Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Aurora Cannabis Inc. (NASDAQ:ACB)
Q4 2020 Earnings Call
Sep 22, 2020, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good afternoon, everyone, and welcome to the Aurora Cannabis fourth quarter fiscal 2020 conference call for the three months ending June 30, 2020. This is being recorded today, Tuesday, September 22, 2020. 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. The company expects to file these documents before the end of this week and they may be assessed via the SEDAR or EDGAR databases. Since we are conducting today's call from our respective remote locations, there may be brief delays, crosstalk or other minor technical issues during this call. We thank you in advance for your patience and understanding.

I would now like to introduce Mr. Miguel Martin, chief executive officer for Aurora Cannabis. Please go ahead, Mr. Martin.

Miguel Martin -- Chief Executive Officer

Thank you, operator, and good afternoon, everyone, and thank you for giving us your time. First off, let me say that I very much appreciate the board's confidence in appointing me to the CEO role. I'm pleased to be working with the team on tactical plans to establish Aurora as a profitable, growth-oriented leader in the global cannabinoid market. I take my fiduciary responsibilities to our investors very seriously and I'm determined to do everything that I can to enhance shareholder value.

This begins with managing business with a high degree of fiscal discipline, especially in the midst of a global pandemic. Over the last several days, I've had an opportunity to speak to a few of you in the investment community, but for the broader audience, perhaps it would be helpful to provide a bit of my background. I spent my entire career in sales, marketing and leadership roles within the regulated CPG product industry. I started my career with Altria and spent about 18 years there, ultimately leading their sales group.

I then went to become the president, one of the largest electronic cigarette companies, Logic, which was then sold to Japan Tobacco, the third largest tobacco company in the world. After that, I went to a start-up and became CEO of Reliva CBD, currently ranked the No. 1 CBD company in Nielsen, which was just recently acquired by Aurora. So I spent a lot of time working in fast paced, constantly evolving, highly regulated and fluid environments where adherence to compliance and testing is essential to success.

I accepted the CEO job because I see an opportunity to quickly leverage my skill set in a regulated CPG product development here at Aurora. I'm fortunate to step into a company built with a dedication to science and the compliance first approach. With strong execution, I expect to build a profitable business in Canada that we believe can be portable to other larger global cannabinoid markets. Having spent four months now at Aurora, I've seen the talent and the industry knowledge that makes this company innovative and agile.

Aurora will be a global leader in cannabinoids, when the largest markets open up, and my job is to make sure that Aurora executes on that plan. With that, I'd like to turn the call over to Glen Ibbott, our chief financial officer, to walk you through the financial results for Q4 2020, and then I'll be back to discuss some of our business plans going forward. Glen?

Glen Ibbott -- Chief Financial Officer

Yes. Thanks, Miguel. My pleasure to take our first earnings call together. I'm very excited about the vision you have for Aurora and the opportunity for Aurora to realize its full potential as we remain focused on becoming a profitable growth-oriented leader in the global cannabinoid market.

So good afternoon, everyone, and thank you for joining us on today's call. As you know, on September 8, we provided a business update, including certain unaudited preliminary fourth-quarter 2020 results. Therefore, I can be a bit brief in my review of our financial results for the quarter. The figures I'll be going over today can be found in the press release we issued after market closed today and are all in Canadian dollars.

For our fourth quarter fiscal 2020, the period from April 1 to June 30, 2020, our net revenue came in at $72.1 million, while our total cannabis net revenue came in at $67.6 million. Our sales mix remains evenly split with the consumer cannabis segment delivering $35.3 million in net revenue and our medical cannabis segment delivering $32.2 million in net revenue. Total kilograms of dried consumer cannabis oil increased by 36% as compared to the prior quarter, but this was offset by an approximate 30% decrease in the average selling price per gram of dry cannabis flower. For Daily Special, our value brand accounted for 62% of total net consumer revenue from flower in the quarter as compared to 35% in the third quarter.

This is the primary factor impacting the decline in our average selling price per gram of dried cannabis flower. Consumer cannabis extract net revenue decreased by $1.5 million as compared to the prior quarter, driven primarily by a decrease in sales of our vape products. During the fourth quarter, the increase in our medical cannabis net revenue was comprised of an increase in Canadian medical sales of $0.7 million and an increase in our international medical cannabis business by 14% or $0.6 million. Pricing in both markets stayed strong and steady.

We have produced over 44,000 kilograms of cannabis in Q4 as compared to approximately 36,000 kilograms in the prior quarter. However, as we continue this aspect of our business reset, which consists of rationalizing our production footprint and closing a number of our smaller facilities, we expect our total production going forward to average about 35,000 kilograms per quarter. And of this production, 65% or more is expected to meet our top-quality flower standard. We expect our facility rationalization to be accretive to our gross margins over time, while we continue to work on maximizing yields, potency and other quality characteristics of our cultivation.

Our forecast for inventory drawdown suggests that our flower production versus sale will reach a steady cadence over the next several quarters. While trim will also reach a steady state drawdown given our renewed focus on vape and other derivative categories. Our cash cost to produce per gram of dried cannabis sold improved to $0.89, down 27% from the previous quarter. This is a slightly modified metric from previous quarters that reflects changes to our inventory costing methodology, which places a heavier weighting on our top-quality flower and less on byproducts.

Our low-cost of per unit production is another lever that allows us to build brands across multiple pricing tiers while maintaining strong, healthy and sustainable margins. Our adjusted gross margin before fair value adjustments on cannabis net revenue was 50% in Q4 versus 43% in the prior quarter. As you are well aware, we have been focused on prudently managing SG&A cost down to our targeted run rate of $40 million to $45 million per quarter over the course of the second half of fiscal 2020. We are pleased to have successfully reduced SG&A costs, which includes R&D spending from over $100 million in Q2 2020 down to $64.6 million in Q4.

Excluding approximately $3 million of nonrecurring costs related to the business redesign. I'm further encouraged to tell you that we are now operating at our targeted quarterly SG&A run rate in the low $40 million range as of Q1. Clearly, reducing the run rate to the low $40 million range was very important as we described to deliver positive EBITDA. We also believe this level of SG&A [Inaudible] and is quite sustainable and very capable of supporting a much higher revenue line.

Our progress in continuing to reduce both overall and per unit production costs as well as the significant decrease in SG&A demonstrates our commitment to manage Aurora to positive EBITDA for Q2 2021. These efforts while certainly necessary, have clearly been disruptive to the organization. So while there is still more work to do, we are now in a position where most of the Aurora team can focus their attention on delivering Miguel's plan for growth. So pulling all of this together, adjusted EBITDA in Q4 2020 was a loss of $34.6 million, a $30.7 million if we exclude severance and nonrecurring costs related to our business transformation.

This is obviously a substantial improvement over the prior quarter adjusted EBITDA loss of $50.4 million, and it is the second consecutive quarter of improvement in our adjusted EBITDA. We expect this trend to continue through our first half of fiscal 2021 as we remain dedicated to achieving positive EBITDA in Q2. Turning to our balance sheet. As of June 30, 2020, our consolidated cash position was $162 million compared to $230 million as of March 31, 2020.

Cash used in Q4 was similar to that in Q3 and however, the mix within cash used shows our significant positive progress. We used $53.3 million in cash to reduce our term debt and lease obligations, and we've made additional debt payments subsequent to quarter end. As of today, our outstanding term debt balance stands at about $110 million. In the quarter, we used cash to pay capital expenditure invoices of $32.8 million, which includes, of course, work done in previous quarters.

This is a $51.3 million reduction in capex quarter over quarter cash spend. Finally, cash used in operations for Q4 was $63.9 million. In the fourth quarter, we raised approximately $48 million under our at-the-market financing program and also financed a new prospective supplement to enable us to raise an additional USD 250 million under the ATM program. So as at the June quarter end, we had approximately USD 220 million available under our current ATM program.

And this provides us with additional balance sheet support if required as we drive toward achieving adjusted EBITDA profitability in the near term. So in this environment, we believe that access to capital is of paramount importance. However, we are focused on getting to cash flow positive as quickly as possible to alleviate the need for additional equity capital as much as possible. We have multiple levers to pull to achieve this milestone, including cost and efficiency opportunities in production and SG&A that we've identified that should continue to drive costs lower over time.

And of course, the successful execution of our tactical plans to improve market share in the Canadian consumer market. As we have demonstrated with our progress on the operational reset, we will continue to prudently manage our liquidity as we strive for positive EBITDA in the second quarter of fiscal 2021. The material run rate reduction in our capex and SG&A costs should provide comfort to our investors that the health of our income statement and balance sheet is of primary importance to us. We expect that our current cash position should be sufficient to fund the operations to the point where positive EBITDA and free cash flow are achieved and sustainable.

The remaining capital available under our [Inaudible] prospectus protects the company and our shareholders as a backstop in an uncertain environment. We'll use it judiciously for opportunities that deliver near-term payback and have, in fact, used it subsequent to our June quarter end to fund the announced termination payment to the UFC. Since we are closing in on the end of Q1 2021, we thought it would be helpful to provide some forward-looking commentary on how the quarter is shaping up. Following the divestiture of noncore subsidiaries during fiscal 2020 our net revenue in Q1 2021 should be comprised exclusively of cannabis net revenue, which is expected to be between $60 million and $64 million compared to the $67.5 million of Q4.

We expect adjusted gross margin before fair value adjustment on cannabis net revenue to be within a range of 46% to 50%. So while growth in the consumer cannabis revenue was not expected in Q1 2021, our medical business is expected to remain steady, and we expect traction from our execution of consumer market share tactical plan as Miguel will outline for you shortly to show results beginning in Q2. However, in terms of progress to positive EBITDA, the Q1 consumer revenue level is more than offset by adjusted gross margin that continued to stay strong due to a favorable sales mix and a significant reductions in SG&A levels to below $40 million range. So two housekeeping notes before turning the call back to Miguel.

But first, as we announced in our business update on September 8, Aurora and the UFC have agreed to mutually terminate the partnership. We will, therefore, be making a onetime payment of USD 30 million to terminate contract in Q1. This is expected to allow us to reallocate more than $150 million to our core markets that would have otherwise been spent in fees, research costs and marketing activation expenses over the next five years. Second, now we reached an agreement with our syndicate of banks, which regarding amendments for secured credit agreement.

These amendments provided us with additional flexibility, including a reduction in adjusted EBITDA milestone and including shifting the attainment of positive adjusted EBITDA into Q2 2021. And finally, a reduction in the size of the revolver facility to better align with our average receivables balance and thereby reduced standby fees. So to conclude, we have made many difficult decisions over the past few quarters and have leaned heavily on the talented and hard-working people in our organization. While it's been disruptive, it was also absolutely necessary.

And now we feel that the company is unencumbered from distraction and can execute on the vision and strategy being developed by Miguel. So with that, I'd like to turn the call back over to Miguel and have him share some of his thoughts.

Miguel Martin -- Chief Executive Officer

Thanks for the financial summary, Glen. I strongly believe that the long-term outlook for cannabinoids is very exciting, both in THC and a non-THC variance. And I think Aurora is uniquely positioned to realize opportunities in both segments. We're seeing the level of interest globally in medical systems grow, and Canada's consumer market is returning to a nice pace of growth.

So there continues to be positive momentum in the industry, and our job now is to prove to investors that we can achieve profitability in our core markets, building a base of free cash flow in our core business, today, will also allow us to invest globally for the multiyear investment horizon we see in cannabinoids. The history of global CPG brands is rooted in building capabilities and core competencies in their home markets that are then portable globally, and that is what we intend to continue to build here at Aurora. Having been with the company for about four months, I believe, I have a reasonably firm grasp on what we need to accomplish across four main focus markets. First, the Canadian medical; second, European and Select International Medical; third, Canadian Consumer and four, U.S.

CBD to be successful. Our domestic and international medical businesses are operating well and continue to track the plan. We will continue to invest in these areas to maintain and grow our leading share in these markets. However, given the recent lack of growth we've been experiencing within the Canadian consumer markets, let me lay out our initial tactical plans within this core market before taking your questions.

First, leveraging traditional CPG models of consumer insights and data sets, including feedback from more mature markets such as the United States to identify consumer product opportunities. Second, reinvigorating Whistler, San Raf and Aurora, our super premium and premium brands; third, continuing to innovate and launch new offerings in key, known margin accretive consumer categories, such as vapor, edibles, and concentrates. And fourth, tactical sales execution, including addressing product availability, visibility, packaging and a focus on higher-margin product sizes and formats. On the first part, we've made investments in both syndicated and proprietary data sets.

This includes monthly information for more mature markets in the U.S. that assist us in modeling future ROI opportunities. These insights are expected to guide us in decision-making and effective execution. Second, I want to dispel the current thinking that the whole cannabis category will be commoditized.

The data from Canada and other mature markets indicate that premium and super premium brands have been and will continue to be successful in all formats. We expect to refocus our dried flower business toward gross profit dollar pools and away from total revenue. One of the first steps we expect to take is building a more balanced portfolio, offering across multiple pricing tiers. We already have a collection of great premium brands, Aurora, San Raf and then Whistler as our super premium offering.

So we need to emphasize all of our strong premium brands to balance out the total offering to our consumers. We also intend to better position these three premium brands across various formats to foster greater brand visibility and provide greater choices to the consumers. For example, San Raf pre-rolls or higher quality Whistler vape. Third, we note the important part of growth in such a new category, and this is a direct experience that I've had from my days at Logic and then at Reliva is that project innovation and leveraging technology needs to be a core competency.

Thankfully, we have a history of product development here at Aurora, and you should expect us to see us leverage that internal expertise into new segments of the market, particularly expanding our market-leading edible offerings into concentrates. Gummies represent a good example of where Aurora already has a leading market position, and we expect to allocate additional resources in the coming quarters to solidify and enhance our leading position and grow that format. These opportunities represent sources of strong gross dollar contribution and where we have technical know how, that gives us an advantage over our competitors. And finally, we'll be focusing on driving profitable growth.

That means making sure that we're improving our execution with classic CPG sales, marketing, trade marketing and customer engagement systems. This will improve in stock conditions, visibility of key brands, customer relationships and that has historically resulted in increased market share. Furthermore, we'll explore aligning our packaging, sizing with that regional demand to enhance our profitability, and where applicable, consider more flexible packaging options to reduce cost. These are just a few of the low-hanging initiatives we'll be executing in the coming months that should continue to build strong brand awareness and affinity with consumers.

While I've outlined just a few of the tactical plans we're putting to work for now in our Canadian consumer business, my focus is on ensuring that the entire Aurora team is executing to their respective plan. This includes continuously looking for more effective ways to connect with our consumers and opportunities to extract efficiencies from our operations. Throughout my career, I've implemented multiple examples of simple, well-executed plans, resulting in outside gains in CPG categories. We operate in a category where market share is moving 500 basis points in a few months.

So I feel strongly that our plan, executed correctly, should return us back to our leadership position in the Canadian consumer market. Glen has already provided an overview of Q4 financials, including our focus on achieving EBITDA profitability in Q2. And I can certainly appreciate that key stakeholders are skeptical of forward-looking statements from Aurora. So all I can say is look to the data in the coming months to see the trajectory of our success in the Canadian consumer market.

If you see progress in our premium brands and adjacent key categories like vape and pre-rolls, you know the plan is on the right track. Thank you for your time. I'd now like to ask the operator to open the call for questions.

Questions & Answers:


Operator

[Operator instructions] Our first question comes from the line of Vivien Azer with Cowen. You may proceed with your question.

Vivien Azer -- Cowen and Company -- Analyst

Thank you. Good afternoon. My question has to do, Miguel, with some of the portfolio initiatives that you just laid out. Given the increasingly large role that value is playing both in your portfolio as well as the category as a whole.

As you look to improve your positioning and market share on Whistler, San Raf and/or Aurora, do you see the need for any pricing adjustments up or down to create a little bit more differentiation throughout your portfolio? Thanks.

Miguel Martin -- Chief Executive Officer

Vivien, good afternoon. Thanks for your question. I believe, having the experience of 20 years in the tobacco, vapor and other regulated product experience, that there really is an opportunity to have a more articulated portfolio. The focus on low-cost flower, I think, has created a lot of pressures.

The reality is the Canadian consumer and other consumers really value the differentiation that this product can bring in some ways more so than other categories that I've worked in, whether it's potency, terpenes, packaging or background, I just think there's a greater opportunity, and there is evidence when you look at more mature markets like Colorado or California, that consumers are willing to pay more. And so yes, adjustments do need to be made in order to make sure we take advantage of that so that we do get a premium and premium margins. The other thing I will talk a little bit about that you're quite familiar with, is the ecosystem of a brand and its equity. So Whistler, as an example, I believe, it's been underserved.

It's always been a super premium flower product, organic in its very nature and finite, there are no reason that the cues you see with the Whistler or Aurora or San Raf can't find its way to other formats, such as vapor, such as pre rolls, such as concentrates. And as long as those key notes of premiumness validate the economics, I think, you can have a really strong ecosystem where you're always going to have a certain amount of value, that the consumer has given proper opportunities to work up that value chain. And given the economics of the difference in margin contribution between a super premium and the value product, given my background with brands such as Small Broke, Copenhagen, Skol, Logic and even parts of the Reliva portfolio, I think, I have a pretty strong background in finding a place for multiple brands throughout that portfolio. So we're excited about it.

I will say it's one of the things that really attracted me to the job. I am blessed with really great premium and super premium assets. And now we have to bring them to the consumers in the marketplace.

Vivien Azer -- Cowen and Company -- Analyst

Perfect. And just a quick follow-up for me. As you've indicated, we should keep an eye on just month to month revenues and development there as benchmarks of success. But as you think about market share, what is the charge for your team? Is it to improve Aurora's overall market share? Or are you more focused on market share by price segment?

Miguel Martin -- Chief Executive Officer

No, I'm absolutely — it's the latter. So I've lived in worlds and you've seen worlds where overall market share is not a true indicator of a company's profitability. We will be much more interested in the market share of our premium and super premium categories. Much more interested in the market share of categories such as vapor and pre-rolls and concentrates that are margin accretive.

And if others want to play in that deep discount flower business, that really has compressed margins in order to boost their overall company market share, so be it, but this really is an effort to achieve profitability to higher margins. And so it will be the latter part of your example. That will be a clear focus to us. And it's our target around EBITDA, profitability and being margin accretive that is much more the focus of the company than an overall company market share.

Vivien Azer -- Cowen and Company -- Analyst

Very helpful. Thank you very much.

Miguel Martin -- Chief Executive Officer

Thank you, Vivien.

Operator

Our next question comes from the line of Pablo Zuanic with Cantor Fitzgerald. You may proceed with your question.

Pablo Zuanic -- Cantor Fitzgerald -- Analyst

Thank you. And congratulations on your appointment, Miguel. Can we do just a quick recap in terms of what's happened over the last six months? And the reason why I asked that, you are guiding for Reg sales to be down 10% to 20% in the September quarter, right? If I do the math, medical is staying around $32 million. So regular September quarter is falling 10% to 20%.

It fell about 10% in the June quarter, right? And you talked about 60% of sales or more coming from your value brand, Daily Special. So just what happened there? Was it that the value segment lost share? It doesn't seem to be the case? Why did the Daily Special not work? And that's one question. And then the second one, when I look forward, yes, you're going to be focusing on the premium side and given your background and the know-how you've talked about, I'm sure that, that can materialize, but you're going to have 60% of sales or more that I suppose is going to be declining, right, because of the trend that we are seeing there are value. So this transition could take place for a while.

I mean, we would be looking at flat sales for more than just one quarter, if you can highlight that. Thank you.

Miguel Martin -- Chief Executive Officer

Sure. So thank you, Pablo, and I appreciate your kind comments. My opinion is the company had a tremendous success with Daily Special. And if you look at the February, say, through April time period, there was a massive amount of market share that was taken, and they were a first mover into that value segment.

However, others quickly followed. And when you're just playing on price, it just becomes a diminishing return. And so I think the company got a bit distracted by the success that they saw with that discount offering, which was Daily Special, which sort of delayed other inputs such as vapor and pre-rolls, when there is a lot of growth in the category. And then everyone else kept piling in.

And because there was such a reliance upon that discount business in a lot of different ways, both on the growth side, on the sales side, on the trade marketing side. When that was just completely pressed against by competitive pricing pressure, it became hard to pivot. Now in terms of your point on timing, I guess, I would raise sort of three points. First is the category is growing.

Aurora has not participated in that category growth in a way that, I think, is respective of what I would expect of the company. And so the good news is the consumers continue to command, stores continue to open, particularly in Ontario and Aurora needs to participate. Second thing is we are see brand shares moving very quickly. The consumer is in a very dynamic situation, unlike, say, domestic tobacco or other categories I've been in where 20 to 30 share points or basis points of share have moved in a month, you're seeing 200, 300 basis points of share moving a month.

So you can do it with the right products with the right execution. And so in terms of timing, we are going to be launching a stronger portfolio of vapor products. You're going to see a greater effort from us on pre-rolls, and you're going to see a deeper focus on our premium flower products. That, plus a stronger focus on sales execution and engagement with the provinces and trade marketing should allow for a quick move.

I'm not here to debate exact timing, and I don't think it's fair to predict exactly when you're going to see X amount of market share by category. But through headset data and other data that clearly is available to you, I would keep going back to this. If you see progress from Aurora on its premium brands in the upcoming weeks and months. And if you see progress in those categories with a margin accretive, versus just overall market share led by low-cost flower, then we're on the right track.

And everything I'm going to do and everything in my background, I think, puts me in a good place to drive that type of execution.

Pablo Zuanic -- Cantor Fitzgerald -- Analyst

Thank you. That's very helpful. And just a quick follow-up for Glen. So Glen, I mean, a that you have to use part of the ATM to settle the UFC, but I suppose we all understand that.

But looking forward, how do you think about the convertible bonds, right? That you had about a 50% discount. Is there an opportunity? Will it make any sense, financial sense and strategically also to use part to ATM, to buy some of those bonds? I think on my math, that would be accretive. If you can touch on that, please. Thanks.

Glen Ibbott -- Chief Financial Officer

Yes. Thanks, Miguel. So listen, I mean, there is an awful lot going on at Aurora. I mean, you talked about the business transformation and a significant effort and focus backed up from the organization.

Now we're pivoting to much more of a focus on delivering on the commercial success that Miguel has just outlined for you. So I'd suggest this. I mean, we've said before that one of the mindset changes we've made within the organization is much more financial discipline and prudence. And one that's a kind of sophistication, if you will.

So it's not the immediate concern. I recognize exactly what you're talking about, but it's not an immediate concern. But we will look at all opportunities because if they make positive sense for the company and our shareholders, and we will certainly consider them. But I mean, you should know that we're certainly most of the organization is focused on delivering what Miguel has just outlined for you.

Pablo Zuanic -- Cantor Fitzgerald -- Analyst

Got it. Thank you.

Operator

Our next question comes from the line of Michael Lavery with Piper Sandler. You may proceed with your question.

Michael Lavery -- Piper Sandler -- Analyst

Good afternoon. Thank you. Can you talk about some of the thinking around the profitability target and what some of the key hurdles are and things to watch? And specifically, coming close already to the end of the first quarter, what's in place already? How much is there some things that you still need to achieve? Just kind of a sense of progress along that and what the key variables are.

Glen Ibbott -- Chief Financial Officer

Miguel, would you like to get it?

Miguel Martin -- Chief Executive Officer

Yes. Why don't you start, Glen, and then I'll talk a little bit forward-looking, please.

Glen Ibbott -- Chief Financial Officer

Yes, absolutely. Yes. Listen, I mean, we've done a lot of heavy work over the last few quarters. And as you know, with SG&A and continuing to main — some healthy margins in place.

We fixed a number of pieces of the business that drive the EBITDA, but we do have the consumer piece of the business that needs to be corrected, and Miguel has told you a little bit about that, and I'm happy to tell you more, sure. But if you look at what we delivered in terms of EBITDA in Q4, it was just over negative $30 million, taking out the severance costs. But that was why we were still carrying $64 million of SG&A costs. So as we stand in Q1, we're now running in the $40 million range.

So you could see the medium improvement in EBITDA of $20 million, just simply from our SG&A reset. We do expect continued strong performance in the Canadian and European medical markets. So really, the root deposit of the EBITDA is exactly as Miguel's outlined. You can watch that in the data over the coming months.

And our continued focus on fiscal prudence. I mean we have done a lot of hard work on our cost structure, but we'll continue to focus on incremental opportunities we got the whole company in a different mindset now. And I know they're all looking for places we can save costs, and it adds up. So it's a different company.

We're positioned, I think, well. And the — as I say, the route forward to deliver on some of these premium categories and even within the flower market and ship that product mix up to something that delivers more dollars to the gross profit line as opposed to simply just delivering revenue?

Miguel Martin -- Chief Executive Officer

Yes. I mean, Michael, I guess, the other thing I would say is when I look at those companies that have been successful of our competitors, they've executed a pretty thoughtful plan, but the execution level was tremendous. And it looks a lot like CPG and I'm sure you can imagine who I'm talking about. So I don't think that the approach has to be particularly advanced or take a long time, and simplistic is not the right word because I have deep respect for our competitors as much as I want to be an aggressive competitor against them.

But to Glen's point, the company really was distracted, I think, in a lot of ways by the reset both on the people side and on the production side, I think, there was a lot of credence put together around overall flower share but there were some investments made that with the right direction and with the right accountabilities and focus, and you're going to hear me say this over and over again, pushing the company into focusing on its premium assets in flower, vapor and pre-rolls and implementing classic CPG, sales, trade marketing, consumer engagement methodology. That's what's worked for others and the rewards have been outsized. So I think we have the assets. I believe we have the right people and with the right plan and accountabilities.

And to Glen's point, we have enough resources we don't need capex. We don't need additional accountability. Because at the end of the day, Michael, as you know, there's only roughly 1,000 stores in Canada. So if you can execute this plan successfully, you can move quickly with the right products in the right availability, and I could rattle off the 5Ps and on and on, but that's really going to be about execution.

But I'm confident that we have the product availability, the product quality and the plan. Now is it ever going to be quick enough for everybody? No, but I think you'll find our steps to be thoughtful. And if you look at what our competitors have done successfully, there's nothing sort of in our portfolio or in our capability set that gives me pause that we don't have what they have.

Michael Lavery -- Piper Sandler -- Analyst

That's helpful color. Just on the portfolio mix, you've mentioned the 62% value in 4Q. What does that look like 1Q to date? And then do you have a target range for where that should be going forward?

Miguel Martin -- Chief Executive Officer

I don't have a specific target. I know some might say, well, that's helpful. I can tell you that there'll be a significant amount of focus put on Whistler, San Raf and Aurora, and that will be across the board. And as you know, with the most great brands, particularly in a market where there's dark marketing or dark marketing provisions, having the sales force, having the provinces, having the product distribution and availability and potency, be focused on that does a lot of it.

So you're going to see progress. You're definitely going to see a more balanced portfolio and you're also going to start to see the development of this ecosystem. Whistler will stand for things in the core categories, both in flower and adjacency. San Raf will stand for things in those other categories and so will Aurora in ways that maybe Daily Special does in all those articulations.

So my goal is to make progress and to have a defensible articulated portfolio. And you're obviously well aware, as we all are of Marlboro Friday, creating a scenario where you so advantaged the discount business, that it creates structural advantages over the premium and super premium business is really not a great place to be. And so we're going to start to reverse that. And those percentages and allocations will definitely advantage the high end of those purchases in those three or four primary categories.

And I guess the only other thing I will say is when you look at things like vapor concentrates and pre-rolls, there's a lot of opportunity to bring some classic CPG elements in packaging and alignment and on vapor, many of the things that you're seeing in other categories on heat-not-burn into consumer connectivity that allows the consumer to see value and therefore, pay higher margins. In a way that maybe traditional flower doesn't lend itself. So I'm pretty bullish on those opportunities. And I believe some of the experiences that I've had on combustibles and smokeless and vapor and other categories lend itself well to this regulated market.

Michael Lavery -- Piper Sandler -- Analyst

OK. Great. Thank you very much.

Miguel Martin -- Chief Executive Officer

You're very welcome, Michael.

Operator

Our next question comes from the line of David Kideckel with ATB Capital Markets. You may proceed with your question.

David Kideckel -- ATB Capital Markets -- Analyst

Hi. [Inaudible] Actually came in for days. So congrats on the quarter, guys. So just to start, I mean, what you've seen in the market so far, how should we think about derivatives in terms of overall revenue mix that you're targeting as well as in terms of margin potential compared to flower, maybe over the next fiscal year and also longer term?

Miguel Martin -- Chief Executive Officer

Glen, do you want to start that, and I'll pick up the backside of it? Or would you like me to start?

Glen Ibbott -- Chief Financial Officer

Yes, Miguel, start, and I'll add in some parts, but [Inaudible]

Miguel Martin -- Chief Executive Officer

So I think if I understand your mix and how we should think about adjacent categories. So from a mix standpoint, due to the fact that so much production and capacity was brought online, you clearly were going to see a glut of flower, and particularly what we would call lower quality flower. And that would be lower potency and terpenes and then the higher gram sizes. And that's always going to have a lower margin profile.

And there'll be a place for that. But as we think about higher-margin offerings. It's not just Whistler, San Raf and Aurora, but also those packing sizes like 3.5 and seven-gram that when done right, give the consumer additional value. And so we've laid out the historic margins and obviously, talked about our medical margins.

I think, as you think about adjacent margins, there's two things really to consider it. And I'm not going to give you the precision of the answer that you may want, but I'll give you a sense of it. When you look at pre-rolls, vapor and edibles, they are margin accretive, particularly as you offer premium items. The second aspect of it is excellence around extraction or in other ways to use the byproduct of your flower production facility also creates economic value or margin accretive opportunities.

So that environment, when you can be having a strongly articulated flower portfolio as well as also being in a situation where the by-product can find its way into margin accretive products. And you can have a fully articulated portfolio where you're doing a decent amount of your business in super premium, a strong amount of your business in the premium, and you have a necessary amount in the discount, that clearly should have a significant margin impact as well as the impact of selling higher-margin items such as premium, vape, pre-rolls and concentrates. And if you look at the U.S., you see a wonderful opportunity, and that's not a national framework. We see brands developing in California and Colorado in some tough markets.

And so clearly, if they can do what they are, it definitely demonstrates that we can do it in Canada, and we feel good about our opportunity. And if you look at the equity scores and you look at sort of the awareness of those premium brands with Westwood, I'm bullish that we can move up the margin chain in flower and in those other adjacent categories.

Glen Ibbott -- Chief Financial Officer

Yes, I'll just add a little bit of maybe an example for a little bit of flavor. You've heard Miguel talk about margin accretive and premium assets. If we used like a 3.5 gram pack of our Whistler flower and compared that to a 3.5 gram of the typical discount flower from what we see in the market. That package of Whistler will deliver 10 times or more, the gross profit dollars that the discount flower would.

So when we say we're blessed with some premium assets, and we already are focused on the margin accretive, it doesn't mean that we have to replace all the Daily Special's revenue with an equal amount of Whistler revenue, although I'd be delighted if we did, but we're really trying to be more sophisticated and bring [Inaudible] at more of a CPG oriented company that is really focused on delivering EBITDA. That means gross profit dollars. So that margin accretive and premium across the brand, but also within flower, I mean, incredibly important in our execution here over the next number of quarters. And so the mix, I think, if I can direct you to anything, please pay attention to the mix, as Miguel's outlined, in those categories rather than just pure sort of revenue market share allocation.

That will be the indicator of our success.

David Kideckel -- ATB Capital Markets -- Analyst

OK. Thank you. That's helpful. And just a follow-up for me.

More of a broader question here. In terms of international markets. I mean, you've talked a lot about the Canadian market. How does the international markets fit into your strategy right now?

Miguel Martin -- Chief Executive Officer

So from an international standpoint, the international revenue today continues to be largely from the German market. And that has been a consistent performer for the past few quarters. And we expect it to show growth into the future. We've had success in the German market.

We're actually No. 1 provider of flower, and we continue to see opportunities in the oil market. And we're close to achieving some really important regulatory milestones, including GMP certification in our operations in Denmark. Now that facility in Denmark will allow us to ship from Denmark to Germany and the rest of the EU and other parts of the world, particularly those parts of the world that really look for GMP products.

So we're bullish on the international market. We're not going to play everywhere. I think you're going to find us to be opportunistic. But the one thing I will say about the international market that also, I think, speaks to other opportunities, is it takes a lot of investment and it takes a lot of compliance experience, and it takes a lot of thought to be successful to the high standards that these international markets have.

Once you build those capabilities, which we continue to do in the Canadian market, in Germany and other markets, it becomes very portable. And I know everybody wants to talk about the high potential of the U.S. and these other markets. But clearly, as these larger markets come online, those companies, particularly the successful Canadian LPs that have demonstrated expertise in the Canadian market, interacting with Health Canada.

And in these other markets that are highly compliant and require a lot of infrastructure and thought puts us in a great position. So we'll continue to be opportunistic, we feel good about the international business. We feel that medical, in many cases, leads to rack opportunities. And that muscle memory that we're developing there can be portable in a way that it's definitely advantageous to us as these markets continue to open.

David Kideckel -- ATB Capital Markets -- Analyst

OK.

Operator

Our next question comes from the line of Andrew Carter with Stifel. You may proceed with your question.

Andrew Carter -- Stifel Financial Corp. -- Analyst

Hey. Thanks Good afternoon. My question is just kind of going back to what was implied in the consumer performance. You've got a stable medical business.

And perhaps you might want to comment on Reliva as well as to how that's trending, it's in line with acquisition. It's pretty significant step down. And the step down is well ahead of kind of what we're seeing in the consumption data. So a couple of questions to that.

Are you seeing anything? Is there any disruption in the orders from the provinces that Ontario would be picking up with stores? Are you missing orders because you talked a lot about execution on pre-rolls concentrates, etc. Could you help us with any more clarity kind of what's going on beyond that?

Miguel Martin -- Chief Executive Officer

Sure, Andrew. I'll be happy to. So I mean you can see it in the headset data the company made a big push in the discount in that February to April time period, built a lot of share. Everybody piled in.

It became sort of a bit of a race, who would have the lowest priced product. The company did not have other products, whether it's in the premium flower business or vapor or pre-rolled. And because those categories also grew at exceptional rate Aurora did not keep pace with category growth, lost share, and therefore, the step down. So I'm not trying to be defensive.

I think you can see what the opportunities were. You can see one competitor, in particular, that did really well. He had a fully articulated portfolio, high levels of availability and visibility. They did well in a finite number of those adjacent categories, particularly vapor and pre-rolls.

And that's the model we're going to follow. So it's going to be — I know I'm going to sound repetitive, but it has worked. It will work. I think the benefit we have now is we had a bit of a distraction with the reset and the factory stuff going on.

We do have great brands. We do have the products coming online. And at the same time that you see on tearing others. So when you look at the provinces, the provinces operate like any other wholesaler in the U.S.

They don't play favorites. They want to make money. They want to have a certain amount of days on hand, and they want to service their retailers. So as brands in this dynamic category, they've done pretty good job, particularly Ontario and others.

And so when you don't have the offerings and your brand is declining share, it's less about the execution. I'm not worried about that. If we have the right offerings and the right product categories, particularly in premium and super premium, which they were also incentivized to push because they make more money on it, then we'll be there. So I'm not worried about that.

If we can take care of what we need to take care of, and I feel good we will, we'll have the support of the provinces who operate as wholesalers and we'll have the support of the retailers. And again, I just highlight the finite number of retailers. I mean I've worked in systems where you're talking about hundreds of thousands of retailers. This is about 1,000.

And so with proper sales execution, which I have a long history of and engagement, I don't think there's anything systemic or systematic in the provinces and the retailers that holds us back. We just did not participate. We lost share because we didn't have the right premium offerings in flower, and we weren't there on vapor and pre-rolls. Those things will be fixed.

As for Reliva — sorry, go ahead.

Andrew Carter -- Stifel Financial Corp. -- Analyst

No. That was it. I was going to Reliva next, but you go ahead.

Miguel Martin -- Chief Executive Officer

OK. As far [Inaudible] about Reliva. Reliva, 99-plus percent of its sales are brick-and-mortar, and you might ask during a COVID environment, why? Two reasons. One is because the retailers that we partner with, and we're exclusive with some of the largest retailers in the country.

We own over 23,000 stores, which I think may be the most. They've taken a really dim view at those that have pivoted to online sales. And so we decided to place a long ball and not do that. Secondly, we're very bullish on what we've heard out of the FDA and I don't think that hinges on the November political decision.

You have Senator McConnell on the Republican side, he's the biggest cheerleader of industrial hemp. And obviously, it's been a good issue for the Democrats. But the reality is, as a retail driven company, COVID really hurts Reliva. Now given its variable nature and not a lot of fixed costs, it's not losing money, but it's not making a material amount of money.

Now the deal, as was announced, contemplated a performance-based metric so if Reliva doesn't perform that back-end of the payment to the shareholders, obviously, will not be there. But it's a wonderful optionality. And I will remind people that to this day, Reliva is the No. 1 ranked Nielsen companies and No.

2 in IRI. And so it's a wonderful optionality. And when the FDA goes forward, those companies with a history of compliance and in brick-and-mortar will win, and I think will be a wonderful asset and even at its most conservative estimate, CBD represents over $1.8 billion or $2 billion in retail revenue. So the real hidden gem in this whole thing, and when we talk about global cannabinoids, is leveraging Aurora's science and innovation on the non-THC parts of the portfolio, which could be bigger than the THC parts of the portfolio, particularly with positive FDA action in the U.S.

Andrew Carter -- Stifel Financial Corp. -- Analyst

Fair enough. And some of this quarter, obviously, was some cuts and the focus on cost savings. So in terms of — as you're trying to get back in the game, I guess, you've got another round of restructuring. Kind of what comfort can you give — that you have the right investments in place and perhaps investments don't even need to go higher from here and that you can successfully execute these restructuring and grow market share here, and I'll pass it on.

Miguel Martin -- Chief Executive Officer

We don't — there's not — if you look at capex or other investments, I mean what I've described can be handled by the production facilities, the marketing and sales organization and everything that we have. So we're going to be nimble and more agile. But from an infrastructure standpoint, I don't see an added investment required. And as the category continues to move, I think you'll find us to be pretty agile around it.

My background has been lower fixed and higher variable. Obviously, this category and this company is a little bit different, but we'll do what it takes to be competitive in the marketplace. But the simple answer to your question is there's no big investments we need to make to be competitive in premium flower, vapor, pre-rolls or concentrates.

Glen Ibbott -- Chief Financial Officer

I'll just add to that. I mean it's been a massive change from where we were a number of quarters ago, and so we call in the question or we had a sustainable level. We absolutely believe that current level is sustainable. I'm certainly capable of supporting a much bigger revenue business.

What happened, I think, is that we had to strip it down to the core market. There was a whole lot of noncore assets and distraction. So stripping away, as you said, we've divested a number of noncore businesses taking complexity of the business. rationalizing our production footprint to gain taking complexity out of the business and really focusing on something that should be fairly straightforward.

We produce and deliver a number of brands across the category. So the better, best of Miguel's world. And we sustain a number of different categories that all derive from cannabis and extract. So it's a fairly simple conceptual business, and we have made it very complicated because of all the optionality we've given ourselves over the years.

So with time to take all that out, we're down at a nice level right now, I think, is very sustainable over the next number of quarters.

Andrew Carter -- Stifel Financial Corp. -- Analyst

Thanks.

Operator

Our next question comes from the line of Tamy Chen with BMO Capital Markets. You may proceed with your question.

Tamy Chen -- BMO Capital Markets -- Analyst

Thanks for the question. First, I just want to ask, can you elaborate a bit more on some of the material weaknesses in certain internal controls that was referenced in an earlier press release and how you will remedy these?

Glen Ibbott -- Chief Financial Officer

Yes. Absolutely, Tamy. This was our first year as the Sox recorder. And quite frankly, with the company such as ours has been built through acquisition, it was a monumental challenge.

And then you throw the COVID pandemic in on top of that where everybody then had to scatter and start working remotely. It was incredibly complex. The material weaknesses, and you'll see them in our MD&A that we'll file in a couple of days, for the most part, revolve around the number of IT systems that we have, many of them scheduled for decommissioning but that were slowed down as part of business transformation and quite frankly COVID and things like that. So we ended up at the year-end, still using some systems we hadn't expected to use.

So there are some issues, like minor issues and should be minor, but issues of segregation in the duties within the system. So there was nothing in there that causes us pause. We're actually, I say, somewhat comforted that a lot of it's been remediated already and the remediation plan for the remainder, for the most part, revolves around finishing the full implementation of the ERP system that's been under way for a while now. It did not result in any material errors or [Inaudible] restatement.

So I'd have to say the outcome of this, given the environment, given the first year of [Inaudible] and incredibly complicated the company behind the scenes at that time was a pretty good outcome. So again, no errors, no restatements and a clear path forward during the [Inaudible] of this year.

Tamy Chen -- BMO Capital Markets -- Analyst

OK. Got it. Thank you. And my follow-up is just going back to the premium strategy, Miguel, that you're talking about.

I'm just wondering, when you talk about this, what is it specifically that you have your eye on that consumers are willing to pay up for? And what are your data analysts telling you because every company or licensed producer sort of says a similar thing that it's the high THC, a lot of terpenes on the vapes, good quality hardware, no leakage. I mean, surely you won't be the only one that can potentially succeed on this. So I'm just trying to understand going forward, when you're trying to push this premium strategy, I mean, is there something more to it that sets up a more proprietary or defensible moat for you in this segment?

Miguel Martin -- Chief Executive Officer

Yes. I mean I think — well, first and foremost, it's being done today, right? Not everyone is just selling discount products. So the environment, the consumer, the trade all have had an aptitude for premium products. Now the trade is an important one, and it's when I've spent most of my career on.

If you talk to the retailers in the provinces, they want to sell more premium products. So there's finite space in the retail stores, there's finite delivery windows. So everyone sort of wants that. In terms of what we're going to do different, Aurora has a long history in strong cooperation.

And a variety of other things they bring there. So when you look at the consumer cues of what they're willing to pay more for, higher potency, higher terpenes, consistency, brand quality, strains some of that IP and genetics that we see that has been positive with other companies and us in past innovations. So Whistler, for a long time, has been a super premium brand, where the company has been able to sell everything that it's been able to make because of that strong organic nature. And so we're going to do more with that and bring those cues into vapor.

Now I'll be more than happy to spend a lot of time on all the reasons why someone is more willing to pay more for our super premium, premium vapor experience. You can see it in packs. You can see the non THC products. Whether it's the technology, the materials, the ecosystem, the software, those are all things that I have a long history with.

On pre-rolls, you see in California and Colorado, the premiumness of the input, the paper, the packaging, the branding. I mean, these are all sort of things you can do but it's being done today. I mean so if you look across the environment in Canada, there are companies being successful, both big and small with premium offerings in all the core categories. I think the sort of stable brands we have and the quality and the consistency we're going to be able to put out a really laser focused on the trade, which I spent a lot of time on in a finite number of stores.

Given where we were, which was not a focus on those items, and a real push on Daily Special as a discount proposition and the results we had, I think, you're going to see a big delta. And we'll see. I mean, take a look at the headset data, and I think you'll know quickly how we're doing.

Tamy Chen -- BMO Capital Markets -- Analyst

OK. Thank you.

Operator

Our next question comes from the line of Matt McGinley with Needham. You may proceed with your question.

Matt McGinley -- Needham and Company -- Analyst

Thank you. You took $135 million in inventory impairments in the fourth quarter, but you produced 44,000 kilograms in that quarter. And you alluded to the fact that you expect inventory to continue to build for a number of quarters. I think, you said at around 35,000 kilograms per quarter, but you're selling it in the fourth quarter under 17,000 kilograms.

So I guess there still seems to be a disconnect between the inventory build and what the sales levels would be, especially given the shift to premium product, which presumably would mean would be siphoning on fewer kilograms. So I guess what causes you to reach equilibrium on the inventory? And do you feel like you're at any risk of taking additional impairments in the future, given there's such a disconnect between what you're producing versus what you're selling?

Glen Ibbott -- Chief Financial Officer

A couple of things will impact that as we look forward. One, there's a note that we may add in our press release, and I alluded to it in my remarks, there'd be more, of course, in the MD&A and financials. But we took a look at — we continue to understand the market better and better, and we exclude products that are in demand, which meet how much we need on hand. So a lot of the write-off in June 30 was there was some older, slower moving product from a number of quarters ago, but there's a lot of it was trim.

And so we took that down and then we also took a look at the way we allocate our costs within our inventory. So we've changed the methodology to put a much heavier weighting on flower and much reduced weighting on trim. I mean, that makes probably a lot of sense. And I know one or two of our peers have taken that step, and I expect everybody will have to at some point.

But what that does for us is a couple of things. In terms of volume, we do expect that with some of the execution and operational improvements that we're in the midst of making, that we should see traction across the categories that use flower. And don't misread the remarks, I think, it's not that we don't expect to continue to ship volumes into a discount market. It's we just need a much more balanced portfolio, and, I think, as Miguel said, it's even maybe take a look at which pack size is delivering the most profit and things like that.

But it's not that we exit that. We just need a balance in our portfolio. So we still expect that to consumed volume. And quite honestly, Miguel said we didn't participate in category growth.

I don't say that this market is starting to get — it's getting plenty big enough. And our expectation and certainly, what we see from market expectations is that it should continue to grow. So we think by simply just stepping up, executing better, participating in market growth and maybe over participating in those categories we want to be, we should see an increase in the volumes consumed. But the other just subtle point is that we won't be building up much in terms of dollar value on our balance sheet related to trim because it's got a very low-cost allocation now.

Matt McGinley -- Needham and Company -- Analyst

Got it. And the EBITDA guidance for the second quarter, you expect that to be positive. And I assume the SG&A doesn't have any big variance there, but what gives you the confidence that the revenue or the gross margin is going to increase given that both have declined in the prior quarters. Did you see trends improve in September? Or is this kind of all on the covenants that portfolio is repositioned into your fiscal second quarter?

Glen Ibbott -- Chief Financial Officer

Yes. Well, let me start, and then Miguel will, I'm sure, add some support to this. So Miguel arrived in the CCO chair beginning of July and then was promoted to CEO shortly thereafter. He's the right guy with the right experience and certainly a track record of executing in exactly this situation.

So we have to, and we are in the process of kind of just make — arresting the decline that we saw over the last few months and getting back in to even keel there. And then there's a number of initiatives, specific initiatives that are focused more on the higher-margin dollars. So let me call it — I'll use the term you'll probably hear, Martin, more from you in the future, quality revenue. So as opposed to this revenue, quality revenue for me, that's what delivered a healthy gross profit dollar as opposed to simply just a gross margin percentage.

I used the example of Whistler. And that's an extreme example where it delivers 10x the gross profit dollars at the discount brand might. But that our route forward in putting dollars on the bottom line is not to sell more of a large pack discount brand, which delivers some dollars, but not a ton, is to play in the category to deliver real dollars to the gross profit line. So the initiatives that we have under way are those.

They're the ones that deliver real gross profit dollars not just percentage. So that means quality, healthy revenue, and that's the focus, and that's the piece that needs to be — we need traction there. And as Miguel said, you can watch the headset data or other markets data that you get, and you should see us performing in those categories. And that's a different revenue dollar than the stuff the discount category delivers.

All revenue dollars are not created equally, and that's an important part of our reset and refocus going forward.

Miguel Martin -- Chief Executive Officer

Yes. I mean, I guess the only thing I'd add is you see where the SG&A is going. You've heard what the plans are. I mean, I will still say, I mean, even with the amount of discount business, the company did in the previous quarter to have the margins land where they landed, is a good indicator that there is upside there.

And so the math isn't too complicated. I think, our indication are that we actually get the premium plan with these adjacent products. We should get what we need on that side of it.

Matt McGinley -- Needham and Company -- Analyst

Great. Thank you.

Miguel Martin -- Chief Executive Officer -- Analyst

You're very welcome.

Operator

Ladies and gentlemen, we have reached the end of today's question-and-answer session. I would like to turn your call back over to Mr. Miguel Martin for closing remarks.

Miguel Martin -- Chief Executive Officer

Thank you so much, and I want to thank everybody for joining today's call. I'm honored to be a part of this team, and I really look forward to leading Aurora to success. And I hope you and all your families are safe in this world. We wish you all the best.

Be good.

Operator

[Operator signoff]

Duration: 66 minutes

Call participants:

Miguel Martin -- Chief Executive Officer

Glen Ibbott -- Chief Financial Officer

Vivien Azer -- Cowen and Company -- Analyst

Pablo Zuanic -- Cantor Fitzgerald -- Analyst

Michael Lavery -- Piper Sandler -- Analyst

David Kideckel -- ATB Capital Markets -- Analyst

Andrew Carter -- Stifel Financial Corp. -- Analyst

Tamy Chen -- BMO Capital Markets -- Analyst

Matt McGinley -- Needham and Company -- Analyst

More ACB analysis

All earnings call transcripts

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.