Cannabis company Hexo Corp. is reducing its workforce by 200 jobs to adjust for expected future revenues and “ensure the long-term viability” of the firm, its chief executive said.
The announcement comes two weeks after Hexo cut its net revenue forecast for the fourth quarter and withdrew its 2020 outlook, citing factors including slower-than-expected pot store rollouts and early signs of pricing pressure.
Hexo, based in Gatineau, Que., had 822 employees as of April 30, according to a filing from its third-quarter financial results. On May 24, it added an additional 250 employees through its acquisition of licensed producer Newstrike Brands Ltd.
Chief executive Sebastien St-Louis said this was his “hardest day” at the company.
“While it is extremely difficult to say goodbye to trusted colleagues, I am confident that we have made sound decisions to ensure the long-term viability of HEXO Corp.,” he said in a statement. “The actions taken this week are about rightsizing the organization to the revenue we expect to achieve in 2020.”
The cuts included the elimination of some executive positions and the departures of chief manufacturing officer Arno Groll and chief marketing officer Nick Davies, the company said in a release.
Shares of Hexo slipped as much as seven per cent to $3.26 on the Toronto Stock Exchange from its previous close of $3.51. The stock closed down 5.7 per cent at $3.31.
The cost-cutting measures came one day after Hexo postponed the release of its fourth-quarter results to Oct. 28 and its conference call to Oct. 29 as it announced a $70-million private placement of convertible debentures led by a group of investors, including St-Louis and board directors.
The company said that it intends to use the proceeds of the private placement for working capital and general corporate purposes.
Analysts said Wednesday that the involvement of senior management and directors in the financing as positive and said it would provide confidence to investors, but given that the conversion price of $3.16 was below the previous day’s close it also signals that Hexo has little conviction in its near-term outlook.
Earlier this month, Hexo said its fourth quarter net revenue was expected to be about $14.5 million to $16.5 million, down from the roughly $26 million it had forecast previously. Hexo also said it was withdrawing its previously issued outlook for its 2020 financial year of up to $400 million in net revenue.
The executive departures announced Thursday are the latest changes in the upper ranks of the cannabis company.
Also in early October, Hexo said its chief financial officer Michael Monahan resigned, effective immediately, after taking on the role in May, citing family reasons.