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Monday, Dec 6, 2021
Mugglehead Magazine
Cannabis & psychedelics industry news based in Vancouver, B.C.
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Auxly promises positive EBITDA by end of 2021

The firm upped Q3 revenue by 17% but tallied a $13.5M loss

Auxly promises positive EBITDA by end of 2021
Auxly says it has 24% of the Canadian vape category and a top-5 spot in the recreational market overall. Image via Auxly

While extraction-focused producer Auxly Cannabis Group Inc. (TSX: XLY) (OTCQX: CBWTF) has expanded its market share to a top-five spot in Canada, it will have to cut costs if it wants to reach profitability goals in 2021.

On Monday, the company reported its earnings for the three months ended Sept. 30, with net revenue rising 17 per cent to $24.5 million from $20.9 million in the previous quarter.

But net loss spiked 255 per cent quarter-over-quarter to negative $13.5 million from $8.7 million.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) improved by 34 per cent to a loss of $6.5 million from a loss of $9.9 million.

Auxly’s cash position improved slightly to $37 million.

Read more: Auxly boosts revenue with big lead of Canada’s vape segment

The company says its significant gains in year-to-date revenue — to $54.5 million from $26 million last year — is primarily due to increased cannabis retail sales, through continued leadership in the 2.0 product category and expansion into 1.0 products.

Auxly doesn’t yet have a presence in Quebec, with around 85 per cent of sales in the quarter coming from B.C., Alberta and Ontario.

A reduction in year-to-date losses is mostly due to the sale of its KGK subsidiary, gains on debenture amendments, better gross margins and income tax recoveries, the firm says. But those gains were offset by an impairment charge related to the sale of Curative, reported last quarter, and a $3.1-million loss this quarter related to its Sunens joint venture.

Auxly is using the Sunens facility to supply its own cannabis, as well as sell to other producers.

Already the top producer of 2.0 products in Canada — dominating the vape category at 24-per-cent market share — the company is expanding more into flower-based products with its popular Back 40s straight pre-rolls.

In October, Auxly said it moved into the number-five spot in Canada, with 7.3 per cent of the recreational cannabis market, achieving its goal of 7–9 per cent by the end of 2021.

The company predicts it will be EBITDA-positive by end of year.

“While the quarter presented some challenges for Auxly, including additional expenditures as it scaled operations, commissioned new equipment, introduced new products and innovations to the base product portfolio and supported the opening of new stores in key provinces like Ontario, the company is pleased with the continued revenue growth trend and believe its initiatives to improve the cost structure will lead to an increase in cash flows and near-term positive adjusted EBITDA,” reads a statement.

 

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