Leading cannabis producer Auxly Cannabis Group Inc. (TSX: XLY) (OTCQX: CBWTF)’s revenue dipped by 23 per cent because of operational challenges but says it has taken the necessary steps to correct the issues for the upcoming quarters.
On Monday, the Toronto-based company released its financial results for the three months ended March 31 and reported net revenue of $22.6 million from $29.3 million in the last quarter. Around 61 per cent of its revenue came from cannabis 2.0 product sales.
Net loss totalled $39.8 million and had a non-cash impairment of around $25.7 million related to the closure of its Auxly Annapolis and Auxly Annapolis OG cultivation facilities.
Adjusted earnings before interest, taxes, depreciation, and amortization reached a negative $5.6 million during the quarter, a slight increase compared to the same period in 2021 primarily related to higher gross profits and partially offset by higher selling, general and administrative expenses.
Year-over-year net revenues improved as a result of the company’s expansion into cannabis 1.0 products and keeping leadership in cannabis 2.0 products.
Cash and cash equivalents totalled $16.3 million in the quarter. Biological and inventory impairments of $0.7 million and $4.9 million respectively were attributable to the closure of the Auxly Annapolis and Auxly Annapolis OG facilities.
Selling, general and administrative expenses went down to $12.8 million slightly lower than the previous quarter.
Around 85 per cent of cannabis sales during the first quarter of 2022 originated from sales in British Columbia, Alberta and Ontario.
Company stock went down on Tuesday by 1.61 per cent to $0.15 on the Toronto Securities Exchange.
Read more: Auxly shutters 2 Nova Scotia facilities
Auxly CEO Hugo Alves said that amid intense and growing competition and seasonal buying trends in the Canadian cannabis market, the company continued to see strength in sales, increasing revenues 147 per cent year-over-year.
“Though this quarter presented some ongoing supply chain and operational challenges preventing us from meeting consumer demands for our branded cannabis products, we believe we have taken the necessary steps to correct these issues for the coming quarters, allowing us to increase fill rates and continue with our exciting new product launches throughout the year,”
We continue to lead the market in cannabis 2.0 products and remain focused on building to leadership in dried flower and pre-rolls and improving our business to achieve our goal of reaching adjusted EBITDA profitability.”