Bonno
2 years ago
What corporate earnings say about your business
Corporate earnings reports might not seem like the most thrilling reading – especially in a dynamic industry like cannabis.
Even so, Wall Street earnings releases are worth your time – both for what they can tell you about our industry and how they can help you craft better financial communiques.
Quebec-based marijuana company Hexo recently reported results for its third fiscal quarter ended April 30. Its news release was a 3,500-word lesson in what not to do.
It only needed about 10 words: Hexo lost $146.7 million on $63.6 million in revenue.That was the story. Those were the numbers.
Here’s what the news release led with instead: “Hexo is committed to streamlining our operations across all functions, allowing our top-selling brands to remain competitive in the marketplace whilst aligning to our long-term financial objectives of becoming cash flow positive and driving growth,” Hexo CEO Charlie Bowman said. “As we move forward, we remain keenly focused on our financial objectives and taking the necessary steps to achieve them, including maintaining a lean organization and concentrating on operational excellence.”
Huh?
Not to be too hard on Hexo – it has enough on its plate without anyone else piling on – but does that mean anything to you? Does it mean anything to anybody?
Straight Talking
Lesson one: ?Always lead with a clear statement of the news. Don’t hide, don’t hedge, don’t spin. Give the news, good or bad. Then own it.
There’s no better model for this then Bill Self, the head basketball coach at the University of Kansas. If you want a master class in how to give a financial presentation, watch Self give a post-game interview.
No matter how spectacularly his team performs, Self never focuses on what the team did well. He ignores the whole highlight reel. Instead, Self finds and focuses on the opportunities he missed, the strategies he could refine, the players he could redirect. The guy could win a national championship and come out saying next time his team will do better.
Lesson two: Lead with clear comparison using standard metrics.
Instead of starting its news release with standard revenue figures, Hexo gave a bullet point about its efforts to restructure some debt. That’s clearly information shareholders must have, so it had to be included. But it did not have to lead the news release, and choosing to lead with something secondary seemed like deliberate opacity.
Straight revenue and earnings might not always be the whole story, but it’s always the best starting place.
Hexo dumped an entire spreadsheet into its news release. They could have done better.
Financial documents should always include the complete version at the end but simplify and declutter the data as much as possible.
Here’s how Hexo could have presented the same information (all dollar figures in Canadian millions):
Takeaway: If you run the numbers, readers are less likely to. Decide what the secondary points of the release should be and put other material disclosures at the end.
Lesson three: If the financials show a significant variance, explain it. If revenue was flat but selling, general and administrative expenses shot up, say why.
In this release, we see major year-over-year changes, all of which should be clearly spelled out. Why did the cost of goods sold rise at twice the pace of revenue?
When companies and news outlets include these details, it does more than tell you about one company. It gives you the basis for a series of comparisons. In other words, the numbers tell you how Hexo did relative to its last reporting period. But you can also discern how well Hexo did relative to rival companies.
Comparing your business to Hexo might not tell you much. But keeping an eye on earnings in the cannabis space will tell you a lot – especially if you take the time to compare public companies’ number to your own.
Andy Obermueller,
editorial@mjbiz.com
Bonno
3 years ago
Not to worry... Hexo has a plan!
Or... why selling bunk weed will get you nowhere fast!!!
BUSINESS
Cannabis company Hexo reports $116.9M Q1 loss, launches new strategic plan
TD
By Thom Bonno The Canadian Press
Tue., Dec. 14, 2021timer2 min. read
updateArticle was updated 1 hr ago
Hexo Corp. says it lost $116.9 million in its first quarter as the cannabis company announced a new strategic plan meant to reduce costs, streamline its business and improve growth.
The Gatineau, Que. company’s loss amounted to 46 cents per diluted share for the quarter ended Oct. 31, compared with a loss of $4.2 million or four cents per share in the same period a year earlier.
It came as the company is overhauling its operations and leadership after Hexo co-founder and chief executive Sebastien St-Louis and chief operating officer Donald Courtney departed the company in October.
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Days later, St-Louis was replaced with Scott Cooper, who ran Truss Beverage Co., a joint venture between Molson-Coors Canada and Hexo that produces the Little Victory, Mollo and Veryvell beverages.
Cooper was immediately tasked with quelling recurring losses and addressing a recent review of Hexo conducted by PricewaterhouseCoopers LLP.
The review found Hexo “did not maintain, in all material respects, effective internal control over financial reporting” and several factors “raise substantial doubt about its ability to continue as a going concern.”
Cooper revealed his answer to these concerns Tuesday, when he unveiled a plan called “The Path Forward.
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“The days of unprofitable cannabis companies are numbered,” Cooper said on a call with analysts, where he discussed the plan.
The Path Forward contains five goals: reducing production costs, streamlining the company’s organizational structure, realizing cost synergies from acquisitions and plant closures, focusing on revenue management through disciplined pricing and accelerating growth through market share gains.
As part of the plan, the company will refocus on medical cannabis and integrate its recent acquisitions of Zenabis Global Inc., Redecan and 48North.
Hexo now expects to find $50 million in synergies from those purchases, up from the $35 million it recently announced.
Hexo hopes these moves will help better align supply and demand — a task cannabis companies like Aurora Cannabis Inc. and Tilray Inc. spent the last year working on in hopes of it leading them to profitability.
However, aligning supply and demand has not been easy because pot companies have had to contend with new shopping habits from cannabis consumers during the pandemic.
Those habits arose as pot companies continued their push to squeeze the illicit market by dropping prices, which has put pressure on their margins but improved their revenues.
Hexo, for example, had a first quarter net revenue of $50.2 million, up from $29.5 million in the same quarter last year.
“We think that the value add we provide with our high-quality products means more to consumers than a race to the bottom in price,” Cooper said.
“Successful companies in the future will be those that can successfully run their businesses, and not just by unprofitable market share.”
He also announced a series of executive changes, including the forthcoming March 11 departure of chief financial officer Trent MacDonald.
Michael Munzar, chair of the company’s board of directors, will step down and be replaced by John Bell, a former member of rival Canopy Growth Corp.’s board.
Jackie Fletcher was named vice-president of science and technology.
Bonno
3 years ago
Hexo warns cash flow isn’t sufficient to support its debt payments
IRENE GALEA
PUBLISHED OCTOBER 29, 2021
A 404 millions payment comes due, but they don,t have it.
Quebec Prime Minister Legault has a request on his desk.
It,s a 404 million $ subvention to Hexo as they are supplying SQDC with bunk weed.
Our tax dollars for a Ponzi.
We visited Hexo a few years ago and had St-Louis showing us a kilo bag of buds saying this bag is 12,000$ with a straight face...Lol
Bonno
3 years ago
They should grow good weed as bunk does,nt sell well.
They are fucked!
Hexo auditor raises ‘substantial doubt’ about company as it reports $67.9M loss in Q4
TD
By Thom Bonno The Canadian Press
Fri., Oct. 29, 2021timer3 min. read
updateArticle was updated 2 hrs ago
Hexo Corp.’s auditor raised serious concerns about the company’s future as it reported a $67.9 million net loss in its latest quarter.
PricewaterhouseCoopers LLP said its recent review of the Ottawa-based cannabis business showed that Hexo “did not maintain, in all material respects, effective internal control over financial reporting” and several factors “raise substantial doubt about its ability to continue as a going concern.”
“The company has suffered recurring losses from operations, has had cash outflows from operating activities, and has financial liabilities that may require significant cash outflows over the next twelve months,” the auditor wrote in a six-page report filed along with Hexo’s fourth-quarter earnings.
It also noted that Hexo’s existing funds and operational cash flow are “not sufficient” enough to fund debt repayments, capex budgets, and potential cash requirements under a senior convertible note.
The auditor’s report come as Hexo is trying to quell the upheaval stemming from a recent strategic reorganization that involved the departure of co-founder and chief executive Sebastien St-Louis and chief operating officer Donald Courtney last week.
St-Louis was replaced with Scott Cooper, who ran Truss Beverage Co., a joint venture between Molson-Coors Canada and Hexo that produces the Little Victory, Mollo and Veryvell beverages.
Cooper told analysts on Friday he was nine days into the job, but “quickly getting my arms around the business” by cramming in meetings with employees, investors, board members, analysts and customers.
“These will also help me understand where Hexo can capitalize on strengths and where we may need to augment capabilities to compete for and earn our customers’ and consumers’ business,” he said.
Cooper will also look for barriers he can break down to help the company meet its targets, address the risk presented by the company’s debt structure and work to help integrate Hexo’s recent acquisitions of Zenabis Global Inc., Redecan and 48North.
The company’s financial position and its senior convertible note will also factor into his and Hexo’s priorities.
“We maintain that positive relationship with the note holder,” chief financial officer Trent MacDonald said on the same call as Cooper.
“We understand the risk this note holds and we take it very seriously.”
Analysts are also watching the company’s share price closely.
RBC Capital Markets analyst Douglas Miehm and analyst Sahil Dhingra pointed out that the company’s stock has declined by about 70 per cent since its third-quarter results “came in weaker than expected due to what were expected to be transitory challenges.”
Its stock sat at $2 on Friday morning, a 1.72 per cent drop.
That drop came as Hexo reported its $67.9 million net loss in its fourth-quarter, which compared with a net loss of $169.5 million in the same quarter last year.
Its net loss amounted to 48 cents per share for the period ended July 31, down from a loss of $1.60 per share in the fourth quarter of 2020.
Hexo says its net loss for the entire year amounted to 89 cents per share, down from a loss of $7.08 per share last year.
The company’s net revenue from sale of goods totalled $38.6 million, up from $27 million at the same time last year.
Hexo says its recent, $235-million purchase of Zenabis contributed $6.8 million in net revenue to the quarter.
But Miehm and Dhingra say data they analyzed shows the market share of a combined Hexo-Zenabis-Redecan-48North has dropped from about 16 per cent in March to 13 per cent in August across Alberta, B.C. and Ontario.
This report by The Canadian Press was first published Oct. 29, 2021.
Companies in this story: (TSX:HEXO)
Note to readers: This is a corrected story. A previous version listed the loss per share for the company’s year-end as the loss per share for the quarter.
12yearplan
3 years ago
As one of the biggest players HEXO really should
..optimize and monetize its vast amounts of sales data by generating insights, analytics, and advanced audience segmentation capabilities, providing them with a market-leading competitive advantage in the fast-growing cannabis retail market, translating into maximum operational efficiency and profitability..
Perhaps, one day soon - hope ur reading Seb ;)
HEXO$
Bonno
3 years ago
HEXO planned to replace some of its strains with ones that it believed were "incredibly promising," but when it came time to cultivate, the quality was subpar. As a result, the new strains were not of the same quality as the ones the company was no longer retaining in its inventory.
DOOMED !!!
3 Things in HEXO's Q3 Results That Should Worry Investors
The cannabis company's bottom line went back into the red, and the reasons why don't bode well for its long-term outlook.
David Jagielski
(TMFdjagielski)
Jun 23, 2021 at 8:18AM
Author Bio
Things were all smiles back in March when HEXO (NYSE:HEXO) released its fiscal second-quarter results. For the period, which ended Jan. 31, the cannabis grower and distributor achieved its goal of reaching positive adjusted EBITDA.
However, when it posted its fiscal Q3 results on June 14, management didn't focus as much on the bottom line -- no doubt because it was a loss, and broke HEXO's streak of seven straight periods of quarter-over-quarter improvement.
For the period that ended April 30, sales were down 31% year over year, and there's no shortage of reasons why. Here are three of the most concerning items I saw in HEXO's latest report that should have investors thinking twice about putting this pot stock into their portfolios.
1. There were multiple supply related issues
CEO Sebastien St. Louis didn't try to sugarcoat the problems the company ran into during the quarter. One of them related to product quality. HEXO planned to replace some of its strains with ones that it believed were "incredibly promising," but when it came time to cultivate, the quality was subpar. As a result, the new strains were not of the same quality as the ones the company was no longer retaining in its inventory.
Although it was admirable for the CEO not to evade the issue, it still presents a real concern. HEXO's sales decline took place while retail sales of cannabis in Canada were rising -- up 6.7% from January to March, when they hit 298 million Canadian dollars. If product quality issues were to blame for a significant share of HEXO's steep sales drop-off, it suggests there is a lot of risk in the company's operations.
2. Craft competition chipped away at its market share
The CEO also admitted that HEXO "underestimated the speed with which the cannabis industry moves," saying that its supply of high-potency products came up short of demand.
In part because of that shortage, smaller producers were able to fill the void and take sales away from HEXO. Although St. Louis was dismissive of the impact, referring to it as "mostly a one-time thing," there's a concern here, too; if products from craft producers (e.g., small cannabis companies) are adequate substitutes for HEXO's own, that could suggest challenges ahead if there is an increase in competition. Ironically, one of the reasons St. Louis has given for not being concerned about craft products is that they are of lower quality -- but he said this toward the end of the quarter, when those rival businesses were also running short on high-potency cannabis products, not unlike the quality issues HEXO ran into during the period.
St. Louis may claim he's not worried about these developments, but they serve as a reminder that growing competition could make it more difficult for HEXO to even keep its sales consistent, let alone grow its business. Along with the steep drop in revenue this past quarter, it reported an adjusted EBITDA loss of CA$10.8 million.
3. There were no international sales
HEXO first launched international products last year when it announced a 24-month agreement with Breath of Life International, an Israeli-based medical marijuana company. International sales have never accounted for much of the company's top line. In fiscal Q2, they totaled just CA$2 million, or 6% of all sales. But in fiscal Q3, international sales were zero. In the earnings release, HEXO said that was as a result of "revised prerequisite testing and an additional certification by the Israeli government."
While HEXO says it is now in compliance and will resume international sales, this was another example of a situation where management wasn't able to react quickly enough. If international cannabis revenue were a bigger chunk of HEXO's business, the drop in revenue would have been even more significant.
This is a stock I would stay far, far away from
HEXO has been aggressive in trying to bolster its business with recent deals, including the acquisitions of Zenabis and other smaller cannabis companies. But it has plenty of problems of its own that it needs to address. I would have a hard time trusting the company to not only prevent these supply and quality-related issues from recurring, or o efficiently integrate its new acquisitions into its operations.
Simply put, too many things caught HEXO and its management off guard last quarter for me to see this as a stock worth taking a chance on. The company's recent acquisitions only add to the risk of even greater losses ahead as it takes on multiple challenges simultaneously.
12yearplan
3 years ago
Still $4.49/g Original Stash HEXO
https://www.sqdc.ca/en-CA/p-os210/697238112225-P
But yeah, monopolies are the future unless Capitalism changes
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=164567957
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=164565702
But why shouldn’t cannabis be exempt? Why are there “very few things” you can produce and sell to the public without government approval? Must the democratic state involve itself with every nuance of human action?
Isn’t it precisely the state’s licensing and regulatory systems that prop up well-connected capitalists at the expense of small-time entrepreneurs?
Can’t cannabis be a gateway to fixing that? Or should we accept the fact that the same state apparatus that banned the herb now wants to restrict and regulate how we produce and consume it?
The same state apparatus responsible for environmental degradation, crony-capitalism, real estate bubbles, and other social ills.
What happened to the classical liberal tradition of questioning everything this territorial monopoly of ultimate decision-making says and does?
We have government regulation. It led to the creation of the MMPR and the LPs. What makes you think Liberal propaganda about public health and safety, about disrupting “organized crime” and protecting “the children” won’t continue this status quo?
LPs are the cannabis producers who benefit from this injustice.
https://cannabislifenetwork.com/what-exactly-is-an-lp/
Can I grow cannabis in my garden?
You can grow cannabis at home, but that might change!
According to the Quebec government’s website, you’re not allowed to grow cannabis at home. However, this ban has been overturned by a judge. This means that you’re legally allowed to grow up to 4 plants at home right now. However, the government has appealed this decision to the Quebec Court of Appeal. A decision is expected in the coming months.
If you decide to grow cannabis at home, it’s a good idea to pay attention to the news in case the situation changes!
https://educaloi.qc.ca/en/legal-news/smoking-cannabis-5-questions/
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