market. But the entity we bought and to this day has one of the key leadership positions in that market. And so with global medical cannabis, there are going to be some times 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 know, you can benefit from it. Now, lately, our product launches and the investments that we've made in that market are encouraging. You know, patients and physicians starting to see value in, you know, more sort of premium products. So I think, you know, that would be there. I'm sorry, was the second question, Pablo, was besides Australia, New Zealand.
Pablo Zwanek
Yeah, the second question in terms of how, as you see some of your peers acquire downstream assets, how do you think about that and where is that allowed? Because the rules vary by market. But speaking about Europe specifically.
Miguel Martin (Executive Chairman and CEO)
Thanks. Yeah, 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, which is one of the largest in the world, which is 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.
Pablo Zwanek
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 pharmaceutical companies? That was something that was talked about five, ten 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? And what I'm saying doesn't make any sense.
Miguel Martin (Executive Chairman and CEO)
Listen, 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 our 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, you know, listen, we've been on that path for a long time, and that's now our sole focus in terms of conservative regulatory forward medical campaign, cannabis regime, and, you know, things like research openings in the US the evolution of these medications for a variety of different, you know, 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 organization, 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.
Pablo Zwanek
Thank you.
Miguel Martin (Executive Chairman and CEO)
You're very welcome.
OPERATOR
Thank you. Ladies and gentlemen, as a reminder, if you'd like to join the question queue, please press the one on your telephone keypad. Our next question comes in line of Kendrick Teague MKM Partners. Please proceed with your question.
Kendrick Teague
Thank you and good morning. 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 read as a shoring up of defenses for potential US export into the German market. Just wanted to get a read through there as to the Drivers of your strategic actions and how well motored you
Miguel Martin (Executive Chairman and CEO)
think that business is. Yeah, 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. Yield, potency, unique attributes. And that is a significant advantage we have. 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 seen that cannabis has a couple of core pathogens that really plague most production facilities.
Powdery mildew and hlbd, probably the most common. We've recently announced patented genetics with disease resistance, particularly on powdery mildew that we're excited about. I think that is a core advantage. Now getting into Germany and places like Poland is not easy and in many cases, you know, 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 continue to have access to that market. So it's not easy. It's the reason why, 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 poor, 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, you know, even if you produce high quality products, to get these products consistently into these highly regulated markets. Thank you.
Kendrick Teague
Appreciate the insight there. And just a quick follow up with respect to pricing, 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 a lot of room with respect to pricing, how should we think about pricing dynamics in Germany over the next year?
Miguel Martin (Executive Chairman and CEO)
Yeah, I think from where we sit, which most of our businesses in the quorum, premium pricing, it's solid. We haven't seen a lot of compression. Clearly there is a lot of compression at the value segment. But, 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 flour 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 flour 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 corn premium and in those places, you know, there's an opportunity to have, you know, strong margins. Great. Thanks for go. I'll leave it there. Very welcome.
OPERATOR
Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Miguel Martin for final comments.
Miguel Martin (Executive Chairman and CEO)
Well, thanks everyone. You know, we are 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.
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