HEXO Reports Net Loss Of $68M In Q4, Net Sales Of $38.7M

Cannabis company HEXO Corp. HEXO HEXO reported its financial results Friday for the fourth quarter and fiscal year ended July 31, revealing a 71% quarter-over-quarter and a 43%year-over-year growth in total net sales.

In the fourth quarter, total revenue amounted to roughly CA$38.7 million ($31.3 million), beating FactSet consensus of CA$33.7 million and marking HEXO's best quarter of sales to date.

In addition, total net revenue for the full fiscal 2021 grew 53% to CA$123.5 million from CA$80.6 million in fiscal 2020.

"I am honoured and humbled to join the team as HEXO's president and CEO," said Scott Cooper, who was recently appointed to helm the company following the departure of Sebastien St-Louis. "I look forward to continuing to build on HEXO's strong foundation with an immediate priority of continuing to integrate our recent acquisitions and reviewing our financial position, with the ultimate goal of driving growth and profitability through the commercialization of cannabis consumer packaged goods products."

Q4 Financial Highlights

• Gross profit before adjustments totaled approximately CA$8 million, compared to CA$5 million in the prior period and CA$8.1 million in the same period of last year.
• Operating expenses increased by 153% sequentially to CA$63.1 million, which compares to CA$71.5 million in the corresponding period of 2020.
• Total net loss and comprehensive loss was nearly CA$68 million, up by 228% quarter-over-quarter and down by approximately 60% year-over-year.
• Total gross margin declined to 20% from 22% on a sequential basis.
• Net adult-use revenue gross margin declined to 12% from 28% over the same period.
• Adult-use net revenues, exclusive of beverages, increased 28% quarter-over-quarter.
• Cannabis beverage net revenues increased 70% quarter-over-quarter and 161% from fiscal 2020.

Full-Year 2021 Financial Results

• Gross profit before adjustments was CA$34.2 million, compared to approximately CA$27 million in the prior year.
• Operating expenses declined by 68% year-over-year to CA$134.3 million
• Total net loss and comprehensive loss was CA$113.6 million, down by nearly 80% compared to the prior year.

Q4 Operational Highlights

• Closed the Zenabis acquisition on June 1, 2021, offering diversified cultivation facilities, including a state-of-the-art indoor grow facility in Atholville, NB.
• Zenabis contributed $6.8 million in net revenue for the two months ended July 31, 2021.
• Committed to ESG leadership by offsetting 100% of its 2020 operational carbon emissions and personal emissions for all employees.
• Subsequent to the quarter, the company closed Redecan or 48North Cannabis Corp. deals in August and September, respectively, on the heels of Hexo's debut on the Nasdaq.

HEXO has reported that these acquisitions will increase its market share, accelerate its path to profitability and create accretive synergies.

In its recent note, Cantor Fitzgerald's Pablo Zuanic remained optimistic on the company's stock.

"Seemingly, there is value here, with the stock trading at 1.9x CY22E sales, well-below peers," he said, adding that HEXO is #2 in the Canadian recreational market.

HEXO Price Action

HEXO's shares traded 4.2424% higher at $1.72 per share during the pre-market session on Friday morning.

Photo: Courtesy of Markus Winkler on Unsplash