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Canadian Cannabis Company Hexo Posts 135% Q2 Revenue Growth

Mar 14, 2019 4:56 pm
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Canadian cannabis producer Hexo Corp (NYSE:HEXO) reported its financial results Thursday for the fiscal second quarter ended Jan. 31. For the first quarter since the full legalization of cannabis in Canada, the company recorded revenue growth of 135 percent on the quarter and nearly 1,300 percent on the year.

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What Happened

HEXO posted fiscal second-quarter gross revenue of CA$16.18 million ($12.14 million), while the net revenue excluding excise taxes amounted to CA$13.38 million. The bulk of the revenue came from the recreational market (CA$12.21 million net).

The large revenue growth helped HEXO narrow its net loss by 52 percent on the year and by 66 percent sequentially to CA$4.33 million. 

During the fiscal second quarter, HEXO sold 2,689 kilograms of dried cannabis products, up by 142 percent on the quarter. The company also produced 4,938 kilograms of cannabis, an increase of 39 percent compared to the previous quarter. 

In addition to larger volume of cannabis sold, HEXO's revenue growth was aided by slight increases in prices. In this way, the company reported an average selling price for the adult market of CA$5.83 per gram versus CA$5.45 a quarter earlier, while for the medical market the price increased from CA$9.12 to CA$9.15 per gram.

Why It's Important

Hexo's results are more or less in line with industry peers Aurora Cannabis Inc. (NYSE:ACB) and Canopy Growth Corp (NYSE:CGC), both of which reported last month. The legalization of adult use is having a beneficial impact on the companies' top-line growth while also helping them reduce their losses. 

What's Next

During the second quarter, Hexo's 1-million-square-foot facility in Belleville, Ontario reached construction and licensing milestones, and the company said it expects first harvests in the next two quarters. It also plans to open its product transformation center in the fiscal fourth quarter.

On the back of these two and other developments, HEXO said it expects its net revenue in the fiscal fourth quarter to double compared to the second quarter.

However, in a trend with revenue growth, HEXO also anticipated higher marketing, administrative and R&D expenses. 

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