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Aurora Cannabis (ACB) Q3 2023 Earnings Call Transcript
By Motley Fool Transcribing – Jun 14, 2023 at 1:00PM
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ACB earnings call for the period ending March 31, 2023.
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Aurora Cannabis (ACB -5.94%)
Q3 2023 Earnings Call
Jun 14, 2023, 8:15 a.m. ET
Contents:
Prepared Remarks
Questions and Answers
Call Participants
Prepared Remarks:
Operator
Greetings. Welcome to the Aurora Cannabis third-quarter and full fiscal 2023 conference call. As a reminder, fiscal 2023 is comprised of three quarters, ending March 31st, 2023. All participants will be in listen-only mode, and a question-and-answer session will follow the formal presentation.
This conference call is being recorded today, Wednesday, June 14th, 2023. I would now like to turn the conference over to your host, Ananth Krishnan, vice president, corporate development and strategy. Please go ahead.
Ananth Krishnan -- Vice President, Corporate Development and Strategy
Thank you, Rob. We appreciate you all joining us this morning. With me today our Aurora's CEO, Miguel Martin; and CFO, Glen Ibbott. Prior to market open today, Aurora issued a news release announcing our fiscal 2023 third-quarter and year-end financial results.
This news release, accompanying financial statements, and MD&A will be available on our IR website, and it will also be available on SEDAR and EDGAR shortly after this call. In addition, you'll be able to find a supplemental information deck on our IR website. Listeners are reminded that certain matters discussed on today's conference call could constitute forward-looking statements that are subject to risks and uncertainties related to our future financial or business performance. Actual results could differ materially from those anticipated in these forward-looking statements.
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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 similarly be accessed via SEDAR and EDGAR. Following the prepared remarks by Miguel and Glen, we will conduct a question-and-answer session with our covering analysts. We ask that you limit yourself to one question and then get back in the queue for follow-up.
With that, I will turn the call over to Miguel. Please go ahead.
Miguel Martin -- Chief Executive Officer
Thank you, Ananth. Q3 marks the end of our abbreviated fiscal 2023, and we're very pleased with our strategic and financial progress. First and foremost, our business transformation plan is working as we have now generated positive adjusted EBITDA for two consecutive quarters. Part of that plan included a commitment to rationalizing expenses, and we've done so over the last three fiscal years by approximately $400 million.
Today, we're announcing an additional 40 million annualized savings that we believe can be achieved by March 31st, 2024, the end of our fiscal 2024 year. This incremental reduction puts us squarely on the path to reach our next financial milestone, which is positive free cash flow. Glen will provide more context on this in his remarks. Milestones aside, the cannabis industry is still full of challenges, but we've not taken our eyes off what we view as Aurora's greatest opportunity, solidifying our position and focusing on resources on the global medical segment.
We remain the No. 1 Canadian LP. There is and will continue to be real and profitable growth opportunities in the global medical market for companies such as Aurora. We have been able to sustain and grow our high-margin medical cannabis revenue over time, and our diversified presence affords us some resilience to macroeconomic and regulatory risks.
Our view is that the momentum for top-line expansion and profitability remains very strong. And as we've said many times, Aurora's expertise in managing the complexity of multiple jurisdictions' regulatory frameworks, our unwavering commitment to science, breeding, and genetics sets us apart in this industry. And these are the capabilities that will position us to win new business in medical and, for that matter. recreational markets as they open up.
Our ability to invest and grow is supported by our strong balance sheet, which we've worked hard to improve over the last three years. We believe we're among a very small group of LPs and MSOs that have a robust balance sheet and net cash position. And this gives Aurora staying power and the necessary capital to be targeted and opportunistic in the midst of rapid industry rationalization. Let's now briefly touch on the quarter before Glen does a more complete financial review.
Our international medical revenue represents a global portfolio of profitable markets where we remain a leading cannabis provider. As part of our commitment to bring high quality, consistent, and innovative cannabis products to these patients, we recently introduced two Canadian-grown, high-THC cultivars that are popular in Canada to German patients. These proven products give physicians even more options to prescribe patients individually tailored treatments. While the German market for rec is exciting and something industry is eagerly awaiting, any enhancements to the current medical industry will have a more immediate impact.
In particular, the German government is currently working to deschedule cannabis in the first part of the legalization bill. With Aurora's leadership position in the German medical cannabis industry, we are well positioned to benefit from these proposed changes. Staying on the topic of Germany, as one of only three companies with a medical domestic production license in that country, Aurora will have a significant advantage and role when the German adult-use regulatory framework is developed. Turning to the Canadian medical market, our focus remains on serving insured patient groups, which represents some 82% of our Q3 Canadian medical cannabis net revenues, up 100 basis points from Q2 and up 500 basis points from Q3 last year.
Our industry-leading share remains at about 25%, roughly double that of our closest competitor. Looking forward, you may have read that we launched a new program for Canadian patients designed to support and empower cannabis patients on their wellness journey. Alongside the advice of a healthcare professional, Aurora patients can use the award-winning Strainprint App by logging their symptoms and consumption habits to better understand which strains, THC, CBD levels, and doses best work for them. This is technology and innovation at work, all for the sake of better patient outcomes.
Switching to Canadian adult rec. Despite ongoing macro challenges that are impacting this industry, Aurora has been able to maintain our net revenue position compared to Q2, while also increasing our gross margins by 5%. When comparing to Q3 of last year, we are seeing net revenue increase by 4.1 million. We've been able to do this by leveraging our science-driven cultivation advantages while continuing to invest in product innovation and product availability.
Finally, let's discuss Bevo, one of the largest suppliers of propagated vegetables and ornamental plants in North America. Q3 plant propagation revenue represented a significant increase from Q2 as we entered prime seasonality as the segment delivers its highest revenues in the late winter and spring months as orders are fulfilled. We have also completed repurposing the 800,000-square-foot Aurora Sky facility for orchid and vegetable propagation. We expect to see revenues generated from the Sky facility in the final quarter of calendar 2023.
And once executed, Bevo's financial contribution could be significant. This rapid expansion serves to increase Bevo's production capability and extended shipping range in Canada and the U.S. Now that we expect to see positive adjusted EBITDA on an annual basis, we see our next financial milestone as maintaining a net cash position and generating positive free cash flow. And with that, I would now like to turn the call over to Glen for our financial review.
Glen Ibbott -- Chief Financial Officer
Thank you, Miguel. Good morning, everyone. I will walk through the Q3 P&L momentarily, but first, let's review our balance sheet. Aurora already has one of the strongest balance sheets among Canadian LPs.
As of Monday, June 12th, we have approximately $230 million of cash and cash equivalents, and this should be more than sufficient to fund operations until we reach positive free cash flow, which we are working to achieve by the end of calendar year 2024. Miguel noted our plan to capture an additional $40 million in annualized cash flow savings this fiscal year. We've already put into motion most of the actions to achieve these savings, including the closure of production at our facility in Denmark, further targeted reductions to external SG&A operations costs, and a number of other initiatives and investments. In Q3 2023, our operations used a net $15.1 million excluding changes in working capital
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