The long, slow, crawl toward profitability that many Canadian-based marijuana companies are inching themselves toward is starting to be pick up pace as cannabis-infused adult beverages begin to smooth out the path.
The latest example came yesterday, when Hexo (NYSE:HEXO), (TSX:HEXO) revealed its most recent earning results. The Quebec-based marijuana grower posted net revenues of C$29.5 (US$23.1) million for its first quarter of fiscal 2021, which was a 9% jump from the previous quarter.
The increase in revenues was achieved with an 8% uptick in recreational cannabis sales and an impressive 54% jump in the adult beverage category.
But despite the significant gains that contributed to Hexo’s posting a gross revenue of C$41.3 (US$32.4) million for the three-month period, which is a 14% hike—the highest total the company has posted in its history—the company still closed the quarter with an adjusted EBITDA loss of C$420,000 (US$330,000).
But when it comes to adjusted quarterly losses, Hexo has been trending in the right direction. The last three-month period was the sixth straight quarter of improved losses for the company.
Hexo CEO Sebastien St. Louis said:
“This was the sixth sequential quarter of adjusted EBITDA improvement, as we march towards being adjusted EBITDA positive. We believe the strength of our balance sheet, along with our low depreciable capital base, have put us on a path where we are looking beyond positive adjusted EBITDA and striving towards positive EPS.”
This was also the second quarter for the company’s rollout of adult beverages as part of its partnership with Denver, Colorado-based Molson Coors (NYSE:TAP). The company is marketing non-alcoholic, cannabis-infused beverages in the Canadian market only.
The Hexo-Molson Coors brand of Truss cannabis drinks is the market leader in Canada. Last month, according to the latest data, it edged out Canopy Growth's (NASDAQ:CGC), (TSX:WEED) Tweed brand, to become the best selling cannabis drink in Canada.
Shares of Hexo gained about 10% in early trading yesterday on the news of the latest earning results, but by the close they had pared back most of that gain. They ended Monday up 1% in New York, closing at $1.01, while in Toronto they finished at $1.32, a 3.13% jump on the day. The company’s shares have lost just over 33% year-to-date.
Not Everyone Toasting Beverage Sales Just Yet
Coming on the heels of slipping into second place in the cannabis beverage sector, Canopy announced its head of the company’s global beverage division is leaving. Andrew Rapsey is departing the company he joined in August.
According to reports of cannabis retail data provided HyFyre, about $23 million in cannabis-infused drinks were sold in Canada since the beginning of 2020. Hexo’s Truss brand is now the most popular. Jockeying for position in the new cannabis beverage market is seen as crucial. Canopy has made a large commitment to the sector, signing a licensing agreement with US-based Acreage Holdings (OTC:ACRGF), (CSE:ACRGu) to market its drink brands in the States as soon as federal regulations permit.
In addition, US beer-maker, Constellation Brands (NYSE:STZ) has invested heavily in Canopy’s beverage segment.
More Bad News For Canopy
The marijuana giant is cutting its Canadian growing operations and laying off 220 workers, a move that will save the company C$200 (US$157) million a year, the company said in a statement last week.
Canopy Growth will close indoor growing facilities in Newfoundland, New Brunswick, Albert and Ontario, in addition to outdoor growing operations in Saskatchewan. The move cuts the company’s Canadian indoor growing operations by 17% and eliminates all outdoor activity.