Profitability

In the earlier part of this series, we discussed how HEXO (HEXO) experienced solid growth in revenue in its second quarter. The company reported a gross income of 6.9 million Canadian dollars, which grew from 732 thousand Canadian dollars. However, year-over-year, the company’s gross margins contracted over the same period from about 61% of net sales to 51% of net sales in Q2.

Despite Huge Revenue Growth, HEXO Still Recorded Loss in Q2

The bottom line

The company, however, reported a loss during the quarter due to an increase in operating expenses. During the second quarter, HEXO’s operating expense grew to 18.5 million Canadian dollars, which would roughly equal 1.4x what the company earned in sales during the quarter. This ratio was 4.6x in the corresponding quarter of 2018. General and admin costs accounted for more than half of the total operating expenses for the company.

A steep operating expense also resulted in a net loss of 4.3 million Canadian dollars, which was lower than the 8.9 million Canadian dollars in the corresponding quarter a year ago in 2018.

The company’s costs have increased as a result of expansion efforts to capture recreational cannabis sales. The company stated that its headcount rose about 32% sequentially, and it continued to invest in expansion facilities.

Costs have also risen for companies (MJ) like Canopy Growth (WEED), Cronos Group (CRON), and Tilray (TLRY), which have also invested heavily in expansion activities.

Read on for more updates from HEXO’s Q2 earnings.

Latest articles

19 May

Chinese Stocks are Getting Crushed

WRITTEN BY JP Gravitt

In the last month the CSI 300 is down 11.5%, much more than US indices.

JCPenney (JCP) is slated to announce its results for the first quarter of fiscal 2019, which ended on May 4, on May 21.

17 May

What to Know about the US-China Trade War

WRITTEN BY Mayur Sontakke, CFA, FRM

The key point of contention in the US-China trade dispute is the large trade deficit the United States runs against China.

On May 16, the Labor Department reported jobless claims for last week. Initial jobless claims fell by 16,000 to 212,000 for the week ended May 11.

Jeffrey Gundlach recommended investors take advantage of the volatility in interest rates at the recent Sohn Conference.

Tesla (TSLA) has fallen 4.2% as of 11:55 AM EDT on May 17. While US equity markets opened in the red today, they've recouped their losses.

172.31.38.64