Elixinol Wellness Hits Q4 Cashflow Positive With 42% Margins and 30% Cost Cut

Elixinol Wellness delivers Q4 turnaround with positive cash flow and 30% cost reduction

Elixinol Wellness has reported its full year results for FY25, marking a decisive shift from restructuring to operational efficiency. The Elixinol Wellness margin expansion strategy has delivered tangible results in Q4 FY25, with the company achieving positive adjusted EBITDA and positive underlying operating cash flow for the quarter. The wellness company reduced its operating cost base by 30% in Q4 FY25 compared to Q4 FY24, whilst simultaneously expanding gross margins to 42% in the same period.

Full year revenue reached $15.5m, representing 3.6% growth despite challenging retail conditions and subdued US sales. Australian operations drove the result, with revenue increasing 8% to $13.9m. The company recorded a net loss after tax of $5.5m, compared to $1.7m in FY24 (which benefited from a one-off tax benefit of $3.6m). Net cash used in operations improved to $3.2m, down from $3.5m in the prior year, with the business generating positive underlying operating cash flow in Q4 FY25.

The company closed the period with a cash balance of $1.4m, having raised $4.0m in capital during FY25 ($1.5m in 1H and $2.5m in 2H). Management characterised FY25 as a year of deliberate reset following merger and acquisition activity in FY24, with the business now structurally positioned for sustainable profitability in FY26.

E-commerce surge and margin expansion underpin the Elixinol Wellness margin expansion strategy

Australian e-commerce revenue surged 163% to $4.3m in FY25, up from $1.6m in the prior year, driven predominantly by the full year contribution from The Healthy Chef acquisition and six new product launches. This channel shift represents the core mechanism behind the company’s margin improvement, with e-commerce carrying materially higher margins than traditional retail distribution.

Gross margin expanded from 38% in FY24 to 39% on a full year basis, with progression accelerating through the year. Early pressure from legacy contracts and global ingredient pricing headwinds eased progressively, with margin improvement achieved quarter-on-quarter. By Q4 FY25, gross margins reached 42%, providing a forward indicator of the structural margin uplift as lower-margin retail SKUs are phased out.

Australian retail revenue declined 19% to $7.1m, reflecting deliberate SKU rationalisation through major retailers. This strategic reduction in lower-margin product lines supported the overall margin improvement despite creating a revenue headwind. The adjusted EBITDA loss of $3.4m (versus $3.0m in FY24) reflected one-off integration costs during 1H FY25, with the cost base reset and contract renegotiations completed during the year positioning the business for materially improved profitability in FY26.

What is margin expansion and why does it matter for small-cap investors?

Margin expansion refers to a company’s ability to retain a larger portion of each dollar of revenue as gross profit, either through selling products at better prices, reducing production costs, or shifting to higher-margin products and sales channels. For loss-making companies transitioning towards profitability, margin expansion can be a more powerful driver of earnings improvement than revenue growth alone.

In Elixinol’s case, the Elixinol Wellness margin expansion strategy operates through three mechanisms. First, shifting sales from traditional retail (which requires wholesaler margins and promotional support) to direct e-commerce channels. Second, rationalising lower-margin SKUs and focusing on higher-margin product categories. Third, renegotiating legacy supply contracts that were locking in unfavourable terms. The result is visible in the progression from 38% gross margin in FY24 to 42% in Q4 FY25, a 400 basis point improvement that flows directly to the bottom line.

For investors, margin expansion is often the leading indicator of future profitability because it demonstrates a company can generate more profit from existing operations without relying solely on revenue growth. Elixinol’s Q4 FY25 positive adjusted EBITDA demonstrates this principle in action, with the company reaching operational breakeven despite full year revenue growing only modestly at 3.6%.

Brand-by-brand performance snapshot

1. The Healthy Chef delivered strong growth throughout FY25, with six new product launches including one menopause-focused product, three protein waters and two limited-edition protein powders. The brand’s predominantly e-commerce model and high-margin profile underpinned group performance during challenging retail conditions.

2. Hemp Foods Australia recorded relatively flat revenue compared to FY24, an outcome management characterised as encouraging given the prior year benefited from an unusually large innovation pipeline and Costco distribution for Hemp Gold Protein. Despite flat revenue, margins improved quarter-on-quarter as the brand refocused on higher-margin products and channels.

3. Elixinol USA recorded subdued sales as the US CBD category faced ongoing regulatory uncertainty. A full brand refresh and new product development was completed during FY25 but deliberately paused pending regulatory clarity. With increasing confidence that legislative updates are approaching, the rebrand rollout is scheduled for Q1 2026 alongside new product launches.

4. Mt Elephant exited Woolworths at the end of FY25 as supermarket rationalisation impacted smaller brands, with focus for FY26 exclusively on Coles. Work is underway with Coles on innovation across flavour, format and sustainability, with management positioning this reset as a launchpad for renewed growth.

5. Contract Manufacturing experienced contraction during FY25 as some hemp-related contracts were reduced and two key customers discontinued superfood ingredient SKUs. This has since reversed, with expanded supply contracts secured for 2026, whilst new opportunities progress across the Australian Superfood Co. portfolio.

FY26 outlook positions Elixinol for sustainable profitability

Elixinol enters FY26 with structural advantages absent at the start of FY25: a 30% lower operating cost base (comparing Q4 FY25 to Q4 FY24), gross margins expanding towards 42%, and demonstrated ability to generate positive adjusted EBITDA and positive underlying operating cash flow. The majority of restructuring and integration activity from the FY24 acquisitions is now complete, positioning FY26 to deliver cleaner operating performance without one-off costs.

Management is actively assessing value-accretive M&A opportunities that could scale the business, broaden distribution or add complementary product capabilities. This optionality provides potential catalysts beyond organic growth, whilst maintaining capital discipline given the company’s $1.4m cash position.

Gavin Evans, Chair

“We enter FY26 with a more disciplined, capital efficient and diversified business… We are well positioned to deliver sustainable growth and improved profitability in FY26 and beyond.”

The company has articulated a vision to build a portfolio of premium branded health food assets with Australian manufacturing capabilities and global growth potential. For investors, the Elixinol Wellness margin expansion strategy has progressed from concept to demonstrated execution in Q4 FY25. The key question for FY26 is whether the company can maintain Q4’s 42% gross margin and positive EBITDA performance on a sustained full year basis, whilst returning to revenue growth as Mt Elephant stabilises and The Healthy Chef continues scaling.

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