Auxly Q3 sales jump 18%, but cash remains a concern
The performance stands out in a sector where producers have largely struggled with softening prices and oversupply.
Auxly Cannabis Group (TSX: XLY) (OTCQB: CBWTF) hit record quarterly sales and strengthened its position in the Canadian market, even as liquidity concerns continue to shadow the producer.
Net revenue jumped 18% to C$33.3 million in the third quarter ending Sept. 30, the Toronto-based company said Friday. Auxly netted income of C$3.2 million, versus C$32.6 million a year earlier when results included C$46.9 million in debt restructuring gains.
That pushed Auxly to fourth place among Canadian recreational cannabis wholesalers, up from sixth last quarter, according to Hifyre data cited in company filings. Gross margins widened to 47% from 30% a year earlier as Auxly leveraged its 1.1 million square foot automated greenhouse facility in Leamington, Ontario. The company consolidated its dried flower and pre-roll manufacturing into the facility after closing its Ottawa operation in November 2023.
“The successful execution of the company’s previously disclosed efforts to increase cultivation yields also contributed to the improved gross margin,” Auxly said in its MD&A.
Vape products have been a bright spot, with Auxly controlling more than 36% of Canada’s all-in-one segment. Sales of its Back Forty brand dried flower rose 12% from the previous quarter, making it the third best-selling flower product nationally.
Still, the company warned it won’t have enough cash to fund operations for the next 12 months without improved sales or margins. As of Sept. 30, Auxly had C$19 million in cash and negative working capital of C$13.2 million.
The company has moved to shore up its finances, with debt dropping 54% from year-end after tobacco giant Imperial Brands PLC converted C$123.4 million in debentures to equity in March, taking a 19.8% stake. Auxly also recently extended an inventory financing loan that was coming due.
“Looking ahead, we will continue to prioritize efficient growth and sustainable profitability,” the company said in filings.
