Hexo Corp Records Q4 Revenues Of $38.8 Million, Posts Going Concern

Hexo Corp (TSX: HEXO) this morning reported its fourth quarter financial results for 2021, posting net cannabis revenue of $38.7 million for the three month period. The company also posted a net loss for the period of $68.0 million.

The quarter was Hexo’s best to date, with revenues increasig 43% on a quarter over quarter basis, partially the result of Zenabis’ revenue now being added to the mix. The brand reportedly added $6.8 million in revenue for the two month period ended July 31 following the close of the transaction on June 1.

Total revenue for the period amounted to $38.8 million, which resulted in a gross profit of $1.5 million before fair value adjustments.

Operating expenses for the three month period amounted to $63.1 million, of which $19.2 million consisted of selling, general and administrative expenses, and $3.7 million was related to marketing and promotion. Also included under the expense line was a $19.4 million impairment of property, plant and equipment, as well as transaction costs of $14.9 million. Overall, the company posted a loss from operations of $59.9 million.

Things did not get much better from here, with other expenses and losses totaling $9.6 million, leading to a total net loss of $68.0 million for the three month period.

For the full fiscal year, the company posted revenues of $123.8 million, with a gross profit before adjustments of $29.1 million. Operating expenses however totaled $134.3 million, while other expenses totaled out at $29.7 million, resulting in a net loss of $113.6 million for the fiscal year.

In terms of its balance sheet, the company as of July 31 had cash and cash equivalents of $67.5 million, with total current assets sitting at $693.4 million. Accounts payable meanwhile were pegged at $63.6 million, with total current liabilities of $503.6 million.

Finally, things are evidently already looking rough in relation to the senior secured convertible debenture the company acquired at the end of May. The company issued a going concern as a result of the debt, as a result of the holder having the option to demand US$15.0 million per month repayments on the debt – something Hexo simply cannot afford. The debt however can be settled in shares, so long as the price of the equity is above US$1.50 per share.

The debt repayment options in fact are so bad, that the company is already looking for additional financing options to be able to repay the debt.

Hexo Corp last traded at $2.04 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.

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