Auxly Cannabis Group Inc. (OTCQX: CBWTF) released its financial results for the third quarter ending September 30, 2021 with revenues increasing 95% to C$24.5 million for the three months ended September 30, 2021. This was a 17% increase for Auxly over the second quarter. Still, the company reported a net loss of C$13 million in the quarter.
The company addressed its challenges during the quarter citing additional expenses as it scaled operations, commissioned new equipment, introduced new products and innovations to the base product portfolio, and supported the opening of new stores in key provinces like Ontario. The company said it was happy with the continued revenue growth trend and believes its initiatives to improve the cost structure will lead to an increase in cash flows and near-term positive adjusted EBITDA.
Auxly said that the revenues were approximately 69% of Cannabis 2.0 Products sales, with the remainder from Cannabis 1.0 Product sales. The company noted that revenues improved during the third quarter of 2021 by $11.9 million over the same period of 2020 and by $3.6 million over the second quarter of 2021. “Likewise, net revenues year-to-date were $54.5 million, an improvement of $26.0 million over the same period of 2020 primarily due to increased retail cannabis sales by the company nationally, achieved through continued leadership in Cannabis 2.0 Product sales and continued expansion into Cannabis 1.0 Products. Auxly reminded investors that it is not in the Quebec market and that roughly 85% of cannabis sales during the third quarter of 2021 came from British Columbia, Alberta and Ontario.
“Despite delays in certain automation equipment at the Kolab facility, which would have contributed to further sales and cost reductions, the company saw an increase in national retail sales in the month of October and moved into the #5 LP position with 7.3% share of the market, successfully achieving the company’s 2021 market share objective of 7-9% by the end of 2021.”
The quarterly net losses improved over last year’s third-quarter net loss of C$17 million. Auxly said the improvement was primarily a result of net income of $12.3 million related to the sale of KGK, recognition of a gain from the Imperial Brands Debenture Amendments, improvements in continuing operating gross profits, and income tax recoveries, partially offset by an impairment charge related to the Curative recoverable amount and losses on the investment in the joint venture.
“We continued to see growth in our Canadian cannabis recreational sales in the quarter, driven by our expanding product offering in dried flower and pre-rolls as well as our continued leadership of the 2.0 product segment where we maintained our #1 overall position driven by our dominance in the vapor segment where our consumers rewarded us with 24% of total national market share,” said CEO Hugo Alves. “As we finish building our asset base, we will increase focus on cost optimization and increasing operational throughput efficiencies to enhance margins and increase profitability.”