HEXO Corp. (NASDAQ:HEXO) Q2 2023 Earnings Call Transcript

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Charlie Bowman: That’s a great question, Aaron. From a standpoint of all the Boards have been really active about reaching out to us, I don’t think anybody was €“ I don’t think anybody was surprised with the price war and the magnitude that went on in the last five months. I think the damage that could occur to the industry is significant because no one wins in a price war. And so I think one of the areas with the OCS taking a lower margin and resetting is clearly to help quite a bit of the retailers. Whereas a lot of that, especially smaller independent retailers are bleeding from a standpoint of just the plethora of retailers that are on the market right now and undercutting one another. I think from a standpoint of the €“ how this takes on, what we look at it is, I can’t say on the industry and the others, but we look at the discipline of the business as the business should be profitable.

The business should have a point of differentiation in every product line that it brings to the market, and you should charge a fair value. That doesn’t mean I charge the premium the highest. It also means I’m not the lowest in the industry, but it should be fair. Our products are all priced in a good spot where we’re in a fair area, a fair price point. As far as our margins go we’ve done an incredible job within the operations of getting cost out to where I feel very comfortable with the statement that if we’re not the, we’re one of the lowest cost operators in the industry. As such, it allows you to take that volatility of when people do silliness, like get into a price war and they should be more disciplined than that. The backside of that is, if there’s additional margin that comes out by the Board €“ by the government, what it should allow is to take away from the illicit market, because the illicit market had a fantastic growth this past year.

And as a result, they have plowed it in throughout the country and it has taken away some €“ quite a bit of the growth. So that’s one of the key things that we work with, and hopefully, the government continues to take on is to curve this illicit market. That’s a good question. Thank you.

Aaron Grey: Okay, great. Thanks very much. That’s helpful. I’ll jump back in the queue.

Operator: It looks like we have no further questions at this time. I’ll turn it back over to Charlie Bowman for any closing remarks.

Charlie Bowman: Just wanted to say thank you to everybody in the time. It was a dynamic nine months that we’ve gone through. And from a standpoint of walking us the opportunity to go through what our quarter two results are, I just wanted to say thank you. And I know from time to time, we have analyst calls that are scheduled up. Any additional questions they have will be more than willing to take on. Thank you very much, and I hope everybody has a fantastic Friday.

Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.

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