TORONTO, March 31, 2022 (GLOBE NEWSWIRE) — Auxly Cannabis Group Inc. (TSX ‐ XLY) (OTCQX: CBWTF) (“Auxly” or the “Company“), a leading consumer packaged goods company in the cannabis products market, today released its fourth quarter and full year 2021 financial results. These filings and additional information regarding Auxly are available for review on SEDAR at www.sedar.com. All amounts are Canadian dollars except common shares (“Shares”) and per Share amounts.
2021 Highlights
Year End Highlights
(000’s) For the years ended December 31: |
2021 |
2020 |
Change |
Change |
||||
Total revenues | 83,829 | 46,719 | 37,110 | 79% | ||||
Net income/(loss)* | (33,739) | (85,426) | 51,687 | 61% | ||||
Net income/(loss) from continuing operations* | (45,895) | (83,889) | 37,994 | 45% | ||||
Adjusted EBITDA** | (21,672) | (28,523) | 6,852 | 24% | ||||
Weighted average Shares outstanding | 783,379,798 | 631,528,750 | 151,851,048 | 24% |
*Attributable to shareholders of the Company
**Adjusted EBITDA is a Non‐IFRS financial measure. Refer to the Financial Measures section in this press release for definitions
(000’s) | December 31, 2021 | December 31, 2020 | Change | Change | |||||
Cash and equivalents | $ | 14,754 | $ | 20,657 | $ | (5,903) | ‐29% | ||
Total assets | $ | 450,422 | $ | 378,963 | $ | 71,459 | 19% | ||
Debt | $ | 168,809 | $ | 114,825 | $ | 53,984 | 47% |
Hugo Alves, CEO of Auxly, commented: “2021 was an incredible year of growth for Auxly. Through the tireless efforts of our passionate and talented people, we were able to navigate unprecedented challenges, deliver record revenues and market share growth and emerge as a Canadian market leader. Auxly exited 2021 as the 5th largest LP in Canada by share of market. Over the course of 2021 we were able to successfully extend our brands into Cannabis 1.0 formats, significantly enhance our cultivation capabilities and solidify our position within the top 10 licensed producers in both dried flower and pre-roll sales; all while maintaining our #1 overall position in the Cannabis 2.0 product segment and a dominant 23% share of market in vapes. On behalf of everyone at Auxly, I would like to thank our consumers. Our mission is to help you live a happier life and we are grateful for the trust you place in us every time you purchase one of our award-winning Back Forty, Kolab Project, Foray or Dosecann branded products. In order to serve you better, we successfully launched 51 exciting new SKUs over the course of 2021, including 10 first-to-market innovations, and we will continue to work relentlessly to keep you smiling in 2022 with 60 new product innovations planned for release over the course of the year. I am proud of the dedication that our team has shown – at every site and every facility – in pulling together as one organization and achieving these results and I am excited to carry the momentum that we’ve earned over the course of 2021 into the new year and continue to win with our customers and consumers.”
Results of Operations
(000’s) For the years ended: |
December 31, 2021 |
December 31, 2020 | ||||
CONTINUING OPERATIONS Revenues |
||||||
Revenue from sales of cannabis products | $ | 120,824 | $ | 57,182 | ||
Other Revenue | – | 70 | ||||
Excise taxes | (36,995 | ) | (10,533 | ) | ||
Total Net Revenues | 83,829 | 46,719 | ||||
Cost of Sales Costs of finished cannabis inventory sold |
62,754 | 33,858 | ||||
Inventory gain/impairment | 3,264 | 3,393 | ||||
Gross profit excluding fair value items | 17,811 | 9,468 | ||||
Unrealized fair value gain / (loss) on biological transformation | 2,384 | 537 | ||||
Realized fair value gain/(loss) on inventory | (905 | ) | (193 | ) | ||
Gross profit | 19,290 | 9,812 | ||||
Expenses | ||||||
Selling, general, and administrative expenses | 45,721 | 46,629 | ||||
Depreciation and amortization | 12,507 | 8,981 | ||||
Interest expense | 17,668 | 12,984 | ||||
Total expenses | 75,896 | 68,594 | ||||
Other incomes / (losses) | ||||||
Fair value gain/(loss) for financial instruments accounted under FVTPL | 6 | (4,408 | ) | |||
Interest and other income | 1,591 | 477 | ||||
Impairment of long‐term assets | (11,426 | ) | (6,146 | ) | ||
Gain/(loss) on settlement of assets and liabilities and other expenses Gain/(loss) on disposal of subsidiary |
20,289 1,355 |
(9,682) – |
||||
Share of gain/(loss) on investment in joint venture | (4,661 | ) | (7,407 | ) | ||
Foreign exchange gain/(loss) | (788 | ) | (627 | ) | ||
Total other income/(loss) | 6,366 | (27,793 | ) | |||
Net loss before income tax | (50,240 | ) | (86,575 | ) | ||
Income tax recovery | 4,330 | 681 | ||||
Net Loss from continuing operations | $ | (45,910 | ) | $ | (85,894 | ) |
Net income/(loss) from discontinued operations | 12,156 | (1,537 | ) | |||
Net income/(loss) | $ | (33,754 | ) | $ | (87,431 | ) |
Net income/(loss) attributable to shareholders of the Company | $ | (33,739 | ) | $ | (85,426 | ) |
Net loss attributable to non‐controlling interest | $ | (15 | ) | $ | (2,005 | ) |
Adjusted EBITDA | $ | (21,672 | ) | $ | (28,523 | ) |
From continuing operations | $ | (0.06 | ) | $ | (0.14 | ) |
From discontinued operations | 0.02 | (0.00 | ) | |||
Net income/(loss) per common share (basic and diluted) | $ | (0.04 | ) | $ | (0.14 | ) |
Weighted average shares outstanding (basic and diluted) | 783,379,798 | 631,528,750 |
Net Revenue
For the year ended December 31, 2021, net revenues were $83.8 million as compared to $46.7 million during the same period in 2020, an improvement of 79%. Revenue in 2021 was comprised of approximately 69% in Cannabis 2.0 Product sales, with the remainder from Cannabis 1.0 Product sales. Net revenues improved as a result of the Company’s 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 throughout 2021 originated from sales to British Columbia, Alberta and Ontario.
Gross Profit
Auxly realized a gross profit of $19.3 million resulting in a 23% gross profit margin1 during the year ended December 31, 2021, compared to $9.8 million (21%) during the same period in 2020. Gross profits improved over 2021 however they were impacted by the Company’s expansion into Cannabis 1.0 Products which presently have lower average profit margins as compared to Cannabis 2.0 Products. Following the acquisition of Auxly Leamington, the Company recognizes gross profit or loss from Auxly Leamington only as product is sold to the Company’s customers after being further processed by Auxly Ottawa or Auxly Charlottetown. For the six weeks to December 31, 2021, the Company realized approximately $0.4 million of additional gross profit as a result of the acquisition of Auxly Leamington. Prior to the acquisition of Auxly Leamington, the net earnings of Auxly Leamington were recorded in other income and expenses on an equity basis in proportion to the Company’s ownership in the joint venture.
Inventory impairment was $3.3 million for the year which was similar to the same period in 2020. For 2021, the amounts relate to the obsolescence of certain retired products and packaging, and reductions in the net realizable value of dried cannabis under the Company’s product specifications.
Unrealized fair value gains and losses on biological assets and realized fair value gains and losses on inventory in 2021 primarily relate to Auxly Leamington. In 2020, Auxly Leamington was accounted for under the equity method.
1 Gross Profit Margin is a supplemental financial measure – See “Non-GAAP Measures” in this press release.
Total Expenses
Selling, general and administrative expenses (“SG&A”) are comprised of wages and benefits, office and administrative, professional fees, business developments, share-based payments, and selling expenses. SG&A expenses were $45.7 million for 2021, which was approximately $0.9 million lower than 2020.
Wages and benefits were $17.8 million for 2021 approximately $3.4 million lower than the same period of 2020, primarily from workforce reductions at the Company’s discontinued cultivation project in Uruguay (Inverell) of approximately $1.2 million with the remainder of the savings coming from headcount reductions and absorption changes in the rest of the Company.
Office and administrative expenses of $13.6 million in 2021 increased by $1.6 million compared to the same period in 2020. The increased expenditures primarily relate to increased operating costs associated with the development and sale of Cannabis Products, TSX listing fees, and Dosecann rent, partially offset by approximately $0.8 million of reduced expenditures at Inverell.
Auxly’s professional fees were $2.9 million in 2021, which was consistent with 2020. Professional fees incurred during the period primarily related to accounting fees, regulatory matters, reporting issuer fees, and legal fees associated with certain corporate activities.
Business development expenses were $0.3 million for the year ended December 31, 2021, as compared to $0.5 million during the same period in 2020. The decrease of $0.2 million is primarily due to a reduction in acquisition, business development and travel related expenses primarily as a result of the on-going COVID-19 pandemic.
Share-based compensation was $1.4 million for the year ended December 31, 2021, as compared to $4.3 million during the same period in 2020. The reduction in expense of $2.9 million as compared to 2020 reflects the impact of lower share prices and the aging of outstanding options.
Selling expenses were $9.6 million for the year ended December 31, 2021, an increase of $4.0 million over the same period in 2020, as a result of cannabis sales activities comprised of brokerage fees earned by Kindred, Health Canada fees related to higher revenues, and increased marketing initiatives for Cannabis Products.
Depreciation and amortization expenses were $12.5 million for the year ended December 31, 2021, $3.5 million greater than the same period of 2020. The increase in expense during the current period is primarily related to additional capital expenditures and inclusion of Auxly Leamington, partially offset by amounts related to Inverell in 2020.
Interest expenses were $17.7 million in 2021, an increase of $4.7 million over 2020 primarily as a result of interest expense and accretion on the $123 million Imperial Brands Debenture and changes related to the amendments thereof, increased leases and debt assumed as a result of the acquisition of Auxly Leamington.
Total Other Incomes and Losses
Fair value changes on financial instruments arise on changes in value of promissory notes and level two securities held. For the year ended December 31, 2021, the Company reported a net fair value gain of $Nil. The $4.4 million loss for the year ended December 31, 2020 was the result of more significant valuation reductions and a larger securities portfolio during 2020.
The Company recorded interest and other incomes of $1.6 million for the year ended December 31, 2021, with increases over the same periods of 2020 primarily due to changes in interest accretion on the promissory note while Auxly Leamington was the Company’s joint venture.
Impairment of long-term assets of $11.4 million in 2021 relates to the sale of Curative where the carrying value exceeded the proceeds of sale. During 2020, the Company recognized an impairment loss on long-term assets of $6.2 million related to Inverell, its discontinued cultivation project in Uruguay.
Gains and losses on settlement of assets and liabilities and other expenses was a gain of $20.3 million in 2021 primarily related to a $16.6 million gain associated with the Imperial Brands Debenture amendments and a $4.2 million first quarter gain on the settlement of a $5.8 million liability associated with a non-monetary product exchange with another licensed producer.
The gain on disposal of subsidiary in 2021 of $1.4 million relates to the final accounting of the Curative sale transaction for assets that were not classified as held for sale prior to closing the transaction in July 2021.
The share of loss on investment in joint venture of $4.7 million represents the Company’s proportionate share of Auxly Leamington’s earnings prior to the acquisition date.
Auxly is exposed to foreign exchange fluctuations from the U.S. dollar to CAD dollar exchange rate primarily related to inventory, capital purchases and Inverell net assets. During the year ended December 31, 2021, the Company reported a foreign exchange loss of $0.8 million as compared to a loss of $0.6 million during the same period of 2020.
Net Income and Loss
Net losses attributable to shareholders of the Company were $33.7 million for the year ended December 31, 2021, representing a net loss of $0.06 per share on a basic and diluted basis. The improvement of approximately $51.7 million relative to the same period in 2020 was primarily a result of net income of $12.2 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, losses on the investment in Auxly Leamington while it was recorded as a joint venture and higher interest and depreciation and amortization expenses.
Adjusted EBITDA
Adjusted EBITDA of negative $21.7 million in 2021 improved by approximately $6.9 million over the same period in 2020 primarily driven by greater gross profits and partially offset by higher selling and office expenses.
Discontinued Operations
On May 27, 2021, the Company announced that it had reached an agreement to sell KGK to Myconic Capital Corp. (now Wellbeing Digital Sciences Inc.) (“Wellbeing”), and on June 2, 2021, completed the sale of KGK to Wellbeing. As a result of the sale, results from operations and cash flows from KGK have been presented as discontinued operations, as applicable, on a retrospective basis. The results of operations for the discontinued operations are presented below.
Year ended December 31, 2021 |
Year ended December 31, 2020 |
||||
Revenue | $ | 2, 214 | $ | 4, 077 | |
Cost of sales | 2, 109 | 2, 750 | |||
Gross profit | $ | 105 | $ | 1,327 | |
Operating expenses, net of government subsidies | 90 | 2,864 | |||
Gain on disposal, before tax | 12, 141 | ||||
Net income/(loss) before tax from discontinued operations | $ | 12, 156 | $ | (1,537 | ) |
Income tax recovery | |||||
Net income/(loss) from discontinued operations | $ | 12, 156 | $ | (1, 537 | ) |
Outlook
In 2021, Auxly remained focused on building on its success as a market leader in Cannabis 2.0 Products, while pursuing focused expansion of its Cannabis 1.0 Products. The Company’s objectives for 2021 were as follows:
Looking ahead to 2022, Auxly remains committed to building on its success as a Canadian market leader. The Company plans to drive organic growth through continued innovation, increased brand traction, and ubiquitous distribution, while prioritizing operational efficiencies and profitability. The Company’s high-level objectives for 2022 are:
Non-GAAP Measures
Please see the Company’s MD&A dated March 30, 2022, under “Non-GAAP Measures” for a further description of the following financial and supplementary financial measures.
Financial Measures
EBITDA and Adjusted EBITDA
These are non-GAAP measures used in the cannabis industry and by the Company to assess operating performance removing the impacts and volatility of non-cash and other adjustments. The definition may differ by issuer. The Adjusted EBITDA reconciliation is as follows:
(000’s) | Q4/21 | Q3/21 | Q2/21 | Q1/21 | Q4/20 | Q3/20 | Q2/20 | Q1/20 | ||||||||||||||||
Net loss from continuing operations | $ | (18,376 | ) | $ | (13,527 | ) | $ | (3,685 | ) | $ | (10,322 | ) | $ | (26,012 | ) | $ | (17,655 | ) | $ | (30,466 | ) | $ | (11,760 | ) |
Interest expense | 4,348 | 3,932 | 4,787 | 4,601 | 3,814 | 3,651 | 3,339 | 2,180 | ||||||||||||||||
Interest income | (308 | ) | (436 | ) | (431 | ) | (416 | ) | 310 | (381 | ) | (345 | ) | (61 | ) | |||||||||
Income tax recovery | – | – | (4,291 | ) | (39 | ) | (24 | ) | (90 | ) | (567 | ) | – | |||||||||||
Depreciation and amortization | ||||||||||||||||||||||||
Included in cost of sales | 689 | 386 | 326 | 141 | 208 | 267 | 176 | 245 | ||||||||||||||||
Depreciation and amortization | ||||||||||||||||||||||||
Included in expenses | 5,678 | 2,223 | 2,174 | 2,432 | 2,328 | 2,076 | 2,688 | 1,889 | ||||||||||||||||
EBITDA | (7,969 | ) | (7,422 | ) | (1,120 | ) | (3,603 | ) | (19,376 | ) | (12,132 | ) | (25,175 | ) | (7,507 | ) | ||||||||
Impairment of inventory | 2,194 | 716 | 124 | 230 | 1,763 | (312 | ) | 668 | 1,274 | |||||||||||||||
Unrealized fair value loss /(gain) on biological transformation | (1,462 | ) | (352 | ) | (315 | ) | (255 | ) | (215 | ) | (172 | ) | (201 | ) | 51 | |||||||||
Realized fair value loss/(gain) on inventory | 904 | 1 | 1 | (1 | ) | – | (2 | ) | 15 | 180 | ||||||||||||||
Share-based compensation | 212 | 55 | 960 | 206 | 472 | 1,178 | 1,282 | 1,417 | ||||||||||||||||
Fair value loss/(gain) for financial instruments accounts under FVTPL | 408 | (223 | ) | (75 | ) | (116 | ) | (262 | ) | 34 | 4,521 | 115 | ||||||||||||
Impairment of long-term assets | – | 60 | 11,366 | – | 1,784 | (144 | ) | 4,506 | – | |||||||||||||||
(Gain)/loss on settlement of assets, liabilities and disposals | 815 | (1,396 | ) | (16,995 | ) | (4,068 | ) | 6,042 | 3,453 | 2,020 | (1,834 | ) | ||||||||||||
Share of loss on investment in joint venture | (1,387 | ) | 3,095 | 2,494 | 459 | 4,412 | 1,214 | 996 | 785 | |||||||||||||||
Foreign exchange loss / (gain) | 242 | (633 | ) | 571 | 608 | 749 | 466 | 1,056 | (1,644 | ) | ||||||||||||||
Adjusted EBITDA | $ | (6,043 | ) | $ | (6,099 | ) | $ | (2,989 | ) | $ | (6,540 | ) | $ | (4,631 | ) | $ | (6,417 | ) | $ | (10,312 | ) | $ | (7,163 | ) |
Supplementary Financial Measures
Gross Profit Margin
“Gross Profit Margin” is defined as gross profit divided by revenue. Gross profit margin is a supplementary financial measure.
ON BEHALF OF THE BOARD
“Hugo Alves” CEO
About Auxly Cannabis Group Inc. (TSX: XLY)
Auxly is a leading Canadian cannabis company dedicated to bringing innovative, effective, and high‐quality cannabis products to the wellness and adult‐use markets. Auxly’s experienced team of industry first‐ movers and enterprising visionaries have secured a diversified supply of raw cannabis, strong clinical, scientific and operating capabilities and leading research and development infrastructure in order to create trusted products and brands in an expanding global market.
Learn more at www.auxly.com and stay up to date at Twitter: @AuxlyGroup; Instagram: @auxlygroup; Facebook: @auxlygroup; LinkedIn: company/auxlygroup/.
Investor Relations:
For investor enquiries please contact our Investor Relations Team: Email: IR@auxly.com
Phone: 1.833.695.2414
Media Enquiries (only):
For media enquiries or to set up an interview please contact: Email: press@auxly.com
Notice Regarding Forward Looking Information:
This news release contains certain “forward‐looking information” within the meaning of applicable Canadian securities law. Forward‐looking information is frequently characterized by words such as “plan”, “continue”, “expect”, “project”, “intend”, “believe”, “anticipate”, “estimate”, “may”, “will”, “potential”, “proposed” and other similar words, or information that certain events or conditions “may” or “will” occur. This information is only a prediction. Various assumptions were used in drawing the conclusions or making the projections contained in the forward‐looking information throughout this news release. Forward‐looking information includes, but is not limited to: the proposed operation of Auxly, its subsidiaries and partners; the intention to grow the business, operations and existing and potential activities of Auxly; proposed timelines for the build‐out, expansion, licencing or commercialization of the Company’s facilities and projects; the Company’s response to the COVID‐19 pandemic; the impact of the COVID‐19 pandemic on the Company’s current and future operations; the Company’s execution of its innovative product development, commercialization strategy and expansion plans; the Company’s intention to introduce innovative new cannabis products to the market and the timing thereof; the anticipated benefits of the Company’s partnerships, research and development initiatives and other commercial arrangements; the anticipated benefits of the Company’s acquisition of Auxly Leamington; the expectation and timing of future revenues and of positive Adjusted EBITDA; expectations regarding the Company’s expansion of sales, operations and investment into foreign jurisdictions; future legislative and regulatory developments involving cannabis and cannabis products; the timing and outcomes of regulatory or intellectual property decisions; the ability of the Company to maintain and grow its market share; the relevance of Auxly’s subsidiaries’ current and proposed products with provincial purchasers and consumers; consumer preferences; political change; competition and other risks affecting the Company in particular and the cannabis industry generally.
A number of factors could cause actual results to differ materially from a conclusion, forecast or projection contained in the forward‐looking information in this release including, but not limited to, whether: the Company will be able to execute on its business strategy; Auxly’s subsidiaries and partners are able to obtain and maintain the necessary governmental and regulatory authorizations to conduct business; the Company is able to successfully manage the integration of its various business units with its own; there are not materially more closures or lockdowns related to the COVID‐19 pandemic; the Company’s subsidiaries and partners are able to obtain and maintain all necessary governmental and regulatory permits and approvals for the operation of their facilities and the development of cannabis products, and whether such permits and approvals can be obtained in a timely manner; the Company will be able to successfully integrate Auxly Leamington’s operations with its own, and whether the expected benefits of the acquisition materialize in the manner expected, or at all; the Company will be able to successfully launch new product formats and enter into new markets; there is acceptance and demand for current and future Company products by consumers and provincial purchasers; the Company will be able to increase revenues and achieve positive Adjusted EBITDA; and general economic, financial market, legislative, regulatory, competitive and political conditions in which the Company and its subsidiaries and partners operate will remain the same. Additional risk factors are disclosed in the annual information form of the Company for the financial year ended December 31, 2021 dated March 30, 2022.
New factors emerge from time to time, and it is not possible for management to predict all of those factors or to assess in advance the impact of each such factor on the Company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward‐looking information. The forward‐looking information in this release is based on information currently available and what management believes are reasonable assumptions. Forward‐looking information speaks only to such assumptions as of the date of this release. In addition, this release may contain forward‐looking information attributed to third party industry sources, the accuracy of which has not been verified by the Company. The forward‐looking information is being provided for the purposes of assisting the reader in understanding the Company’s financial performance, financial position and cash flows as at and for periods ended on certain dates and to present information about management’s current expectations and plans relating to the future, and the reader is cautioned that such forward‐ looking information may not be appropriate for any other purpose. Readers should not place undue reliance on forward‐looking information contained in this release.
The forward‐looking information contained in this release is expressly qualified by the foregoing cautionary statements and is made as of the date of this release. Except as may be required by applicable securities laws, the Company does not undertake any obligation to publicly update or revise any forward‐ looking information to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events, whether as a result of new information, future events or results, or otherwise.
Neither Toronto Stock Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Toronto Stock Exchange) accepts responsibility for the adequacy or accuracy of this release.
1) Headset Canadian Insights data, Jan 1, 2021 – Dec 31, 2021
2) Recipient of the “Best Indica Pre-Roll” at the 2021 Kind Awards
3) Brightfield Group, all 4 brands increased in national brand recognition as reported between March 2020 – September 2021
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