Hexo Corp (TSX: HEXO) this morning reported its fiscal second quarter 2023 results, which it top-billed as being net income positive, thanks in large part to non-operating income.

“Our continued focus on profitability is yielding solid results, including positive net income before tax for the first time in our history. [..] Our adjusted gross margin lift to 45 per cent from 40 per cent last quarter, shows that we continue to align operations towards the path to profitability,” commented CFO Julius Ivancsits on the results.

Net revenue for the quarter amounted to $24.2 million, a decline of 26% versus the first quarter, which saw $35.8 million in net revenue. The figure meanwhile represented a 57% decline on a year over year basis. And despite bragging about a positive net income figure for the quarter, the company saw its cost of goods sold come in at $26.3 million, higher than net revenue for the quarter, resulting in a gross loss before fair value adjustments of $2.2 million.

Operating expenses meanwhile came in at $23.8 million, versus $23.2 million in the prior quarter, and $667.3 million in the year-ago period which at the time was driven by notable impairments of intangible assets and goodwill. The company posted an overall loss from operations of $29.7 million.

“SG&A spending is down 11 per cent or $1.5 million compared to the previous quarter. We also made significant progress in our trade accounts receivable with a $21 million reduction compared to the first quarter and have paid off $40.7 million in debt,” commented Ivancsits.

After posting non-operating income of $34.2 million, comprised largely of a $31.8 million gain on the loss on convertible debt fair value adjustments, the firm was able to post a net income of $0.7 million. Adjusted EBITDA meanwhile came in at a loss of $2.4 million.

Cash and cash equivalents meanwhile came in at $34.2 million, down from $83.2 million at the start of the fiscal year.

The company also noted in the results that as of the quarter beginning April 30, it must post positive adjusted EBITDA of not less than US$1.00 to meet financial covenants related to its senior secured convertible note, while also maintaining minimum liquidity of US$20 million. The requirement is said to “lend substantial doubt as to the ability of the company to meet its obligations as they come due.”

Hexo Corp last traded at $2.04 on the TSX.

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