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Good afternoon, everyone. Welcome to the Aurora Cannabis' First Quarter Fiscal 2020 Conference Call for the three months ending September 30, 2019. During today's call, Aurora will be referring to an earnings presentation which listeners are encouraged to download from the Financial Reports section of the Company's investor website,

Listeners are reminded that certain matters discussed in today's conference call or answers that may be given to questions asked could constitute forward-looking statements that are subject to the risks and uncertainties relating to Aurora's future financial or business performance. Actual results could differ materially from those anticipated in these forward-looking statements. The risk factors that may affect results are detailed in: Aurora's annual information form and other periodic filings and registration statements. These documents may be accessed via SEDAR and EDGAR databases.

I would now like to introduce Mr. Cam Battley, Chief Corporate Officer of Aurora Cannabis. Please go ahead, Mr. Battley.

With me today are our Executive Chairman, Michael Singer; Terry Booth; our Chief Executive Officer, and Glen Ibbott, our Chief Financial Officer.

As we're doing today's call a little later than usual, for today's agenda, I'll do a quick review of the quarter, including our operational highlights, and discuss our upcoming next-generation products. And then, Glen will discuss our financial results. We will then take your questions.

I would like to point out what the operator referred to and that is our presentation that's available in the Financial Reports section of our website. In particular, if you go to that site, you will see an innovation that we began using a couple of quarters ago and that is our dashboard with key performance indicators for the quarter.

This quarter, all the bad news is in the top left-hand corner, and that is that our Canadian consumer cannabis revenues are down 33%, obviously not the number we were hoping for, however, if you take a look at the other eight key performance indicators that we've been tracking now for three quarters, they're all green, they're all positive. Our Canadian medical revenue is up, our international revenue is up, our cash cost to produce is actually down 25%, we've moved under CAD1 and we came in at CAD0.85 per gram the cash cost to produce. Our average net selling price per gram is up 7%. Our gross margin -- our industry-leading gross margin remained stable at 58%, which is head and shoulders above our peers.

Our kilograms produced were up 43%, and even our SG&A, which we promised that we would control as part of our path to profitability, is actually down 3%, including the impact of a one-time out-of-period adjustment. And then finally, our number of active registered patients is up 8% to a record of 91,000.

Now I'd like to briefly address the current state of the market. The past few months have been challenging for the broader cannabis industry. Between issues of governance, evolving consumer demand and provincial retail bottlenecks, there has been no shortage of negative news .That said, I want to reiterate that our view of the opportunity in the Canadian and global cannabis industry is still extremely robust. It's important to remind ourselves that the Canadian consumer market is just over a year old. These issues will take a little time to resolve. But in the end, we'll be a stronger business because of it.

At Aurora, our objective is to continue to define the future of cannabis worldwide and positively and significantly impact the lives of millions of people by cementing our leadership position in the medical, consumer, and hemp-derived cannabinoids markets.

As we indicated on our Q4 call, we expected to see growth plateau in the market in Q1 2020, and in fact, as we reported today, our consumer market revenues declined as a result of changes in customer preferences and particularly challenges in retail and provincial distributors. I want to emphasize that we view these as short-term headwinds, and despite them, Aurora has continued to maintain our position as the leading producer and supplier of high-quality medical and consumer cannabis products.

Our non-wholesale cannabis net revenue declined 19% this quarter, totaling in at CAD60.5 million at the end of Q1. To that, we added a further CAD10.3 million for wholesale transactions. We believe that the wholesale market continues to represent an opportunity for Aurora, and we will be opportunistic, we are in a unique position to capture a greater share of that market in the coming quarters with potential white labeling strategies and other bulk sale opportunities.

Our strong cultivation capability highlighted by our record 41,436 kilograms of production in fiscal Q1 is part of what gives us the confidence in our ability to capitalize on this market. Our industry-leading Q1 2020 gross margins remained stable at 58% providing CAD53.7 million in gross profit to fund our operations. I'm also proud to report that our high-tech cultivation facilities delivered on our promise to provide industry-leading indoor cash cost to produce below CAD1 a gram, and in fact, this quarter we came in well ahead of our expectations at CAD0.85 a gram.

While we continue to leverage our coast-to-coast supply agreements to offer a broad range of premium consumer products across Canada, Aurora also remains focused on supplying medical patients with consistent premium products. In Q1 2020, the total number of active registered patients increased by 8%, demonstrating the value of Aurora's products and patient loyalty to the Aurora family of brands.

Turning to the consumer side, the Ontario Cannabis Store, Ontario's online retailer recently announced their top selling dried flower products after the first year of consumer legalization. I'm very proud to report that our products performed exceptionally well with San Rafael '71 Pink Kush in the number one selling spot, followed by Aurora Blue Dream in second place, and San Rafael '71 Tangerine Dream taking third position. This is excellent confirmation that our premium cannabis products continue to resonate extremely well with Canadian consumers, because we're adaptable to their demand for high-quality consistent products.

We continue to be successful because Aurora has built a product development strategy that focuses on strengthening our competitive advantage with innovative product forms, enhancing the experience of existing customers and capitalizing on opportunities to attract new consumers and new patients. Great examples of this are -- one great example of this is how we continue to address the demand from medical patients for alternative delivery formats and dosing options.

A couple of the unique products that we brought to market include the recent launch of Aurora Oral Dissolve Strips, a sublingual strip which we created together with CTT Pharmaceuticals. Dissolve Strips are a discrete easy way to use the product that is ingested sublingually to provide more rapid bio-availability of the cannabinoids to the body.

We're also excited to have recently reintroduced Aurora Cloud for our medical patients. It's the first and only legal concentrated CBD vape product in the Canadian market today. In addition, with the second wave of legalization coming into effect shortly, Aurora's insights and product innovation teams have done tremendous work to formulate new products in the right format that we think will exceed customer expectations and drive category growth.

Aurora's Cannabis 2.0 strategy focuses on four key pillars, using quality extracts, leveraging proprietary extraction technologies to produce high-potency concentrates, providing a range of superior products to suit different consumer preferences, and using our expertise to produce consistent and reliable products at scale.

The initial suite of new products that we will launch include vapes, concentrates, gummies, chocolates, mints and cookies. We've selectively partnered with a variety of organizations, prioritized our resources and built the inventory to help ensure consumers across Canada will have access to our high-quality derivative products. We're ready to ship product as soon as the regulations allow and are excited for consumers and patients to finally have access to a greater selection of product forms.

As well, in advance of our new product forms being available to the market, we've launched 'Ready For Edibles.' It's a campaign dedicated to educating new and experienced cannabis consumers on responsible consumption and safe storage of edibles product before they become available for sale in December. We want to ensure the Canadians have the information that they need to understand these new products, how to consume them responsibly, and most importantly, that they should be kept away from children and pets. Educational content will also focus on identifying signs of over-consumption, understanding the differences in onset times and effects, cautions around mixing with alcohol and driving while intoxicated. This we believe is the behavior of the industry leader.

So as you can see, we're looking ahead, continuing our focus on strategy and execution, serving our medical patients and consumers with premium safe affordable products, and gaining consumers' confidence and brand awareness.

I'd now like to turn the call over to Glen who'll discuss the financial highlights of the first quarter and then we'll open up the line to questions.

Thanks, Cam, and good evening, everyone. The figures I'll be going over today can be found in our financial statements and in our MD&A, and all are in Canadian dollars unless we note otherwise.

For our first quarter of fiscal 2020 for the period July 1st to September 30th, we reported net revenue of just over CAD75 million. Our total cannabis net revenue including wholesale came in at CAD71 million for the quarter. Non-wholesale cannabis net revenue was down 19% at CAD61 million, a decrease attributed primarily to the decline in consumer cannabis revenues. Of note, demonstrating our continued commitment to the medical market, our medical cannabis revenues grew 3% even in the faces of challenges from a consumer system cannibalization. Finally, we did out a further CAD10 million in wholesale revenue at a very attractive 58% gross margin.

I'll now go into a bit further detail on each of these revenue streams. During Q1 2020, our medical cannabis net revenue increased 3% quarter-over-quarter to over CAD30 million, driven by our continued success in growing our patient base, which currently stands at just over 91,000 clients.

Our revenue was affected by a slight decrease in the average net selling price of medical cannabis of 6%, but more than offset by patient growth. The decline in selling price was the result of temporarily pricing incentives designed to support the move of valuable long-term medical patients to Aurora and away from LPs that were not servicing them well. As usual, our medical cannabis sales and gross margins were impacted by our decision to absorb the cost of excise taxes. We continue to lobby the government to remove these taxes for medical products.

Our international medical cannabis sales during Q1 increased 11% to CAD5 million comprising 7% of our total consolidated net revenue. We expect a higher rate of growth in our international markets, and over the last quarter, have been adjusting strains under cultivation at our EU-GMP facilities to better meet the needs of the European markets. We have also been growing our sales force in Germany and believe we continue to have the leading market share of natural medical cannabis.

Consumer revenue was CAD30 million, a decrease of CAD15 million or 33% from the prior quarter. This decline, as you'd all know, was driven by constraints in the distribution networks that have caused a temporary decline in ordering of the Prudential distributors as they allow inventory levels to normalize.

With adequate consumer choice now available, we are also seeing consumers exercise that choice to select those products that they prefer. We monitor the sell-through rates from the provinces to the retailers very carefully and so we believe that to be a strong indicator that our products are meeting the needs of consumers for both quality and pricing. We are pleased that the Aurora family of brands continues to show strength across the major provinces for sell-through. We expect headwinds to persist through the next quarter before Canadian consumer infrastructure develops and matures throughout the back half of our fiscal 2020 with the licensing of new retail stores across Canada and the introduction of the new product formats.

I do want to emphasize that our average net selling price of CAD5.68 per gram was a sequential improvement of 7%, further highlighting that demand for high-quality recreational cannabis is strong and premium product can capture better pricing.

During Q1, Aurora generated CAD10 million in wholesale revenues compared toCAD20 million in the prior quarter. Although the selling price per gram declined from the previous quarter, we consider that selling excess extraction grade product at a 58% margin was a very prudent decision. As we noted on our last conference call, we expect our wholesale revenues to continue to be uneven. But with our reliable production of quality cannabis at a very low cost, Aurora is uniquely positioned to capitalize on this wholesale revenue opportunity. We do have line of sight to further wholesale revenues in Q2 2020 and are actively pursuing the development of a white label business as well.

Aurora produced over 41,000 kilograms of cannabis in Q1 as compared to 29,000 kilograms during the prior quarter. This increase in output was primarily primarily due to our production levels achieving a steady cadence at targeted capacities, and our continued operational optimization at our Sky and Ridge facilities. In Q2, we expect production to return closer to our targeted annual capacity of 150,000 kilograms as we undertake certain R&D initiatives designed to enhance the cultivation process and as we introduce into our cultivation with certain higher potency but lower yielding strains that are in high demand as consumer preferences evolve and become evident.

Our cash cost to produce per gram of dry cannabis decreased CAD0.85 per gram, down 25% from the previous quarter. As Cam mentioned, we delivered on a very important milestone that we've been talking to you about for several quarters, sub CAD1 cost to produce.

In an industry where reliable and quality supply is critical to building the revenues and brands that will drive the company forward, we have a suite of production assets that deliver very high quality cannabis on a consistent basis and with the lowest production cost among those of our peers that are operating at scale. It is hard to overstate how important this is for Aurora's success over the next several years. To set out an example, CAD100 of revenue at Aurora will deliver almost CAD60 to fund the growth of the business without having to access external financing sources. It also allows us to move quickly to profitability as revenues recover. Let's consider to two comparable companies, each with CAD80 million of quarterly SG&A. Aurora would need to generate about CAD130 million in revenue to flip to profitability. A comparable company at say a 30% gross margin would need almost CAD270 million in revenue to break even. Our fundamental business leverage with these gross margins is incredibly important to building a long-term healthy business. It should be evident that Aurora can compete strongly in any market situation and would still deliver healthy returns at pricing that would not be sustainable for others.

Now I'd like to discuss our SG&A levels, so I need to provide some context. You'll recall that we booked just over CAD10 million in audit adjustments in our last quarter. As we noted then, our true SG&A was about CAD83 million. For Q1 2020, SG&A actually decreased by 3% to CAD81 million. This decline was primarily driven by reduced fulfillment and shipping costs related to revenue levels and a decrease in sales and marketing expense as a result of smaller scale but targeted marketing campaigns during Q1. These cost reductions were partially offset by controlled increase in corporate salaries due to annual salary increases and the addition of professional talent, both new hires and outsourced consulting to support strategic growth initiatives.

As our Company matures, we have made a number of changes to internal policies and oversight in order to closely manage the expansion of SG&A in our drive to profitability and prudent capital management. As at September 30, 2019, we had CAD153 million in cash and cash equivalents. In August, we announced the upsizing of our secured term credit facility of CAD360 million with an accordion feature for an additional CAD48 million of capacity, and in early September, we disposed off our remaining equity investment in The Green Organic Dutchman generating approximately CAD86 million in gross proceeds.

Our adjusted EBITDA loss for Q1 was CAD39.7 million compared to a CAD26.6 million loss in the prior quarter, again when you take into account the impact of our year-end adjustments in Q4. The change in our adjusted EBITDA loss is primarily due to the quarter-over- quarter decrease in revenue.

Developing a profitable and robust global cannabis company is extremely important to Aurora. We believe our industry-leading gross margins and high-quality cultivation philosophy will allow us to continue to thrive under any and all market conditions. We expect adjusted EBITDA to improve in the future as market constraints are relieved as we increase revenue through the sale of higher margin derivative products and as we manage corporate development and SG&A growth prudently.

As you may have seen in our press releases today, we have announced a decisive plan to immediately strengthen our balance sheet. This plan includes several steps that are designed to streamline our operations, provide financial flexibility and reduce financial leverage in response to a changing market and regulatory set of conditions, all with a view toward long-term growth and sustainability.

First, we continue to monitor and forecast the supply and demand in the Canadian and international cannabis markets in order to time our scale up of further Aurora production capacity, as needed. As a result, we recently adjusted the construction timeline for both the Aurora Sun and Aurora Nordic 2 facilities to more closely align with our current expectations for the time you've increasing demand. These adjustments will result in a significant decrease in our ongoing quarterly level of capital investment and are expected to conserve approximately CAD190 million of cash over the next few quarters, as compared to our previous build-out plan. With the work completed to-date, the Company will be well positioned to advance these capital projects, as global demand or as Aurora's market share grow. As we noted in our release, we still expect to complete approximately 238,000 square feet at Aurora Sun in calendar 2020, representing six grow rooms and mother room.

As I mentioned last quarter, Q4 2019 was the peak of our capex spend with over 20 capital projects on the go. Many of these projects continued through Q1 and have been substantially delivered in October and November. Our expectation for fiscal 2020 quarterly capex is that Q2 will be similar to the CAD108 million we reported this quarter, Q3 will be in the CAD70 million range, and Q4 will be in the CAD50 million range.

Next, we announced that we have entered into conversion support agreements with investors, representing approximately CAD155 million or 67% of the principal value of the March 2020 convertible debentures that are currently outstanding. Under this contemplated transaction, all holders of the March convertible debentures will be granted the special conversion option for a short period of time to convert their March CDs at a price to be determined by a five-day VWAP formula. Any holders not exercising their conversion option will remain holders of their original debentures that will mature on March 9, 2020.

Finally, we have been active under our USD400 million at-the-market financing program, as it represents a strategically valuable source of equity capital. To be clear, cash raised under this program is transacted at the market price with no discounts warrants or other sweeteners offered. We consider the availability of the ATM for Aurora given our normal trading volumes to be a very important tool, especially given the current market conditions. Fiscal year-to-date, the Company has raised gross proceeds of USD124 million or approximately CAD165 million through the issuance of just over 29 million common shares.

We believe that these measures to strengthen our balance sheet and financial position, in addition to the solid operating performance we discussed earlier, strongly position Aurora to outperform if the Canadian and international markets begin to expand the size of the addressable market.

Thanks, Glen. So in conclusion, we continue to focus on what we can control in an evolving market, consistent execution, operational excellence and our focus on operating a sustainable long-term business, and in addition to being agile and intelligent in responding to changing market and regulatory conditions.

As our key performance indicators show, Aurora delivered solid operating results this quarter. This is exemplified by our industry-leading indoor cash cost to produce, which declined 25%, and our continued strong and industry-leading gross margins and market share. Our announcement of a formal plan to settle the March convertible debentures, a reduction in our capital investments over the next several quarters and raising over USD124 million in gross equity proceeds since the start of fiscal 2020 through our ATM are designed to put Aurora on a solid path to being a long-term winner in the global cannabis business.

[Operator Instructions] Your first question comes from the line of Vivian with Cowen and Company. Please go ahead, your line is open.

Hi. So I'd like to unpack your revenue priorities please. I appreciate your commentary around the margin benefits, around White Label products, that's certainly evident in your near 60% gross margin, which is CPG-like and very impressive, broadly in Staples and in particular in Canadian cannabis. But at the same time, ECB has been unique in delivering higher quality cannabis at an impressively low cost. So after this week, where we've seen so many of your peers report earnings, we know this has been increasingly challenging for your peers to achieve, but I wanted to hear two things. Number one, how do you get comfort on demand planning around wholesale? And number two, do you think that your like high-quality production is repeatable and scalable? Thank you.

Glen, if you would -- if you'd take the financial side of that and then I can speak to the production.

Yeah, hi Vivien. You're asking how we get a view on wholesale as a long-term business. What we are seeing is that the extractors, and as you know, there is a number of that have scaled up over the last year and are playing an important role in the industry right now, are actually being selective about the quality of the inputs that they're getting. And so we in this quarter of the CAD10 million, there is at least three -- it's kind of spread evenly among three extraction companies and a small but through an LP. And we do continue to get sort of the interest as long as we can supply the quality of cannabis that they're looking for, for continued buying. What we're just trying to be cautious, as we were last quarter, because we still think it will be a little bit lumpy and there'd be sort of an opportunistic element to this, but we do have a view for continued revenues. I'm not going to go as far as saying as much as this quarter, but certainly enough to pay attention to.

The white labeling piece of this I think is really interesting to us. We are seeing a number of LPs that are either late to the game and are more interested in building a brand or simply just are starting to realize that it's maybe time to exit the cultivation side and the manufacturing scale-up is incredibly difficult and we have the capacity across the chain from seed to sale built within our business now to be able to execute a white label business.

So we do have a team working actively on that. I think that's a real interest in terms of the additional capacity that we can produce is to go that route because I believe long term that will be where the better margins are. I believe on the wholesale bulk opportunities to extraction companies will see pricing pressure there develop over time. We haven't seen it yet, but we will see it, so much more interested in white labeling side. Cam?

Yeah, so Vivien, to get the other part you asked, whether we think that our high-quality cannabis production is replicable and scalable, and answer is, yes, that's exactly how we designed our production technologies and innovations from the very beginning, including our large Sky class facilities and we keep getting better and better at this. So we already had the highest production efficiency per square foot in the world and we think that we can continue to enhance that. So, yes, our production with that high quality at low cost is designed specifically to be both replicable and scalable.

Good stuff. I just want to add to Cam's and Glen's comments with respect to these wholesale deals that we're doing, they mainly consist of trim and shake and it's the lower quality product that comes off of our product, we would normally extract from ourselves, and in fact, some of the supply agreements in that wholesale includes our us extracting for other LPs, so it's another line of business, it's a profitable one with product that we would not normally consider high importance to us.

That's super helpful. Thank you. A very quick follow-up. I want to be mindful of everyone else in the queue. But, like, is there are framework -- can we define what quality means because I was chastised several times over the last two-and-a-half days at our conference in Boston around pegging potency to quality and that could very well be right. I don't know that the Canadian market place is so sophisticated and I don't know that your buyers are so sophisticated either, but you guys are clearly delivering a better product that has wholesale demand and I want to understand like what do you think the demand drivers are for that wholesale business that carries such a nice margin, please? And thank you.

Sure, so quality -- quality of cannabis, it's something that has to be growing in a pristine environment, has to be growing in a environmentally controlled environment with the appropriate level on CO2 of micromoles of temperature and humidity, and at the end of the day, we know we can grow great pot and that's attestation to the awards that we receive from the consumers that are largely consumers that are very educated with respect to cannabis and it's really the profile of the cannabis including the THC levels, CBD levels and turpenoid profiles, terpene profiles, very important that those three come together and a pleasing effect, if you will, and that is what charts upgrade plot like our [Indecipherable] San Rafael and our Blue Dream, it is what the educated and longtime users of the products look for. Now [Indecipherable] plant [Indecipherable] guys that can't grow [Indecipherable] gets raunchy and burns your throat and those things aren't doing very well, are they? And that is because they're growing in environments that are non-conducive, they are not conducive to growing great smooth [Indecipherable] cannabis, it's the profile,

Your next question comes from the line of Tamy with BMO Capital Markets. Please go ahead, your line is open.

Hi, thanks. First question is, could you clarify what you mean by the lock of support in the press release on the debentures. So are the committed CAD155 million shareholders, are they subject to a share lockup and if so for how long?

Sure, it's Michael (Multiple Speakers) So, we indicated that we had secured a commitment of up to CAD155 million. So a big, a majority of that is irrevocable commitments and they will be free trading stock at the time at which we grant those to the holders, and so we're very confident that obviously that represents a significant portion of that convertible debenture and we feel good that we're making a huge step forward in strengthening our balance sheet by virtue of this decision.

Okay, thanks. My follow-up question is, I'm just trying to reconcile between your commentary about number of your strains or products, I should say, are top rated in a number of these provinces versus the sell-in that we've seen this quarter, recognize that there is the limited distribution and number of stores, but we've seen some of your peers increase their share of sell-in sequentially. So could you help me reconcile between these two assets? Thank you.

Yes, this is Cam. What we're tracking is that our brands remain either number one or number two in all the major markets across the country. What we're seeing is that we obviously moved an awful lot of product in the previous quarter and so it takes time for them to work through the inventories. That's essentially what we anticipate. We're getting nothing but good feedback on our brands, and we believe that we continue to lead to have a leading brands in the marketplace, if not number one, then number two.

Cam, I would like to add to that, what happened with the provinces last October was there was an under-supply and the licensed producers took heat, the provinces took heat, we allocated the best we could, I don't think many of our contracts were under-supplied and then we all started growing cannabis and some started growing cannabis a little bit later and not been able to provide stuff the shelves at all. During the summer, the provinces feasted on the supply that was available and stocked their shelves to the limits and that was maybe a good idea in their minds, because they're not going to have supply issues for the retailers anymore, but it also affected the next quarter in which they didn't buy as much.

The other thing that's occurred is, some LPs including ourselves, we've put some product aside for 2.0 and getting ready for this derivative market, if you will, it's higher value market. So some of our higher top strains weren't as available to these provinces because we were saving it and we were extracting it and we were creating pens and gummies and cookies and things like that that are going to be available for 2.0.

So I think that if any LP has increased its sale, this is because they came to the party later or they finally had the ability to provide the contractual amount that they were committed to.

Your next question comes from the line of Chris with Bank of America. Please go ahead, your line is open.

Hi, good evening. So maybe I just want to ask higher level kind of philosophical question, and it's the second time today that I have used that word, and so I guess maybe just trying to understand your decision process, right? And maybe how that's evolved and what you've learned over the past six months, right, because I guess we've known for a little bit now that maybe things were slowing and you know that capex has stayed high. Obviously, it's coming down going forward, which is good to see. But you have to use this ATM and kind of dilute your shareholders more just to kind of buffer your balance sheet and I get that sort of what's required right now, but , and so I don't think anyone's arguing with the company's ability to execute on cultivation and get good gross margins and supply the channel and certainly I think the Canadian government and the retail channels, it's not helping you out, right. But there is another aspect of it that discretionary spending has been pretty high and here we kind of are at really having to buffer the balance sheet where things that aren't so ideal and so maybe just kind of how your decision-making process has evolved right over time, and how we should kind of think about things over the next six months to 12 months?

You've asked, what we've learned? The answer is, hell of a lot. And you noticed that we started to change our behavior, including our spending habits right the beginning of 2019 and that's when we started to get very serious about the path to profitability. So since then, we've been putting an awful lot of effort in controlling it -- in cost management, right? And you see that our SG&A is clearly that that's been well managed and until this quarter, it has been growing less fast than our revenues. So we have learned a lot. I think you should also take a really close look at at the margins, our commitment to high margins and higher margins than our peers and continually bringing those costs down, while increasing scale, that's something that speaks to a sustainable business.

Now you say that there have been indications that the retail infrastructure would not be there. Well, yes , but that's true and we'll take our lumps on that as long as everybody else does too and I don't just mean other producers, analysts and observers across the board I think anticipated that there would be more retail infrastructure available by now than there is. Now if the question then becomes, what do you do about it? And we think that we are doing the intelligent rational things. We're scaling our production to make sure that it's there to meet the demand, we're going to try and enhance that demand and stimulate that demand certainly, but we're also -- we're making very careful steps to ensure that we maintain that high margin and keep delivering those high margins over time. To us, that speaks to the companies that will come out the other side after a win-win, because we all know that not all existing cannabis companies, including publicly listed ones, are going to make it. To us, that business strategy speaks to a company that's going to come out the other side and be a long-term leader.

Okay, thanks, Cam, and then just as a follow-up, and Glen, I suppose I asked you something similar last quarter and the pieces have just changed a little bit here, but if you kind of take that, what's remaining on the credit facility and the fact that you don't probably have to pay as much on the convert obligation in your calendar Q1, but even if you kind of assume cash burn at the improved capex and maybe even operating cash flow better, is it kind of your base case now that you need to exercise all of the ATM to kind of get you to your fiscal '21 cash flow when maybe you get cash flow positive or maybe said another way if that's not the right way to think about it -- because that's kind of maybe how my math is working out, what's the appropriate way to think about just cash burn relative to funding needs and how you're going to get there? Thanks so much.

Yes. So, Chris, and yes, that's an excellent and an obvious discussion we've had it before and we all want to do the math. What really I think about this is, there is a lot of things yet to come and I know a number of our peers itself, for instance, with strong revenue guidance and stuff because we need to see how a few things play out. We had an excellent feedback from a number of sources on our initial product offering for the 2.0 products. The provinces won't issue purchase orders until December when they're legally allowed to purchase. But we're starting to get a view that we've got the right line-up of products, quality products and at the right price and so we think we'll be off to a good start there. A big part of this is as with the 1.0 launch was showing up, so showing up with good product portfolios, with piece of it, it will also depend on how our peers show up as well. So as we talked about earlier in my example of leveraging the margin, the profitability or EBITDA line is going be highly dependent on how the consumer market with the new products and with the retail footprint if we take Ontario at their worth and speed things up, that's going to impact our revenues a lot and finally impact how much cash and when we get to profitability, about how much cash we'll need. But we are also trying to balance our need or desire to continue to build a global business. So part of this I think will inflect as we look at certain strategic and the transactions We're looking at would certainly be accretive, but we will. I guess, see how it plays out. Right now, my anticipation isn't that we would need to use the ATM to the extent that we currently have approved, but I'm going to have to wait to see on how 2.0 and retail rollout and certain strategic transactions play out over the next several quarters before I can -- before we can land definitively on that. I'm certainly happy to continue to talk to [Indecipherable] about this because I think we are learning every step of the way as to how things are going to look over the next couple of quarters.

Hi, Chris. It's Terry here. Just to add to Glen's commentary there with respect to Cannabis 2.0, there's a few things here with 2.0. I also include the Ontario retail government processes being fixed. Alberta met Ontario sales, we got one-third of the population to Ontario. So that tells me there's a significant amount of cannabis users because we have the same cannabis users per capita in the provinces of Ontario and Alberta.

So there's a massive amount of people who have not been brought into the web, if you will, of legalized cannabis because it hasn't been as available and if you think about it all that we've really been selling these poor retailers, that was only joints, capsules, tincture and bud, and how we're going to be adding a numerous different product lines to truly meet the mandate of the federal government and the UN Convention when you legalize adult cannabis, you have to show that you're going to be competing with and reducing the gray market.

This 2.0 is going to do that and it's going to allow the retailers to do better off, it is going to increase the sales on the high-value products, and it's going to bring in more users that are already in the system, but still choosing to go to the gray market. I'm excited to tell about 2.0, I don;t want to be supposed to be told be conservative Terry, but I really am pumped about how Aurora has done its job and getting ready for 2.0 and all indicators from our retailers, from our provinces, from Health Canada and all the little hemp [Indecipherable] here, has that Aurora is at the top of that pack as well. So we're pretty pumped.

Your next question comes from the line of Doug with RBC Capital Markets. Please go ahead, your line is open.

Thank you. Hey, how are you doing? Got a couple of questions that maybe have been obvious, but I'm just curious about how things are going with the US CBD deal in terms of timing, and first to on time or if there is anything new you want to add to that discussion?

Yes I'm going hand it to Michael and then maybe come back at the end because we've learned a great deal about the US market, because remember, it's not just the Canadian cannabis sector that's been struggling, it's the US sector as well. So there's has been a lot to learn about that. Michael, do you want to speak to this?

Sure So, no surprise we remain very active in looking at opportunities in the US and they have to fit a number of certain criteria and I think what we're looking to do is to try to sort of piece together a number of different sort of strategic initiatives that I'll put our way out.

So obviously, we're going to have to operate under the current regulatory framework. That's a key criteria for us. So we see the US market as a platform for us to be able to capitalize on not just the US market, but use that as a springboard if you want for international CPG expansion and so that links very nicely to our relationship with Nelson and the Congress and the connections that Nelson has provided us in terms of some of these strategic partnering discussions. We're actively involved in negotiating a long-term relationship with many of these CPG companies with Nelson's help in terms of how we're going to structure this so that we could link together, like I said, not just a US strategy, but one that integrates a number of different of these strategic partners in different industry verticals that we start to think about, I'm owning a lot of these different industry verticals that we see as a huge global opportunity.

So we're not at a point at which we can announce that today of course but we continue to make tremendous progress and we're excited about the development of those discussions or the continued dialog that we have with numerous parties, then I think when we eventually do announce a US entry and a strategy, it's going to be very clear as to how this ties together and it's not just those strategic partners we've announced, other strategic partners like the UFC, and so all of this is going to be all encompassing and a very clear path forward in terms of how we feel we're going to operate in many different of these developing industry opportunities.

If I could add, Michael, on the --[Indecipherable] pretty slow at this, but it's important that we know what the regulatory framework will look like and the USDA just recently like two weeks ago, maybe less, finally put out their requirements around the production of hemp and the testing of hemp and CBD [Indecipherable] when they get tested and that drives a lot of our decisions on which partners we choose to enter into the United States. So we're happy at that finally out and that will expedite the decision on the entry point.

Okay, perfect. My follow-up question just has to do with product velocity, we have seen good product velocity with your various products but maybe what you could do is just compare what you're producing in Sky versus MedReleaf/Whistler and then maybe dovetail that into, we've seen a lot of issues, and maybe this was touched on a little earlier around product returns and those sorts of things and do you believe that there is any evidence that you could face potential for pricing decreases or product returns in the future? And with that, I'll leave it there. Thanks very much.

Yes, it is Cam, I'll take the first crack at that. We have not -- to date, we have not seen significant issues with product returns. And I know why you're asking because that's really kind of plagued some of our peers. We're not having the same issues. I want to touch wood because you never know what will happen in the future, but we do not anticipate that we will have those issues either. Just remind me with the first part of your question was, Doug, if the microphone is still open.

Okay. I'm sorry, Doug, we'll have to do that in a follow-up call. It's been a long day and having that [Indecipherable].

Good afternoon. Hi. Cam, you referenced changes in the -- or in customer preferences impacting your revenue in the quarter, I'm just hoping you can elaborate on what that is. And just to clarify your commentary from earlier, do you expect to grow revenues in Q2?

We're not projecting that. We're not giving guidance on that. As Glen indicated earlier, we'll have better visibility, once we see exactly what the rollout of new retail infrastructure is going to look like and also when we see what happens with the uptake on the Cannabis 2.0 products.

Yes, look, we were constantly evolving our product mix. One of the things, if you were on an earlier call today, is one of the other companies, perhaps had difficulties with the volume of certain derivative products that they were trying to move in the consumer market. On the -- in terms of flower too, we're always adjusting based on which sells well. So we have already started to change the mix of cultivars that we're growing and we will continue to do. So I think actually we're very, very agile. We've got a very good market surveillance and I would suspect better than most of our peers, and that's essentially what we're talking about there.

Okay, thanks. And then my follow-up is on profitability. So the various puts and takes in the market and we all know there's not enough stores. You'd previously expected profitability a couple of quarters ago. So I'm trying to get a sense of when do you expect this now and what ability do you have to flex SG&A down in case the retail rollout delay continues?

Sure. Listen, I think it is important -- we do have a long-term view on this industry. Cam outlined that a little bit earlier. We're very excited and I haven't seen anybody pull back on kind of the accessible market projections in Canada, in the US and globally. So we're balancing -- you're asking specifically about tackling SG&A, we think we have it at a pretty good state right now, the folks in the spending of course were containing and controlling and really watching it closely, but I'm also recognizing we're trying to build a global leader here and sometimes you got to be careful not sort of pull that too far short term at the cost of the long-term value creation.

So I guess what I'm trying to get at here is I think SG&A is at a good level, we'll manage it prudently. In terms of profitability and EBITDA, as Cam mentioned earlier, I don't think there's any of us on this call that we're expecting Ontario a year after legalization to expand 24 stores, so they made the right noises slightly or certainly are a little more optimistic that [Indecipherable] going to get out of the way and start licensing that province properly and it's we harp on Ontario simply because it is the biggest province in there so far behind the leaders like Alberta, which has almost 300 stores as compared to Ontario's 24. So when we were looking at EBITDA positive, we were expecting an Alberta retail footprint, [Indecipherable] we've seen a retail store go in, the spending is very encouraging at those stores, so we expect that to be a big driver. But we're just being very cautious right now. We're controlling, and I think, controlling effectively all the levers that will take us to profitability and certainly among our large-scale peers we think we'll get there much earlier than others, but we've gone on about the margins. We think that's incredibly important again using my example, the difference in revenues you need to generate whether you're operating 60% margins or 30% margins to get to profitability are astounding and with controlling SG&A we deliver the product mix that the market wants because all those pieces in place we just need the retail infrastructure, the provincial distribution and the new products, and then we'll see how this plays out. So we're staying away from projecting when that will happen, but we know what we're monitoring to see what that ramp looks like.

Your next question comes from the line of Michael with Piper Jaffray. Please go ahead, your line is open.

Thank you. Good evening. I have kind of strategic question and a quick follow-up after. But strategically. I guess if you look at your business, you've got the highest growth gross margins in the industry, you've got the lowest cost at least by far almost anybody, and yet your EBITDA margin is negative, it got worse, it's obviously behind the targets for profitability you've had for 4Q and if I'm hearing you right there is not really necessarily a light at the end of the tunnel. As you look at your wholesale sales and you talked about the attractive margins there even slightly better than total company gross margins and also the outlook you gave with very positive remarks around the outlook for white label sales, I guess I just want to understand how you think about where your right to win is and where your best position that would you ever rethink how you approach your position in the market and maybe pivot a little bit more to take advantage of where you've got these advantages and rethink a little bit of who you want to be when you grow up?

So let me just clarify, are you talking about do we want to move more toward wholesale in the short term or the medium term rather than then something else. Is that what you're saying?

Well, a little bit yes I mean, I guess, here something how I'm thinking about, you've also obviously mentioned the attractiveness of the Wave 2.0 products and that's clear, but clearly everyone saying that and there is no brands established yet, if even for the extractors they want quality products to put into those quality flower to go into the extraction for those products. You seem to be saying over and over again that your cultivation is really your strength, does it makes -- is it right to be investing as a brand owner and on the downstream side if really where you can win is on your low-cost advantages?

So -- Okay -- there is a -- I'll look to unpack that and let's start with wholesale. Let's remember that virtually all the wholesale product that we're selling is trim and shake and maybe some some popcorn buds, the smaller, less attractive flowers. So there is a limited amount of that. We also have -- Aurora arguably has the most attractive medical brand, certainly in the world, and we've got the most attractive consumer brands in Canada. I would not say that our chief strength is just cultivation, it is cultivation and that's great. And we've emphasized now for what three quarters that we see the critical success factor in the short term here in this industry, being able to produce consistently without crop loss, high quality, low cost cannabis and then to move it through multiple distribution channels. But that's not the only thing we are good at. Our technology is amazing and so one of the reasons we are so confident about Cannabis 2.0 is because our product development team led by Dr. Shane Morris who is just amazing. We have a tremendous product development team and we're very excited about our products. We think that in general Cannabis 2.0 advantages will tend to benefit the larger companies more than the smaller companies and we think that we have particular advantages there. So we're not prepared to concede any aspect of this business right now.

Okay. That's really helpful color, and just to follow up, I'd love a quick sense if you look at it this way or have some way to quantify it, when you look at your portfolio and your yield, your crop, clearly we've seen the stronger demand on the higher potency side, I don't know if 20% is the magic cut off. I'm not sure how you may classify it. But when you look at your portfolio and what you sell, do you have a sense of how it breaks down by potency?

Sure. You're bang on, potency is the driver at this point of the popularity of Cannabis flower. If you think about i,t potency and the next 2.0 as whatever we want it to be right, we can take right up to the max or is going to be derivative products like shatter and hashish and that oils in the future and near-term future that will have extreme potency and we'll be able to shake out exactly where that demand is, if people really want to take it to a 95%, well, we'll see. I think that the cultured community people that are chronic users of this excellent product, we will be looking toward that. But what is the percentage of those? But we don't have all the stats. The West Coast of USA to provide some insight into that, they are certainly higher value products though and you're right, the demand for the high potency is there and that's why we've pivoted over the last six months to start focusing on the higher potency, me myself. You don't think that what I would use this, but because it does take you through a different [Indecipherable] land, and I think that people are still looking for it, the millennials are looking for -- they think that they are getting more product when they get more kick -- and until they get fully educated with respect to the different combinations of terpenes and CBD and THC and the other 114 cannabinoids may have -- they'll find their way and they'll find their brand. We're still in year one here, right? This is inning two perhaps in Canadian adult usage and Aurora has nailed it. You well have to remember these other companies had a six-month -- six-quarter, sorry, head start on Aurora and I'd hate to belabor that point, but we've caught and passed them and we've done a two quarters in a row and we're doing in a great way. The Aurora story is a great one because we went with a method of grow that was not risky, that we de-risked the method to grow by having these purposeful-built facilities -- purpose-built facilities and I can't say it enough how proud we are of the teams that have assembled these, we're becoming the employer of choice. We're becoming a partner of choice globally. These health departments across the world are calling us first. The team that works outside of Canada are nailing across the board. I'm excited to tell, yes , we had a drop in cannabis sales, but it was anticipated, and we let you know, hey, the provinces were oversupplied and some of us producers not us reading oversupply of those provinces and hence the return issue. We had our allocation plan, we didn't take the bait, we maintained our allocation amount as per our contracts and that's why we have very few returns if any of the very note, we got the odd broken box, but this is a significant difference between us and the rest with respect to quality and to suggest that we're just great producers, that's crazy. We are great at every vertical that we've entered and will continue to execute into every vertical that we enter by hiring the people who want to come over and work for us.

Your final question comes from the line of Matt with Canaccord Genuity. Please go ahead, your line is open.

Hi, How are you guys doing? Thanks for taking the question. I know it's getting late. I'll just keep it to one. It relates to -- you mentioned the importance of your gross margin as a key metric and it's something as you sort of look at all the different capacity expansion plans throughout the industry that are starting to reach inflection points here. You've noted a couple of facilities where you're going to be taking the foot off the accelerator as a means of reallocating capital, but what's your view on the risk of facilities are actually currently already up and running, where that money is already and capital has already been invested becoming underutilized as more and more capacity comes online, and how that might impact your gross margins in the near term given that I think it's generally understood that there is a huge oversight trend of overall capacity, let alone the inventory that's sitting at the retailers right now. I'll leave it there. Thanks again.

Okay. I'm going to take the first crack at this and then hand it to Glen and if he wants to Terry. Overcapacity is really an interesting question, because there is no really such -- there really is no such thing in economics over the long term, right? It's going to find its appropriate level and we always felt from the very beginning that we had to be able to produce a very large amount of cannabis, but particularly economically, something that a number of our peers have not demonstrated the ability to do. Now, you're right, a lot of capacity has come into the system. I don't know how much of it's going to stay and there are producers out there who are not economic right now and they'll never be economic because they simply don't have the capability to produce cannabis at low cost. I would say that from the Aurora perspective, on the contrary, we are quite prepared to generate very, very healthy margins even if there is price compression over time. That stands us in very good stead and as Glen has emphasized to be able to continue to succeed under any market conditions. Glen, do you want to add to that and take us home?

Yes , I think it's important to make the point that we hear about oversupply as we've seen there is oversupply of some poor quality product resulting in not moving through. As I mentioned in my prepared comments that we monitor sell-through from the provinces to the retailers closely. I think that's a good indicator of the viability of the health of the business or you're producing products that consumer wants. So when we're you know number one or number two in the major provinces in sell-through rates, it's important to us because it says that we're actually, yes, we're producing so is everybody else. We're producing products that people want. And so, but when we talk about oversupply, you need to peel it apart a little bit, I think, and just say oversupply of what? And if it's oversupply of poor quality cannabis and we are seeing a few new folks in the industry launching what they've said are value brands, but that was in some cases it's dumping inventory brands. Yes. They're going to have to get rid of that inventory and the production at whatever price that the public is willing to pay for it, and that's a whole different [Indecipherable] us producing a quality product. Even if we want to compete in value category, a quality product with healthy margins that consumers want. So I think as Cam said there will be some capacity. I think that assets the market, if you can see price compression on the poor quality cannabis and you can produce for that sub CAD1 but even if you can produce for less than CAD3 , then you're going to have a real problem remaining variable on the cultivation side.

So we'll see, it's very interesting time, I think the next year a number of quarters you are going to play the game out here and we'll see who is left that can compete with the healthier companies like us.

Glen, if I can add to this quality question, you know when we negotiated with these provinces a year ago, they didn't want to differentiate between the quality of cannabis, because they didn't know. In fact, we knew -- we knew that we had better cannabis the most and we were trying our very best, but they grinded us hard. They know you guys shall be priced in the same bucket until we see where the demand is. Now that the demand is up, they're starting to see these the big dots [Indecipherable] champagne starting to see that people want Aurora cannabis on shelf, there are some strains that we can't grow enough of, and we're on that, we're trying to grow it as much as we can of the brands that are in high demand and that's just catching up now, so -- and I didn't realize this-- we didn't realize it and it took at a year to sort of figure that out. And now let me go back to these provinces, look, here's the criteria, here's the demand, here's much the retailers are ordering, this is what they're selling, this is what the consumers want , we're able to put that price up even more.

They think about it, we have the [Indecipherable] price because of high quality cannabis and we're the lowest cost producer. That's a recipe for success. That's what makes me excited in a big way and I think you all going to be happy campers if you're investing in Aurora come the closure of 2.0 and can really look at about 2.0 then. That might not be the last calendar quarter. It might be the first calendar quarter which that better be if we're driving a bus, right. But this is a rosy picture for Aurora, I wouldn't want to be in some other shoes out there in this industry. We know that the access to capital is difficult. That's why we set up great instruments at market not discounted not warrant [Indecipherable] we have a sound plan.

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We're making sound decisions in reducing capex based on global demand, we're able to turn that back on [Indecipherable] and we do feel, I feel that we're going to happen within a short time frame, but let's see how it all pans out. Aurora has once again taken another step to meeting this world as the greatest cannabis company in the world and we're very proud of that.

Yes, and I'll just wrap it up. I want to thank everybody for your questions. Thank you very much, and we look forward to speaking to you next quarter. Have a great evening.

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