William C Goodin
Posted by William C Goodin on Jun 26, 2019 9:55:00 AM

HEXO Stocks Slide as Third Quarter Earnings Fall Short of Expectations

 

Hydropothecary-ProductHEXO Corp. (TSX: HEXO) saw its stocks slide down after the company's third-quarter earnings fell short of expectations. The company reported that financial results for the third quarter of 2019 stood at $15.9 million in gross revenues with a net loss of $7.7 million. However, HEXO says that it remains optimistic that it remains on track to reach its 2020 target of $400 million in net revenue.

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“This quarter saw HEXO remain on-track as it continues ramping up to $400 million in revenue in fiscal 2020, including completing the first harvest in our 1 million sq. ft. Expansion and preparing to fund our ongoing expansion projects and innovation initiatives by entering a $65 million syndicated credit facility.” HEXO CEO and co-founder Sebastien St-Louis.

Third Quarter Highlights:

  • HEXO remains on-track ramping up to $400 million net revenue in fiscal 2020 and to double net revenue in Q4 fiscal 2019
  • Entered a syndicated credit facility with CIBC and BMO for up to $65 million available credit to fund continuing expansion and innovation initiatives.
  • 9,804 kg of dried cannabis produced, an increase of 98% over the previous quarter
  • 2,904 kg of gram and gram equivalents sold, an increase of 8% quarter over quarter
  • Headcount more than doubled from 364 to 822
  • Completed first harvests in new 1,000,000 sq. ft. expansion as HEXO continues ramping up to annual production capacity of 150,000 kg of dried cannabis
  • Secured 60,000 kg of hemp to be supplied for CBD extraction purposes in preparation for upcoming edibles market and HEXO launch in eight American states in 2020

HEXO also announced its plans to enter eight additional U.S. states with its CBD products. The company’s chief executive Sebastien St-Louis gave no further details but said that they were working on a joint venture with Molson Coors Brewing Co.

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The company is planning to launch a wide range of CBD products and is currently in discussion with Fortune 500 companies for potential partnerships. HEXO hopes that with these partnerships, the company will be able to leverage its existing distribution and go through non-marijuana channels.

In earlier news, HEXO announced the closing of the agreement to acquire Newstrike. This recent acquisition will provide the company the capacity to produce approximately 150,000 kg of cannabis annually along with access to four additional production campuses. This will also give the company better domestic market penetration with its combined distribution agreements in eight provinces.

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