Hexo Corp (TSX: HEXO) (NASDAQ: HEXO) reported its fourth quarter earnings this evening, reporting net revenues of $27.1 million for the three month period ended July 31, 2020, along with a net loss of $169.5 million. For the entire fiscal year, the company reported net revenue of $80.8 million and a massive net loss of $546.5 million before tax.
Looking at the fourth quarter, the company posted a gross profit before adjustments of $8.1 million. However it then wrote off $2.2 million in inventory, and marked down the value of current inventory to the tune of $41.9 million, resulting in a gross loss before fair value adjustments of $36.0 million.
Operating expenses for the quarter totaled out to $71.5 million, indicating that Hexo is nowhere near close to profitability. Expenses for the three month period were comprised of a $45.4 million impairment to property, plant and equipment, following by selling, general and administrative expenses of $12.4 million, and share-based compensation of $4.4 million.
During the quarter the company also took a $54.3 million loss on inducement of convertible debentures, a $4.3 million unrealized loss on investments, and an interest expense of $2.7 million among other items. The total non operating loss amounted to a total of $63.3 million during the three month period, contributing to the net loss of $169.5 million over the course of the quarter.
Looking at the full fiscal year at a high level, net revenues of $80.8 million resulted in a gross profit before adjustments of $27.0 million. However, after taking into consideeration $0.7 million in write offs of biological assets, $4.4 million in written off inventory, and a $68.3 million write down on the value of inventory, the actual gross profit for the year amounted to a loss of $46.4 million.
On top of this annual gross loss, the company recorded $418.6 million in operating expenses, including $52.78 million in SG&A expenses, and $26.8 million in share based compensation. On top of this, the year saw a number of impairments such as:
- Impairment of property, plant and equipment of $79.4 million
- Impairment of intangible assets of $108.2 million
- Impairment of goodwill of $111.9 million
- Realization of onerous contract of $4.8 million
- Disposal of long-lived assets of $3.9 million
Total non-operating income for the fiscal year added an additional $76.0 million to the overall loss of $552.5 million for the fiscal year.
Moving to the current balance sheet, the one positive for Hexo is that it currently has a cash balance of $184.2 million, as compared to $94.3 million in the third quarter, a result of having quarterly cash flow from financing activities of roughly $86.6 million. Restricted funds however fell from $17.4 million to $8.3 million over the course of the quarter.
Inventory meanwhile shrank significantly to $64.9 million from that of $105.9 million due in part to write downs. Receivables meanwhile climbed, with trade receivables climbing to $19.4 million and other receivables climbing to $16.7 million, compared to $16.8 million and $12.2 million, respectively, in the prior quarter. Total current assets overall climbed to $305.7 million, up from $259.5 million.
Current liabilities meanwhile climbed significantly, a result of a term loan becoming current during the quarter, resulting in the line item ballooning to $29.9 million, up from $3.1 million. Accounts payable also climbed, hitting $32.5 million as compared to $26.7 million in the prior quarter. Total current liabilities overall climbed from $43.8 million to $82.5 million during the quarter.
Hexo Corp last traded at $0.72 on the NYSE.
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.