Key highlights of second quarter of 2019
fiscal year
GATINEAU, Quebec, March 14, 2019 (GLOBE NEWSWIRE) -- HEXO Corp (TSX:HEXO; NYSE-A:HEXO) (the "Company") is reporting its financial results for the second quarter of the 2019 fiscal year, the Company’s first full quarter following the legalization of adult-use cannabis in Canada. Total gross revenue for the quarter reached $16.2 million, an increase of 144% from the previous quarter.
“This is an exciting time for HEXO as we continue to achieve milestones on the way to becoming a top two cannabis company,†said HEXO Corp CEO and co-founder, Sebastien St-Louis.
“This quarter not only saw an exponential increase in gross revenue and production, but also saw us continue to execute on our promises including reaching a construction and licensing milestone on our 1,000,000 sq. ft. greenhouse expansion and listing on the NYSE-A. Just yesterday, we announced an agreement to acquire Newstrike Brands Limited. HEXO’s future is very promising, I am looking forward to continually driving shareholder value and achieving milestones with our team.â€
Other financial highlights from the quarter include:
During the quarter ended January 31, 2019, the Company announced that its 1,000,000 sq. ft. greenhouse expansion reached construction and licensing milestones. The first harvest from the facility is expected later this month and will allow HEXO to continue ramping up to an annual production capacity of 108,000 kg of dried cannabis annually.
Subsequent to quarter end, HEXO announced that it entered into a syndicated credit facility for up to $65 million available credit through a $50 million credit facility with an option to increase by an additional $135 million and a $15 million revolving loan with CIBC. The proceeds of the total available credit of $200 million will be used in part to fund the Company’s ongoing expansion projects and innovation initiatives.
HEXO most recently announced an agreement to acquire Newstrike Brands Ltd. This transaction was unanimously approved by the board of directors of both HEXO Corp and Newstrike Brands Limited. The acquisition will provide HEXO Corp capacity to produce approximately 150,000 kg of high-quality cannabis annually with access to four cutting-edge 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 annual synergies of $10 million, allowing HEXO to operate more efficiently with a continued commitment to excellence. The acquisition requires Newstrike shareholder approval before being finalized.
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.
Second Quarter 2019 Financial Results
Summary of results for the three and six months period ended January 31, 2019 and 2018 (in thousands of Canadian dollars, except share and per share amounts, and where otherwise noted)
| For the three months ended | For the six months ended | |||||||||
| Income Statement Snapshot | January 31, 2019 | January 31, 2018 | January 31,
2019 |
January 31, 2018 | ||||||
| $ | $ |
$ |
$ | |||||||
| Gross cannabis revenue | 16,179 | 1,182 | 22,809 | 2,283 | ||||||
| Excise taxes | (2,803 | ) | – | (3,817 | ) | – | ||||
| Net revenue from sale of goods | 13,376 | 1,182 | 18,992 | 2,283 | ||||||
| Ancillary revenue | 62 | – | 109 | – | ||||||
| Gross margin before fair value adjustments | 6,939 | 731 | 9,772 | 1,369 | ||||||
| Gross margin | 11,603 | 752 | 18,842 | 3,215 | ||||||
| Operating expenses | 18,486 | 5,491 | 40,524 | 8,335 | ||||||
| (Loss)/income from operations | (6,883 | ) | (4,739 | ) | (21,682 | ) | (5,120 | ) | ||
| Other income/(expenses) | 2,558 | (4,213 | ) | 4,553 | (5,750 | ) | ||||
| Net income (loss) | (4,325 | ) | (8,952 | ) | (17,129 | ) | (10,870 | ) | ||
| For the three months ended | ||||||||||
| Operational Results | January 31,
2019 |
October 31, 2018 | ||||||||
| Average selling price of adult-use dried gram & gram equivalents | $ | 5.83 | $ | 5.45 | ||||||
| Kilograms sold of adult-use dried gram & gram equivalents | 2,537 | 952 | ||||||||
| Average selling price of medical dried gram & gram equivalents | $ | 9.15 | $ | 9.12 | ||||||
| Kilograms sold of medical dried gram & gram equivalents | 152 | 158 | ||||||||
| Total kilograms produced of dried gram equivalents | 4,938 | 3,550 | ||||||||
Q2 PERIOD HIGHLIGHTS
OPERATIONAL HIGHLIGHTS
ORGANIZATIONAL GROWTH
FACILITY EXPANSION
FINANCIAL POSITION
Summary of
Results
Revenue
| Q2 ’19 |
Q1 ’19 | Q4 ’18 | Q3 ’18 | Q2 ’18 | ||||||||
| ADULT-USE Adult-use cannabis gross revenue1 |
$ | 14,792 | $ | 5,194 | $ | – | $ | – | $ | – | ||
| Adult-use excise taxes | (2,587 | ) | (970 | ) | – | – | – | |||||
| Adult-use cannabis net revenue | 12,205 | 4,224 | – | – | – | |||||||
| Dried grams and gram equivalents sold | 2,537,211 | 952,223 | – | – | – | |||||||
| Adult-use gross revenue/gram equivalent | $ | 5.83 | $ | 5.45 | $ | – | $ | – | $ | – | ||
| Adult-use net revenue/gram equivalent | $ | 4.81 | $ | 4.44 | $ | – | $ | – | $ | – | ||
| MEDICAL | ||||||||||||
| Medical cannabis revenue1 | $ | 1,387 | $ | 1,436 | $ | 1,410 | $ | 1,240 | $ | 1,182 | ||
| Medical cannabis excise taxes | (216 | ) | (44 | ) | – | – | – | |||||
| Medical cannabis net revenue | 1,171 | 1,392 | 1,410 | 1,240 | 1,182 | |||||||
| Dried grams and gram equivalents sold | 151,521 | 157,504 | 152,288 | 134,253 | 131,501 | |||||||
| Medical gross revenue/gram equivalent | $ | 9.15 | $ | 9.12 | $ | 9.26 | $ | 9.24 | $ | 8.99 | ||
| Medical net revenue/gram equivalent | $ | 7.73 | $ | 8.84 | $ | – | $ | – | $ | – | ||
| Ancillary revenue2 | $ | 62 | $ | 47 | $ | – | $ | – | $ | – | ||
| Total net sales | $ | 13,438 | $ | 5,663 | $ | 1,410 | $ | 1,204 | $ | 1,182 | ||
| 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 second quarter of fiscal
2019 increased to $13,438 from $1,182 in the same period of fiscal
2018. The main contributor is the addition of adult-use sales in
which the Company realized its first full quarter of legalization
in Canada. Adult-use sales in the quarter accounted for 91% of
total revenue. Non-cannabis ancillary sales which began in the
previous quarter increased to $62 from $47. This revenue is derived
from a management agreement held by the Company with arms-length
partners.
ADULT-USE SALES
The Company realized its first complete quarter of adult-use sales during the second quarter of fiscal 2019. Adult-use gross sales totaled $14,792 in the three months ended January 31, 2019, which is a 1,151% increase over the $1,182 of total sales in the second quarter of 2018 (which included medical sales only during that period), and a 185% increase over the $5,194 of adult-use sales in the first quarter of the current fiscal year. This is a direct result of the Company’s strong supply agreements and introductory brand awareness campaign.
The Company’s adult-use gross sales for the six months period ended January 31, 2019 totaled $19,986, an increase of $17,703 as compared to the six months period ended January 31, 2018 total sales of $2,283 (which include medical sales only during that period). The increase is due to there existing no adult-use sales in the comparative period.
Sales volume in the second quarter of 2019 was 2,537 kg for a 166% increase over the 952 kg equivalents sold in the first quarter of fiscal 2019. Dried flower products represented 85% of gram equivalents sold during the period, a 5% decrease from the first quarter of fiscal 2019 and oil product sales comprising the balance.