Cannabis News

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In the cannabis space this week, HEXO shared how it aims to increase cash flow, while Cresco Labs abandoned a planned acquisition.

This week, a Canadian licensed cannabis producer shared its plan to cut on costs as it aims to reach a better cash flow line over the next two fiscal years.

Meanwhile, a planned acquisition from a US-based multi-state operator (MSO) has now been dismantled.

Keep reading to find out more cannabis highlights from the past five days.


HEXO wants to generate C$175 million over next two fiscal years

Quebec-based HEXO (TSX:HEXO,NASDAQ:HEXO) issued a note to shareholders outlining what it calls “the path forward,” a new strategy to cut costs in an effort to increase its cash flow line.

Scott Cooper, president and CEO of HEXO, said it has become a strategic imperative for the company to achieve “positive cash flow from operations within the next three quarters."

He explained, “As an organization we are making strategic decisions quickly to ensure we have the optimal operating footprint we need for the next phase in HEXO’s strategic evolution, while remaining focused on the needs of customers and in our continued efforts in product innovation."

The firm wants to build C$175 million over the next few years, which HEXO plans to achieve by generating C$37.5 million in incremental cash flow in the 2022 fiscal year, and C$135 million in the 2023 fiscal year.

According to the company, these financial goals will be achieved thanks to cost reductions and anticipated organic revenue growth. The first few steps HEXO will take as a way to succeed in its plan include a 30 percent reduction in the company’s selling, general and administrative expenses by the end of the 2023 fiscal year.

HEXO is also planning to cut back on its production expenses, mainly by utilizing in-house packaging options.

As a last new measure introduced this past week, HEXO is exploring the divestiture of non-core assets. The firm announced the sale of its interest in Belleville Complex to Olegna Holdings for just over C$10 million.

MSO's Maryland entry plan ends with failed acquisition

Cresco Labs (CSE:CL,OTCQX:CRLBF) intended to buy 100 percent of Blair Wellness, a medical cannabis dispensary firm located in Maryland. But that will no longer happen for the MSO.

On Wednesday (January 19), Cresco Labs told shareholders it will begin looking again for M&A opportunities or other ways to expand the company’s footprint in Maryland.

“We have terminated the purchase agreement with Blair Wellness due to the failure of certain closing conditions to be met prior to our specified termination date,” Charlie Bachtell, Cresco Labs’ CEO and co-founder, said in a statement to investors.

The deal was originally unveiled in August 2021. At the time of the announcement, Bachtell said Blair Wellness had revenue lines “consistently higher than double the Maryland state average.”

The acquisition was expected to close in Q4 2021. There is no termination fee related to this deal.

Cannabis company news

  • The Valens Company (NASDAQ:VLNS,TSX:VLNS)gave a shareholder update and announced a virtual investor day that is set for February 7. "We recognize 2021 was an especially tough year for cannabis and small-cap growth investors,” Tyler Robson, CEO and chair of Valens, said.
  • Fire & Flower Holdings (TSX:FAF,OTCQX:FFLWF) issued its Form 40-F Registration Statement with the US Securities and Exchange Commission in alignment with its planned NASDAQ listing. “Listing on the Nasdaq will allow us to expand our shareholder base and drive increased shareholder value as we continue to leverage our unique technology-driven business model to enter new targeted markets across North America,” Trevor Fencott, CEO of Fire & Flower, said.
  • Curaleaf Holdings (CSE:CURA,OTCQX:CURLF)completed its acquisition of Arizona-based cannabis operator Bloom Dispensaries. "Bloom is an excellent strategic fit for Curaleaf as it further expands our capacity and retail footprint in Arizona with an attractive set of assets, enabling us to better serve the state's US$1.4 billion plus annual market opportunity,” Boris Jordan, executive chairman of Curaleaf, said.
  • Alcanna (TSX:CLIQ)issued a notice to shareholders indicating a final court approval for its planned business arrangement with Sundial Growers (NASDAQ:SNDL).

Don't forget to follow us @INN_Cannabis for real-time updates!

Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.

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