Why are shares of Hexo Corp. trading down 6% today?

It’s been a great year for HEXO Corp. (NYSEMKT:HEXO) so far. The company reported tremendous revenue growth in its first full quarter of sales in the Canadian adult-use recreational marijuana market. It announced the acquisition of Newstrike Brands. And HEXO even received some love from Wall Street, with Bank of America Merrill Lynch analyst Christopher Carey naming HEXO as his favorite pot stock.

With the wind at its back, HEXO hoped to deliver even more good news to investors with its fiscal 2019 third-quarter results. The company announced those results Wednesday evening. Here are the highlights from HEXO’s update.

HEXO results: The raw numbers

Metric Q3 2019 Q3 2018 Year-Over-Year Change
Gross revenue CA$15.9 million CA$1.24 million 1,184.7%
Net income (loss) (CA$7.75 million) (CA$1.97 million) N/A
Diluted earnings (loss) per share (CA$0.12) (CA$0.01) N/A

DATA SOURCE: HEXO. ALL AMOUNTS IN CANADIAN DOLLARS. N/A = NOT APPLICABLE.

What happened with HEXO this quarter?

As expected, HEXO’s massive year-over-year revenue growth came from the Canadian adult-use recreational marijuana market. The company posted adult-use gross revenue of CA$14.6 million compared to no revenue from this market in the prior-year period. Dried flower and milled products made up 84% of gram equivalents sold during the quarter.

HEXO’s adult-use gross revenue slipped 1.3% from the previous quarter due to a lower price per gram sold. The company sold 2,759 kilograms or equivalents of adult-use cannabis in the third quarter compared to 2,537 kilograms in the previous quarter.

Medical cannabis revenue increased 6.7% year over year to CA$1.3 million. This total reflected a decline of 4.6% from the fiscal second quarter, though.

The primary constraint for HEXO’s top line continues to be its limited production capacity. The company’s new 1-million-square-foot greenhouse didn’t have its first harvest until April. The fiscal third quarter ended on April 30.

HEXO reported a wider net loss in the quarter as the result of a significant increase in spending. Operating expenses…

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