HEXO reports solid growth
HEXO (HEXO) reported its Q2 earnings on March 14. The company saw a significant increase in sales year-over-year to 13.4 million Canadian dollars, which rose almost 10 times from revenues of 1.18 million Canadian dollars in the corresponding quarter a year ago. The company, however, missed analysts’ estimate of 14.1 million Canadian dollars.
The company’s stellar growth in revenue was driven primarily by the legalization of recreational cannabis in Canada beginning in October 2017. This earnings release reflected the first full quarter of recreational cannabis sale in Canada.
Drivers of revenue
The revenue growth was driven by two metrics. One, adult-use cannabis sales, which increased to 2,537 kilograms of dried cannabis from 952 kilograms sequentially. Medical cannabis sales fell to 152 kilograms in Q2 from 158 kilograms in Q1.
The second driver for revenues, average selling price, also rose sequentially. The adult-use cannabis average selling price increased sequentially to 5.83 Canadian dollars per gram from 5.45 Canadian dollars per gram. The medical cannabis average selling price increased to 9.15 Canadian dollars per gram from 9.12 Canadian dollars per gram over the same period.
The legalization of recreational cannabis has been the primary driver for earnings of cannabis companies like Canopy Growth (WEED), Aphria (APHA), and Aurora Cannabis (ACB) in the first quarter. However, how well these companies maintain their position will be worth watching.