TORONTO – Auxly Cannabis Group Inc., a leading consumer packaged goods company in the cannabis products market, released its financial results for the fourth quarter and full year ended December 31, 2024. All amounts are Canadian dollars except common shares and per-share amounts.
Highlights for the fourth quarter and subsequent events
- Net revenue of $34.6 million, an increase of 29% over the prior year period.
- Gross Margin on Finished Cannabis Inventory Sold, of 54% in 2024, up from 40% in 2023.
- SG&A of $9.3 million, a reduction of 5% over the prior year period.
- Adjusted EBITDA of $11.0 million or 32% of net revenue, up from $2.3 million in 2023.
- Cash flow from operations of $3.2 million and cash at quarter end totalled $18.4 million.
- 4th largest Canadian Licensed Producer, with market share of 6.0% at quarter end.
- Back Forty exited the quarter as the #1 cannabis brand in Canada.
- Highlights for the year ended December 31, 2024
- Net revenue of $122.3 million, an increase of 21% over the prior year.
- Gross Margin on Finished Cannabis Inventory Sold of 46% in 2024, up from 34% in 2023.
- SG&A of $35.7 million, a reduction of 8% compared to 2023.
- Adjusted EBITDA of $26.7 million or 22% of net revenue, up from $1.5 million in 2023.
- Total Debt reduced by 56% in 2024 with the conversion of over $123 million of debt into shares by Imperial Brands plc and repayment of the outstanding standby debenture facility.
- The Company’s Back Forty all-in-one vape was recognized by budtenders as the “Innovation of the Year” at the 2024 KIND awards.
- The Company held the #1 position nationally in the non-infused pre-roll category.
Management commentary
“The Auxly team delivered an outstanding year, driven by our unwavering commitment to innovation, gross margin expansion, and operational excellence,” said Hugo Alves, Founder and Chief Executive Officer of Auxly. “With demand for THC in Canada and around the world at an all-time high, Auxly is uniquely positioned to capitalize on this opportunity through our large-scale, low-cost cultivation advantage and innovation leadership in the largest, fastest-growing product categories. We are just getting started and excited about the road ahead and will remain focused on driving sustainable, profitable growth and creating meaningful value for all of our stakeholders.”
Auxly President Mike Lickver echoed this optimism, stating, “Our success is a testament to the dedication of our team, the loyalty of our consumers, and the trust of our partners. We made tremendous strides in brand awareness, culminating in Back Forty emerging as the #1 cannabis brand in Canada by the end of 2024. As we move forward, our commitment to superior product quality and consumer-centric brands will continue to strengthen Auxly’s leadership in the Canadian cannabis market.”
Net revenues
For the year ended December 31, 2024, net revenues were $122.3 million as compared to $101.1 million during the same period in 2023, representing increases of 21%. Revenues for the year ended December 31, 2024 were comprised of approximately 61% (2023 – 61%) in sales of dried flower and pre-roll Cannabis Products, with the remainder from oils and Cannabis 2.0 Product sales.
For the year ended December 31, 2024, approximately 76% (2023 – 82%) of cannabis sales originated from sales to British Columbia, Alberta and Ontario. During 2024, the Company had sales in all Canadian provinces and the Yukon and Northwest Territories.
Gross profit
Auxly realized a gross profit of $59.9 million for the year ended December 31, 2024, resulting in a 49% Gross Profit Margin, respectively as compared to $21.3 million or 21% during the same periods in 2023. The Gross Margin on Finished Cannabis Inventory Sold for the year ended December 31, 2024 improved to 46% versus 34% in 2023 as a result of the streamlining and improvements made in the Company’s manufacturing process to reduce operating costs and increased demand and pricing of adult-use recreational market and bulk flower products.
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 2024 of $2.3 million were associated with charges related to reductions in net realizable value of dried cannabis under the Company’s product specifications and obsolescence of certain retired products and packaging, a decrease of $8.1 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 $35.7 million in 2024, $3.0 million or 8% lower than 2023. The decrease in SG&A was primarily as a result of measures taken to reduce overhead in the organization.
Wages and benefits were $16.9 million for the year, as compared to $16.3 million during 2023. Wages and benefits in 2023 included a positive adjustment to compensation accruals. Excluding the adjustments to compensation accruals in 2023, wages and benefits decreased compared to 2023 due to the streamlining of operations and support staff as a result of a more focused product portfolio.
Office and administrative expenses were $5.2 million for the year, $5.2 million lower than the same period in 2023. The decreased expenditures were primarily related to streamlining of operations, lower corporate head office spending, and reduced insurance expenses.
Auxly’s professional fees were $2.2 million during 2024, $0.8 million lower than 2023. 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 $0.4 million for year ended December 31, 2024 as compared to $0.5 million for the same period in 2023. These expenses primarily relate to business development and travel related expenses.
Selling expenses were $11.0 million for the year ended December 31, 2024, an increase of $2.5 million from the same periods in 2023. 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 year was $5.1 million, primarily due to the impact of the increased closing price of the Company’s Shares as at December 31, 2024 on the value of Cash Settled RSUs granted in 2023 and RSUs issued in 2024. During the same period in 2023, equity-based compensation was $1.6 million.
Depreciation and amortization expenses were $4.5 million for 2024, representing a decrease of $2.5 million over 2023. The decreases were primarily as a result of reductions in intangible assets and depreciation associated with disposed assets, including the transition out of the Auxly Ottawa Carleton Place facility.
Interest expenses were $15.0 million for the year ended December 31, 2024, a decrease of $10.7 million over the same period in 2023. The decrease in expenses were primarily a result of the conversion of Imperial Debentures into Shares and lower interest expense on adjustable-rate debt, partially offset by interest from newly financed obligations. Interest expense includes accretion on the convertible debentures and interest paid in kind on the Imperial Debenture. Interest payable in cash was approximately $8.8 million for 2024, $0.5 million lower than 2023 as a result of lower principal amounts outstanding on debt instruments.
Total other income and losses
Total other incomes and losses was $nil for 2024, compared to net gains of $3.9 million in 2023. The other incomes and losses in 2024 included gains on settlement of assets and liabilities, the extensions of the unsecured promissory notes and gains on the sale of equipment, offset by foreign exchange losses, the loss on the adjustment to the provision related to the claim filed by Kindred Partners Inc. and the loss on the sale of the Auxly Ottawa facility. The net gains in 2023 were primarily driven by the gains on the extension of the Imperial Brands Debenture and the unsecured promissory notes, partially offset by $35.9 million of impairment of other assets, noting that the Company’s market capitalization traded significantly below its shareholders’ equity. Other income and losses in 2023 also included the closure of the Auxly Ottawa facility where the carrying value exceeded the fair value less cost to sell, and the disposal of Inverell.
Net income and loss
Net loss for the year ended December 31, 2024 was $16.3 million, representing a net loss of $0.01 per share on a basic and diluted basis. The net loss of $16.3 million for 2024 included $16.0 million of deferred tax expense on the conversion of Imperial Debenture into Shares. Excluding the gains on the extension of the Imperial Brands Debenture in the third quarter of 2023 of $46.9 million and the after-tax charges of $32.7 million related to the impairment of other assets during the fourth quarter of 2023, net income increased by $42.4 million primarily due to improved gross profits and reduction in expenses, including the operational stability as a result of the consolidation of the Company’s dried flower and pre-roll manufacturing to the Auxly Leamington facility.
Adjusted EBITDA
Adjusted EBITDA was $26.7 million for the year, an improvement of $25.2 million when compared to $1.5 million during 2023. Adjusted EBITDA for the year ended December 31, 2024 improved primarily as a result of improved gross profits and lower SG&A.
Outlook
As the Company looks ahead to 2025, it remains steadfast in its commitment to profitable growth. Building on a record-breaking year, the Company expects to further improve in 2025 through focused innovation, expansion of our distribution footprint and enhanced production efficiency.
At the core of the Company’s strategy is its commitment to teamwork and the excellence of its people. The Company will continue to foster an inclusive, collaborative, high-performance culture with a shared commitment to quality, innovation and continuous improvement. The Company’s people are the foundation of its success, and the Company will continue to invest in their development. By empowering the team with the tools, training, and leadership needed to excel, the Company will drive operational discipline, efficiency and success in all areas of the business.
The Company will continue to build on its track record of product innovation leadership. The Company’s commitment to consumer insights and its culture of operational agility and speed to market in a sector where consumer preferences evolve rapidly will continue to support its excellence in this area. In 2024, the Company accepted several new genetics into commercial production from its dried flower research and development program. Two of these strains, Liquid Imagination and Fire Breath, were top selling flower products in Canada in 2024. In the pre-roll category, the Company was the first to introduce the extra large 0.75g format in the straight-cut pre-roll segment and developed in-house automation technology for coating infused pre-rolls, improving product quality and enhancing efficiency. The Company’s Back Forty all-in-one vapes significantly grew the category and shifted the demand for new vape products, winning “Innovation of the year” at the KIND Industry Awards. All of these product innovations highlight Auxly’s ability to achieve market-leading success across its key categories and underpins the Company’s continued financial success in a market where consumer preferences are dynamic and still evolving. The Company’s innovation leadership in the largest and fastest-growing product categories is a competitive advantage.
The Company anticipates continued market success across its core categories through focus and execution. This includes defending the leadership position of the Back Forty brand, which exited 2024 as the #1 brand in Canada by retail sales. The Company will expand its domestic distribution channels and continue to assess available options for sustainable international expansion. The Company will continue to deepen its relationships with retailers across the country to ensure that our products are always accessible. The Company will remain dedicated to consumer and competitor insights and will refine its proprietary business intelligence tools to maximize the value proposition of its product offerings.
Efficiency remains a key priority as Auxly remains focused on profitable growth. In 2024, the Company successfully increased cultivation yields at its Auxly Leamington facility by increasing plant density and optimizing post-harvest processes. The Company has identified further areas to expand production in 2025 on a capital-light basis. The Company will leverage its culture of continuous improvement by improving its supply chain, enhancing inventory management, and building in-house capabilities for international market diversification.
Enhancing financial stability is a key piece of the Company’s corporate strategy. The Company’s disciplined approach to capital management has reduced overhead expenses and strengthened its balance sheet. In 2024, the Company reduced total debt by 56% and refinanced its debt facilities. In the coming year, the Company will maintain a sharp focus on reducing debt and its cost of capital, while working with its existing capital partners to ensure long-term stability and liquidity needed for continued profitable growth.
Looking ahead, the Company is confident in its ability to continue delivering exceptional results by focusing on innovation, operational excellence, and profitable growth in its key categories. By executing on its strategic priorities, the Company will reinforce its leadership in the Canadian cannabis market, fortify its foundations for continued profitable growth and create value for all of its stakeholders in 2025 and beyond.
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 global leader quality cannabis products.
