HEXO Corp Q1 Revenue Increaes 9% Sequentially to $29.5 Million

HEXO Corp Reports First Quarter Fiscal 2021 Financial Results
  • Record Quarter with Gross Revenue of $41.3 Million
  • Adjusted EBITDA Improves for the Sixth Consecutive Quarter

OTTAWA, Dec. 14, 2020 (GLOBE NEWSWIRE) — HEXO Corp. (TSX: HEXO; NYSE: HEXO) (“HEXO” or the “Company”) today reported first quarter fiscal 2021 financial results. All amounts are expressed in Canadian dollars unless otherwise noted.

I would like to thank the entire HEXO team for the remarkable progress made in the first quarter. Today’s record revenue performance reflects our commitment to providing consumers with high-quality products, at reasonable prices, for all occasions. We continue to hold the number one market share position in Quebec, while continuing to aggressively expand into other markets.

HEXO CEO and co-founder Sebastien St-Louis

HEXO is now top four in adult-use market share by net sales dollars in Canada. We have also moved into the top beverage spot through Truss, our joint venture with Molson Coors, and have reached the number one market share position for hash, which we believe will continue to be an important category for the industry.

Key Financial & Operating Highlights from 1Q21

  • Gross revenue of $41.3M, the highest in the Company’s history, increased 14% from 4Q20 and 114% from the comparative prior year period.
  • Net revenue of $29.5M, up 9% from 4Q20 and 103% from the year ago period.
  • Sales momentum increased across Canada, with 18% of the periods gross sales coming from Alberta, 15% from Ontario and 6% from British Columbia.
  • Maintained number one market share in Quebec.
  • Number one in beverages with net revenue increasing 54% versus 4Q20.
  • Six straight quarters of Adjusted EBITDA loss improvement, 87% reduction from ($3.25M) in 4Q20 to ($0.42M).
  • Adjusted Gross Margin of 39% on sales excluding adult-use beverages, while beverage related revenue was gross margin positive in just its second full quarter of being in market.
  • At the close of Q1, the Company’s working capital was $250.3M, including $149.8M of cash.
  • Operational cash use of ($6.1M) for the quarter, not including financing and investing activities.

“We made extraordinary gains toward profitability this quarter, as we continue to optimize production, persist in our war on COGS, and focus on reducing our SG&A. This was the sixth sequential quarter of Adjusted EBITDA improvement, as we march towards being Adjusted EBITDA positive. We believe the strength of our balance sheet, along with our low depreciable capital base, have put us on a path where we are looking beyond positive Adjusted EBITDA and striving towards positive EPS,” continued St-Louis. “As discussed on our fiscal year-end earnings call, we purposely took time this quarter to focus on better matching supply to forecasted demand, leading to tough decisions, such as delaying the relaunch of our UP brand until Q2. Despite this, we were able to achieve record sales and I am delighted at the progress we have made to date. UP has been successful thus far, which gives us confidence in our approach moving forward.”

First Quarter 2021 Financial Results

Total net revenue in 1Q21 increased $2.3M to $29.4M from $27.1M in 4Q20 due primarily to 8% growth in adult-use cannabis sales and 54% growth in adult-use beverage. Total net revenue increased 103% from the comparative period of fiscal 2020. The Company strengthened its positions in several key Canadian markets outside of Quebec, while maintaining its top competitive position within Quebec.

The Company’s consolidated gross margin for 1Q21 improved to 35% from 30% in 4Q20. This increase is directly attributable to an improved gross profit in adult-use beverage during the period, where Truss Beverage achieved positive gross profit in only its second quarter of being in market.

Operating expenses were $20.8M in the quarter, an improvement of $50.7M from 4Q20, as the Company continued to streamline costs across the organization, primarily in SG&A, offset by marketing costs related to product launches. Loss from operations improved to $2.6M in 1Q21 from a loss of $60.5M in 4Q20, driven by a clean balance sheet and absence of material, non-recurring charges.

The Company’s total Adjusted EBITDA improved by 87% or more than $2.8M from ($3.3M) in 4Q20 to ($0.4M) in 1Q21. Net loss improved to $4.2M from a loss of $66.0M in 4Q20, when the Company took significant write downs.

Adjusted EBITDA

 

The management’s discussion and analysis for the period and the accompanying financial statements and notes are available under the Company’s profile on SEDAR at www.sedar.com and on its website at www.hexocorp.com.

Non-IFRS Measures

In this press release, reference is made to gross profit before adjustment, profit/margin before fair value adjustments, adjusted gross profit/margin, adjusted EBITDA, and revenue per gram equivalent which are not measures of financial performance under International Financial Reporting Standards (IFRS). These metrics and measures are not recognized measures under IFRS, do not have meanings prescribed under IFRS and are as a result unlikely to be comparable to similar measures presented by other companies. These measures are provided as information complementary to those IFRS measures by providing a further understanding of our operating results from the perspective of management. As such, these measures should not be considered in isolation or in lieu of a review of our financial information reported under IFRS. Definitions and reconciliations for all terms above can be found in the Company’s Management’s Discussion and Analysis for the three months ended October 31, 2020, filed on SEDAR and EDGAR.

Conference Call

The Company will hold a conference call, Monday, December 14th, 2020 to discuss these results. Sebastien St-Louis, CEO, and Trent MacDonald, CFO, will host the call starting at 8:30 a.m. Eastern standard time. Analysts’ question and answer period will follow management’s presentation.

Date: December 14, 2020

Time: 8:30 a.m. EST

Webcast: https://event.on24.com/wcc/r/2876521/3E600F67F53F73D721304EA073134431

For previous quarterly results and recent press releases, see hexocorp.com.

About HEXO Corp

HEXO Corp is an award-winning consumer packaged goods cannabis company that creates and distributes innovative products to serve the global cannabis market. The Company serves the Canadian adult-use markets under its HEXO Cannabis, Up Cannabis and Original Stash brands, and the medical market under HEXO medical cannabis. For more information please visit hexocorp.com.

Original Press Release

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