The Quebec-based company credited its Original Stash line for driving recreational sales net of excise tax up 28.8 per cent to $21 million in Q3. HEXO said its thriftiest offering accounted for half of the 9,338 kilograms sold to non-medical buyers in the three months ended April 30.
“We launched Original Stash as a black market killer,” chief executive officer Sébastien St. Louis told analysts on a post earnings conference call Thursday morning.
HEXO debuted its 28 gram Original Stash product last October on the one-year anniversary of recreational legalization in Canada, priced at $4.49 per gram. The company said its prime objective was to lure consumers away from black market dealers commanding a dominant share of pot sales. A number of rivals have followed suit, launching their own budget pot offerings in recent months.
“We’ve had 11 of our competitors follow in the four to six months after we launched,” St. Louis added. “What we launched basically defined the market.”
HEXO reported a loss of $19.5 million for the quarter ended April 30. Net sales climbed 30 per cent to $22.1 million. The company nearly cut its adjusted EBITDA loss in half in its third quarter, at $4.3 million. HEXO said it is tracking towards profitability by that measure in the first half of fiscal 2021, depending on the pace of retail store openings and the impact of COVID-19.
Analysts polled by Bloomberg expected a net loss of $14.6 million, $20.3 million in net sales, and an adjusted EBITDA loss of $8.3 million.
The company booked non-cash impairment charges of $138.3 million on its Niagara facility, which has been listed for sale, and intangible assets acquired from Newstrike Brands.
Toronto-listed HEXO shares climbed about 10 per cent in early trading on Thursday, following a 30 per cent rally in the U.S. pre-market action. The company has underperformed a number of rivals in the ever-turbulent cannabis sector, with shares down about 85 per cent over the past 12 months.
“Our goal is to become a top two player in adult-use market share in Canada. HEXO has moved quarter-over-quarter from a top five spot to now the top four spot nationally,” St. Louis said. “If you look at our market share by volume, HEXO is a top player.”
Earlier this month HEXO, received a sales licence from Health Canada for its manufacturing and processing facility in Belleville, Ont. St. Louis said he expects the site will improve efficiency through greater use of automation, and boost the company’s cannabis 2.0 offerings, including a beverage line through the company’s joint venture with Molson Coors (TPX-B.TO).
“With a shored-up balance sheet and its Belleville facility green-lit subsequent to period end, which will be utilized in its Cannabis 2.0 production, we believe HEXO's positioning has markedly improved from just a few months ago,” Canaccord Genuity analyst Matt Bottomley wrote in a research note on Thursday.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.