MJBizMag October 2022 - 10

FIVE QUESTIONS with Charlie Bowman
Rehabbing a Struggling Company
CEO of Hexo outlines cost-cutting strategy
and plans for nonoperational real estate
By Solomon Israel
C
anadian marijuana producer
Hexo Corp. spent more than
$935 million to acquire three
other cannabis companies in 2021:
Redecan ($766 million), Zenabis
($185 million) and 48North
($41 million).
After those acquisitions, Hexo
found itself deeply in debt. With a
ravaged share price that endangered
its Nasdaq listing, Hexo's auditor
warned that the company might not
be able to stay afloat.
Founding CEO Sébastien St. Louis
left Hexo in 2021, and his successor,
Scott Cooper, stepped down in April.
Hexo's latest CEO, Charlie
Bowman, leads a much smaller
Hexo: The Quebec-based company
listed 1,277 employees as of July
2021, and Bowman said it now has
570 employees in Canada and the
United States.
Earlier this year, the company
signed an alliance with Tilray
Brands, with the New York-based
competitor acquiring Hexo's debt
in exchange for the option to take
a significant stake in Hexo and
cooperation between the two
businesses.
Bowman doesn't rule out an
eventual acquisition by Tilray.
MJBizMagazine spoke with
Bowman about his plans to get
Hexo back on solid ground.
Hexo lost nearly $740 million
in the first nine months of
its fiscal year. Can you share
the plan for cost-cutting and
streamlining?
There was a debt structure that
was unsustainable; that's now been
addressed with the Tilray debt
purchase that went through.
There was also an excessive
amount of SG&A (selling, general
and administrative expenses) and
third-party consultants that were
on board. We've done a tremendous
job of getting those under control.
There wasn't a real clear pathway
to get to EBITDA (earnings before
interest, taxes, depreciation and
amortization) positive and then,
from there, to actually start driving
into earnings.
So, the first thing that I had to
Charlie Bowman
do was to establish some form
of a bedrock, look at what the
foundation of the company could
really grow from and where it had
distinct competitive advantages.
10 October 2022 | MJBizMagazine
For us, it was around cultivation
and some unique products that
were in the market.
Since Hexo's acquisitions, the
company has been struggling
financially, and Zenabis has
filed for creditor protection.
Were those acquisitions a
mistake?
What Zenabis brought to the table,
and its uniqueness, we had that
inside of Redecan. So, it made sense
to put (Zenabis) into bankruptcy
protection. And it's going to have a
really good home when it comes out.
You never know what the
mindset was when people went
into the acquisitions and the
buying. But I can say, for the
integration and the value we're
bringing out, we've carved out
those bits that are unique and give
us competitive advantage, and
that's what we're focusing on.
Hexo owns several
nonoperational facilities.
Should we expect discount
facility sales as we've seen
with other large Canadian
companies?
We've taken the impairments ...
we've realigned the balance sheet.
We do have facilities that are for
sale, but we'll get our fair market
value out of those facilities and be
able to move on, just as we also
have been able to rightsize our
facilities to where our cost of goods
has gone down.
MJBizMag October 2022

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