Auxly's Record Quarter and the Case for Buying Back Its Own Stock
Cannabis operator posts record revenue and EBITDA, but management says the market isn't reflecting the value—so it's repurchasing shares.
XLY.TO · Earnings Call · 2026-08-13
Record Quarter, Structural Margins
Auxly Cannabis Group (XLY.TO) delivered what it called a "quarterly record" in net revenue, adjusted EBITDA, and cash flow from operations for Q2 2026. Net revenue hit $45.8 million, up 18% year-over-year, with adjusted EBITDA up 24% to $14.3 million, translating into a 31% EBITDA margin. “We have the operating assets, the scale, and cost discipline to deliver best in class margins” — Hugo Alves, Co-founder and Chief Executive Officer · 2026-08-13, said CEO Hugo Alves. That margin is not a fluke: management is emphasizing class margins as structural, driven by cultivation yields, manufacturing improvements, and strategic procurement initiatives. The cash flow conversion from EBITDA was an impressive 94%, and the balance sheet shows $38M cash against $44M debt. “We believe that the operating leverage we are delivering is structural.” — Hugo Alves, Co-founder and Chief Executive Officer · 2026-08-13
Why the Market Isn't Paying Attention
Yet the market's response has been muted—or at least the share price hasn't tracked the fundamentals. Management addressed this directly. In July, they completed a 14-to-1 share consolidation, and they've been active on the NCIB, deploying $5.7M in the quarter to repurchase shares. Hugo Alves put it plainly:
We are building to last.
On the NCIB, he added, “At these prices, we are buyers of our shares, not as issuers.” — Hugo Alves, Co-founder and Chief Executive Officer · 2026-08-13 The intrinsic value argument is central: they are generating record cash flow and still see their stock as undervalued. This is a notable shift from earlier quarters where the focus was purely on margin expansion and operational turnaround.
Expansion and "Win at Home"
The company is also reinvesting in growth. Auxly disclosed a ~$30 million capital program over the next three years to increase yields at Leamington by 30% over 2025 levels. This includes the previously guided $10-12M for 2026. CFO Travis Wong explained that the expansion is manageable and funded from operations. This ties to the company's "win at home" strategy, a phrase that appears prominently in this quarter's keyword trajectory. Win at home reflects management's clear priority: dominate the Canadian market before chasing international opportunities. “We are not in a rush. Our view has not changed. We continue to be focused on winning at home.” — Hugo Alves, Co-founder and Chief Executive Officer · 2026-08-13
The record is underpinned by innovation. The Galactic Jack launch under Back Forty has already won 1,400 points of distribution, and Liquid Imagination remains the top-selling strain in Canada. The company is confident in its back-half pipeline, with new pre-roll and vape SKUs planned. This is a continuation of the strategy we saw in prior calls, where management repeatedly highlighted low-cost cultivation and automation. “We've seen an improvement simply in the dried flower and pre-roll sections because of the low-cost structure of Auxly Leamington.” — Brian Schmitt, CFO · 2023-05-15 That was from the Q2 2023 call, showing that the margin story has been building for years. In the past, we saw the company navigate price compression in vapes, as when management noted, “we do expect to see some momentum and an uptick throughout Q4 as retailers would have been able to pull the revised pricing.” — Michael Lickver, Chief Operating Officer · 2022-11-14
What's changed is the confidence. Three years ago, the company was just turning EBITDA positive; now it's printing record cash flow, buying back stock, and outlining a multi-year growth capex plan. The cash flow from operations has become a tangible proof point. Yet the market cap remains under $250M for a company generating $14M quarterly EBITDA—a compelling capital return story if management executes.
There are risks, of course: cannabis price compression, regulatory uncertainty, and the fact that the expansion plan is front-loaded. But the fundamental trajectory is upward. As Hugo Alves said in closing, "We are building to last." The market may finally be starting to agree.