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Home / Business / HEXO Revenue Skyrockets in Its First Full Quarter of Recreational Pot Sales — The Motley Fool

HEXO Revenue Skyrockets in Its First Full Quarter of Recreational Pot Sales — The Motley Fool



When Canadian marijuana producer HEXO (NYSEMKT: HEXO) reported the first quarter 2019 fiscal results in December, the company's revenue included only two weeks of recreational marijuana sales. Investors did not have a complete view of the growth that HEXO would actually generate with the new market. But this image is now quite clear.

HEXO announced the results of its second fiscal 2019 quarter, which ended on January 31st, before the market opening on Thursday. Here are the highlights from the company update. (All figures are in Canadian dollars.)

  Marijuana leaf with $ 100 bills in the background

Image source: Getty Images.

HEXO results: The raw numbers

Metric

Q2 2019

Q2 2018

Change year over year

Sales

CA $ 16.2 million CA $ 1.2 million

1.268.8%

Profit (loss) net

(CA $ 4.3 million) (CA $ 8.9 million)

N / A

Adjusted earnings per share (EPS)

(CA $ 0.02) (CA $ 0, 10)

N / A

Data source: HEXO. CA $ 1 = $ 0.75.

What happened with HEXO this quarter?

Not surprisingly, it brought the huge growth in sales of HEXO. Over 91% of the company's second-quarter revenue, approximately $ 14.8 million, comes from the Canadian adult recreational marijuana market.

Furthermore, it is not surprising that HEXO has made most of its sales. The company entered into a major supply agreement with the province of Quebec and generated 84% of sales of adult products in the province in the second quarter. The rest of HEXO sales for adult use came from British Columbia and Ontario.

Much of the improvement in HEXO compared to the previous quarter and the previous period stemmed from the growth in volumes. However, the company also benefited from an increase of $ 0.38 per gram to its average selling price compared to the previous quarter.

What could be somewhat surprising, however, was that sales of HEXO recreational marijuana increased by 185% compared to the previous quarter. This is certainly a big leap. But in the second fiscal quarter there were almost six days of recreational sales compared to the first quarter – from 92 days to 16 days.

Sales of medical cannabis increased 17% year-on-year to CA $ 1.4 million. However, this was a 3.4% drop compared to the previous quarter.

What the management said

The CEO and co-founder of HEXO, Sebastien St-Louis, said: "This is an exciting time for HEXO as we continue to achieve goals on the way to becoming one of the two best companies of cannabis ". [19659002] St-Louis added:

This quarter not only saw an exponential increase in gross revenues and production, but also saw us continue to fulfill our promises, including achieving a milestone in the construction and licensing of a 1,000,000 square foot greenhouse and listed on the NYSE-A. Just yesterday we announced an agreement for the acquisition of Newstrike Brands Limited. The future of HEXO is very promising, I look forward to constantly driving shareholder value and achieving goals with our team.

Looking forward

HEXO does not expect an increase in net revenue (reflecting the least-excise gross revenue) in the third quarter. However, HEXO thinks that net sales in the fourth quarter will double that of the second quarter. What will make the big difference? Capacity.

The company plans to complete its initial harvest from its new one million square meter greenhouse in the third quarter. This expansion will increase the annual production capacity of HEXO to around 108,000 kilograms. But even better days should be ahead.

HEXO has just announced the acquisition of Newstrike Brands, an agreement that will increase its annual production capacity to around 150,000 kilograms. The company's partnership with Molson Coors also places HEXO in a privileged position to profit from the large recreational market in Canada for cannabis drinks and food products. HEXO expects this market to open in the latter part of 2019.

Keith Speights has no position in any of the stocks mentioned. Motley Fool owns shares of Molson Coors Brewing. The Motley Fool recommends HEXO. The Motley Fool has a disclosure policy.


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