Auxly Reports First Quarter 2026 Results

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.

Learn more at www.auxly.com and stay up to date at Twitter: @AuxlyGroup; Instagram: @auxlygroup; Facebook: @auxlygroup; LinkedIn: company/auxlygroup/.

Financial Highlights and Key Performance Indicators  

Results of Operations

EBITDA and Adjusted EBITDA Reconciliation

Notice Regarding Forward Looking Information:  

This news release contains certain "forward‐looking information" within the meaning of applicable Canadian securities law. Forward‐looking information is frequently characterized by words such as "plan", "continue", "expect", "project", "intend", "believe", "anticipate", "estimate", "may", "will", "potential", "proposed" and other similar words, or information that certain events or conditions "may" or "will" occur. This information is only a prediction. Various assumptions were used in drawing the conclusions or making the projections contained in the forward‐looking information throughout this news release. Forward‐looking information includes, but is not limited to: the proposed operation of Auxly, its subsidiaries and partners; the intention to grow the business, operations and existing and potential activities of Auxly; proposed timelines for the build‐out, expansion, licencing or commercialization of the  Company's facilities and projects; the Company's execution of its innovative product development, commercialization strategy and expansion plans; the Company's intention to introduce innovative new cannabis products to the market and the timing thereof; the anticipated benefits of the Company's partnerships, research and development initiatives and other commercial arrangements; the expectation, timing and quantum of future revenues, Gross Margin on Finished Cannabis Inventory Sold, SG&A and of positive Adjusted EBITDA; expectations regarding the Company's expansion of sales, operations and investment into foreign jurisdictions; future legislative and regulatory developments involving cannabis and cannabis products; the timing and outcomes of regulatory or intellectual property decisions; the ability of the Company to maintain and grow its market share; the relevance of Auxly's subsidiaries' current and proposed products with provincial purchasers and consumers; consumer preferences; political change; competition and other risks affecting the Company in particular and the cannabis industry generally.

A number of factors could cause actual results to differ materially from a conclusion, forecast or projection  contained in the forward‐looking information in this release including, but not limited to, whether: the Company will be able to execute on its business strategy or achieve its goals; Auxly's subsidiaries are able to maintain the necessary governmental and regulatory authorizations to conduct business; the   Company is able to successfully manage the integration of its various business units with its own; the Company's   subsidiaries obtain and maintain all necessary governmental and regulatory permits and approvals for the operation of their facilities and the development of cannabis products, and   whether such permits and approvals can be obtained in a timely manner; the Company will be able to successfully launch new product formats and enter into new markets; there is acceptance and demand for current and future Company products  by consumers and provincial purchasers; the Company will be able to increase and maintain revenues, maintain positive Adjusted EBITDA, and/or achieve and maintain its target Gross Margin on Finished Cannabis Inventory Sold; risks relating to the overall macroeconomic environment, which may impact customer spending, the Company's costs and margins, including tariffs (and related retaliatory measures), the levels of inflation, and interest rates; and general economic, financial market, legislative, regulatory, competitive and political conditions in which the Company and its subsidiaries and partners operate will remain the same. Additional risk factors are disclosed in the annual information form of the Company for the financial year ended December 31, 2025 dated March 25, 2026.

New factors emerge from time to time, and it is not possible for management to predict all of those factors or to assess in advance the impact of each such factor on the Company's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward‐looking information. The forward‐looking information in this release is based on information currently available and what management believes are reasonable assumptions. Forward‐ looking information speaks only to such assumptions as of the date of this release. In addition, this release may contain forward‐looking information attributed to third party industry sources, the accuracy of which has not been verified by the Company. The forward‐looking information is being provided for the purposes of assisting the reader in understanding the Company's financial performance, financial position and cash flows as at and for periods ended on certain dates and to present information about management's current expectations and plans relating to the future, and the reader is cautioned that such forward‐ looking information may not be appropriate for any other purpose. Readers should not place undue reliance on forward‐looking information contained in this release.

The forward‐looking information contained in this release is expressly qualified by the foregoing cautionary statements and is made as of the date of this release. Except as may be required by applicable securities laws, the Company does not undertake any obligation to publicly update or revise any forward‐ looking information to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events, whether as a result of new information, future events or results, or otherwise.

Neither Toronto Stock Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Toronto Stock Exchange) accepts responsibility for the adequacy or accuracy of this release.

SOURCE Auxly Cannabis Group Inc.

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