HEXO Corp., one of Canada’s leading cannabis producers, reported significant financial growth in the first quarter of the 2019 fiscal year, ending October 31, 2018. The company achieved gross revenue of $6.7 million, a substantial increase fueled by the legalization of adult-use cannabis in Canada. HEXO’s revenue from adult-use cannabis alone amounted to $5.2 million, accounting for 78% of the total revenue for the quarter, all within the first two weeks of legalization.
Remarkable Growth Post-Legalization
The legalization of adult-use cannabis in Canada on October 17, 2018, marked a turning point for HEXO. The company quickly capitalized on this new market, achieving over a 500% revenue increase compared to the previous quarter. HEXO’s CEO and co-founder, Sebastien St-Louis, emphasized that the company’s rapid revenue growth demonstrates its ability to execute its strategic plans effectively. He highlighted that HEXO is on track to generate significant revenue throughout the fiscal year, positioning itself as a world-class cannabis organization.
Strategic Partnerships and Expansion Initiatives
In line with its growth strategy, HEXO formed a notable partnership with Molson Coors Canada, creating a joint venture named Truss. This collaboration aligns with HEXO’s objective to partner with Fortune 500 companies across various product categories, leveraging their established distribution and brand platforms to expand its market presence.
Additionally, HEXO acquired a scalable facility in Belleville, Ontario, to establish a center of excellence for cannabis-based consumer packaged products. The company is also on schedule to make a 1 million sq. ft. production facility operational by the end of December 2018. This expansion is part of HEXO’s broader goal to increase its production capacity and meet the growing demand in both domestic and international markets.
International Expansion and First European Partnership
HEXO also made its first foray into the European market by establishing a partnership in Greece. This partnership aims to create a Eurozone distribution center, providing HEXO with a strategic foothold in Europe and enabling the company to expand its reach into international markets.
Financial Highlights
The first quarter of fiscal 2019 saw HEXO selling approximately 1,110,000 gram equivalents of cannabis, a significant increase from the 539,000 gram equivalents sold throughout the entire fiscal year of 2018. The gross revenue per gram in the adult-use market was $5.45, while the medical market saw a higher average of $9.12 per gram. HEXO’s adult-use sales accounted for 952,223 gram equivalents, with dried flower representing 81% of the total sales.
Medical cannabis sales also experienced a 2% increase over the previous quarter, with revenue reaching $1.4 million. The company’s medical cannabis sales volume increased by 30% year-over-year, reflecting growing demand for its products, particularly oil-based products, which command a higher price per gram compared to dried flower.
Increased Production and Capacity
During the quarter, HEXO produced over 3,550 kg of dried cannabis, a substantial increase driven by the commissioning of its new 1 million sq. ft. facility. This facility is expected to significantly boost the company’s production capacity, allowing it to achieve an annual production goal of 108,000 kg of dried flower. The new facility will house the mother plants and provide cuttings to support the first production cycle, positioning HEXO to meet the rising demand in the adult-use market.
Operating Expenses and Investments
HEXO’s operating expenses increased significantly in the first quarter, reflecting the company’s rapid expansion and increased scale of operations. General and administrative expenses rose to $4.9 million, up from $1.2 million in the same period the previous year. This increase was driven by higher staffing levels, additional rental space, and increased compliance costs associated with HEXO’s public listing on the TSX.
Marketing and promotion expenses also saw a dramatic rise to $11.7 million, compared to just $1.1 million in the first quarter of fiscal 2018. These expenses were largely attributed to HEXO’s efforts to build brand recognition and establish a strong presence in the newly legalized adult-use market. The company launched several promotional events and campaigns, including the Canada-wide “Never Jaded” tour featuring prominent artists and personalities.
Loss from Operations and Other Income
HEXO reported a loss from operations of $14.8 million for the quarter, a significant increase from the $381,000 loss reported in the same period the previous year. The loss was primarily due to the increased operating expenses associated with scaling up operations for the adult-use market. Despite the loss from operations, HEXO recorded other income of $2 million, largely due to the revaluation of financial instruments and gains on convertible debentures.
Looking Ahead
As HEXO continues to expand its production capacity and strengthen its partnerships, the company is well-positioned to capitalize on the growing cannabis market in Canada and internationally. With a strategic focus on innovation, partnerships with Fortune 500 companies, and a strong commitment to meeting consumer demand, HEXO is poised for continued growth in the evolving cannabis industry.
About HEXO Corp.
HEXO Corp. is a leading Canadian cannabis producer known for its innovative and easy-to-use products. The company operates over 310,000 sq. ft. of production space, with plans to complete an additional 1 million sq. ft. expansion by the end of 2018. HEXO serves the adult-use market under the HEXO brand and continues to provide medical cannabis through its Hydropothecary brand.
For more information, visit HEXO’s corporate website at www.hexocorp.com.
This version captures the essence of the original press release while maintaining key details and a focus on HEXO’s strategic initiatives and financial performance.
