Auxly Cannabis Group, a major player in the Canadian cannabis market, has reported an impressive 18% increase in net revenue for the third quarter, reaching C$33.3 million. This growth is particularly noteworthy in an industry where many producers are struggling with falling prices and oversupply.
The company’s strong performance can be attributed to various factors, including the successful utilization of its 1.1 million square foot automated greenhouse facility in Ontario. By consolidating its manufacturing operations and focusing on increasing cultivation yields, Auxly was able to significantly improve its gross margins, which widened to 47% from 30% a year earlier.
Additionally, Auxly’s vape products and Back Forty brand dried flower have been driving sales growth, with the company now commanding over 36% of the all-in-one segment in Canada. The Back Forty brand dried flower saw a 12% increase in sales from the previous quarter, solidifying its position as one of the top-selling flower products in the country.
Despite these positive developments, Auxly remains cautious about its financial situation. The company disclosed that it may not have enough cash to sustain operations for the next 12 months without improved sales or margins. As of September 30th, Auxly had C$19 million in cash and negative working capital of C$13.2 million.
To address these concerns, Auxly has taken steps to strengthen its financial position. This includes reducing its debt by 54% through a debt-to-equity conversion by Imperial Brands PLC, a major tobacco company. Additionally, the company has extended an inventory financing loan that was nearing maturity.
In its filings, Auxly emphasized its commitment to prioritizing efficient growth and sustainable profitability moving forward. Despite the ongoing cash concerns, the company remains optimistic about its ability to navigate the challenges ahead and continue its upward trajectory in the Canadian cannabis market.