Traderstock101 wrote: HEXO PROVIDES UPDATE ON REDECAN ACQUISITION
In connection with its previously announced acquisition of the entities operating the business of Redecan, Hexo Corp. has now obtained and will be shortly filing the recently completed audited consolidated financial statements of Redecan for the financial year ended Dec. 31, 2020, and the unaudited interim financial statements for the first quarter ended March 31, 2021, prepared in accordance with accounting standards for private enterprises (ASPE). The company previously announced a definitive share purchase agreement to acquire Redecan, Canada's largest privately owned licensed producer.
"Redecan has the top consumer loyalty in Canada, impressive market share and leading products in key categories. Today, we are excited to finally share additional financial information with Hexo shareholders," said Hexo chief executive officer and co-founder Sebastien St-Louis. "Redecan's historical financial statements demonstrate exactly what we already knew: Redecan is one of the fastest growth LPs in Canada with positive income from operations, impressive margins, lean operational efficiency and strong revenue. Once closed, the acquisition will further strengthen our position as a leader in the Canadian cannabis industry, bolster the company as we look towards becoming a top three global cannabis products company and put us firmly on the path towards positive EPS."
Key financial highlights
- Revenue, net of excise duties of $73.6-million for 2020 and $24.7-million in Q1 2021, representing an increase of 146 per cent over Q1 2020;
- Unadjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $28.9-million for 2020 and $12.4-million for Q1 2021, per the attached table;
- Income from operations of $8.3-million and net earnings of $6.9-million in Q1 2021;
- Income from operations of $16.7-million and net earnings of $11.6-million in 2020;
- Gross margins (gross margin divided by revenue, net of excise duties) of 51 per cent in 2020 and 58 per cent in Q1 2021;
- Selling, general and administrative costs (defined as general and administrative, plus marketing and promotion, plus research and development) as a per cent of sales of 27 per cent in 2020 and 23 per cent in Q1 2021;
- Depreciable capital base, consisting of property, plant and equipment, was $84.1-million at Dec. 31, 2020, the lowest of any of the top six licensed producers in Canada.
Pro forma highlights for the nine months ended April 30, 2021, for Hexo and the nine months ended March 31, 2021, for Redecan, adjusted to international financial reporting standards
- Net revenue of $155.6-million;
- Gross margin before fair value adjustments of $69.1-million, or 44.4 per cent;
- Income from operations of $38.6-million.
The Redecan acquisition is expected to close in calendar Q3 2021, subject to the satisfaction of customary closing conditions, including the receipt of applicable regulatory approvals and the shareholder approval required under Toronto Stock Exchange rules.
Redecan's historical financial statements for the financial year ended Dec. 31, 2020, and for the first quarter ended March 31, 2021, as well as certain pro forma financial statements giving effect to the acquisition of Redecan by Hexo have been filed or furnished, as applicable, as schedules to an amended and restated material change report dated July 14, 2021, available under the company's profile on SEDAR and EDGAR, respectively.
About Hexo Corp.
Hexo is an award-winning licensed producer of innovative products for the global cannabis market. Hexo serves the Canadian recreational market with a brand portfolio including Hexo, UP Cannabis, Original Stash, Bake Sale, Namaste and REUP brands, and the medical market in Canada, Israel and Malta. The company also serves the Colorado market through its Powered by Hexo strategy and Truss CBD USA, a joint venture with Molson Coors. In the event that the previously announced transactions to acquire 48North and Redecan close, Hexo expects to be the No. 1 cannabis products company in Canada by recreational market share.