Canadian Cannabis Company HEXO Posts Wider Loss In Q1; Launches New Strategic Plan

HEXO Corp HEXO reported a widened loss in Q1 FY22, despite a rise in revenue. The Canada-based cannabis company recorded a net loss of C$(116.9) million, compared to C$(67.9) million prior quarter and C$(4.2) million last year.

• Sales reached C$50.2 million, an increase of 29% from Q4 FY21 and up 70% from Q1 FY21.
• The company closed its acquisitions of Redecan and 48North, which contributed net revenues of C$13.5 million and C$1.1 million, respectively, during the two months ended October 31.
• Hexo's non-beverage gross margin before adjustments increased to 28% from 25% in the previous quarter, compressed from 39% posted a year ago.
• Overall gross margin reached 25%, much lower than 35% in Q1 FY21. The cost of goods sold increased 373% Y/Y to C$82.9 million.
• HEXO has announced a new strategic plan to strengthen its balance sheet and accelerate its transformation.
• HEXO forecast positive cash flow within the next four quarters based on the incremental cash flow of C$37.5 million in fiscal 2022 and an additional C$135 million in 2023.
• HEXO said that new measures under the strategic plan include five priorities: reducing manufacturing & production costs, streamlining & simplifying its organizational structure, realizing cost synergies, focusing on revenue management, and accelerating growth through organic market share gains.
• The company also expects over C$50 million in synergies, higher than its initial target of C$35 million. To date, it has achieved C$25 million of run-rate synergies.
• Price Action: HEXO shares are down 5.48% at $0.92 on the last check Tuesday.