TORONTO – Auxly Cannabis Group Inc., a leading consumer packaged goods company in the cannabis products market, reported its financial results for the three and six months ended June 30, 2025.
Financial highlights for the second quarter
- Net revenues of $38.8 million, an increase of 33% year-over-year
- Gross Margin on Finished Cannabis Inventory Sold of 52%, compared to 41% in Q2 2024
- SG&A of $10.3 million, an increase of 11% year-over-year
- Adjusted EBITDA of $11.6 million or 30% of net revenue, an increase of 123% year-over-year
- Net income of $8.3 million, an increase of 315% year-over-year
- Cash flow from operations of $4 million
- Cash at quarter end totalled $17 million.
Balance sheet enhancement initiatives after the second quarter
- Amended senior debt, extended maturity, and added $10 million in new credit
- Imperial Brands converted remaining debt into equity, reinforcing long-term support
- Pro forma Total Debt to TTM Adjusted EBITDA of 1.4x
- Pro forma net working capital at June 30, 2025 of $35 million.
Management Commentary
Hugo Alves, CEO, commented: “Amidst a record quarter for net revenue, gross profit, and Adjusted EBITDA, we believe we are still Just Getting Started. Net revenue increased 33% year-over-year through increased demand for our products, deeper distribution across the country, increasing production volumes, and higher pricing. Customers and consumers love and trust our brands which bodes well for maintaining and increasing market share. Gross margin improved to 52% as we gained production efficiencies, and a stable cost base has translated to a 30% Adjusted EBITDA margin. Subsequent to quarter-end, we were delighted to announce a recapitalization that decreased our debt burden and materially reduced interest expense going forward. Looking forward, we are remaining focused on what works. We are going to provide innovative products to Canadian cannabis consumers, and we plan to capitalize on our scale and market leadership to deliver sustainable financial performance.”
Net Revenues
For the three and six months ended June 30, 2025, net revenues were $38.8 million and $71.5 million as compared to $29.2 million and $54.4 million during the same periods in 2024, representing increases of 33% and 31% respectively. The year-over-year growth in net revenue was primarily driven by higher incremental volumes and improved pricing across the portfolio. The increase was particularly supported by strong performance in the Company’s flower portfolio, which benefited from increased demand and improved distribution.
Revenues for the three and six months ended June 30, 2025 were comprised of approximately 65% (2024 – 63%) and 64% (2024 – 61%) in sales of dried flower and pre-roll Cannabis Products, with the remainder from oils and Cannabis 2.0 Product sales. For the three and six months ended June 30, 2025, approximately 75% (2024 – 78%) and 75% (2024 – 77%) of cannabis sales originated from sales to British Columbia, Alberta and Ontario. Since 2024, the Company had sales in all Canadian provinces and the Yukon and Northwest Territories.
Gross Profit
Auxly realized a gross profit of $22.7 million and $41.4 million for the three and six months ended June 30, 2025, resulting in a 58% Gross Profit Margin for both periods, as compared to $15.9 million (55%) and $25.4 million (47%) during the same periods in 2024. The Gross Margin on Finished Cannabis Inventory Sold for the three months ended June 30, 2025 improved to 52% from 41% in 2024. The Gross Margin on Finished Cannabis Inventory Sold for the six months ended June 30, 2025 improved to 51% from 40% in 2024. The higher Gross Margin on Finished Cannabis Inventory Sold resulted from the improvements made in our manufacturing process to reduce operating costs as well as benefiting from increased demand and pricing of adult-use recreational market and bulk flower products. Higher cultivation yields lowered costs, and efficiency improvements at our Auxly Charlottetown facility further reduced costs.
Realized and unrealized fair value gains and losses reflect accounting treatments associated with Auxly Leamington cultivation activities and sales and are influenced by changes in production, sales and net realizable value assumptions.
Inventory impairments during the second quarter of 2025 of $0.1 million were associated with charges related to reductions in net realizable value of dried cannabis under the Company’s product specifications, a decrease of $0.3 million from the comparative period.
Total Expenses
Selling, general and administrative expenses (“SG&A”) are comprised of wages and benefits, office and administrative, professional fees, business development, and selling expenses. SG&A expenses were $10.3 million in the second quarter of 2025, $1.0 million or 11% higher than the same period in 2024. Year-to-date expenditures of $20.0 million in 2025 were $2.1 million higher than the same period in 2024. The increase in SG&A was primarily driven by investments to support higher sales.
Wages and benefits were $4.5 million for the quarter, as compared to $4.8 million during the same period in 2024. Year-to-date wages and benefits of $9.2 million were $0.1 million higher than that of the same period in 2024. Year-to-date wages and benefits increased compared to 2024 due to an increase in bonus accruals which was partially offset by cost savings from the streamlining of operations and support staff as a result of a more focused product portfolio. Wages and benefits in the seconder quarter of 2024 included non-recurring restructuring related cost of $0.7 million.
Office and administrative expenses were $1.2 million for the quarter, flat compared to the same period in 2024. Year-to-date expenditures of $2.7 million were $0.1 million higher than the same period in 2024. The Company continues to actively control overhead spend in the organization while growing sales.
Auxly’s professional fees were $0.5 million during the second quarter of 2025, flat compared to the same period in 2024. Year-to-date expenditures of $0.9 million were $0.1 million lower than that of the same period in 2024. Professional fees incurred primarily related to accounting fees, regulatory matters, reporting issuer fees, and legal fees associated with certain corporate activities and as a result can fluctuate significantly from one period to the next.
Business development expenses were $0.1 million for the six months ended June 30, 2025 as compared to $0.2 million for the same period in 2024. These expenses primarily relate to business development and travel related expenses.
Selling expenses were $4.0 million and $7.1 million for the three and six months ended June 30, 2025, an increase of $1.3 million and $2.0 million from the same periods in 2024. The increase in expenditures was primarily as a result of investments in marketing initiatives and higher Health Canada fees related to higher revenues.
Equity-based compensation for the three and six months ended June 30, 2025 was $1.1 million and $2.6 million, respectively, primarily driven by the Cash Settled RSUs granted in 2023 and RSUs issued in 2025 and 2024. During the same periods in 2024, equity-based compensation was $0.7 million and $2.6 million, respectively.
Depreciation and amortization expenses were $1.3 million for the three months ended June 30, 2025 and $2.6 million year-to-date, representing an increase of $0.2 million and $0.3 million over the same periods in 2024 as a result of capital investments made during 2024.
Interest expenses were $1.9 million and $4.0 million for the three and six months ended June 30, 2025, a decrease of $0.9 million and $5.6 million over the same periods in 2024. The decrease in expenses were primarily a result of the conversion of Imperial Debentures into Shares and lower interest expense on adjustable-rate debt. Interest expense includes accretion on the convertible debentures and interest paid in kind on the Imperial Debenture. Interest payable in cash was approximately $1.5 million for the second quarter of 2025, $0.7 million lower than the same period in 2024 as a result of lower principal amounts outstanding on debt instruments.
Total Other Income and Losses
Total other income and losses was a net gain of $0.2 million for the three months ended June 30, 2025, compared to a net loss of $0.1 million in the same period in 2024. The other income and losses in the second quarter of 2025 were primarily driven by foreign exchange gains, partially offset by non-recurring expenses related to the Bank of Montreal Amended Credit Facility. The other income and losses in second quarter of 2024 were primarily driven by the loss on the sale of the Auxly Inc. facility and foreign exchanges losses, partially offset by the gains on the extensions of the unsecured promissory notes and interest and other income.
Total other income and losses for the six months ended June 30, 2025 was a net gain of $0.1 million compared to a net loss of $0.9 million in the comparative period. The year-to-date net loss for 2024 included the loss on the adjustment to the provision related to the claim filed by Kindred Partners Inc.
Net Income and Loss
Net income for the three months ended June 30, 2025 was $8.3 million, representing a net income of $0.01 per share on a basic and diluted basis. The change in net income in 2025 as compared to a net income of 2.0 million in the same period in 2024 was primarily driven by improved gross profits and reduction in interest and accretion expenses.
The net income of $20.4 million for the six months ended June 30, 2025 includes $8.1 million of deferred tax recovery related to the change in estimated useful life of intangible assets. The net loss of $24.0 million for the six months ended June 30, 2024 included $16.0 million of deferred tax expense on the conversion of Imperial Debenture into Shares. Excluding the deferred tax recovery related to the change in estimated useful life of intangible assets in 2025 and the deferred tax expense on the conversion of Imperial Debenture into Shares in 2024, year-to-date net income increased by $20.3 million primarily due to improved gross profits and reduction in interest and accretion expenses.
Adjusted EBITDA
Adjusted EBITDA was $11.5 million and $19.0 million for the three and six months ended June 30, 2025, an improvement of $6.4 million and $11.6 million over the same periods in 2024, primarily as a result of improved gross profits, partially offset by higher selling expenses to support higher sales.
Outlook
Auxly remains focused on delivering sustainable, profitable growth by building on its leadership in the Canadian cannabis market. The Company continues to advance its strategy through focused innovation, operational excellence, and prudent financial management. With a strengthened balance sheet, the Company is well-positioned to drive long-term shareholder value.
We expect the Canadian recreational cannabis market will continue to provide tailwinds in the near-term from increasing social acceptability, capture of market share from the illicit market, the reduction of supply from shuttered capacity and the divergence of existing supply to international markets.
Due to these market factors, increasing demand for our brands, focused product innovations, efficiencies across our operations and favourable product mix, we expect continued growth in net revenue in the second half of 2025. Considering the improvements we have made towards operational efficiencies, increasing net revenue should continue to translate into higher gross profit, and Adjusted EBITDA should benefit from operating leverage given a consistent overhead cost structure.
We expect to allocate $1.5 million to $2.5 million of cash flow from operations towards capital projects at Auxly Leamington and Auxly Charlottetown in 2025, part of which has already been invested. Excess cash flow after these expenditures will be allocated towards strengthening our balance sheet and/or pursuing accretive strategic initiatives.
We continue to see long-term potential in international markets, and we are actively evaluating export opportunities. The Company is well-positioned to succeed internationally, supported by our strong brands, scalable production, and strategic partnership with Imperial Brands.
Over the long-term, Auxly remains confident in its ability to deepen its leadership position in Canada’s largest cannabis categories: dried flower, vapes, and pre-rolls. With its consumer-trusted brands, best-in-class operating assets, national distribution, and data-driven approach to innovation, Auxly is well-positioned to meet evolving consumer preferences and deliver strong financial performance.
About Auxly Cannabis Group Inc.
Auxly (TSX: XLY) is a leading Canadian consumer packaged goods company in the cannabis products market, headquartered in Toronto, Canada.
