Hexo Corp (TSX HEXO) (NYSE: HEXO) filed its interim financial statements for the fourth quarter of 2019 tonight, recognizing net revenues of $15.39 million during the quarter, while posting a total net loss of $56.68 million. Net revenues for the full fiscal year came in at $47.34 million, as compared to $4.93 million in 2018. The total net loss for the full fiscal year came in at $81.56 million.
The real story for the quarter however, was the rate at which the firms expenses increased relative to that of the revenue growth exhibited by the firm. Revenues on a quarter over quarter basis increased 18.82% on a net basis. Meanwhile, expenses themselves increased 94.97% during the same time period.
| Expense | Q3 ($000) | Q4 ($000) | % Change |
| General & administrative | 10,495 | 22,375 | 113.19% |
| Marketing & promotion | 5,122 | 9,520 | 85.86% |
| Stock-based compensation | 8,162 | 10,197 | 24.93% |
| R&D | 0 | 2,822 | N/A |
| Depreciation | 140 | 581 | 315.00% |
| Amortization | 137 | 1,407 | 927.00% |
| Total | 24,056 | 46,902 | 94.97% |
Hexo reported an increase in total assets for the period ended July 31, 2019, with an increase from $266.51 million to that of $314.55 million. The increase was primarily driven by inventory build, which increased from $36.77 million to that of $86.27. Cash decreased during the period to $113.56 million from $173.09 million in the prior quarter.
In terms of cannabis itself, the firm sold 4,009 kilograms of recreational cannabis and cannabis equivalents during the quarter, a 45% increase from the prior quarter’s 2,759 kilograms. Cumulatively, the firm sold 4,818 kilograms of cannabis in the quarter when including medical and wholesale sales.
While the total amount of cannabis sold increased significantly, the average selling price decreased on a per gram basis. Average sale per gram of adult-use cannabis decreased from $5.29 to $4.74, while medical pricing decreased from $9.11 per gram to $8.34 on a quarter over quarter basis. The fourth quarter also saw the only wholesale cannabis sold during the fiscal year, at a rock-bottom average price of $0.56 per gram.
Total kilograms produced during the quarter increased from 9,804 kilograms to 16,824 kilograms, demonstrating that the firm is currently cultivating roughly four times more product than its selling on a quarterly basis. Notably, Hexo was also subjected to an impairment loss on inventory of $16.91 million, as a result of price compression being exhibited within the sector.
Following the prior cancellation of guidance for 2020, Hexo also provided an outlook for 2020 within the filed management discussion and analysis. Within, the firm is projecting revenues of between $14 and $18 million for the first quarter of fiscal 2020. Referencing calendar 2020, the issuer indicated it is currently projecting that it will be EBITDA positive.
Hexo Corp closed today’s session at $3.03 on the TSX Exchange.
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.
