HEXO Corp announces positive adjusted EBITDA and 94% increase in net revenue from prior year
March 18 2021 - 6:30AM
HEXO Corp. (TSX: HEXO; NYSE: HEXO) (“HEXO” or the "Company") today
reported its financial results for the second quarter fiscal 2021
ended January 31, 2021 (“2Q21”). All amounts are expressed in
Canadian dollars unless otherwise noted.
"I am so proud of the entire HEXO team for the role they played
in helping us achieve positive adjusted EBITDA this quarter, along
with our seventh consecutive quarter of adjusted EBITDA
improvement," said HEXO CEO and co-founder Sebastien St-Louis. "Our
continued focus on delighting consumers has seen us increase
our market share across Canada while maintaining the number one
position in Quebec. We’re also very excited to have launched
“powered by HEXO” CBD beverages in Colorado. Our net revenues
and gross margin have continued to improve year over
year, bolstered by our premium product mix with the relaunch
of UP Cannabis."
"We are especially excited about our recently announced
agreement to acquire Zenabis. We believe this transaction
will be accretive for our shareholders and will position HEXO
for accelerated domestic and international growth. The
acquisition would place HEXO solidly in the top three position
among licensed producers for Canadian adult-use cannabis sales,
based on the most recent interim quarterly financial statements,”
continued St-Louis.
Key Financial & Operating Highlights
-
Achieved positive adjusted EBITDA, along with the seventh
consecutive quarter of adjusted EBITDA improvement.
-
Total net revenue increased to $32.8M, up 94% from the prior year
quarter (“2Q20”) and 12% from the first quarter of fiscal 2021
ended October 31, 2021 (“1Q21”).
-
Non-beverage Canadian adult-use revenue increased by 72% from
2Q20
-
Adult-use net revenue increased by 10.5% in 2Q21, marking the fifth
consecutive quarter of growth.
-
Maintained number one position for market share in Quebec while
increasing adult-use net revenues in the rest of Canada to 49% of
the Company’s sales composition, up from 44% in 1Q21.
-
Gross revenues for the UP Cannabis brand increased to $3.2M,
representing 8% of total adult-use, non-beverage gross revenue in
2Q21 vs under 1% in 1Q21 due to the successful relaunch of the UP
brand in late 1Q21.
-
Brand mix, including the UP Cannabis brand, boosted non-beverage
adult-use gross margin to 37%, up from 36% in 1Q21.
-
Maintained the number one position in the beverage category with
net revenue increasing 11% over 1Q21.
-
Operational cash use of ($2.9M) for the quarter, and ($8.1M) over
the past three quarters combined, not including non-cash working
capital items.
-
Due to HEXO’s ongoing success, the Company has never qualified for
the Government of Canada’s COVID-19 related emergency response
programs, such as the Canada Emergency Wage Subsidy (CEWS).
Conversely, several of the Company’s competitors have received tens
of millions of dollars, all of which has been included in their
operational cash flows
Subsequent Events
-
Appointed Charles Bowman as General Manager of US Operations
-
Entered into definitive arrangement agreement to acquire Zenabis
Global Inc. The transaction remains subject to customary closing
approvals including regulatory and shareholders approvals, as well
as approval of the Plan of Arrangement by the British Columbia
Supreme Court.
-
Won a complete dismissal (subject to plaintiffs’ appeal right) in
the federal US securities class action pending in the United States
District Court for the Southern District of New York.
|
For the three months ended |
For the six months ended |
Income Statement Snapshot |
January 31, 2021 |
|
October 31, 2020 |
|
January 31, 2020 |
|
January 31, 2021 |
|
January 31, 2020 |
|
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
Revenue from sale of goods |
45,678 |
|
41,300 |
|
23,817 |
|
86,977 |
|
43,114 |
|
Excise
taxes |
(12,851 |
) |
(11,887 |
) |
(6,861 |
) |
(24,738 |
) |
(11,699 |
) |
Net revenue from sale of goods |
32,827 |
|
29,413 |
|
16,956 |
|
62,239 |
|
31,415 |
|
Ancillary
revenue |
53 |
|
55 |
|
51 |
|
108 |
|
92 |
|
Total revenue |
32,880 |
|
29,468 |
|
17,007 |
|
62,347 |
|
31,507 |
|
|
|
|
|
|
|
Gross profit before adjustments |
11,688 |
|
10,381 |
|
5,676 |
|
22,067 |
|
10,114 |
|
Gross profit/(loss) before fair value
adjustments |
11,314 |
|
11,924 |
|
(10,413 |
) |
23,236 |
|
(31,854 |
) |
Gross profit/(loss) |
18,584 |
|
18,214 |
|
(7,912 |
) |
36,796 |
|
(28,966 |
) |
|
|
|
|
|
|
Operating
expenses |
(25,501 |
) |
(20,776 |
) |
(281,506 |
) |
(46,280 |
) |
(321,030 |
) |
Loss from operations |
(6,917 |
) |
(2,562 |
) |
(289,418 |
) |
(9,484 |
) |
(349,996 |
) |
Other
expenses and
losses |
(13,922 |
) |
(1,635 |
) |
(8,749 |
) |
(15,553 |
) |
(14,325 |
) |
Net loss before tax |
(20,839 |
) |
(4,197 |
) |
(298,167 |
) |
(25,037 |
) |
(364,321 |
) |
Tax
recovery |
– |
|
– |
|
– |
|
– |
|
6,023 |
|
Total Net
loss |
(20,839 |
) |
(4,197 |
) |
(298,167 |
) |
(25,037 |
) |
(358,298 |
) |
Second Quarter 2021 Financial Results
Total net revenue in 2Q21 increased $3.4M to $32.8M from $29.4M
in 1Q21 due primarily to 11% growth in non beverage adult-use
cannabis sales and 11% growth in adult-use beverage. Total net
revenue increased 94% from the comparative period of fiscal 2020.
The Company strengthened its positions in several key Canadian
markets outside of Quebec, while maintaining its top competitive
position within Quebec.
Total net revenue for the six months ended January 31, 2021
increased 98% to $62,347 compared to the same period of
fiscal 2020.
For the three months ended |
Adult-Use(excluding beverages) |
Medical |
International |
Wholesale |
Total non-beverage |
Adult-usebeverage |
Company total |
January 31, 2021 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
Net revenue |
26,904 |
422 |
2,000 |
109 |
29,435 |
3,392 |
32,827 |
Cost of
sales |
17,010 |
143 |
577 |
44 |
17,774 |
3,418 |
21,192 |
Gross profit before adjustments ($) |
9,894 |
279 |
1,423 |
65 |
11,661 |
(26) |
11,635 |
Gross margin
before adjustments (%) |
37% |
66% |
71% |
60% |
40% |
(1%) |
35% |
|
|
|
|
|
|
|
|
October 31, 2020 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
Net revenue |
24,344 |
486 |
1,125 |
401 |
26,356 |
3,057 |
29,413 |
Cost of
sales |
15,497 |
123 |
317 |
113 |
16,050 |
3,037 |
19,087 |
Gross profit before adjustments ($) |
8,847 |
363 |
808 |
288 |
10,306 |
20 |
10,326 |
Gross margin
before adjustments (%) |
36% |
75% |
72% |
72% |
39% |
1% |
35% |
|
|
|
|
|
|
|
|
The Company’s consolidated gross margin for 2Q21 remained
consistent at 35% from 1Q21. The Company’s recently relaunched
premium Up brand contributed $3.2M in sales during the period.
Reduction of total operating expenses by 91% in 2Q21 from 2Q20,
as the Company had no material impairments in the period. SG&A,
marketing and promotion and R&D expenses improved by 3% from
2Q20 as the Company has actively sought to reduce operating
expenses and drive toward EPS. These expenses were reduced 23% for
the six months ended January 31, 2021 as compared to the same
period of fiscal 2020.
The Company met its goal of reaching positive adjusted EBITDA in
2Q21. Total adjusted EBITDA improved by 148% to $202 from ($419) in
the previous quarter.
Adjusted EBITDA
|
Q2’21 |
|
|
Q1’21 |
|
|
$ |
|
|
$ |
|
Total net
loss |
(20,839 |
) |
|
(4,197 |
) |
Finance expense (income), net |
2,472 |
|
|
1,895 |
|
Depreciation, included in cost of sales |
2,385 |
|
|
2,406 |
|
Depreciation, included in operating expenses |
1,679 |
|
|
1,078 |
|
Amortization, included in operating expenses |
342 |
|
|
331 |
|
EBITDA |
(13,961 |
) |
|
1,513 |
|
|
|
|
|
Investment (gains) losses |
13,135 |
|
|
1,388 |
|
Non-cash fair value adjustments |
(7,270 |
) |
|
(6,290 |
) |
Non-recurring expenses |
1,296 |
|
|
525 |
|
Other non-cash items |
7,002 |
|
|
2,445 |
|
Adjusted EBITDA |
202 |
|
|
(419 |
) |
The management’s discussion and analysis for the period and the
accompanying financial statements and notes are available under the
Company's profile on SEDAR
at www.sedar.com and on its website
at www.hexocorp.com.
Non-IFRS Measures
In this press release, reference is made to gross profit before
adjustment, profit/margin before fair value adjustments, adjusted
gross profit/margin, adjusted EBITDA, and revenue per gram
equivalent which are not measures of financial performance under
International Financial Reporting Standards (IFRS). These metrics
and measures are not recognized measures under IFRS, do not have
meanings prescribed under IFRS and are as a result unlikely to be
comparable to similar measures presented by other companies. These
measures are provided as information complementary to those IFRS
measures by providing a further understanding of our operating
results from the perspective of management. As such, these measures
should not be considered in isolation or in lieu of a review of our
financial information reported under IFRS. Definitions and
reconciliations for all terms above can be found in the Company’s
Management’s Discussion and Analysis for the three and six months
ended January 31, 2021, filed on SEDAR and EDGAR.
Conference Call
The Company will hold a conference call, March 18th, 2020 to
discuss these results. Sebastien St-Louis, CEO, and Trent
MacDonald, CFO, will host the call starting at 8:30 a.m. Eastern.
Analysts’ question and answer period will follow management’s
presentation.
Date: March 18, 2021 Time: 8:30 a.m. EST
Webcast: https://event.on24.com/wcc/r/2948058/C229CDF2D3B1E49A664CAA0768E4F4B2
For previous quarterly results and recent press releases,
see hexocorp.com.
About HEXO Corp
HEXO Corp is an award-winning consumer packaged goods cannabis
company that creates and distributes innovative products to serve
the global cannabis market. The Company serves the Canadian
adult-use markets under its HEXO Cannabis, Up Cannabis and Original
Stash brands, and the medical market under HEXO medical cannabis.
For more information please
visit hexocorp.com.
Forward-Looking Statements
This press release contains forward-looking information and
forward-looking statements within the meaning of applicable
securities laws (“forward-looking statements”). Forward-looking
statements are based on certain expectations and assumptions and
are subject to known and unknown risks and uncertainties and other
factors that could cause actual events, results, performance and
achievements to differ materially from those anticipated in these
forward-looking statements. Forward-looking statements should not
be read as guarantees of future performance or results.
Forward-looking statements in this press release include but are
not limited to the Company’s statements with respect to
management’s belief that certain expenses included in operating
expenses are non-recurring and related to significant changes in
market conditions and the refocus of its operations on becoming
Adjusted EBITDA positive.
A more complete discussion of the risks and uncertainties facing
the Company appears in the Company’s Annual Information Form and
other continuous disclosure filings, which are available on SEDAR
at www.sedar.com and EDGAR
at www.sec.gov. Readers
are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this press release.
The Company disclaims any intention or obligation, except to the
extent required by law, to update or revise any forward-looking
statements as a result of new information or future events, or for
any other reason.
Investor Relations:
invest@HEXO.com
www.hexocorp.com
Media Relations: (819) 317-0526
media@hexo.com
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