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.
As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.
