Auxly Cannabis Group Inc. (TSX: XLY) (OTCQX: CBWTF) released its financial results for the three months ended March 31, 2022. Auxly reported net revenues rose 147% to $22.6 million versus $9.2 million during the same period in 2021. Revenues fell sequentially from the fourth quarter’s revenue of $29 million. Auxly admitted it had lower winter yields at Auxly Leamington and hardware and packaging shortages due to supply chain disruptions. The company said believes that those challenges are largely behind it, and is very encouraged by yield and overall product quality improvements that it has seen at Auxly Leamington, which it believes will better equip Auxly to meet the demand for its flower and pre-roll products.
Net losses rose to $39 million for the quarter versus last year’s net loss of $10 million for the same time period. The earnings per share were ($0.05) versus last year’s ($0.01).
Revenue in the first quarter of 2022 was approximately 61% in Cannabis 2.0 Product sales, with the remainder from Cannabis 1.0 Product sales. Auxly said that revenues improved as a result of its expansion into Cannabis 1.0 Products and continued leadership in Cannabis 2.0 Products. Consistent with prior periods, as the Company does not participate in the Quebec market, approximately 85% of cannabis sales during the first quarter of 2022originated from sales to British Columbia, Alberta and Ontario.
Hugo Alves, CEO of Auxly, said, “Amid intense and growing competition and seasonal buying trends in the Canadian cannabis market, Auxly continued to see strength in sales, increasing revenues 147% year-over-year. Though this quarter presented some ongoing supply chain and operational challenges preventing us from meeting consumer demands for our branded cannabis products, we believe we have taken the necessary steps to correct these issues for the coming quarters, allowing us to increase fill rates and continue with our exciting new product launches throughout the year. We continue to lead the market in cannabis 2.0 products and remain focused on building to leadership in dried flower and pre-rolls and improving our business to achieve our goal of reaching adjusted EBITDA profitability.”
The company addressed the increase in losses saying that there was an impairment of long-term assets of $12.9 million and intangible assets and goodwill of $10.8 million respectively in the first quarter of 2022 related to the closure of the Auxly Annapolis and Auxly Annapolis OG facilities where the carrying value exceeds the fair value less cost to sell. Gains and losses on settlement of assets and liabilities and other expenses in the prior-year quarter were primarily associated with a gain on the settlement of a $5.8 million liability associated with a non-monetary product exchange with another licensed producer. The share of loss on investment in joint venture of $0.5 million represents the company’s proportionate share of Auxly Leamington’s earnings prior to its acquisition in November 2021, which results are presently consolidated into the Company’s financial statements.
Auxly said it is confident in its second-quarter sales outlook and in its ability to achieve Adjusted EBITDA profitability in 2022. The company, however, provided no numbers for its sales expectations.