HEXO Corp. (TSX: HEXO) (OTC: HYYDF) reported its financial results for the first quarter of the 2019 fiscal year with gross revenue of C$6.7 million versus last year’s C$1.1 million for the same time period. The revenue figure includes C$5.2 million from legal adult-use cannabis sales during the first two weeks of legalization.
Still, the company delivered a net loss of C$14.7 million versus last year’s net loss of C$381,000. Hexo said that the increased loss was mainly due to higher expenses needed for expanding the scale of the operations as it prepared for the legalization of the adult-use market and the realization of stock-based compensation expenses in line with the increased headcount and market share price value of the company.
“HEXO hit tremendous milestones in the weeks following the legalization of adult-use cannabis,” said HEXO’s CEO and co-founder Sebastien St-Louis. “The company continues to honor its commitment to executing on its plans, which has led to a significant portion of our first quarter’s $6.7 million in revenue generated in just two weeks and represents more than a 500% increase over last quarter.”
Hexo said that it sold approximately 1,110,000 total gram in the quarter versus 539,000 in total fiscal 2018. Despite the new adult-use market, the company still experienced a 2% increase over last quarter in its medical cannabis sales.
“HEXO’s first quarter financials highlight the remarkable pace of its adult-use cannabis sales and put HEXO on-track to generate significant revenue this year”, added Mr. St-Louis.
Adult Use Sales
Hexo said that its adult-use sales totaled C$5.1 million during the quarter, which is a 371% increase over the C$1.1 million of medical sales in the first quarter of 2018, and a 5% increase over the C$4.9 million of total medical sales in all of fiscal 2018.
The sales volume in the first quarter of 2019 was 952,223 gram equivalents sold. With a limited ability to sell other forms of cannabis, dried flower represented 81% of gram equivalents sold during the period.
The company reported that adult-use revenue per gram was approximately C$5.45. Hexo said that this was reflective of the bulk of sales attributed to dried flower which commands a competitive market sales price. The remaining balance was made up of oil sales which get a higher revenue per gram equivalent.
The company statement said that 90% of all adult-use sales were realized in Quebec through the SQDC with the remaining 10% derived in Ontario and British Columbia via the OCS and BCLDB respectively.
Medical Cannabis Sales
Even though the focus has been on the new adult-use cannabis market, medical sales continue to be an important part of the equation. Revenue increased 30% to C$1.4 million compared to C$1.1 million in the same period last year. Hexo said that the higher revenue was driven by increased sales volume as well as higher Elixir oil sales which get a higher revenue per gram when compared to dried gram sales. Sequentially, revenue increased 2% reflecting a lower revenue per gram on the dried flower sales which decreased $0.22/gram due to the current period’s sales mix of products.
The sales volume for medical cannabis increased 30% to 157,504 gram equivalents, compared to 120,844 in the same prior year period, due to an increase in oil-based products as the product mix purchased by customers shifted towards smoke-free alternatives. Total dried grams sold increased 10% when compared to the same prior year period. Revenue per gram equivalent remained at $9.12 as compared the same prior year period. On a sequential basis, sales volume collectively increased 3% across both dried and oil sales.
Geographical sales in Ontario and Quebec increased 8% and 16% respectively.