Hexo Corp Posts Q1 2022 Revenues of $50.2 Million, Net Loss Of $117.4 Million

Hexo Corp (TSX: HEXO) this morning reported its first quarter 2022 financial results, posting revenues of $50.2 million, while also posting a substantial loss of $117.4 million. Inflating the loss for the quarter was several impairments, which are related to a transformation plan the company has undertaken.

Revenue for the quarter amounted to $50.2 million, an increase of 29% from the $38.7 million in revenue the compare recorded in the fourth quarter of 2021. Revenues improved on a quarter over quarter basis partially due to a $13.5 million bump from the Redecan acquisition and a further $1.1 million contribution from 48North, signaling that excluding inorganic growth, revenues would have been just $35.6 million for the quarter.

The company got off to a good start for fiscal 2022, writing down inventory by $36.2 million which is partially due to a cancellation of an extraction capital project known as the Keystone Isolation Technology project. The impact resulted total costs of goods sold of $83.0 million, resulting in negative gross profits of $32.8 million.

Operating expenses meanwhile totaled $123.1 million, including a $23.8 million impairment of property, plant and equipment, as well as an impairment of $26.9 million in investment in associate, which is related to the firms Truss joint venture with Molson Coors. $24.4 million in acquisition and transaction costs were also incurred, as well as $22.5 million in SG&A. Total loss from operations amounted to $155.1 million.

Impairments do not include the closure of three facilities that were announced subsequent to the end of the quarter.

Ahead of the net loss, the company saw a $42.2 million positive boost from non-operating income, which was largely related to gains from warrant liabilities. Overall the company posted a net loss of $117.4 million, with the firm not providing an EBITDA figure.

Cash on hand meanwhile amounted to $55.8 million, while restricted cash is pegged at $131.6 million. The company however is now contending with US$241.6 million in remaining senior secured convertible notes which it is trying to rework with lenders due to its dilutive nature. US$118 million of the initial note has been repaid thus far, with the firm required to make monthly payments of up to US$20.0 million.

Outside of the financial results, the firm indicated that it expects to see synergies from recent acquisitions increase from $35.0 million to $50.0 million as it works on its transformation plan. The firm is expecting positive cash flow of $37.5 million in 2022, and a further $135.0 million in 2023.

Lastly, the firm will see its CFO, Trent MacDonald, leave the company effective March 11, 2022, with the company now undergoing a search for a replacement.

Hexo Corp last traded at $1.23 on the TSX.

Information for this briefing was found via Sedar and Hexo Corp. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

Leave a Reply