HEXO Corp. (HEXO), a seed-to-sale Canadian licensed producer supplying the Canadian adult-use consumer packaged goods market announced its Q1, 2022 financial results today for the period ended October 31, 2021, as follows: 

Q1 Financial Highlights

(All results are presented in Canadian dollars and compared to the previous quarter. Go here to convert into other currencies.)

• Net Revenue: increased 29.5% to $50.2M of which $14.6M was a result of the close of Redecan and 48North
• Gross Profit: decreased to $(31.8)M from $3.2M
• Net Loss: increased by 72.0% to $(116.9)M
• SG&A Expenses: increased by 25.8% to $28.7M
• Compensation: increased to $3.8M from .8M
• Operating Expenses: increased 95.1% to $(123.1)M

Management Commentary

Scott Cooper, President & CEO, said:

“We are taking immediate steps through our new strategic plan, The Path Forward, to strengthen our capital position, improve operations, accelerate organic growth and complete our transformation to be cash flow positive from operations within the next four quarters.

Having visited all our core sites, and in meeting with our employees and customers, I am more confident than ever in HEXO’s future and our ability to accelerate the creation of short and long-term value for shareholders.”

The Path Forward

The Company has announced a new transformative plan, The Path Forward, which is made up of five priorities:

1. Reduce manufacturing and production costs;
2. Streamline and simplify the organizational structure;
3. Realize cost synergies from acquisitions and recent plant closures;
4. Focus on revenue management, including more disciplined pricing; and
5. Accelerate growth through organic market share gains and capture missed revenue opportunities, including
   • improving their ability to align cultivation planning with market demand,
   • reintroduce a focus on medical and strengthen our commercial capabilities and innovation pipeline.

The Company expects to:

• achieve +$50M in synergies as it integrates its recent purchases of Redecan, Zenabis and 48North which exceeds its initial stated target of $35M and
• generate incremental cash flow of $37.5M in FY '22 and an additional $135M in FY '23.

To facilitate reaching its objectives the company halted its the Keystone Isolation Technologies project indefinitely as of October 31, 2021, resulting in a one-time charge of $11.3 million

Stock Performance

The stock price of HEXO is DOWN -74.2% YTD and has gone DOWN -35% just since the end of Q1 and went DOWN -10% today as a result of the release of its Q1 financial results this morning.