HEXO Corp. Archives - Green Market Report

Debra BorchardtDebra BorchardtApril 8, 2020
hexo3.jpg

3min12830

The price of HEXO Corp. (TSX: HEXO; NYSE: HEXO) plunged another 22% after shareholders learned that the company announced a $40 million offering. The stock was falling from its close of 69 cents to roughly 54 cents, down from its 52-week high of $8.40. The company said it expects to use the net proceeds from the Offering for working capital and other general corporate purposes.

Hexo said it would be filing a preliminary prospectus supplement to its amended and restated base shelf prospectus dated December 14, 2018, relating to a proposed underwritten public offering. In addition, the company said it intends to grant the underwriters a 30-day option to purchase up to an additional 15% of the Units offered in the proposed Offering on the same terms and conditions.

Canaccord Genuity Corp. and Canaccord Genuity LLC are acting as the lead underwriters for the Offering.

Hexo recently reported a staggering net loss of C$289 million for fiscal 2020 second-quarter ending January 31, 2020. The net revenue for Hexo increased by 17% to $17 million from $14.5 million in the first quarter. The earnings are reported in Canadian dollars.

The loss from operations for the quarter was $289.4 million, compared with a loss of $60.6M in the prior period. The company said that excluding non-cash write-downs and impairment charges in the quarter, the adjusted net loss was ($23.2M) compared with ($34.0M) in Q1’20. This was basically one of those kitchen sink quarters. The company just tossed everything but the kitchen sink into the loss column and just ripped the bandaid off.

While the quarter just seemed completely ugly, there was some slim good news for the company. The gross revenue increased 23% sequentially to $23.8 million.  Adult-use cannabis shipped revenue increased 21% sequentially to $24.4 million.

At the time of the earnings release Sebastien St-Louis, CEO, and co-founder of HEXO Corp said, “The industry continues to see challenges ahead, and following a strategic review of the Company’s core and non-core assets we believe we have positioned HEXO to meet these challenges head-on.”


Debra BorchardtDebra BorchardtDecember 16, 2019
hexo3.jpg

4min6920

HEXO Corp. (TSX: HEXO)(NYSE: HEXO)  reported its financial results for the first quarter fiscal 2020 ended October 31, 2019, in Canadian dollars. The company reported that the net revenue in the first quarter decreased sequentially to $14.5 million versus $15.4 million in the fourth quarter of 2019. The revenue increased over $5.7 million reported in the first quarter of 2019.

The net loss for the quarter was an eye-popping $62.4 million. The company attributed the increase in loss to “The larger magnitude of the company’s operations, the expanding scale production and sales in the period, and an impairment loss.” Operating expenses increased from $22 million in the first quarter of 2019 to $35.1 million for the first quarter of 2020.

The stock was falling over 8% on the news of the losses and was lately trading at $2.08, down from its 52-week high of $8.40.

“We have done some pretty heavy lifting on our operations, as we work towards profitability in 2020. The choices that we have made and implemented have already led to a 25% reduction in our operating expenses,” said Sebastien St-Louis, CEO, and co-founder of HEXO Corp. “Cost control combined with our multi-brand approach, an updated strain mix, as well as the introduction of new products, will help us increase our market share and total revenue, leading us towards great results in 2020. I am more confident than ever in our ability to continue down this path and to pivot with more speed and assertiveness should market conditions evolve again.”

The company noted that adult-use sales volume during the quarter increased 5% to 4,196 kg from 4,009 kg equivalents sold in the prior quarter. Gross adult-use revenue per gram equivalent decreased to $4.35 in Q1’20 from $4.74 in Q4’19, reflective of the provision for sales returns and price adjustments recorded in the quarter. “The provision is reflective of a general best estimate provision for returns and price adjustments based on the Company’s assessment of sell-through and slow-moving inventory. This was partially countered by the addition of the premium brand Up cannabis, which commands revenue of $7.03 per gram on dried flower during the quarter. The adult-use net revenue per gram equivalent decreased to $3.24 in Q1’20 from $3.51 in Q4’19, reflecting the impact of the provision above.”

Block B Issues

Hexo disclosed on November 15, 2019, that there was a licensing issue in Block B of its Niagara facility, inventory from Block B was quarantined and held back from sales. The inventory was kept on the books and although destruction was a possible outcome, Hexo has said it has reassessed any risks related to such inventory and concluded that it is cleared for sale and will not be subject to destruction. Block B is now fully Licensed by Health Canada.

 


Debra BorchardtDebra BorchardtOctober 29, 2019
hexo3.jpg

6min7280

HEXO Corp. (TSX: HEXO; NYSE: HEXO) stock was dropping over 6% in early trading after the company gave guidance, despite beating earnings estimates during the company release of its financial report. Net revenue in Canadian dollars for the fourth quarter ending July 31, 2019, increased to $15.4 million versus last year’s $13 million for the same time period. This beat revenue estimates by $.38 million according to Seeking Alpha.

The company delivered a net loss increase of over 400% coming in at $56 million for the quarter versus last year’s net loss of $10 million for the same time period. The company said the increase in net loss was” primarily due to the significant scale of operations and increased stock-based compensation expense due to higher cannabis market value, increased R&D expenditures and an impairment loss on inventory.”

“We are at the end of the first year of adult-use legalization in Canada, which was an incredible year full of successes and challenges across the industry.  We’ve gone from $4.9M to $59.3M in gross revenue in just one year. This type of revenue growth is a testament to the Company’s resilience and capacity to pivot in the face of uncertainty,” said Sebastien St-Louis, CEO, and co-founder of HEXO Corp. “I am confident that our multi-brand approach, focusing on customer demand, re-evaluating our strain mix, as well as the introduction of new products to counter the black market, will help us increase our market share and total revenue”.

Full Year Results

The company’s revenues for the full year were $59 million in fiscal 2019 versus $4.9 million in fiscal 2018. The net losses for the year were $81 million versus last year’s $23 million.

Guidance Less Than Stellar

HEXO  gave the following outlook for 2020:

Q1 2020 guidance: Revenue will range between $14M – 18M and attributed the lack of growth on “a provision for returns and retroactive adjustments on inventory held by provinces, which is subject to price adjustments as a result of a re-evaluation of the Company’s pricing strategy.”

2020 guidance: Positive EBITDA. HEXO said its original revenue guidance for fiscal 2020 was lowered “due to slower than expected store roll out across Canada, consumer demand-based product mix shifts and lower than expected sell-through.”

Sales Mix

Adult-use sales in the quarter accounted for 91% of total revenue. The company noted that adult-use gross sales jumped  30% to $18 million in the quarter versus $14 million in the third quarter and zero for the same time period last year. The acquisition of Newstrike contributed $2 million in sales. Sales to the AGLC, which was new business in the quarter, added another $4 million.

Sales volume in the fourth quarter grew by 45% to 4,009 kg from 2,759 kg equivalents sold in the prior quarter. The acquisition of Newstrike contributed 396 kg, sales to the AGLC contributed 971 kg. Dried flower and milled products represented 89% of gram equivalents sold during the quarter, a 4% increase from the prior quarter, with oil product sales comprising the balance of the quantity sold.

Expenses

Operating expenses increased to $46 million in the quarter versus last year’s $10 million for the comparable quarter as the company said it reflected a significant increase to the scale of our operations. Loss from operations for the quarter was $60 million compared to $10 million for the comparable quarter year over year.

Rough Times

HEXO had been signaling the quarter was going to be a difficult one to deliver. The CFO resigned earlier in the month and the company laid off 200 employees. The company also had to delay  its original planned earnings announcement. The company blamed the new financing for the reason it had to reschedule the release of its fourth-quarter and full-year financial results to October 28, 2019. Hexo had entered into subscription agreements with a group of investors for a C$70 million private placement basis, for an 8.0% unsecured convertible debentures of Hexo.

Positives

The company launched the Original Stash brand that competes with black market prices. HEXO’s JV with Molson Coors Canada, Truss Beverages Co., announced the first beverage brand for 2.0, Flow Glow, a partnership with Flow Glow Beverages Inc. water for CBD infused beverages. It also obtained a research and Phase 1 license for Belleville, and sale of cannabis topicals, extracts, edibles and beverages for Gatineau facility.

“Above and beyond significantly increasing our retail reach to nine provinces, we’ve also launched Original Stash, the industry’s first true value brand, which we believe will not only compete directly with the illicit market but also contribute to a significant increase in sell-through,” added St-Louis.


William SumnerWilliam SumnerOctober 10, 2019
daily_hit004-1280x533.png

5min7530

It’s time for your Daily Hit of cannabis financial news for October 10, 2019.

On the Site

Nevada Marijuana Licenses Makes Appearance In Russian Campaign Violation Arrest

The two Russian nationals that were arrested on Thursday for campaign finance violations also tried to apply for marijuana licenses in Nevada according to the arrest allegations. The document said that  Lev Parnas, Igor Furman, David Correia and Andrey Kukushkin “planned to use Foreign National-1 as a source of funding for donations and contributions to State and federal candidates and politicians in Nevada, New York and other states to facilitate acquisitions of retail marijuana licenses.”

HEXO Corp.

HEXO Corp. (TSX: HEXO)(NYSE: HEXO) stock was plunging almost 20% as the company told Wall Street that its revenues would be lower than expected. The company said in a statement that it now expects net revenue for the fourth quarter to be approximately $14.5 million to $16.5 million and net revenue for the year to be approximately $46.5 million to $48.5 million.” This is a far cry from the company’s claim in June that it was on track to reach $400 million in net revenue in 2020 and said it would double net revenue in the fourth fiscal quarter.

MediPharm Labs

MediPharm Labs Inc., a wholly-owned subsidiary of MediPharm Labs Corp. (TSX: LABS) (OTCQX: MEDIF), has secured a $38.7 million credit facility from a top 5 Canadian Schedule 1 bank. Although the company initially sought $20 million, the credit facility was upsized and is comprised of a revolving term facility, a non-revolving term facility and a non-revolving delayed draw term facility.

In Other News

Village Farms International

Village Farms International, Inc. (TSX: VFF) (NASDAQ: VFF) announced that a group of underwriters co-led by  Beacon Securities Limited and GMP Securities L.P. have agreed to purchase, on a bought deal basis, 2,660,000 common shares of the company at a price of C$9.40 per share. The total value of the offering is approximately C$25 million. Pending regulatory approval, the offering is expected to close on or around October 22, 2019. The net proceeds of the offering will go towards working capital and general corporate purposes.

Canopy Growth

Canopy Growth Corporation (TSX: WEED) (NYSE: CGC) announced that David Klein has been appointed Chair of its Board of Directors effective immediately. Klein is currently the Executive Vice President and Chief Financial Officer of Constellation Brands, Inc. “There is no company better positioned to win in the emerging global cannabis market. I look forward to continuing to work with Canopy Growth’s very talented leadership team to position the company for long-term, industry-leading profitable growth,” Klein said in a statement.

Cannara Biotech

Cannara Biotech Inc. (CSE: LOVE) (OTCQB: LOVFF) (FRA: 8CB) has secured a first mortgage against its Farnham Facility, valued at $6 million, with the Canadian Imperial Bank of Commerce.  The mortgage will help reduce the company’s debt service costs. “Once Cannara’s cultivation and sales licenses are granted we’ll look to augment this mortgage to further reduce our debt service costs,” commented Zohar Krivorot, President and CEO of Cannara.


William SumnerWilliam SumnerJuly 23, 2019
stock-1863880_640.jpg

3min12510

Amplify Investments is getting into the cannabis industry. Today, Amplify ETF’s announced the launch of Amplify Seymour Cannabis ETF (NYSE Arca: CNBS), an actively managed ETF covering the cannabis industry. Tim Seymour, CIO of Seymour Asset Management and CNBC Fast Money co-host, will act as the fund’s portfolio manager.

As one of the world’s most premier financial journalists, Seymour recently served as the headline speaker for the Green Market Summit in Chicago, Illinois. You can watch his fireside chat with Peter Miller, CEO of Slang Worldwide Inc. (SLGWF), about the explosive growth of the cannabis industry here.

“The global legal cannabis industry is still very much in its infancy and presents an attractive growth opportunity for investors looking to capitalize on this emerging frontier,” Seymour said. “Amplify has a track record of offering investors access to disruptive areas of the market via the ETF structure, and the cannabis industry certainly fits this mold.”

As portfolio manager, Seymour will base his decisions off of publicly available data, regulatory filings, third party research, and his evaluations of companies’ financial fundamentals.

The CNBS portfolio will include cannabis companies that are federally legal in the countries in which they operate. Specifically, the portfolio will cover companies that fall into one of three categories: cannabis/hemp plant, support cultivation and retail, and ancillary companies that provide goods and services to the cannabis industry.

Another qualification is that at least 80% of the companies in the ETF must receive 50% or more of their revenue from the hemp or cannabis industry. The fund portfolio currently covers 25 of the cannabis industry’s leading companies; such as Aurora Cannabis (NYSE: ACB), Canopy Growth (NYSE: CGC), Hexo Corp. (NYSE: HEXO), Tilray (NASDAQ: TLRY), and WeedMD (OTCMKTS: WDDMF)

“Cannabis and hemp are seeing a new wave of potential use cases across multiple industries, and investors are eager to gain access to this emerging sector,” said Christian Magoon, founder and CEO of Amplify ETFs. “Tim is a recognized voice and active investor in the cannabis space, and we’re excited to harness his investment expertise and specialized insights to navigate and capture the expanding opportunity in the rapidly evolving industry.”


William SumnerWilliam SumnerJune 13, 2019
daily_hit004-1280x533.png

6min8090

It’s time for your Daily Hit of cannabis financial news for June 13, 2019.

On the Site

Cannabis’ Black Market Continues to Thrive Amidst Continued Legalization

Despite legalization continuing to spread, and efforts advocating towards federal legalization of cannabis, the black market in the U.S. for cannabis continues to thrive across the nation.Simply put, despite access and legal product being available, people are still as or more likely to purchase their cannabis from black market sources, with this trend not showing any signs of stopping.

HEXO Corp.

HEXO Corp (TSX:HEXO) ( NYSE-A:HEXO)  reported its financial results for the third quarter of the 2019 fiscal year with $15.9 million in gross revenues and a net loss of $7.7 million. The company claims it is on track to reach $400 million in net revenue in 2020 and says it will double net revenue in the fourth fiscal quarter.

Executive Spotlight: Amanda Ostrowitz, Founder & CEO of RegsTechnology

Amanda Ostrowitz is a regulatory attorney and entrepreneur who’s identified a need for a user- friendly, scalable platform to research regulations and laws in the cannabis industry. Amanda founded RegsTechnology and its current product, CannaRegs, as a tool to aid attorneys, business people, and governments with localized tracking of regulatory issues.

MJMicro Conference

Although adult-use cannabis is legal in nine U.S. states, problems persist with companies trying to gain access to capital and essential financial services. Consequently, the industry has devised a series of methods and institutions to circumvent these difficulties; from credit unions to keeping their funds in a giant safe. Another unique way that the cannabis industry has adapted to the issue has been connecting companies with private capital investment through investor forums. A perfect example of this is the MJMicro Conference planned for June 25, 2019, in New York City.

In Other News

Tilray

Tilray, Inc. (NASDAQ: TLRY) today announced the appointment of Kristina Adamski as Executive Vice President, Corporate Affairs. Adamski will help coordinate the company’s corporate affairs team and help oversee the company’s public relations, corporate social responsibility and government affairs functions. Adamski previously served as Nissan North America’s Vice President of Corporate Communications for more than three years. “We’re thrilled to welcome Kristina to our growing senior leadership team. We’re confident that her vast experience in corporate affairs and global communications will support Tilray’s long term global growth strategy as we expand around the world,” says Brendan Kennedy, CEO, Tilray.

Treehouse REIT

Treehouse Real Estate Investment Trust, Inc. announced that it has closed on nearly a $16 million debt commitment with a large, federally insured and regulated commercial bank. As the company continues to acquire cannabis-use properties, the note commitment will carry a 5.6% interest rate and provides for a revolving facility for future notes. “Treehouse is excited to announce that we have successfully procured federally insured commercial bank financing,” said Brian Kabot, Stable Road Capital Chief Investment Officer and Treehouse Board Member. “The capital relationship allows us to continue executing cannabis-related real estate acquisitions in a scaled, non-dilutive manner that is most accretive to our investors. We are witnessing federally regulated lenders enter the cannabis space and we are thrilled to be at the forefront of those efforts.”

Canndescent

The luxury cannabis brand Canndescent announced that it has signed a definitive agreement to acquire buildings and operating licenses in Nevada, Michigan and Massachusetts for $28.5 million. The acquired building will be retrofitted to support the company’s proprietary cultivation and extraction methods. “Our expansion is a huge win for cannabis consumers as the best of California cannabis will finally be available in other markets,” said Canndescent CEO Adrian Sedlin. “We’re sort of the ‘anti-MSO’ or as I like to call it, we’re an MSBO, Multi-State Brand Operator, having nailed brand and execution first and now rolling up assets with intentionality and understanding.”



About Us

The Green Market Report focuses on the financial news of the rapidly growing cannabis industry. Our target approach filters out the daily noise and does a deep dive into the financial, business and economic side of the cannabis industry. Our team is cultivating the industry’s critical news into one source and providing open source insights and data analysis


READ MORE



Recent Tweets

@GreenMarketRpt – 20 hours

“Your path you must decide” – Yoda How to Choose the Best

@GreenMarketRpt – 20 hours

Happy Friday! Green Market Report’s Marijuana Money October 23, 2020

@GreenMarketRpt – 2 days

RT : “Industry leaders are hoping that 2021 will be the turnaround after a monumentally tragic year where the lingering effects o…

Back to Top

You have Successfully Subscribed!