HEXO Summary - Seeking Feedback For longterm followers of HEXO Corp, please review and let me know if I missed anything (good or bad) in the summary below. I have included a small paragraph at the end regarding US Legalization so also let me know if that is of use or if I should be omitting it on future posts.
Due to the high level of mis-information on this forum and others I will likely be posting this, along with all supporting links etc, in order to correct any misinformation being circulated (posted in error or otherwise).
If you agree with the summary please feel free to circulate on any and all Social Media platforms you are a member of where mis-states are being made. Again, another post will follow with all the supporting links once I have gathered feedback on this summary.
As always, this is not intended to replace anyone's Due Dilligence, always be sure to do your own.
Best Regards
Q
- Long on HEXO
HEXO Corp 2021 SUMMARY (Current as of April 9, 2022)
HEXO Corp is an award-winning consumer packaged goods cannabis company that creates and distributes innovative products to serve the global cannabis market. The Company serves the Canadian adult-use markets under its HEXO, HEXO Plus, Up, Original Stash and Bake Sale brands and the medical market under HEXO medical cannabis. As one of the largest licensed cannabis companies in Canada, HEXO Corp operates with 2 million sq. ft of facilities in Ontario and Quebec with approximately 1200 employees on staff.
HEXO Corp partnered with Molson-Coors in 2018 to initiate the development and sale of Cannabis Infused Drinks for the Canadian Market with product hitting the shelves in the summer of 2020, later in the same year, HEXO Corp and Molson-Coors initiated sales into the United States through a 2nd Joint Venture (JV) for the sale of infused drinks into the state of Colorado. Drinks are provided through Truss in Canada and TrussCBDusa in the United States. A third JV was formed with BedFellows Arts for drinks in Nov of 2021 with these drinks actively being sold within both Canadian and US markets. Molson-Coors itself is also producing drinks for Coke as well as the Zoa Energy Drink product line owned by Dwayne Johnson “The Rock”.
In total HEXO Corp and Truss tout four international supply agreements with products available in 17 US States as well as active supply agreements in place with Israel, Australia and South Africa. Efforts are reported as being on-going (or proposed) to initiate sales into both Germany and Poland.
In 2021 HEXO Corp acquired three other Canadian Cannabis Companies; Zenabis Global, 48 North and finally Redecan. Redecan had been a Privately held company and was, by far, the largest of the three acquisitions by the company. Redecan is a leader in the sale of pre-rolls but also carries Cannabis Capsules, Gummies, Oils and Vapes. Both Zenabis and Redecan products are carried by Shopper’s DrugMart, a Nation-wide chain of drug stores within the Canadian Market and is considered one of the largest (and most profitable) Canadian producers of pre-rolls.
As of Sept 2,,2021, all three acquisitions were approved by shareholders with the three companies now rolling up under the HEXO Corp umbrella. The new additions to HEXO Corp added production capacity but most importantly a host of new product lines and market share covering everything from Edible Gummies and Pre-Rolls to Health and Beauty Products. According to HEXO Corp these additions place the operation in the Number 1 Position within Canada based on sales taking lead over Tilray as well as Canopy Growth (Refer to HEXO Corp Q1 – The Path Forward Presentation).
In May 2021, the company announced the acquisition of a production facility in Colorado and noted that this would be undergoing upgrades to produce products for MSOs seeking to take advantage of the “Powered by HEXO” patented technology. At this point there is no indication that the company plans to cultivate Cannabis within the US and are opting to source raw product from local producers. Revenue will be made through the sale of these Cannabis 2.0 products as well as royalty payments for the use of HEXO’s patents.
During an interview at the 2021 Canaccord Conference the former CEO disclosed that HEXO has now signed its new Consumer Packaged Goods (CPG) Fortune 200 partner. Food products were noted during the interview and that these new products would be tested in the Province of Quebec, additional details regarding US Expansion as well as the introduction of Redecan Pre-Rolls into the US Market were discussed in the same interview. At this time HEXO Corp has yet to formally comment on the F-200 through a formal Press Release. In January of 2022 HEXO Corp Investor Relations once again confirmed that a Fortune 200 Partner is indeed in place however that the company is under a Non-Disclosure Agreement (NDA) at this time and cannot release any further details. Popular speculation as to who the Fortune 200 Partner are include: Kellogg’s Canada (due to Kellogg’s location being next door to the HEXO Bellville Facility), Mondolez (the maker of Oreo Cookies) as well as Kraft Foods. Again, nothing formal has been released to the market therefore it is unknown if the deal is real or still in the works and pending notice to the Market.
Oct 20, 2021 the Founding Father of the Company, Sebastien St-Louis (aka SSL), and then CEO was reported as having stepped aside as part of a strategic restructuring. Mr. St-Louis was succeeded by the CEO of Truss Beverages, Scott Cooper, who originally joined Truss Beverages from Molson-Coors. Mr. Cooper’s new role as President and CEO of HEXO Corp was made official on Nov 19th, 2021.
Nov 9th, 2021, the Company disclosed that it will be selling off the components of Zenabis Global as well as 48 North that are not necessary for HEXO Corp to achieve its longer-term objectives. HEXO Corp noted that much of the production capacity needed to support the operation will be addressed through its state-of-the-art automated facility in Belleville, Ontario.
On Dec 14th, 2021 the company produced its 2022 Q1 QTR report which included three months of sales from Zenabis Global along with two months of sales from both 48 North and Redecan. The report produced yet another historical high in sales for the company over previous QTR numbers as well as the one year prior numbers. Along with the report Price-Waterhouse produced an audit report (available on www.sedar.com) that noted a concern with the company being able to address it’s 2023 debentures issued to secure funding needed for the Redecan acquisition.
The new CEO of HEXO Corp has implemented a new Path Forward plan that will refocus the company on more organic growth as well as bring new attention back to the sale of high-margin Medical Cannabis products. Early in March of 2022 Tilray Brands and HEXO Corp announced that the two companies would be forming a partnership, expected to close in May of 2022, along with a deal where in Tilray Brands will assume ownership of HEXO Corp’s debenture debt and thereby removing a substantial amount of cost associated with carrying the associated debt of the debentures. As part of the partnership the two companies will be consolidating some of Tilray’s production into HEXO’s facilities with both companies collaborating together on new Product Developments.
January of 2022, HEXO Corp issued a Press Release noting that, due to the low share price of its common shares, it may be called upon to perform a share consolidation (aka Reverse Split) in order to move the share price back above $1 USD in order to comply with the minimum share price requirements of the NASDAQ. No exact timing has been provided for this however the company did note July 25, 2022 as a date when they can apply for a 180 day extension bringing the latest possible date out to January of 2023.
Latest speculation on US Cannabis legalization appears to be focused on April 20th (4:20), 2022 with the passing of the MORE Act by US Senate. Speculation on the ACT passing into law is mixed with legalization being a long overdue commitment by the Biden administration. Legalization has likely seen many delays likely due to the Federal Government’s focus on Covid 19 in 2020 and 2021 as well as larger economic for foreign conflicts such as Afghanistan and the Ukraine. Advocates for legalization point to the economic benefits and job creation as well as the on-going injustices of those convicted of cannabis related crimes.