Auxly Cannabis Q2 Results: Revenue up 18% YoY, EBITDA margin expands to 31%
Auxly Cannabis Group posted record Q2 2026 results with net revenue up 18% YoY to $45.8 million and adjusted EBITDA rising 24% to $14.3 million. Gross margins expanded to 55%, and cash flow conversion hit 94%. The company completed a 14-to-1 share consolidation and outlined a $30 million capital program to boost yield by 30%.
*this image is generated using AI for illustrative purposes only.
Auxly Cannabis Group Inc (TSX: XLY) delivered record financial performance in the second quarter of 2026, driven by strong demand for its core portfolio and improved operational efficiency. Net revenue reached $45.8 million, marking an 18% year-over-year increase. The company’s adjusted EBITDA climbed 24% to $14.3 million, resulting in an EBITDA margin of 31%.
Gross margin on finished cannabis inventory sold expanded to 55%, up from 52% in Q2 2025. This improvement was attributed to higher cultivation yields, enhanced manufacturing processes at Leamington and Charlottetown facilities, and strategic procurement initiatives that lowered input costs, including vape API expenses.
Cash flow from operations before working capital changes reached $13.4 million, a 31% year-over-year increase. This figure represents a 94% conversion rate from adjusted EBITDA, indicating that profitability improvements are translating directly into cash generation.
What the Numbers Show
A notable divergence exists between reported net income and underlying operational performance. Reported net income for the quarter was $7.7 million, essentially flat compared to $8.3 million in Q2 2025. However, management highlighted that excluding non-cash fair value adjustments on biological assets and inventory, underlying net income would have improved by $2.2 million year-over-year. This suggests that while top-line growth and margin expansion are robust, mark-to-market accounting entries on biological assets continue to mask the full extent of operational profit improvement in the bottom line.
Capital Allocation and Balance Sheet
The company maintained a strong balance sheet with $38 million in cash and $44 million in long-term debt. During the quarter, Auxly deployed $5.7 million to repurchase 2.6 million post-consolidation shares through its Normal Course Issuer Bid (NCIB) program. In July, the company completed a 14-to-1 share consolidation, a move aimed at aligning its market profile with the quality of its business.
Management outlined a longer-term capital program of approximately $30 million over the next three years to increase yield at the Auxly Leamington facility by approximately 30% over 2025 levels. This expansion includes $10 million to $12 million guided for 2026 and is expected to be funded comfortably from cash from operations. The investments focus on additional cultivation zones and post-harvest capabilities.
Strategic Outlook
Auxly remains focused on the Canadian market, citing it as the highest-return option currently available. While the company maintains long-term ambitions for international expansion, it prioritizes "winning at home" given the dynamic regulatory frameworks in emerging markets. New product launches, including the Galactic Jack sativa cultivar under the Back 40 brand, received positive consumer feedback, with the sales team securing over 1,400 points of distribution shortly after launch.
| Metric | Q2 2026 | Q2 2025 | Change |
|---|---|---|---|
| Net Revenue | $45.8 million | $38.8 million* | +18% YoY |
| Adjusted EBITDA | $14.3 million | $11.5 million* | +24% YoY |
| EBITDA Margin | 31% | 29%* | +200 bps |
| Gross Margin (Cannabis) | 55% | 52% | +300 bps |
| Cash Flow from Ops | $13.4 million | $10.2 million* | +31% YoY |
Note: Prior year figures are derived from stated percentage changes where exact prior values were not explicitly listed in the transcript summary but implied by the growth rates provided.
How will the $30 million capital expansion at the Leamington facility impact Auxly's cash flow trajectory and debt-to-equity ratio over the next three years?
Given the decision to prioritize the Canadian market, what specific regulatory changes or market saturation risks could force Auxly to reconsider its international expansion timeline?
Will the recent 14-to-1 share consolidation successfully attract institutional investors, or will it primarily serve as a cosmetic adjustment to market perception?
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