- 21% growth in recreational net revenue year-over-year
- First Jupiter private placement tranche closed adding $41.5
million of cash bringing Organigram's closing cash balance at
quarter-end to $83.6 million
- Subsequent to quarter end, closed $28.8 million oversubscribed
marketed offering, which when combined with the remaining two
anticipated Jupiter tranches will increase cash position by
additional $110 million
- Company's recent investment in Steady State LLC (d/b/a Open
Book Extracts) ("OBX") adds to growing U.S. portfolio, which
includes Phylos Bioscience Inc. ("Phylos")
- Organigram's U.S.-based strategic investments may benefit from
expected change in rescheduling of cannabis by the Drug Enforcement
Administration from Schedule I to Schedule III
HIGHLIGHTS
- Held the #1 position in milled flower, #1 in hash, #1 in
ingestible extracts, #1 in pure CBD gummies, #2 in edibles, #2 in
infused pre-rolls, #3 in pre-rolls, #3 in dried flower, and held
the overall #3 market position in Canada1
- #1 market share position in Atlantic Canada, #3 in Ontario, and
a top 5 licensed producer in every Canadian province1
- The Company's SHRED brand surpassed $200 million in annual
retail sales as a result of brand loyalty, product quality, and
consistent innovation1
- Completed first international flower shipment to Sanity Group
GmbH ("Sanity Group") in Germany and first flower shipment to 4C
Labs Ltd. ("4C Labs") for UK distribution
- Subsequent to quarter end, signed two new international supply
agreements in Australia and the UK
- Successfully completed preliminary European Union Good
Manufacturing Practices ("EU-GMP") audit of the Moncton
facility
- Manufacturing equipment for nano-emulsion technology delivered
to Winnipeg facility to begin scale up and anticipated gummy launch
in the fall
- Closed strategic investment in OBX of US $2 million structured
as a convertible note
- Completed first harvest of seed-based production and planted
additional seed-based grow rooms resulting from technology acquired
from the strategic investment in US-based Phylos
- Company has achieved over $3.7 million in domestic THCV retail
sales since launch in August 20231 and subsequent to Q2 shipped
first international THCV flower, further leveraging Organigram's
strategic investment in Phylos
- Pro-forma cash position of approximately $1952
Organigram Holdings Inc. (NASDAQ: OGI) (TSX: OGI), (the
“Company” or “Organigram”), a leading licensed producer of
cannabis, announced its results for the second quarter ended March
31, 2024 (“Q2 Fiscal 2024”).
“We are pleased with our performance against the strategic
priorities we laid out at the beginning of Fiscal 2024," said Beena
Goldenberg, Chief Executive Officer. “Organigram is now the only
licensed producer among the top three licensed producers in Canada
with significant cash, negligible debt, and sizeable funds
earmarked for strategic international investment. We have also made
solid progress toward our goal of diversifying our exposure to
international markets through our Jupiter fund and increasing our
customer base abroad. Domestically, we grew our market share
throughout Q2 Fiscal 2024 and we remain focused on driving
additional gains in the back half of Fiscal 2024 by expanding
distribution, introducing new products, and executing high-impact
retail campaigns."
Canadian Recreational Market Introduction Highlights
As an industry leader and pure-play cannabis company, Organigram
remains committed to delivering consumer focused innovations and
products to the Canadian market. Q2 Fiscal 2024 saw the
introduction of 16 new SKUs to the market for Organigram. Some
notable highlights include:
SHRED Rainbow Oz. Dartz - A variety
pack containing seven packs of our popular Dartz, for a total of 70
joints per package
Big Bag O' Buds Serial Jealousy - A
new Organigram cultivar in a one ounce bag which hit $1 million in
sales in its first 2 months in market
SHRED Supersonic Citrus - A new addition to
our milled flower lineup containing our exclusive whole-flower THCV
flower
SHRED Guava Lime Go-Time THCV Heavies - Each
diamond, distillate and terpene infused pre-roll contains a 3:1
ratio of THC and THCV
Monjour Me-Time Mango - 30 x 50mg CBD gummies
featuring a delicious mango and strawberry flavour
Research and Product Development
Product Development Collaboration ("PDC") and Centre of
Excellence ("CoE")
- Organigram and BAT continue to work together through their PDC
on new workstreams to develop innovative technologies in the
edible, vape and beverage categories in addition to new disruptive
inhalation formats aimed at addressing the biggest consumer pain
points that exist in the category today. Organigram is preparing to
deliver new products in these spaces and the launch priority
includes gummies which will feature a new nano-emulsion
technology
- The PDC has completed pharmacokinetics studies regarding the
onset and bioavailability of our nano-emulsion technology, and is
now analyzing preliminary results to substantiate functional
consumer claims
Follow-on Strategic Investment from BAT and creation of the
Jupiter Investment Pool
- In January 2024, Organigram shareholders voted to approve the
$124.6 million investment from BAT and the Company completed the
first of three tranches of the investment for proceeds of $41.5
million
- In March 2024, the Company announced a U.S. $2 million
investment into OBX in the form of a convertible note. The
investment marked Organigram's second investment in a U.S.-based
company operating in the cannabis industry, and the inaugural
Jupiter investment.
- OBX specializes in legal cannabinoid ingredient production and
serves as a one-stop formulation and finished goods manufacturer,
simplifying its clients’ supply chains. The investment in OBX
provides a further footprint in the U.S, which was a strategic
priority set out in the Jupiter investment strategy.
International
- In Q2 Fiscal 2024, the Company completed its first shipments to
Sanity Group in Germany and to 4C Labs for UK distribution, and
reported international shipments totaling $2.1 million
- Subsequent to quarter end, the Company signed two new
international supply agreements in Australia and in the UK
- The Company is evaluating more international expansion
opportunities in the US and overseas, propelled by the Jupiter
strategic investment pool
Liquidity and Capital Resources
- On March 31, 2024, the Company had cash (restricted &
unrestricted) of $83.6 million
- In January 2024, Organigram closed the first of three tranches
from BAT's follow-on $124.6 million strategic investment for gross
proceeds of $41.5 million.
- In March 2024, the Company announced an underwritten overnight
financing which was oversubscribed and closed in April 2024 for
gross proceeds of $28.8 million
- On a pro-forma basis, Organigram will have a cash position of
approximately $195 million upon closure of the anticipated tranches
of BAT's follow-on strategic investment
Key Financial Results for the Second Quarter 2024
- Net revenue:
- Q2 Fiscal 2024 recreational net revenue increased 21% to $33.1
million from $27.4 million in the second quarter ended February 28,
2023 ("Q2 Fiscal 2023")
- Compared to the prior period, overall net revenue decreased 5%
to $37.6 million, from $39.5 million in Q2 Fiscal 2023 primarily
due a reduction in international revenue
- Cost of sales:
- Q2 Fiscal 2024 cost of sales decreased to $26.4 million, from
$29.6 million in Q2 Fiscal 2023, primarily due to higher inventory
provisions in Q2 Fiscal 2023 of $3.2 million related to net
realizable value adjustments of inventories
- Adjusted gross margin3:
- Q2 Fiscal 2024 adjusted gross margin was $11.6 million, or 31%
of net revenue, compared to $13.4 million, or 34%, in Q2 Fiscal
2023. The decrease in the adjusted gross margin rate was primarily
due to lower international sales
- Selling, general & administrative (SG&A) expenses:
- In Q2 Fiscal 2024, the Company recognized a $4.2 million
provision for a receivable associated with its Israeli customer
Canndoc
- SG&A expenses, adjusting for the Canndoc provision,
decreased to $15.9 million from $16.1 million in Q2 Fiscal 2023.
The decrease was the result of lower costs associated with
implementing a new ERP system
- Net Loss:
- Q2 Fiscal 2024 net loss was $27.1 million compared to $7.5
million in Q2 Fiscal 2023. The increase in net loss from the
comparative period is primarily due to lower unrealized gain on
changes in the fair value of biological assets and change in fair
value of derivative liabilities of $12.5 million
- Adjusted EBITDA4:
- Q2 Fiscal 2024 adjusted EBITDA was negative $1.0 million
compared to $5.6 million adjusted EBITDA in Q2 Fiscal 2023. The
decline was primarily attributable to lower international sales
compared to Q2 Fiscal 2023, which negatively impacted the adjusted
gross margin rate compared to the prior year period
- Net cash used in operating activities before working capital
changes:
- Q2 Fiscal 2024 net cash used by operating activities was $8.3
million, compared to $2.5 million cash used in Q2 Fiscal 2023,
which was primarily due to lower international sales and adjusted
EBITDA
"Our higher international sales in Q2 Fiscal 2023 resulted in a
comparatively lower adjusted gross margin rate in Q2 Fiscal 2024,"
said Greg Guyatt, Chief Financial Officer. "However, we are
expecting international revenue to continue along the growth
trajectory we have seen over the last two quarters while lower
cultivation costs, which we achieved beginning in Q2 Fiscal 2024,
begin to flow through to our income statement in Q3 fiscal 2024. As
we head into the second half of our fiscal year, we are on track to
deliver full-year adjusted EBITDA that will exceed that of Fiscal
2023 and positive cash flow from operations before working capital
changes."
Select Key Financial Metrics (in $000s
unless otherwise indicated)
Q2-2024
Q2-2023
% Change
Gross revenue
57,425
52,898
9%
Excise taxes
(19,797)
(13,405)
48%
Net revenue
37,628
39,493
(5)%
Cost of sales
26,366
29,642
(11)%
Gross margin before fair value changes to
biological assets & inventories sold
11,262
9,851
14%
Realized fair value on inventories sold
and other inventory charges
(11,062)
(14,170)
(22)%
Unrealized gain on changes in fair value
of biological assets
9,400
14,121
(33)%
Gross margin
9,600
9,802
(2)%
Adjusted gross margin(1)
11,609
13,372
(13)%
Adjusted gross margin %(1)
31 %
34 %
(3)%
Selling (including marketing), general
& administrative expenses(2)
20,162
16,071
25%
Net loss
(27,075)
(7,488)
262%
Adjusted EBITDA(1)
(1,045)
5,648
(119)%
Net cash used in operating activities
before working capital changes
(8,277)
(2,450)
238%
Net cash used in operating activities
after working capital changes
(13,217)
(19,711)
(33)%
Note (1) Adjusted gross margin, adjusted gross margin % and
adjusted EBITDA are non-IFRS financial measures not defined by and
do not have any standardized meaning under IFRS and might not be
comparable to similar financial measures disclosed by other
issuers; please refer to “Non-IFRS Financial Measures” in this
press release for more information. Note (2) Excluding non-cash
share-based compensation.
Select Balance Sheet Metrics (in
$000s)
MARCH 31, 2024
SEPTEMBER 30,
2023
% Change
Cash & short-term investments
(excluding restricted cash)
72,606
33,864
114%
Biological assets & inventories
83,264
80,953
3%
Other current assets
38,392
41,159
(7)%
Accounts payable & accrued
liabilities
40,174
20,007
101%
Current portion of long-term debt
66
76
(13)%
Working capital
138,228
133,545
4%
Property, plant & equipment
97,122
99,046
(2)%
Long-term debt
52
79
(34)%
Total assets
331,778
298,455
11%
Total liabilities
59,981
26,832
124%
Shareholders’ equity
271,797
271,623
—%
Capital Structure
in $000s
MARCH 31, 2024
SEPTEMBER 30,
2023
Current and long-term debt
118
155
Shareholders’ equity
271,797
271,623
Total debt and shareholders’ equity
271,915
271,778
in 000s
Outstanding common shares
94,469
94,469
Options
2,840
2,830
Warrants
—
4,236
Top-up rights
2,343
2,035
Restricted share units
3,825
881
Performance share units
1,170
261
Total fully-diluted shares
104,647
104,712
Outstanding basic and fully diluted share count as at May 13,
2024 is as follows:
in 000s
MAY 13, 2024
Outstanding common shares
103,370
Options
2,837
Warrants
4,451
Top-up rights
3,665
Restricted share units
3,811
Performance share units
1,160
Total fully-diluted shares
119,294
The following table reconciles the Company's Adjusted EBITDA to
net loss.
Adjusted EBITDA Reconciliation (in $000s
unless otherwise indicated)
Q2-2024
Q2-2023
Net (loss) income as reported
$ (27,075)
$ (7,488)
Add/(Deduct):
Financing costs, net of investment
income
(650)
(1,051)
Income tax expense (recovery)
(30)
1
Depreciation, amortization, and (gain)
loss on disposal of property, plant and equipment (per statement of
cash flows)
3,180
6,867
Share of loss (gain) from investments in
associates and impairment loss (recovery) from loan receivable
112
296
Change in fair value of contingent
consideration
—
(24)
Realized fair value on inventories sold
and other inventory charges
11,062
14,170
Unrealized gain on change in fair value of
biological assets
(9,400)
(14,121)
Share-based compensation (per statement of
cash flows)
1,995
1,342
COVID-19 related charges, government
subsidies, insurance recoveries and other non-operating
expenses
87
—
Legal provisions (recoveries)
—
(75)
Share issuance costs allocated to
derivative warrant liabilities and change in fair value of
derivative liabilities and other financial assets
12,529
(2,433)
ERP implementation costs
173
1,377
Transaction costs
(170)
27
Provisions (recoveries) and net realizable
value adjustments related to inventory and biological assets
347
3,521
Research and development expenditures, net
of depreciation
2,556
3,239
Provision for Canndoc expected credit
losses
4,239
—
Adjusted EBITDA
$ (1,045)
$ 5,648
The following table reconciles the Company's adjusted gross
margin to gross margin before fair value changes to biological
assets and inventories sold:
Adjusted Gross Margin Reconciliation (in
$000s unless otherwise indicated)
Q2-2024
Q2-2023
Net revenue
$ 37,628
$ 39,493
Cost of sales before adjustments
26,019
26,121
Adjusted gross margin
11,609
13,372
Adjusted gross margin %
31%
34%
Less:
Write-offs and impairment of inventories
and biological assets
314
1,256
Provisions to net realizable value
33
2,265
Incremental fair value component on
inventories sold from acquisitions
—
—
Gross margin before fair value
adjustments
11,262
9,851
Gross margin % (before fair value
adjustments)
30%
25%
Add:
Realized fair value on inventories sold
and other inventory charges
(11,062)
(14,170)
Unrealized gain on changes in fair value
of biological assets
9,400
14,121
Gross margin
9,600
9,802
Gross margin %
26%
25%
Second Quarter Fiscal 2024 Conference Call
The Company will host a conference call to discuss its results
with details as follows:
Date: May 14, 2024 Time: 8:00 am Eastern Time
To register for the conference call, please use this link:
https://registrations.events/direct/Q4I9676693302
To ensure you are connected for the full call, we suggest
registering a day in advance or at minimum 10 minutes before the
start of the call. After registering, a confirmation will be sent
through email, including dial in details and unique conference call
codes for entry. Registration is open through the live call.
To access the webcast:
https://events.q4inc.com/attendee/619527249
A replay of the webcast will be available within 24 hours after
the conclusion of the call at https://www.organigram.ca/investors
and will be archived for a period of 90 days following the
call.
Non-IFRS Financial Measures
This news release refers to certain financial and operational
performance measures (including adjusted gross margin, adjusted
gross margin % and adjusted EBITDA) that are not defined by and do
not have a standardized meaning under International Financial
Reporting Standards (“IFRS”) as issued by the International
Accounting Standards Board. Non-IFRS financial measures are used by
management to assess the financial and operational performance of
the Company. The Company believes that these non-IFRS financial
measures, in addition to conventional measures prepared in
accordance with IFRS, enable investors to evaluate the Company’s
operating results, underlying performance and prospects in a
similar manner to the Company’s management. As there are no
standardized methods of calculating these non-IFRS measures, the
Company’s approaches may differ from those used by others, and
accordingly, the use of these measures may not be directly
comparable. Accordingly, these non-IFRS measures are intended to
provide additional information and should not be considered in
isolation or as a substitute for measures of performance prepared
in accordance with IFRS.
Adjusted EBITDA is a non-IFRS measure that the Company defines
as net income (loss) before: financing costs, net of investment
income; income tax expense (recovery); depreciation, amortization,
reversal of/or impairment, normalization of depreciation add-back
due to changes in depreciable assets resulting from impairment
charges, (gain) loss on disposal of property, plant and equipment
(per the statement of cash flows); share-based compensation (per
the statement of cash flows); share of loss (gain) from investments
in associates and impairment loss (recovery) from loan receivable;
change in fair value of contingent consideration; change in fair
value of derivative liabilities; expenditures incurred in
connection with research and development activities (net of
depreciation); unrealized (gain) loss on changes in fair value of
biological assets; realized fair value on inventories sold and
other inventory charges; provisions (recoveries) and net realizable
value adjustment related to inventory and biological assets;
government subsidies and insurance recoveries; legal provisions
(recoveries); incremental fair value component of inventories sold
from acquisitions; ERP implementation costs; transaction costs;
share issuance costs; and provision for Canndoc expected credit
losses. Adjusted EBITDA is intended to provide a proxy for the
Company’s operating cash flow and derives expectations of future
financial performance for the Company, and excludes adjustments
that are not reflective of current operating results.
Adjusted gross margin is a non-IFRS measure that the Company
defines as net revenue less cost of sales, before the effects of
(i) unrealized gain (loss) on changes in fair value of biological
assets; (ii) realized fair value on inventories sold and other
inventory charges; (iii) provisions (recoveries) of inventories and
biological assets; (iv) provisions to net realizable value; (v)
realized fair value on inventories sold from acquisitions.
Adjusted gross margin percentage is a non-IFRS measure that the
Company calculates by dividing adjusted gross margin by net
revenue.
Management believes that this adjusted gross margin and adjusted
gross margin percentage both provide useful information to assess
the profitability of the Company's operations as they represent the
normalized gross margin generated from operations and exclude the
effects of non-cash fair value adjustments on inventories and
biological assets, which are required by IFRS.
The most directly comparable measure to adjusted EBITDA,
calculated in accordance with IFRS is net income (loss) and
beginning on page 6 of this press release is a reconciliation to
such measure. The most directly comparable measure to adjusted
gross margin calculated in accordance with IFRS is gross margin
before fair value adjustments and beginning on page 7 of this press
release is a reconciliation to such measure.
About Organigram Holdings Inc.
Organigram Holdings Inc. is a NASDAQ Global Select Market and
TSX listed company whose wholly-owned subsidiary, Organigram Inc.,
is a licensed producers of cannabis and cannabis-derived products
in Canada.
Organigram is focused on producing high-quality, indoor-grown
cannabis for patients and adult recreational consumers in Canada,
as well as developing international business partnerships to extend
the Company’s global footprint. Organigram has also developed a
portfolio of legal adult-use recreational cannabis brands,
including Edison, Holy Mountain, Big Bag O’ Buds, SHRED, Monjour
and Trailblazer. Organigram operates facilities in Moncton, New
Brunswick and Lac-Supérieur, Québec, with a dedicated manufacturing
facility in Winnipeg, Manitoba. The Company is regulated by the
Cannabis Act and the Cannabis Regulations (Canada).
Cautionary Note Regarding Forward Looking Statements
This news release contains forward-looking information.
Forward-looking information, in general, can be identified by the
use of forward-looking terminology such as “outlook”, “objective”,
“may”, “will”, “could”, “would”, “might”, “expect”, “intend”,
“estimate”, “anticipate”, “believe”, “plan”, “continue”, “budget”,
“schedule” or “forecast” or similar expressions suggesting future
outcomes or events. They include, but are not limited to,
statements with respect to expectations, projections or other
characterizations of future events or circumstances, and the
Company’s objectives, goals, strategies, beliefs, intentions,
plans, estimates, forecasts, projections and outlook, including
statements relating to the Company’s future performance, the
Company’s positioning to capture additional market share and sales
including international sales, expectations for consumer demand,
expected increase in SKUs, expected improvement to gross margins
before fair value changes to biological assets and inventories,
expectations regarding adjusted gross margins, adjusted EBITDA and
net revenue in Fiscal 2024 and beyond, the Company's ability to
generate consistent free cash flow from operations, expectations
regarding cultivation capacity, the Company’s plans and objectives
including around the CoE, availability and sources of any future
financing including satisfaction of closing conditions for future
tranches of the BAT follow-on investment, EU-GMP certification,
availability of cost efficiency opportunities, expectations around
lower product cultivation costs, the ability to achieve economies
of scale and ramp up cultivation, expectations pertaining to the
increase of automation and reduction in reliance on manual labour,
expectations around the launch of higher margin dried flower
strains, expectations around market and consumer demand and other
patterns related to existing, new and planned product forms; timing
for launch of new product forms, ability of those new product forms
to capture sales and market share, estimates around incremental
sales and more generally estimates or predictions of actions of
customers, suppliers, partners, distributors, competitors or
regulatory authorities; continuation of shipments to existing and
prospective international jurisdictions and customers, statements
regarding the future of the Canadian and international cannabis
markets and, statements regarding the Company’s future economic
performance. These statements are not historical facts but instead
represent management beliefs regarding future events, many of
which, by their nature are inherently uncertain and beyond
management control. Forward-looking information has been based on
the Company’s current expectations about future events.
This news release contains information concerning our industry
and the markets in which we operate, including our market position
and market share, which is based on information from independent
third-party sources. Although we believe these sources to be
generally reliable, market and industry data is inherently
imprecise, subject to interpretation and cannot be verified with
complete certainty due to limits on the availability and
reliability of raw data, the voluntary nature of the data gathering
process, and other limitations and uncertainties inherent in any
statistical survey or data collection process. We have not
independently verified any third-party information contained
herein.
Forward-looking information involves known and unknown risks,
uncertainties and other factors that may cause actual events to
differ materially from current expectations. These risks,
uncertainties and factors include: general economic factors;
receipt of regulatory approvals, consents, and/or final
determinations, and any conditions imposed upon same and the timing
thereof; the Company's ability to meet regulatory criteria which
may be subject to change; change in regulation including
restrictions on sale of new product forms; timing for federal
legalization of cannabis in the U.S. and changing regulatory
conditions including internationally; imposition of tariffs or
duties in international markets, including Israel; change in stock
exchange listing practices and ability to continue to meet minimum
listing requirements from time to time; the Company's ability to
manage costs, timing and conditions to receiving any required
testing results and certifications; results of final testing of new
products; changes in governmental plans including those related to
methods of distribution and timing and timing and nature of sales
and product returns; customer buying patterns and consumer
preferences not being as predicted given this is a new and emerging
market; material weaknesses identified in the Company’s internal
controls over financial reporting; the completion of regulatory
processes and registrations including for new products and forms;
market demand and acceptance of new products and forms; unforeseen
construction or delivery delays including of equipment and
commissioning; increases to expected costs; competitive and
industry conditions; change in customer buying patterns; and
changes in crop yields and potency. These and other risk factors
are disclosed in the Company's documents filed from time to time
under the Company’s issuer profile on the Canadian Securities
Administrators’ System for Electronic Data Analysis and Retrieval +
(“SEDAR+”) at www.sedarplus.com and reports and other information
filed with or furnished to the United States Securities and
Exchange Commission (“SEC”) from time to time on the SEC’s
Electronic Document Gathering and Retrieval System (“EDGAR”) at
www.sec.gov, including the Company’s most recent management
discussion and analysis ("MD&A") and and annual information
form. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this
news release. The Company disclaims any intention or obligation,
except to the extent required by law, to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. Forward looking information is subject
to risks and uncertainties that are addressed in the “Risk Factors”
section of the MD&A dated May 14, 2024 and there can be no
assurance whatsoever that these events will occur.
1 As of March 31, 2024 Multiple Sources (Hifyre, Weedcrawler,
provincial boards, internal modelling) 2 Pro-forma cash as of close
of the two anticipated BAT follow-on investment tranches. 3
Adjusted gross margin is a non-IFRS financial measure not defined
by and does not have any standardized meaning under IFRS and might
not be comparable to similar financial measures disclosed by other
issuers; please refer to “Non-IFRS Financial Measures” in this
press release for more information. 4 Adjusted EBITDA is a non-IFRS
financial measure not defined by and does not have any standardized
meaning under IFRS and might not be comparable to similar financial
measures disclosed by other issuers; please refer to “Non-IFRS
Financial Measures” in this press release for more information.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240513851082/en/
For Investor Relations enquiries, please contact:
Max Schwartz, Director of Investor Relations
investors@organigram.ca
For Media enquiries, please contact:
Paolo De Luca, Chief Strategy Officer
paolo.deluca@organigram.ca
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