Hexo’s Q3 2022 net loss increases 638% to C$1,527 million, is there profit?

HEXO Corp. HEXO HEXO revenue grew 101% in Q3 2022 to C$45.57 million ($35.26 million) compared to CA$22.66 in Q3 2021.

Third Quarter 2022 Financial Highlights

  • Gross profit was a loss of C$5.27 million compared to a gain of C$8.82 in Q3 2021, an unfavorable situation decrease of 159.75%.

  • Adjusted EBITDA was a loss of CA18.33 million compared to a loss of C$10.78 million in the third quarter of 2021.

  • The total net loss was C$152.7 million compared to a net loss of C$20.7 million in the third quarter of 2021.

  • Cash and cash equivalents were C$14.22 million

Other Highlights

  • On April 12, 2022, HEXO entered into definitive agreements with Tilray Brands Inc. TLRY to restructure the terms of the senior secured convertible bond. Among other changes, the maturity of the notes will be extended by three years and the capital condition clause will be removed, relieving the company of punitive dilution pressure under the current note structure.

  • Concurrent with the definitive agreements, HEXO entered into a definitive share purchase agreement with an affiliate of KAOS Capital Inc.which, when completed, will provide HEXO with access to an aggregate 180 million Canadian dollars over a period of 36 months.

  • Announcement of the closure of the centralized processing and manufacturing plant in Belleville ON. The decommissioning and phase-out process is expected to be finalized by the end of July 2022.

  • Net sales decreased 14% quarter over quarter due to a reduction in international and adult sales.

  • Operating loss improvement of 80%, quarter over quarter, due to second quarter 2022 balance sheet realignment and previously recorded C$616 million impairments on goodwill, intangible assets and tangible assets.

  • C$34,924 of total senior secured note redemptions occurred during the quarter, resulting in the issuance of 72.26 million common shares.

  • The loss on the company’s senior secured note was reduced by C$61,556 due to lower volatility in the valuation approach.

  • The company’s total assets held for sale increased to CA$22,450 from CA$13,404 in the prior quarter.

  • named HEXO Joelle Mraisformer Deputy General Counsel as General Counsel and Corporate Secretary.

Withdrawal of financial guidelines

The Company is fully withdrawing its previously issued guidance on operating synergies and expected incremental cash flow increases for fiscal years 2022 and 2023, and there can be no assurance that the Company will decide in the future to provide any guidance regarding any operational, financial or other measure.

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Photo: Courtesy of Katie Harp on Unsplash

Ann J. Cox