TORONTO, May 14, 2026 /CNW/ - Auxly Cannabis Group Inc. (TSX: XLY) (OTCQB: CBWTF) ("Auxly" or the "Company") a leading consumer packaged goods company in the cannabis products market, today released its financial results for the three months ended March 31, 2026. These filings and additional information regarding Auxly are available on SEDAR+ at www.sedarplus.ca.
Highlights for the quarter ended March 31, 2026 (Q1 2026) compared to the prior period (Q1 2025):
-- Net revenue of $39.8 million, an increase of 22%
-- Gross Margin on Finished Cannabis Inventory Sold of 55%, compared to 48%
in 2025
-- Adjusted EBITDA of $12.3 million, an increase of 65% and representing 31%
of net revenue
-- Net income of $3.5 million or $0.003 per basic and diluted share
-- Cash flow from operations before working capital changes of $11.3 million,
an increase of 102%, representing 92% conversion from Adjusted EBITDA.
See definitions and reconciliation of non-GAAP measures elsewhere in this release.
Management Commentary
Hugo Alves, CEO of Auxly commented: "Auxly delivered a strong first quarter, with net revenue of $39.8 million, up 22% year-over-year, and Adjusted EBITDA of $12.3 million, up 65% year-over-year. Our top line success can be attributed to the value proposition offered by Back Forty, contributions from new innovations like South Point and All-in-One Boosted Vapes and improved distribution. Our world-class production and manufacturing operations combined with a culture of financial discipline continue to yield industry leading profitability, with Gross Margin on Cannabis Inventory Sold of 55% and an Adjusted EBITDA margin of 31%. We generated $11.3 million of cash flow from operations, up 102% year-over-year and finished the quarter with a cash balance of over $42 million, giving us a strong balance sheet to support our capital program, repurchase Auxly common shares under the NCIB and consider opportunistic uses of capital that meet our return thresholds."
First Quarter 2026 Financial Overview
Net revenue was $39.8 million in Q1 2026 as compared to $32.7 million in Q1 2025, representing an increase of 22%. The year-over-year growth in net revenue was primarily driven by higher incremental volumes across the core portfolio, improved pricing across the flower portfolio, partially offset by price compression on vape products. The increase was particularly supported by strong performance in the Company's flower segment, which benefited from increased demand and improved distribution.
Gross Margin on Finished Cannabis Inventory Sold for Q1 2026 improved to 55% from 48% in Q1 2025. In addition to the factors impacting net revenue, the higher Gross Margin on Finished Cannabis Inventory Sold resulted from the improvements made in our manufacturing process to reduce operating costs, higher cultivation yields, efficiency improvements at our Auxly Charlottetown facility and strategic procurement initiatives that further reduced costs.
Selling, general and administrative expenses were $11.4 million, or 28.6% of net revenue in Q1 2026, compared to $9.7 million, or 29.6%, in Q1 2025. The increase in absolute SG&A reflects investments made to support higher sales, while the decline as a percentage of net revenue indicates improved operating efficiency.
Net income was $3.5 million in Q1 2026, a decrease of $8.6 million compared to Q1 2025. Q1 2025 included $8.1 million of deferred tax recovery related to the change in estimated useful life of intangible assets. Excluding the deferred tax recovery, net income decreased by $0.5 million primarily driven by higher fair value loss on biological transformation and inventory. Excluding the impact of fair value adjustments on biological transformation and inventory and the deferred tax recovery in 2025, net income increased $5.8 million primarily due to improved gross profits and the reduction in interest and accretion expenses, partially offset by higher SG&A.
Adjusted EBITDA was $12.3 million in Q1 2026, an improvement of $4.8 million or 65% compared to $7.4 million in Q1 2025. Adjusted EBITDA improved primarily as a result of improved gross profits, partially offset by higher selling expenses and higher wages and benefits to support higher net revenue.
Outlook
Auxly remains focused on delivering sustainable, profitable growth by building on its leadership in the Canadian cannabis market. Auxly continues to advance its strategy through focused innovation, operational excellence, and prudent financial management. With a strengthened balance sheet, we are well-positioned to drive long-term shareholder value.
We expect the Canadian recreational cannabis market will continue to benefit from the tailwinds of increasing social acceptability, capture of market share from the illicit market, the divergence of existing supply to international markets and limited capital availability to the cannabis sector. We believe many of these trends could persist over the long-term.
Auxly continues to see long-term potential in international markets and is actively evaluating export opportunities. We are well-positioned to succeed internationally, supported by our strong brands, scalable production, and a strategic partnership with Imperial Brands. Auxly intends to invest in its international export capabilities over the course of 2026 to prepare and position us for long-term international growth. Our deliberations towards international sales are purposefully rigorous and measured to ensure that international cannabis activities are accretive to profitability and that our focus on winning at home is not compromised.
Auxly believes it can continue to grow net revenue above market rates through product innovation, further investment in distribution and increased capacity at Auxly Leamington. Both innovation and output increases are expected to be funded from operating cash flow for the foreseeable future. Auxly plans to maintain profitability through focused innovation, investment in efficiency and quality, and rigorous cost control. Furthermore, the conversion of profitability to cash flow from operations is expected to improve through the reduction of interest expense and stabilization of working capital investments.
Auxly expects to allocate between $10 million to $12 million of cash flow from operations towards capital projects at Auxly Leamington in 2026. In combination with previous capital investments, these investments are expected to increase quality, capacity and efficiency throughout cultivation and processing and add capabilities that will allow for direct international shipments.
Over the long-term, Auxly remains confident in its ability to deepen its leadership position in Canada and make meaningful advances towards our vision of global leadership while maintaining profitability. 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.
Balance Sheet and Capital Allocation
As of March 31, 2026, current assets were $109.2 million, including cash and cash equivalents of $42.7 million. Total Debt outstanding was $45.0 million and total Debt to TTM Adjusted EBITDA was 0.9x. Cash flow from operations before working capital changes was $11.3 million, representing 92% conversion from Adjusted EBITDA.
Total basic and diluted weighted average shares outstanding for the three months ended March 31, 2026 were 1,376.6 million shares and 1,611.6 million shares, respectively.
On April 14, 2026, the Company announced a share repurchase program of up to 68.9 million common shares, representing less than 5% of the issued and outstanding shares as of April 7, 2026, to be conducted through to April 19, 2027.
Non- GAAP Measures
EBITDA and Adjusted EBITDA are non-GAAP financial measures used in the cannabis industry and by the Company to assess operating performance removing the impacts and volatility of non-cash and other adjustments. The definition may differ by issuer. EBITDA and Adjusted EBITDA used by the Company are reconciled with net income or loss from continuing operations of the Company, an IFRS measure, in the section "Results of Operations" in the MD&A dated May 13, 2026.
"Gross Margin on Finished Cannabis Inventory Sold" is a supplementary financial measure and is defined as net revenue less cost of finished cannabis inventory sold divided by net revenue. "Gross Profit Margin" is defined as gross profit divided by net revenue. Gross Profit Margin is a supplementary financial measure. "Debt" is defined as current and long-term debt and is a supplementary financial measure. It is a useful measure in managing the Company's capital structure and financing requirements.
Conference Call
Auxly's management team will host a conference call today, Thursday, May 14, 2026, at 10:00 a.m. EST to discuss its financial results. Participants can access the conference call by telephone by dialing: 1-888-699-1199 (conference ID: 87366) or by audio webcast at: https://app.webinar.net/0YwVgEegekG. Investors are encouraged to send questions to the Investor Relations Team in advance of the call for discussion during the question and answer period. For those unable to participate in the conference call at the scheduled time, it will be available for replay on the Company's website within 24 hours after the conclusion of the call.
ON BEHALF OF THE BOARD
"Hugo Alves" CEO
About Auxly Cannabis Group Inc. (TSX: XLY)
Auxly is a leading Canadian consumer packaged goods company in the cannabis products market, headquartered in Toronto, Canada. Our mission is to help consumers live happier lives through quality cannabis products that they trust and love. Our vision is to be a leader in branded cannabis products that deliver on our consumer promise of quality, safety and efficacy.
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