We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Share Name | Share Symbol | Market | Type |
---|---|---|---|
HEXO Corp | NASDAQ:HEXO | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.71 | 0.69 | 0.71 | 0 | 01:00:00 |
HEXO Corp. (TSX: HEXO; NASDAQ: HEXO) ("HEXO" or the “Company"), a leading producer of high-quality cannabis products, today reported its financial results for the third quarter of the 2023 fiscal year (“Q3’23”). All currency amounts are stated in Canadian dollars unless otherwise noted.
“In the third quarter, we entered into a definitive arrangement agreement whereby Tilray will acquire all outstanding shares of HEXO,” said Charlie Bowman, President and Chief Executive Officer of HEXO. “We continue to expect the transaction will be completed by June 30, 2023.”
“HEXO recorded $21.6 million in net revenues in the third quarter, representing an 11% decline from the second quarter,” noted Julius Ivancsits, Chief Financial Officer of HEXO. “Our G&A expenses, excluding Health Canada cannabis fees1, improved by $2.6 million compared to the second quarter, while our selling, marketing, and promotion expenses were largely flat quarter over quarter. We recognized an adjusted EBITDA2 loss of $3.9 million, compared to a loss of $2.4 million in the second quarter.”
Significant Financial Results
1 G&A (or General and Administrative) expenses net of Health Canada cannabis fees constitutes a non-IFRS measure and differs from the presentation within the Q3’23 financial statements. See the Operating Expenses table below for reconciliation to financial statement presentation. 2 Adjusted EBITDA is a non-IFRS measure with no standardized definition. See section ‘Reconciliation for Adjusted Earnings before interests, taxes, depreciation and amortization to total net loss before tax’ below for full the reconciliation to the financial statement presentation of net loss.
Key Financial Results (in thousands of Canadian dollars)
For the three months ended
For the nine months ended
April 30,
January 31,
April 30,
April 30,
April 30,
2023
2023
2022
2023
2022
$
$
$
$
$
Revenue from sale of goods
31,727
35,268
63,590
119,879
205,101
Excise taxes
(10,534)
(11,809)
(18,021)
(39,683)
(56,808)
Net revenue from sale of goods
21,193
23,459
45,569
80,196
148,293
Service and ancillary revenue
392
702
-
1,320
225
Net revenue
21,585
24,161
45,569
81,516
148,518
Cost of goods sold
(29,075)
(26,337)
(55,179)
(90,974)
(199,463)
Gross loss before fair value adjustments
(7,490)
(2,176)
(9,610)
(9,458)
(50,945)
Realized fair value amounts on inventory sold
(2,846)
(5,194)
(8,903)
(28,006)
(31,629)
Unrealized gain on changes in fair value of biological assets
982
1,394
13,238
4,778
42,763
Gross (loss)/profit
(9,354)
(5,976)
(5,275)
(32,686)
(39,811)
Operating expenses
(111,362)
(23,771)
(127,704)
(158,298)
(918,139)
Loss from operations
(120,716)
(29,747)
(132,979)
(190,984)
(957,950)
Finance income (expense), net
41
(752)
(4,964)
(2,628)
(14,552)
Non-operating income (expense), net
(8,990)
34,169
(14,759)
10,547
(33,736)
Net Income/(Loss) before tax
(129,665)
3,670
(152,702)
(183,065)
(1,006,238)
Current and deferred tax recovery
12,459
(2,948)
7,697
10,323
33,070
Net Income/(Loss)
(117,206)
722
(145,005)
(172,742)
(973,168)
Other comprehensive income
1,861
(11,784)
(1,658)
(5,723)
19,339
Total net loss and comprehensive loss
(115,345)
(11,062)
(146,663)
(178,465)
(953,829)
Net Revenue
For the three months ended
Q3’23
Q2’23
Variance
Variance
Q3’22
Variance
Variance
$
$
$
%
$
$
%
Adult-use cannabis net revenue
16,056
21,333
(5,277)
(25%)
31,125
(15,069)
(48%)
Beverage based adult-use sales
–
–
–
N/A
4,059
(4,059)
(100%)
International sales
649
(265)
914
345%
6,446
(5,797)
(90%)
Domestic medical sales
517
550
(33)
(6%)
672
(155)
(23%)
Wholesales
3,971
1,841
2,130
116%
3,267
704
(22%)
Net revenue from the sale of goods
21,193
23,459
(2,266)
(10%)
45,569
(24,376)
(53%)
Service revenues
392
702
(310)
(44%)
–
392
N/A
Total net revenues
21,585
24,161
(2,576)
(11%)
45,569
(23,984)
(53%)
Cost of Goods Sold & Adjusted Gross Margin
The following table summarizes and reconciles the Company’s gross profit line items per IFRS to the Company’s selected non-IFRS financial measures adjusted cost of sales, gross profit/margin before adjustments and gross profit before fair value adjustments. Refer to the ‘Non-IFRS Measures’ section below for definitions.
For the three months ended
For the nine months ended
April 30,
January 31,
April 30,
April 30,
April 30,
2023
2023
2022
2023
2022
$
$
$
$
$
Net revenue from the sale of goods
21,193
23,459
45,569
80,196
148,294
Adjusted cost of sales
(12,167)
(12,818)
(30,722)
(46,886)
(90,987)
Gross profit before adjustments1
9,026
10,641
14,847
33,310
57,307
Gross margin before adjustments
43%
45%
33%
42%
39%
Depreciation included in COGS2
(4,642)
(4,675)
(4,814)
(14,090)
(15,756)
Write off of biological assets and destruction costs
-
-
-
-
(2,340)
Write off of inventory
(2,425)
(817)
(1,973)
(7,642)
(7,529)
Write (down)/up of inventory to net realizable value
(9,729)
(7,600)
(13,274)
(22,244)
(63,408)
Crystallization of fair value on business combination accounting
-
-
(4,396)
-
(19,446)
Gross (loss)/profit before fair value adjustments
(7,770)
(2,451)
(9,610)
(10,666)
(51,172)
Realized fair value amounts on inventory sold
(2,846)
(5,194)
(8,903)
(28,006)
(31,629)
Unrealized gain on changes in fair value of biological assets
982
1,394
13,238
4,778
42,764
Gross (loss)/profit
(9,634)
(6,251)
(5,275)
(33,894)
(40,037)
1 This is a supplementary financial measure. See section "Key Operating Performance Indicators" of the MD&A for additional details. 2 In FY23 the Company modified the definition of the Non-IFRS metric gross profit/margin before adjustments to be net of depreciation included COGS in order to align with managements definition of the key metric, used in the evaluation and monitoring of the business, as well as to better align with the Company’s competitors defined measure.
Operating Expenses
For the three months ended
For the nine months ended
April 30,
January 31,
April 30,
April 30,
April 30,
2023
2022
2022
2023
2022
$
$
$
$
$
General and administration (“G&A”)1
7,857
10,484
23,605
28,810
68,645
Selling, Marketing and promotion (“S,M&P”)
2,812
2,678
5,366
9,595
17,958
Share-based compensation
701
301
5,769
1,961
13,610
Research and development (“R&D”)
81
166
540
569
2,985
Depreciation of property, plant and equipment
831
839
1,579
2,454
4,776
Amortization of intangible assets
2,948
3,262
2,957
9,080
18,010
Restructuring costs
85
481
2,804
1,628
11,317
Impairment of property, plant and equipment
54,914
408
83,171
54,711
207,103
Impairment of intangible assets
18,775
-
-
18,775
140,839
Impairment of goodwill
-
-
-
-
375,039
Impairment of Investment in joint ventures and associates
(115)
643
-
528
26,925
Derecognition of onerous contract
-
(269)
-
(269)
-
Loss/(gain) on disposal of property, plant and equipment
236
133
(2,935)
(141)
(2,861)
Acquisition transaction and integration costs
19,742
4,645
1,175
28,102
30,120
Health Canada Cannabis Fees
2,495
-
3,673
2,495
3,673
Total
111,362
23,771
127,704
158,298
918,139
1 The Company has adjusted the presentation of the General and Administrative expenses to separately present the Health Canada Cannabis Fees for increased transparency. This presentation differs from that of the Company’s interim financial statements for the three and nine months ended April 30, 2023.
General and Administration Expenses by Nature
For the three months ended
For the nine months ended
April 30,
April 30,
April 30,
April 30,
2023
2022
2022
2022
$
$
$
$
General and administrative
6,209
9,172
15,043
22,081
Salaries and benefits
2,911
7,846
8,402
27,507
Professional fees
1,004
6,922
6,944
16,917
Consulting
228
3,338
916
5,813
Total
10,352
27,278
31,305
72,318
Other income and losses
For the three months ended
For the nine months ended
April 30,
January 31,
April 30,
April 30,
April 30,
2023
2022
2022
2023
2022
$
$
$
$
$
Interest and financing expenses
(295)
(1,263)
(5,147)
(4,025)
(15,701)
Interest income
336
511
183
1,397
1,149
Finance income (expense), net
41
(752)
(4,964)
(2,628)
(14,552)
Revaluation of financial instruments (loss)/gain
212
273
3,147
487
42,481
Share of loss from investment in associate and joint ventures
(967)
43
(1,856)
(3,322)
(6,674)
Loss on convertible debt fair value adjustments
(4,327)
31,777
(15,110)
21,179
(80,105)
Gain on sale of interest in BCI
(111)
-
-
(111)
9,127
Gain/(Loss) on investments
254
-
-
394
(576)
Foreign exchange (loss)/gain
(2,838)
3,709
(527)
(8,151)
393
Other income and losses
(1,213)
(1,633)
(413)
71
1,618
Total
(8,990)
34,169
(14,759)
10,547
(33,736)
Reconciliation of Adjusted Earnings before interests, taxes, depreciation and amortization to Total Net Loss Before Tax (in thousands of Canadian dollars)
Q3’23
Q2’23
Q3’22
$
$
$
Total net loss before tax
(129,665)
3,670
(152,702)
Finance expense (income), net
(41)
752
4,964
Depreciation (cost of sales)
4,642
4,675
4,814
Depreciation (operating expenses)
831
839
1,579
Amortization (operating expenses)
2,948
3,262
2,957
Standard EBITDA
(121,285)
13,198
(138,388)
Investment (gains) losses
7,777
(35,802)
14,346
Non-cash fair value adjustments
1,864
3,800
61
Non-recurring expenses
19,827
5,126
3,979
Other non-cash items
87,878
11,266
101,665
Adjusted EBITDA
(3,939)
(2,412)
(18,337)
Select Balance Sheet Metrics (in thousands of Canadian dollars)
As at
30-Apr-23
31-Jul-22
$
$
Cash & cash equivalents
20,000
83,238
Restricted funds
2,180
32,224
Trade receivables
21,116
42,999
Biological assets & inventory
39,723
82,315
Other current assets
12,702
30,871
Accounts payable & accrued liabilities
28,015
72,581
Senior secured convertible note
178,021
210,379
Adjusted working capital1
16,421
123,730
Property, plant & equipment
205,854
285,866
Intangible assets
70,383
94,343
Assets held for sale
1,080
5,121
Total Assets
396,678
680,949
Total Liabilities
253,947
367,257
Shareholders' equity
142,731
313,692
1 A Non-IFRS measure defined as the Company’s current assets less current liabilities net of the senior secured convertible note. The note is classified as a current liability as the lender possesses the ability to unilaterally convert the note to equity and therefore does not represent a cash-based liability to the Company within one-year of April 30, 2023. Working capital is utilized as a key metric for management in assessing the Company’s ability to meet its future obligations.
Liquidity Risk
During the three and nine months ended April 30, 2023, the Company reported operating losses of $120,716 and $190,984, respectively; cash outflows from operating activities of $23,144 in the nine months ended April 30, 2023 and an accumulated deficit of $2,014,326 and has yet to generate positive cashflows or earnings. The Company had a working capital deficiency of $140,500 and held cash and cash equivalents of $20,000 as at April 30, 2023 ($83,238 at July 31, 2022).
On April 10, 2023, the Company entered into a definitive arrangement agreement (the “Arrangement Agreement" or the “Arrangement”) with Tilray Brands Inc. (“Tilray”) whereby Tilray will acquire all of the issued and outstanding common shares of the Company subject to shareholder approval and the satisfaction of or waiver of the closing conditions under the Arrangement Agreement (for full transaction details see Note 13). Under the proposed Arrangement Agreement, Tilray will acquire all of the issued and outstanding common shares of the Company whereby each HEXO Shareholder will receive 0.4352 of a share of Tilray common stock in exchange for each HEXO Share implying a purchase price of US$1.25 per HEXO Share based on the volume weighted average price of Tilray Shares on the Nasdaq Stock Market (“Nasdaq”) for the 60-day period ended on April 5, 2023.
The Company and Tilray also entered into a letter agreement on April 10, 2023 (the “Original Waiver and Amendment Agreement”), which, among other things, provides for a waiver by Tilray of, and the amendment to, certain covenants under the amended and restated senior secured convertible note due May 2026 issued by the Company and held by Tilray (the “Note”) to mitigate the risk of covenant breaches by the Company until the consummation of the Arrangement and to allow the Company to use existing cash resources to satisfy the Company’s ongoing payment and contractual obligations and operate its business.
The amendments to certain financial covenants were as follows; Tilray has agreed to waive the requirement under the Note that HEXO achieve a positive Adjusted EBITDA for the three months ending April 30, 2023 and for subsequent quarters, and to amend the financial covenant set out under the Note to reduce the minimum liquidity threshold from US$20 million to US$4 million. On April 30, 2023, the Company was compliant with the amended minimum liquidity covenant.
Subsequent to the end of the period, on June 1, 2023, the Company and Tilray amended the Arrangement Agreement in order to satisfy a condition precedent of a private placement of Series 1 Preferred Shares, a first tranche of which was also completed with the issuance of US$11,500,000 in Series 1 Preferred Shares on June 1, 2023. See Note 30, Subsequent Events, of the Company’s Q3’23 interim condensed consolidated financial statements for a detailed description of the private placement and the amendments to the Arrangement Agreement as well as other concurrent agreements and transactions. Upon execution of the private placement, the amended minimum liquidity covenant was reduced from US$4 million to one US dollar.
In the event the Arrangement is not consummated, there is a significant probability of the Company not being able to meet its obligations as they come due within the twelve months following April 30, 2023 and, accordingly, there would be significant doubt about the appropriateness of the going concern assumption and use of accounting principles applicable to a going concern.
There can be no assurances that the Arrangement will be consummated. If the Arrangement is not completed, the Company will be confronted with default under one or more covenants under the Note, either within the near term or in the next 12-month period. As such, these circumstances create material uncertainties that lend substantial doubt as to the ability of the Company to meet its obligations as they come due and, accordingly, there are material uncertainties that cast significant doubt about the appropriateness of the going concern assumption.
About HEXO Corp.
HEXO is an award-winning licensed producer of premium products for the global cannabis market. HEXO delivers a thoughtfully curated portfolio of both recreational and therapeutic cannabis products that inspire customer loyalty. HEXO’s brands include HEXO, Redecan, Original Stash, Bake Sale and T 2.0, as well as medical cannabis products.
HEXO’s world-class Canadian grow sites are unmatched in size, technological advantage and yield of high-quality cannabis, driving innovation through every step of the process. HEXO operates three major grow sites in Ontario and Québec, including one of the largest facilities in North America. HEXO Corp. is a publicly traded company under the tickers (TSX: HEXO) and (NASDAQ:HEXO).
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. 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.
The preceding press release should be read in conjunction with the management’s discussion and analysis (“MD&A”) and condensed interim consolidated financial statements and notes thereto as at and for the quarter ended April 30, 2023. Readers should also refer to the section regarding “Non-IFRS Measures” in the immediately following section of this press release. Additional information about HEXO is available on the Company’s profile on SEDAR at www.sedar.com and EDGAR at www.sec.gov, including the Company’s Annual Information Form for the year ended July 31, 2022 dated October 31, 2022.
Non-IFRS Measures
In this press release, reference is made to adjusted cost of sales, gross profit before adjustment, profit/margin before fair value adjustments, adjusted gross profit/margin, adjusted EBITDA, crystallization and adjusted working capital 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 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 quarter ended April 30, 2023, filed under the Company's profile on SEDAR at www.sedar.com and EDGAR at www.sec.gov respectively.
View source version on businesswire.com: https://www.businesswire.com/news/home/20230614709022/en/
For media or investor inquiries: invest@hexo.com
1 Year HEXO Chart |
1 Month HEXO Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions