Elixinol Faces Cash Tightness as Margin Recovery and Ecommerce Growth Unfold
Elixinol Wellness reported a 13.7% year-on-year revenue increase in Q1 FY25, despite a softer quarter compared to record Q4, with ecommerce momentum and strategic initiatives setting the stage for margin recovery and growth in H2.
- Q1 FY25 revenue up 13.7% year-on-year to $3.5M, down 18.7% from record Q4
- Gross margin declined to 37% due to legacy SKU clearance and promotional rebates, forecast to improve to 43-45%
- Temporary rise in operating expenses linked to Healthy Chef integration and restructuring
- Ecommerce channels continue strong growth, supporting a positive outlook for second half
- Closing cash at $599K with net operating cash outflow of $626K; cost-saving measures underway
Q1 Performance Overview
Elixinol Wellness Limited (ASX: EXL) has released its Q1 FY25 activities report, revealing a mixed but cautiously optimistic performance. The company posted revenue of $3.5 million for the quarter, marking a 13.7% increase compared to Q1 FY24. However, this figure represents an 18.7% decline from the record-breaking $4.3 million achieved in Q4 FY24. The softer quarter reflects timing delays in new product ranging and a strategic rationalisation of retail SKUs.
Despite this, the company’s ecommerce segment maintained strong momentum, underpinning a more robust outlook for the second half of the fiscal year. This channel’s growth is particularly important as it offers higher margins and less exposure to traditional retail pressures.
Margin and Cost Dynamics
Gross margin contracted to 37% in Q1 from 40% in the previous quarter, primarily due to increased promotional rebates and the clearance of legacy low-margin SKUs. Management forecasts a margin rebound to between 43% and 45% by the end of 2025, driven by a shift towards higher-margin ecommerce sales, refined pricing strategies, and procurement efficiencies.
Operating expenses saw a temporary uptick, attributed to the integration of The Healthy Chef team, closure of the Ananda facility, and broader team restructuring efforts. These non-recurring costs weighed on the quarter’s profitability but are expected to ease, with cost-saving initiatives already underway to reduce the operating cost base from Q2 onwards.
Brand and Channel Performance
Revenue contributions varied across Elixinol’s portfolio. The Healthy Chef brand generated $738,000, buoyed by a refreshed digital strategy and plans to launch five new SKUs starting May 2025. Hemp Foods Australia experienced a decline to $1.03 million, impacted by delayed new SKU ranging and the phase-out of Hemp Gold Protein at Costco. Mt Elephant’s revenue softened to $233,000 due to SKU reductions and seasonal factors but maintained core distribution in major grocery chains.
Elixinol USA stabilized with $451,000 in revenue and maintained gross margins above 61%, supported by renewed growth initiatives and digital marketing efforts. Bulk Ingredients and Aust Superfoods posted softer and improved performances respectively, reflecting competitive pressures and targeted sales strategies.
Channel-wise, direct-to-consumer (DTC) and ecommerce channels outperformed, reducing reliance on traditional grocery retail, which faced reorder gaps and SKU rationalisations. Distributor and wholesale channels saw reduced promotional activity but are expected to recover in Q2.
Cash Flow and Financing
Elixinol reported a net operating cash outflow of $626,000 for Q1, closing the quarter with $599,000 in cash. The company has secured multiple financing facilities, including trade debtor finance and ecommerce revenue advances through partners like ScotPac, PayPal Commerce Finance, and Shopify Commerce Finance. These facilities provide liquidity to support inventory growth and operational scaling.
Management acknowledges the tight cash position but remains confident in reducing cash burn through margin-accretive revenue growth and disciplined cost control. Discussions on additional secured funding options are ongoing, with expectations to bolster the balance sheet further in Q2.
Strategic Outlook
Looking ahead, Elixinol is focused on expanding The Healthy Chef portfolio with new product launches targeting well-ageing and functional hydration markets. The company is also advancing the national rollout of the Soul Seed snacking range, pending strategic distribution partnerships.
In the U.S., a dedicated marketing resource and targeted digital campaigns aim to reignite growth, particularly through practitioner and DTC channels. The company’s structural realignment is complete, providing a streamlined foundation for enhanced commercial execution and growth.
Overall, while Q1 presented some headwinds, Elixinol Wellness is positioning itself for a stronger second half of FY25, with margin recovery, product innovation, and ecommerce growth as key drivers.
Bottom Line?
Elixinol’s Q1 challenges set the stage for a pivotal H2 as margin recovery and ecommerce growth take centre stage.
Questions in the middle?
- Will margin improvements materialize as forecasted through 2025?
- How effectively can Elixinol scale its ecommerce channels to offset retail softness?
- What impact will new product launches and U.S. market initiatives have on revenue momentum?
