Auxly Cannabis Group (XLY) Q2 2024 earnings summary

Executive summary

• Net revenue for Q2 2024 was $29.2M, up 33% year-over-year and 16% sequentially, with six-month net revenue at $54.4M, up 18% year-over-year.

• Q2 2024 net income was $2.0M, a turnaround from a net loss of $12.9M in Q2 2023; six-month net loss was $24.0M, including a $16M deferred tax expense on debenture conversion.

• Set all-time highs in gross margin (41%) and adjusted EBITDA ($5.2M), with positive cash flow from operations of $2.9M.

• Maintained market leadership in all-in-one vape category with over 32% share and #2 national vape sales position.

• Back Forty brand secured top four all-in-one vape SKUs and strong positions in dried flower and pre-rolls nationally.

Financial highlights

• Cash and cash equivalents at June 30, 2024 were $14.3M, compared to $15.6M at December 31, 2023.

• Total assets were $260.6M, with total liabilities of $154.3M and equity of $106.3M at June 30, 2024.

• Inventory at quarter-end was $25.8M, slightly down from $26.1M at year-end.

• Interest and accretion expenses for Q2 2024 were $2.7M, down from $6.5M in Q2 2023.

• Adjusted EBITDA for Q2 was $5.2M, up 580% year-over-year.

Outlook and guidance

• Management notes material uncertainty about the ability to continue as a going concern due to negative working capital and insufficient cash to fund operations for the next 12 months without improved sales, margins, or refinancing.

• Focus remains on sustainable growth, profitability, and operational efficiency in vape, pre-roll, and dried flower categories.

• Plans include seeking additional financing, asset sales, prioritizing higher-return projects, and cost reductions.

• Plans to expand all-in-one vape portfolio and launch new Kolab Project vape format in H2 2024.

• Expects continued revenue growth, gross margin improvements, and enhanced profitability in H2 2024.