Hexo Q3 2022 Net Loss Grows Staggering 638% To CA$152.7M, Are There Profits?

HEXO Corp HEXO HEXO revenue grew 101% in Q3 2022 to CA$45.57 million ($35.26 million) compared to CA$22.66 in Q3 2021.

Q3 2022 Financial Highlights

• Gross profit was a loss of CA$5.27 million compared to gain of CA$8.82 in Q3 2021, an unfavorable decrease of 159.75%.

• Adjusted EBITDA was a loss of CA18.33 million compared to a loss of CA$10.78 million in Q3 2021.

• Total net loss was CA$152.7 million compared to a net loss of CA$20.7 million in Q3 2021.

• Cash and cash equivalents were CA$14.22 million

Other Highlights

• On April 12, 2022, HEXO entered into definitive agreements with Tilray Brands Inc. TLRY to restructure the terms of the senior secured convertible note. Among other amendments, the notes maturity will be extended by three years and the equity condition clause will be removed, relieving the company from the punitive dilution pressure under the notes current structure.

• Concurrent with the definitive agreements, HEXO entered into a definitive equity purchase agreement with an affiliate of KAOS Capital Inc, which when completed, will provide HEXO access to an aggregate CA$180 million over a 36-month period.

• Announced the closure of the centralized processing and manufacturing facility in Belleville ON. The decommissioning and phase out process is expected to be finalized by the end of July 2022.

• Net sales decreased 14%, quarter over quarter, led by a reduction of international and adult-use sales.

• Loss from operations improvement of 80%, quarter over quarter, as the result of the Q2’22 realignment of the balance sheet and the CA$616 million of previously recognized impairments to goodwill, intangible assets and property, plant and equipment.

• CA$34,924 of total senior secured note redemptions occurred during the quarter, resulting in the issuance of 72.26 million common shares.

• The loss on the company’s senior secured note was reduced by CA$61,556 due to less volatility in the valuation approach.

• The company’s total assets held for sale increased to CA$22,450 from CA$13,404 from the previous quarter.

• HEXO appointed Joelle Maurais, former assistant general counsel as general counsel & corporate secretary.

Withdrawal of Financial Guidance

The company is entirely withdrawing its previously issued guidance on operational synergies and expected incremental increases to cash flows for the 2022 and 2023 financial years, and there can be no assurance that the company will in the future decide to provide any guidance whatsoever with respect to any operational, financial or other measure.

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