Elixinol Wellness reported steady Q3 revenue with a notable 300bps gross margin improvement, driven by e-commerce and core brands, while executing cost reduction initiatives supported by a $2.5 million capital raise.
- Q3 revenue steady at $3.8 million, year-to-date receipts up 9%
- Gross margin expanded by 300 basis points, led by e-commerce growth
- Operational cost reduction initiatives underway targeting Q4 savings
- Two-tranche $2.5 million capital raise supports liquidity and growth
- New premium protein supplements launched under The Healthy Chef brand
Steady Revenue and Margin Expansion
Elixinol Wellness Limited (ASX – EXL) has delivered a solid performance in the third quarter of fiscal 2025, maintaining revenue at $3.8 million, consistent with the prior year despite ongoing portfolio rationalisation. Year-to-date receipts have increased by 9% to $11.75 million, reflecting improved customer payment cycles and disciplined working capital management.
The company’s gross margin rose by 300 basis points compared to the previous quarter, a significant uplift driven by a strategic shift towards higher-margin e-commerce sales and core brand offerings. This margin expansion underscores Elixinol’s focus on derisking its business model and enhancing profitability through a more premium revenue mix.
Operational Discipline and Cost Control
Elixinol is actively implementing structural cost reduction measures, including overhead optimisation, tighter procurement controls, and SKU rationalisation. These initiatives are on track to deliver material operating cost savings starting in the fourth quarter of 2025. The company reported operating cash outflows of $1.3 million in Q3, consistent with planned seasonal inventory investments ahead of harvest.
Management’s focus on operational efficiency is complemented by a rightsizing strategy aimed at streamlining staffing and consolidating marketing activities in-house, which is expected to further improve margins and cash flow in the coming quarters.
Capital Raise and Liquidity Position
At the end of Q3, Elixinol held $0.4 million in cash, bolstered by a successful two-tranche capital raise totaling $2.5 million. The first tranche of $0.6 million was received during the quarter, with the remaining $1.9 million expected in mid-November following shareholder approval. This capital injection is intended to support growth initiatives, working capital flexibility, and ongoing margin and efficiency projects.
The company also maintains access to multiple financing facilities, including trade debtor and e-commerce revenue advances, which provide additional liquidity buffers. Despite a tight cash runway of approximately 0.3 quarters based on current operating cash flows, management anticipates improved cash generation and reduced outflows in Q4 through its cost and margin initiatives.
Brand Performance and Product Innovation
Hemp Foods Australia delivered its strongest quarter of the year, driven by core product categories, offsetting a softer period for The Healthy Chef brand following an exceptional Q2. The Healthy Chef is actively expanding into the high-growth functional nutrition market with new premium protein supplements launched in Q3, including grass-fed collagen blends targeting the $499 million Australian protein supplements sector.
Looking ahead, The Healthy Chef plans to launch 'Metabolic Burn' in Q4, a premium supplement designed to support metabolic wellness, aligning with global health trends and reinforcing Elixinol’s strategy to broaden its footprint in the wellness and performance nutrition space.
Outlook and Strategic Focus
Elixinol’s management remains confident in the company’s trajectory towards sustained profitability. The combination of margin accretive revenue growth, disciplined cost control, and enhanced capital management is expected to reduce net cash outflows and drive breakeven results in the near term. Investors will be watching closely to see if the company can translate these operational improvements into consistent positive cash flow and earnings in the upcoming quarters.
Bottom Line?
Elixinol’s Q3 progress sets the stage for a critical Q4 test of its margin expansion and cash flow turnaround strategy.
Questions in the middle?
- Will the anticipated Q4 cost savings and margin improvements materialize as planned?
- How will the market receive The Healthy Chef’s new premium supplements in a competitive wellness sector?
- Can Elixinol sustain liquidity beyond Q4 without additional capital raises?