Canadian cannabis producer Hexo reported a total net loss before tax of 129.7 million Canadian dollars ($98 million) in the company’s third quarter, bringing accumulated losses since 2016 to more than CA$2 billion.
Quebec-based Hexo disclosed plunging revenue while reporting its fiscal third quarter Thursday.
In the February-April period, Hexo’s net sales were CA$21.6 million, down by approximately 50% compared to the same period last year.
By revenue stream in the quarter:
- Recreational cannabis sold at retail was CA$26.5 million, down 46% from last year.
- Medical sales were CA$647,000, down 28% from last year.
- International revenue fell 90% compared to last year, to CA$649,000.
- Cannabis beverage sales were CA$0, compared to CA$4 million one year ago.
The only revenue stream that did not experience a significant year-over-year decline was wholesale transactions.
Hexo’s wholesale sales increased 22% over last year’s quarter to CA$4 million.
In a conference call with an analyst, Hexo CEO Charlie Bowman blamed:
- Soft performance in key markets, including Alberta, Ontario and Quebec.
- Fierce competition within the industry.
- SKU rationalization in which Hexo discontinues poorly performing product offerings.
Another reason was that a subsidiary filed for bankruptcy protection and was therefore deconsolidated from Hexo’s earnings.
That subsidiary, Zenabis Global, contributed CA$8.5 million in net sales in the third quarter of 2022 – revenue that is no longer applicable for Hexo.
Hexo bought Zenabis in 2021 for CA$235 million in stock – one of several acquisitions that ultimately pushed the Gatineau business to the brink of bankruptcy.
Hexo has not generated positive cash flow or earnings since 2016, the company also disclosed.
Also in the third quarter, Hexo said it entered into a definitive agreement for Tilray to acquire all of Hexo’s outstanding shares.
Hexo said its shareholders approved Tilray’s acquisition of the issued and outstanding common shares of the Quebec company.
The final arrangement between Hexo and Tilray remains subject to court approval.