Good morning. My name is Jamie and I will be your conference operator today. At this time, I would like to welcome everyone to the Aphria Inc. Q4 Quarterly Investors Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question-and-answer session. [Operator Instructions] Mr. Carl Merton, you may begin your conference.

Good morning everyone. Thank you for joining us to discuss our Q4 financial results. With me on the call is Vic Neufeld, Chief Executive Officer of Aphria. I trust that you all had the opportunity to read our press release this morning. Today’s call is intended to give you more color about the results and to answer any questions you may have in our allotted 45 minutes. Before we get started, I am required to read the following cautionary statement. In talking about our financial and operating performance and in responding to your questions, we may make forward-looking statements, including statements concerning Aphria’s objectives, its strategies to achieve those objectives, as well as statements with respect to management’s beliefs, plans, estimates, intentions, and similar statements concerning anticipated future results, circumstances and performances or expectations that are not historical facts. These statements are based on our current estimates and assumptions and are subject to risk and uncertainties that could cause our actual results to differ materially from the conclusions in these forward-looking statements. The forward-looking statements in this discussion speak only as of today’s date and we undertake no obligation to update or revise any of these statements. Now, I would like to turn the call over to Vic Neufeld, Chief Executive Officer of Aphria.

Thank you, Carl, and good morning everyone. As you’ve read in today’s press release, Q4 was a healthy quarter. The results of exceptional performance by the Aphria leadership team. Regardless of how one creatively reports various costs of goods sold, the end results, which reflects the total corporate results is EBITDA, and more specifically adjusted EBITDA. When setting aside these significant investments made in our many international markets, the quarter highlighted our eleventh consecutive quarter of positive EBITDA. An accomplishment we do not believe has ever been achieved by any other licensed producer. And as I often convey, it is important that [indiscernible] begin to focus on their bottom lines. How many more quarters of unacceptable low gross margins and sky rocketing SG&A cost could be sustained before prudent investment logic will prevail. Aphria has and will continue to be focused on delivering solid revenue growth, while managing the costs necessary to support the Aphria growth story. Responsible stewardship of shareholder investments will win the day. Carl will shortly talk about the quarter just ended, but I want to address the Aphria story of tomorrow. Starting with capacity. Our Part IV expansion at Aphria One and retrofit at Aphria Diamond is on track and on budget. Both projected to be construction complete by September to mid-October yet known as a time lag for an onsite Health Canada inspection. It is still our expectations and calibrated in our commitments and planning to all prudential regulators that by the end of January 2019, Aphria will be generating increased harvest to further support the recreational markets. By June of 2019, Aphria will be harvesting in excess of 20,000 kilos per month. In terms of planning for October 17, but also planning for further product introductions in the following 12 months, we are building…

Before getting to our fourth quarter results, I would like to highlight one change we made to our EBITDA definition starting this quarter, but also for future quarters. During the quarter, we made a fundamental change to our business model, expanding our business focus from Canada to international. Accordingly, our previous definition of adjusted EBITDA would not have recognized the advanced state of the Canadian market as compared to the relatively [indiscernible] states of the other global Cannabis markets. For this reason, we added two adjusted EBITDA definitions to our reporting. Adjusted EBITDA from ACMPR operations and adjusted EBITDA from Aphria International. Combined the two definitions, total our previous our adjusted EBITDA definition in isolation adjusted EBITDA from ACMPR operations is effectively consistent and comparable in prior quarters with our previous adjusted EBITDA definition. Adjusted EBITDA from ACMPR operations represents the adjusted EBITDA from the same base business we previously reported and includes all results of Aphria One, Aphria Diamond, and Broken Coast. Adjusted EBITDA from Aphria International represents all remaining operations. During the quarter, we reported the eleventh consecutive quarter of positive adjusted EBITDA from ACMPR operations. We are proud of the streak but acknowledge that over the next two quarter to three quarters investment is required in our business to support the near exponential growth expected in the cannabis industry. The investment will support our growing portfolio of adult-use in medical use brands, alternate uses of cannabis, including the transition of cannabis from a product by itself to an ingredient, increased headcounts, and international opportunities. During this period, our adjusted EBITDA levels will temporarily decrease, including in some periods, potentially being negative, but our focus will remain the same. Responsible use of the assets entrusted to us by shareholders. Q4 was highlighted by multiple important key performance indicators,…

[Operator Instructions] Your next question comes from Noel Atkinson with Clarus Securities. Your line is open.

Good morning, thanks for taking my call. I just have a few questions here. First, I was wondering if you could talk about the potential shift in Ontario to private retail for adult-use and how this impacts Aphria in the short-term and medium-term?

Yes, thanks Noel, it is Vic responding. When one looks at where Ontario was two months ago versus Premier Ford and where is heading in terms of Ontario, whether it is hybrid or eventually one day full privatization, in either business model the Aphria Brands will play a critical role regardless of who owns and runs retail. It is part of our obligation as senior leadership of Aphria to understand the retail landscape and, I’m going to off road a bit here and talk about our review of the Manitoba situation. The privatization of those licenses, which we’ve now heard they are going to expand that. When one looks at owning the real estate space called shelf, there are a lot of benefits, but it also comes with risks. So, when Ontario finally comes up with their total business model on a who, how, where and when retail, recreational, privatization in Ontario is going to work. Rest assured Aphria will be part of that conversation will fully evaluate these opportunities and move forward with our shareholders value in safeguarding of those assets in mind. So, it’s a bit premature and all to really talk about where we want to land, we will play in whatever stand box premieres forward eventually brings forward in Ontario.

Okay. And then secondly, could you comment all about the relationship that was announced yesterday between software’s and manually for the medical cannabis side?

Yes. Let’s make sure everyone understands, the Manulife entry is really one other beta test. They have chosen a clinic, small in the Toronto area that has relationship and can bring forward patients that the process of registration of coverage of reimbursement with Manulife and Shoppers Drug Mart because they have a very tight relationship. Sunlife is already there. So, Manulife’s introduction was really expected to come now. And so, what they are doing is really assisting Shoppers Drug Mart, and their infirmary online program, once Shoppers Drug Mart gets their full-licensed producers status, which as we all know has been ongoing for many months and hopefully successful in the near-term future. So, this is their way of trying to understand the process, work out the kings [ph] on our beta test basis before it really gets into a full-fledged full license producer business model for Shoppers Loblaw.

Okay. And then finally, I was wondering Carl, if you could talk about sort of the amount of CapEx required to finish all the generic projects, Canada, Malta, Africa with how much CapEx do you think you have left to go?

I will let Carl talk about the numbers, but just at a high level, let me just deal with one that is, no two of them that are very short-term in terms of action plans necessary. Within the next 2 to 3 weeks, a team is going back down to Argentina to speak to the Ministry of Health, but also Ministry of Agriculture referred to as INTA. They’ve reached out to us and asked us they want to work towards a 90-day period of entering into a joint venture where we design engineer build operate train, a greenhouse operation for medical cannabis subject to the both ministries over site. Very, very big step forward. They have chosen us obviously because we have been there. We’ve presented the Aphria credentials several times and they really value the word quality that we bring to the table. Columbia will also be an add-on to that same trip. Once you go south of the equator, you might as well knock of a few countries because it’s not just a short place. We’re going back to [indiscernible] to the firm [indiscernible] and now start pulling triggers on the design of South American greenhouses and Phase I of the co-Canada projects. So, there are opportunities that we have to act on soon and quick. Keeping in mind that it is not until mid-to-late September if not later, the expected closing of the acquisition of Colombia, Argentina, and Jamaica. So, a lot of our activities are going to be based on crossing that finish line. But we need to put all of the dominos in place. So, Carl if you have some guesstimates or estimates of CapEx for these opportunities?

Yes. You know Part IV and Part V expansion and we have about $45 million left to spend at the end of the year. For Aphria Diamond, we're looking at another approximately $40 million in CapEx just it will come. For the Centre of Excellence, we did not announce, it is all right here at the end of the year, and we hadn't spent any of the under $55 million a year until the full 55 million remains. In Africa, the capital project is around $2 million and in Malta it is 3 million euros.

Okay, and the Avanti isn't that significant?

The Avanti is, sorry, I just forgot, I forgot Avanti, Avanti is $3 million as well, sorry $3 million not euros.

Okay, great. Thanks very much.

Your next question comes from Tamy Chen with BMO Capital Markets. Your line is open.

Hi, Vic and Carl. Thanks. I just have a couple of questions. First question, are you able to disclose or quantify how much inventory Aphria has at the end of this quarter in terms of kilograms, and if possible are you able to break down what that is between dried flower and what you intend to convert to oil?

That information is in the financial statements that were posted on SEDAR. I understand from our few people they may not be up on SEDAR yet. So…

If you don’t mind Tamy, we are dealing with May 31. So, the ramp up of inventories would have accelerated greatly in June, July and August and because we are in that quarter we’re not going to really disclose those amounts, but there is a growing finished flower, finished oil being produced and stored waiting for October, while the delivery waiting for October 17.

So, Tamy inside the financial statements it shows 3,200 kilos of cannabis, harvested cannabis, 702 kilos of trim, and the 7,700 liters of cannabis oils, and kilogram equivalents basis 1,700 kilos.

Got it. Thanks. And my other question is, now that you’ve had a full quarter of Broken Coast, I would have thought that the cost of production, your blended cost of production might have crept up a bit, I understand Broken Coast is a fully endorsed facility. So, first question is, are you able to give further color on Broken Coast cost structure versus the Aphria greenhouse, and also are you able to provide insights on how Broken Coast grow operation has performed since you have acquired the business?

So, on the cost sides, we did not disclose in the financial statements Broken Coast’s cost per gram or Aphria One’s, we just presented in a blended rate as that was more tied to the financial statements. The blended rate was the $1.60 per gram. At Aphria One, the number is less than Broken Coast number is higher. They are not materially different from each other. Broken Coast runs a very clean and very efficient operation. And your second question about the quality of product coming from Broken Coast in terms of its small back to premium product, and our expectations as they continue to deliver exceptional premium products that were extremely proud of and are excited to be able to offer that into not just a medical market, but in the rec market to start and middle quantities we have available from Aphria One.

Okay. That was all. Thank you.

Your next question comes from Matt Bottomley with Canaccord Genuity. Your line is open.

Good morning Vic and Carl. Just couple of questions on my front. Maybe just a quick addition to Noel’s original question on the potential shift here on Ontario, obviously there is still a lot of unknowns here, but your expectation of when product might be delivered in Ontario of September October is that materially changed in your mind given this potential pivot?

It’s our belief, our expectation, and all of our plans are still calibrated so that we begin the delivery of the pipeline still sometime between late August and mid-September to late September. Every province will be different. Subject to our MOUs, but also subject to their build-outs. So, we're still on track so that by early October every prudential regulator in their warehouse has our product. I really don't think that’s going to change, but another part of an answer to your larger question is Ontario. Matt, as we all know Ontario is about two weeks behind in advertising and allocating their opening needs whether it’s going to be their first three six-month need or the first 12-months every providence is different, we are waiting. We have carved out and allocated internally, what we think we can reasonably commit to and deliver on in that opening pipeline fill, but also from October through, I’m going to suggest early-to-mid January 2019 what we can continue to service and depending on the POS sell-through. And then after that, as I had in my opening comments that’s when we really start producing more hardware side of Aphria One and Aphria Diamond and our regulators know exactly what that means and where we come to the table in filling some of their hoes and their needs. So, we have not recalibrated any of our plans. Online will happen across every province. Ontario will move quickly. I’m afraid it’s just not going to move quick enough in terms of the $40 that under premier wins announcements were to be in place.

Okay, great. Thanks for that. Maybe just shifting to the international platform, do you guys have any commentary or views on what we're hearing out of the United Kingdom? I know that you have some relationships there through your Aphria International, previously Nuuvera, any updates on that market, as well as your view on how long it might take the German market now to reset and re-tender that process?

I think Germany in the next 2 weeks to 4 weeks will have clarity and release what the new tendering rules are. Just for clarity, every applicant who was in the race before and all of their scoring systems getting to this second etcetera is all thrown out of the window, it is a whole new race. We feel very, very confident given what Nuuvera then done in getting to the final selection process. We have the same team in place and now we're just making improvements because now the Aphria team is assisting the German team that came with the acquisition. So, Germany is about 2 weeks to 4 weeks out in terms of clarity, and I could only assume that it is going to be a 3-month to 6-month window of opportunity allowing any licensed producer globally to make a submission. We have a very solid vertically integrated plan from importation, cultivation, testing, packaging, clinic, and distribution into the pharmacy retail channel. So, we are very, very confident with what we have acquired through Nuuvera and how we have further re-engineered and just tweaked a few of those plans. Back to the U.K. though, the U.K. is years behind Canada and within the last two months has really leapfrogged and is close to getting to where Canada was when we became legal medical on April 1, 2014. The House of Lords, House of Commons, have really, really come together understanding the benefits, not science, the way Pharma companies would view it, but truly patient evidence, they are really moving the needle fast. We have a great relationship and various agreements with a leading medical physician who as I have spoken to many, many committees within Homeland, as well as within department of health, we are very well-positioned in the U.K. to move the needle. In country cultivation is a conversation for maybe two or three years down the road, but right now it is about scripting, it is about the Aphria Rideau oil, which is CBD only from our Treasure Island and how that opportunity of that particular product with Aphria exceeds your control and mind and how and where Aphria is going to be successful in the U.K.

Okay, thanks guys. Very helpful.

Your next question comes from Martin Landry with GMP Securities. Your line is open.

Hi, good morning. Just to confirm, was there any international revenues recorded during the quarter?

A very minor amount related to the SL Group in adult.

Okay. And how do you see that evolving into Q1 and Q2 and when are we going to see an inflection point in your international revenues?

So, the ability to sell at our pace much more significant revenue base in the EU will be driven by EU compliant GMP certification. We see that timing really starting to hit financial statements, probably Q2. In the intern, we are working on multiple other strategies in the EU that we’ll see a sales level increase for the terms of the exports coming from 10 it will be Q2.

Okay.

I think a little more specific, Martin, the Q2 that Carl is referring to is probably a good time frame in dealing with where we are in Argentina. The importation of our Rideau oil, which is again our high CBD oil, but also where we stand with the in-country cultivation plans for Columbia, how quick we can mobilize there and then get in markets. So, I would agree with Carl, Q2 would be the beginning of significant, and hopefully Q3 will be the beginning of materiel events coming from these countries that as we can now appreciate takes a long time to navigate through the hallways of Ministries of Justice of Health, of agriculture, and we are well down that path.

Okay, that’s fair. And Carl, you talked in your opening remarks about doubling the head count, and then you also said that you have incurred extra operational cost, just wondering when did that occur, when did you double your head count was this during Q4 or afterwards?

A portion of it was inside of Q4 and a portion of it was – is more current.

Okay. So, it’s fair to say that your OpEx are going to increase sizeably in Q1 right?

I am not a big fan of the word sizably, but it will increase. It just depends on what level you're asking the question. If it relates to grams, it is not going to be huge, but if you're talking about pure dollars, yes, that is going to be major expenses.

It’s, Vic. Martin if I could start to add now and it should be well-understood that as we lead up to October 17 different companies have different strategies of brand activation and launch. I can suggest to you that of the Aphria brands for the adult-use is getting closer and closer to actually now activation. We have taken the posturing that too far ahead of the curve is money not well spent. So, as we get into August, which would be the last month of Q1, but also September, October the other two months of Q2, you will start to understand that we have strategic plans very, very specific tactical and the execution of that is going to require some spending methods never been historically felt on our income statement. So, we were you there, but let’s also not forget that we’ve got significant revenues and margins that are going to be hitting the income statement at the same time. So, to give forward guidance we dare not, but we know what we’re spending and where we’re – and how we're spending. And those amounts Martin will not break the ACMPR rules. We will play within them, we will have our interpretations, but we will not be in the – on the radar of Health Canada.

Okay. And in answer to your prior questions, you alluded to having the possibility of shipping in August, wondering what’s going to be the proportion of your shipments in August versus September to [indiscernible] ahead of the rec opening?

No province has to date given us the release orders from the blankets or those MOUs that we – all the licensed producers have referred to. We are still awaiting ship dates and what mode of transportation they want, where the DCs to be dropped off, et cetera. So, this is all still our plans, how the prudential regulators come up with their actual purchase orders of delivering is yet to be identified, but we feel somewhere between end of August, throughout the month of September, and again Ontario is yet to send any quantities out of the marketplace yet, but that is our expectations and that is how we’re growing, harvesting, storing, and packaging of our various rec brands.

Okay. That’s it from me. Thank you.

Your next question comes from Graeme Kreindler with VIII Capital. Your line is open.

Hi, good morning gentlemen. I have some couple of questions about what to expect over the next couple of quarters. From the cost side of things, I was just curious as to what your outlook is for the actual medical market, what the top line is going to look like as you get closer and closer to October 2017?

Medical is and always will be part of the Aphria definition. We see medical continuing to grow. The unknown Graeme whether it’s 20%, 15%, 30% we all can logically assume that all of our medical patients today there are some that are under disguise of recreational and will leave licensed producers and go to provincial legal recreational outlets, but we see a continued growth of medical patients for the medical cannabis regions. We were always there and we will continue. We are, we put together and ready to execute some very dynamic growth plans for the medical side of Aphria. I can also suggest to you, I have said it many a time, we are all patiently waiting for shopper’s drug mart to get their full licensed producer status. It’s been long on the [indiscernible] from a Health Canada perspective, but that will also make a major statement to the medical community to support, be supported by the Sunlife, Manulife, Green Shield, I mean all of these carriers coming on board. More and more employers through their health spend accounts are adding medical cannabis to their list of eligible expenses for their employees. It will continue. So, I can suggest to you and we don't give forward guidance, especially by division, but I can tell you Medical Aphria Canada is going to continue to grow successfully and very profitably.

Okay. Thanks guys. That's it from me.

There are no further questions at this time. I will turn the call back over to the presenters.

Again, thank everybody for participating in today's call. I will finish off by saying what I said at the beginning, Q4 was a healthy quarter for us. We hit on a lot of cylinders, a lot of investment of costs have been made, more coming forward as Carl has already summarized into Q1 and Q2 of our fiscal 2019, and we will absolutely be delivering shareholder value on all three pillars. Medical Canada, Medical Globally, and recreational come October 17 and thereafter. Again, thank you for your attendance and support.

This concludes today's conference call. You may now disconnect.