Key highlights of third quarter
of 2019 fiscal year
Subsequent to quarter end:
GATINEAU, Quebec, June 12, 2019 (GLOBE NEWSWIRE) -- HEXO Corp (TSX:HEXO; NYSE-A:HEXO) (the "Company") is reporting its financial results for the third quarter of the 2019 fiscal year.
“The past five years have seen the cannabis industry landscape, and our company, evolve significantly,†said HEXO CEO and co-founder Sebastien St-Louis. “This evolution continues at a staggering pace, as HEXO ramps up production effort and significantly increases its inventory, further contributing to our capacity to meet the demand and to reach our sales and revenue targets. Our Innovation, Development and Engineering team has grown significantly ahead of the legalization of edibles and now includes 25 professionals with PhDs and extensive experience in major consumer packaged goods companies
“This quarter saw HEXO remain on-track as it continues ramping up to $400 million in revenue in fiscal 2020, including completing the first harvest in our 1 million sq. ft. Expansion and preparing to fund our ongoing expansion projects and innovation initiatives by entering a $65 million syndicated credit facility.â€
Subsequent to quarter end, HEXO bolstered its senior management team through the appointment of Michael Monahan as Chief Financial Officer and Donald Courtney as Chief Operating Officer. HEXO continues to drive value through its management team, with experience across a variety of industries, guiding and supporting the Company.
HEXO most recently announced the closing of the agreement to acquire Newstrike. The acquisition will provide HEXO Corp capacity to produce approximately 150,000 kg of high-quality cannabis annually with access to four additional production campuses. It also provides the Company diversified domestic market penetration with combined distribution agreements in eight provinces. The combined entity is estimated to realize millions in annual synergies, allowing HEXO to operate more efficiently with a continued commitment to excellence.
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.
Operational and Financial Highlights
KEY FINANCIAL PERFORMANCE INDICATORS
Summary of results for the three and nine months period ended April 30, 2019 and April 30, 2018:
| For the three months ended | For the nine months ended | ||||||||||||||
| Income Statement Snapshot | April 30,
2019 |
April 30, 2018 | April 30,
2019 |
April 30, 2018 | |||||||||||
|
$ |
$ |
$ |
$ | ||||||||||||
| Gross cannabis revenue | 15,930 | 1,240 | 38,739 | 3,523 | |||||||||||
| Excise taxes | (2,974 | ) | – | (6,792 | ) | – | |||||||||
| Net revenue from sale of goods | 12,956 | 1,240 | 31,947 | 3,523 | |||||||||||
| Ancillary revenue | 61 | – | 170 | – | |||||||||||
| Gross margin before fair value adjustments | 6,440 | 761 | 16,212 | 2,130 | |||||||||||
| Gross margin | 21,832 | 2,666 | 40,674 | 5,881 | |||||||||||
| Operating expenses | 24,056 | 5,319 | 64,580 | 13,654 | |||||||||||
| Loss from operations | (2,224 | ) | (2,653 | ) | (23,906 | ) | (7,773 | ) | |||||||
| Other income/(expenses) | (5,527 | ) | 682 | (979 | ) | (5,068 | ) | ||||||||
| Net loss | (7,751 | ) | (1,971 | ) | (24,885 | ) | (12,841 | ) | |||||||
| For the three months ended | |||||||||||||||
| Operational Results | April 30,
2019 |
January 31, 2019 |
October 31, 2018 | ||||||||||||
| Avg. gross selling price of adult-use dried gram & gram equivalents | $ | 5.29 | $ | 5.83 |
$ | 5.45 | |||||||||
| Kilograms sold of adult-use dried gram & gram equivalents | 2,759 | 2,537 | 952 | ||||||||||||
| Avg. gross selling price of medical dried gram & gram equivalents | $ | 9.11 | $ | 9.15 |
$ | 9.12 | |||||||||
| Kilograms sold of medical dried gram & gram equivalents | 145 | 152 |
158 | ||||||||||||
| Total kilograms produced of dried gram equivalents | 9,804 | 4,938 |
3,550 | ||||||||||||
Q3 PERIOD HIGHLIGHTS
OPERATIONAL HIGHLIGHTS
ORGANIZATIONAL GROWTH
FACILITY EXPANSION
FINANCIAL POSITION
Summary of Results
Revenue
| Q3 ’19 |
Q2 ’19 |
Q1 ’19 | Q4 ’18 | Q3 ’18 | |||||||||
| ADULT-USE | |||||||||||||
| Adult-use cannabis gross revenue1 | $ | 14,607 | $ | 14,792 | $ | 5,194 | $ | – | $ | – | |||
| Adult-use excise taxes | (2,741 | ) | (2,587 | ) | (970 | ) | – | – | |||||
| Adult-use cannabis net revenue | 11,866 | 12,205 | 4,224 | – | – | ||||||||
| Dried grams and gram equivalents sold (kg) | 2,759 | 2,537 | 952 | – | – | ||||||||
| Adult-use gross revenue/gram equivalent | $ | 5.29 | $ | 5.83 | $ | 5.45 | $ | – | $ | – | |||
| Adult-use net revenue/gram equivalent | $ | 4.30 | $ | 4.81 | $ | 4.44 | $ | – | $ | – | |||
| MEDICAL | |||||||||||||
| Medical cannabis revenue1 | $ | 1,323 | $ | 1,387 | $ | 1,436 | $ | 1,410 | $ | 1,240 | |||
| Medical cannabis excise taxes | (233 | ) | (216 | ) | (44 | ) | – | – | |||||
| Medical cannabis net revenue | 1,090 | 1,171 | 1,392 | 1,410 | 1,240 | ||||||||
| Dried grams and gram equivalents sold | 145 | 152 | 158 | 152 | 134 | ||||||||
| Medical gross revenue/gram equivalent | $ | 9.11 | $ | 9.15 | $ | 9.12 | $ | 9.26 | $ | 9.24 | |||
| Medical net revenue/gram equivalent | $ | 7.52 | $ | 7.73 | $ | 8.84 | $ | – | $ | – | |||
| Ancillary revenue2 | $ | 61 | $ | 62 | $ | 47 | $ | – | $ | – | |||
| Total net sales | $ | 13,017 | $ | 13,438 | $ | 5,663 | $ | 1,410 | $ | 1,240 | |||
| 1 Gross adult-use and medical cannabis revenues represent sales under the normal course of business and are exclusive of excise taxes. | |||||||||||||
| 2 Revenue outside of the primary operations of the Company. | |||||||||||||
Total net revenue in the third quarter of fiscal 2019 increased to $13,017 from $1,240 in the same period of fiscal 2018. The main contributor is the addition of adult-use sales in which the Company is realizing in its first fiscal year of legalization in Canada. Adult-use sales in the quarter accounted for 91% of total revenue. Non-cannabis ancillary sales which began in the first quarter of fiscal 2019 remained consistent at $61 from $62 in the previous quarter. This revenue is derived from a management agreement held by the Company with arms-length partners.
ADULT-USE SALES
As communicated in the previous quarter’s management discussion and analysis the current quarters adult-use gross sales stayed relatively flat totaling $14,607 in the three months ended April 30, 2019. This represents a slight decrease of 1% as compared to the prior quarter. Third quarter gross sales increased by $13,367 relative to the same period of fiscal 2018, (which included medical sales only during that period) or an increase of 1,078%. This is a result of the Company’s additional production capacity still in the ramp up stage as the new 1 million sq. ft. greenhouse realized its first harvest in April 2019.
The Company’s adult-use gross sales for the nine months period ended April 30, 2019 totaled $34,593, an increase of $31,070 as compared to the nine months period ended April 30, 2018 total sales of $3,523. The increase is due to fiscal 2018 containing medical sales only.