Auxly Cannabis Group Inc.

Auxly reported Q2 26 net revenue of 45.8 million, up 18% year over year; gross margin on finished cannabis inventory sold of 55%, up from 52% in Q2 25; adjusted EBITDA of 14.3 million, up 24% year over year, with a 31% EBITDA margin; and cash flow from operations before working capital changes of 13.4 million, up 31% year over year. Management also said quarterly net income was 7.7 million, essentially flat versus 8.3 million in Q2 25, and that cash on hand was 38 million versus 44 million of long-term debt. Forward-looking, management left its 2026 outlook unchanged, expecting net revenue growth above market rates, improved cash conversion, and continued profitability, while outlining a roughly 30 million capital program over 3 years to raise Leamington yield by about 30% over 2025 levels, including 10 million to 12 million in 2026.

Hugo Alves emphasized that the quarter showed structural operating leverage, calling out record revenue, EBITDA, and cash flow as proof that Auxly’s scale and cost discipline are working. He framed the growth strategy around innovation, distribution, and expanding capacity at Leamington, and said the company is prioritizing Canada over international markets for now because it sees the highest-return opportunity at home. His tone was confident and constructive, with repeated comments that demand remains very strong and that the business is building long-term value.

Travis Wong focused on the durability of the margin structure, saying the 31% EBITDA margin is supported by three main levers: stronger net revenue, structurally higher gross margin, and controlled SG&A growth. He pointed to higher cultivation yields, improved manufacturing at Leamington and Charlottetown, and strategic procurement efforts such as lower vape API costs as drivers of the gross margin improvement to 55%. He also noted that net income was 7.7 million and said underlying net income would have improved meaningfully excluding noncash fair value adjustments, while cash flow conversion from adjusted EBITDA was 94% and the company ended with 38 million in cash and 44 million in long-term debt.

Analysts asked about the planned 30% yield increase in Leamington, and management said it will come from additional post-harvest capabilities, a new grow zone, and related infrastructure, with improvements expected throughout the 3-year buildout. Questions on margin sustainability led Travis Wong to say the company believes the EBITDA margin is sustainable because gross margin gains are structural and SG&A is being kept in line with revenue growth. On international expansion, Hugo Alves said Auxly sees long-term potential but is not rushing, preferring to focus on winning in Canada while maintaining optionality through Imperial Brands and market learning.