Auxly Cannabis Group Inc. Q2 2026 Update – XLY.to

Disclosure: I own shares in XLY. I am not a professional. Please do your own due diligence.

Auxly is a Canadian cannabis company focused on branded products across flower, pre-rolls, vapes and other formats. Its portfolio includes Back Forty, South Point, Kolab Project, Foray, Parcel and Dosecann.

Price: $3.01 CAD

MC: ~352 million CAD (diluted)

EV: ~360 million CAD

1 year performance: +26.5%

Auxly reported this morning and held a call. Results were a smidge ahead of my expectations, although the stock was down 6.8% on the day.

all numbers in Canadian dollars unless stated otherwise

• Revenue (net of excise tax): $45.8M vs $38.8M, +18.0% YoY

• Gross Profit (IFRS, including fair value adjustments): $23.9M vs $22.7M, +5.2% YoY

• Gross Margin on Finished Cannabis Inventory Sold: 54.8% vs 52.2%, +260 bps YoY

• Adjusted EBITDA: $14.3M vs $11.5M, +23.6% YoY

• Adjusted EBITDA Margin: 31.2% vs 29.8%, +140 bps YoY

• Basic weighted average shares outstanding: 102.3M vs 94.0M, +8.9% YoY

• Diluted weighted average shares outstanding: 117.3M vs 105.3M, +11.4% YoY

• Revenue (net of excise tax): $85.6M vs $71.5M, +19.7% YoY

• Gross Profit (IFRS, including fair value adjustments): $42.2M vs $41.4M, +1.9% YoY

• YTD Gross Margin on Finished Cannabis Inventory Sold: 54.9% vs 50.5%, +440 bps YoY

• Adjusted EBITDA: $26.5M vs $19.0M, +39.8% YoY

• Adjusted EBITDA Margin: 31.0% vs 26.6%, +450 bps YoY

• Dried flower and pre-roll sales approximately 67% of Q2 revenue vs 65%, +200 bps YoY

• Cannabis 2.0 sales approximately 33% of Q2 revenue vs 35%, -200 bps YoY

• Auxly ranked as the 3rd largest licensed producer in Canada by total recreational retail sales in Q2 2026

• 14:1 share consolidation became effective July 28, 2026

• NCIB

  • 2.6M shares repurchased and cancelled during Q2 for $5.7M

  • average purchase price was $2.19 per share

  • maximum authorization is up to 4.9M shares

  • remaining capacity after Q2 repurchases is approximately 2.3M shares

• Ayurcann DIP Facility: Auxly advanced $1.5M and the facility was fully repaid on June 3, 2026, including interest and fees

Auxly did not disclose brand specific metrics, but the call gave a fair amount of colour on where the momentum is coming from. Back Forty remains the main growth engine, with strength across flower, pre-rolls and vapes.

• Total capex: $0.4M vs $0.3M, +32.4% YoY

• Total capex YTD: $1.2M vs $0.4M, +230.6% YoY

• 2026 capex guidance: $10.0M-$12.0M

• 2026-2028 capital program: up to $30.0M through the end of 2028, inclusive of 2026 spend

• Remaining 2026 capex based on H1 spend: approximately $8.8M-$10.8M

• Remaining 2026-2028 capital program based on H1 spend: approximately $28.8M

• Expected impact: roughly 30% more production capacity from 2025 levels

• Leamington capital program

  • Auxly outlined a larger $30M capital program through 2028, which includes the $10M-$12M already guided for 2026.

  • Management said they laid out the longer-term plan because investors were asking for more visibility.

  • The program is focused on Leamington and is expected to increase production capacity by roughly 30% from 2025 levels.

  • Benefits are expected to show up over the three-year period, with the program funded from internal cash flow.

• Margin sustainability

  • Gross margin and EBITDA margin improvements were described as structural and not a “one-off”

• Brand and innovation performance

  • Liquid Imagination has been the top-selling strain in Canada for more than two years.

  • Galactic Jack had already reached more than 1,400 points of distribution.

  • South Point is already a top 40 flower brand nationally with two SKUs, and another strain is planned later this year.

  • Back Forty pre-rolls were described as Canada’s favourite pre-roll, with another pre-roll innovation launching soon.

• International

  • Auxly still sees long-term opportunity internationally, but Canada remains the priority.

  • Imperial Brands was highlighted as a potential advantage when looking to expand internationally.

• Capital allocation

  • Organic investment remains the priority.

  • Auxly expects to fund capital projects and NCIB activity from cash flow without issuing equity.

  • The NCIB remains active but repurchases will be weighed against other opportunities (organic investment, selective M&A and debt payoff).

  • At current prices, management described Auxly as a buyer of shares, not an issuer.

• Revenue is usually weaker in Q1 and Q2, and the second half should be seasonally stronger.

• More product launches are planned in the core categories.

• Auxly expects to fund the Leamington expansion and NCIB from operating cash flow.

• Working capital should be similar to last year, with some increase as revenue grows.

• International remains long-term optionality, not the main focus today.

• The NCIB remains active but repurchases will be weighed against other opportunities, including organic investment, selective M&A and balance sheet strength.

I have XLY at 7.0x EV/ttm EBITDA and ~8.7x EV/ttm FCF (no working capital). I am expecting FCF growth moving forward, though it may be a bit more muted as they invest to increase capacity from here within the existing footprint.

The Auxly team is executing well. The story has moved from balance sheet repair, proving profitability and cleaning up the share structure to execution and capital allocation.

The main things I’ll be watching are Leamington capex execution, whether the 30% capacity increase starts showing up in revenue, and whether margins hold as they spend.

Despite the run, XLY is far from expensive and we haven’t seen meaningful institutional capital come into the sector.

I continue to hold and would look to add.

Thanks for reading my work.

Dean

long XLY.to