Share prices for Organigram Holdings Inc. (Nasdaq: OGI) (TSX: OGI) were up nearly 6% in trading after positive results showed shaved losses and revenue that beat expectations for the fourth quarter and fiscal year ending Aug. 31, 2022.
The Canadian cannabis company reported net revenue of $45.5 million, up 83% from $24.9 million in the same time period last year. Organigram attributed the rise to an “increase in adult-use recreational revenue, partly offset by lower average net selling price due to product mix and a decrease in medical revenue.”
Net revenue for the fiscal year rose 84% to $145.8 million due to an increase in recreational and international revenue, the company said, partially offset by a decrease in medical sales.
Organigram trimmed its net loss to $6.1 million in the fourth quarter, versus $26 million in the same time frame last year.
Net loss for the entirety of fiscal 2022 was $14.3 million, versus $130.7 million in fiscal 2021. The company said that the quarterly and annual decrease in net loss is primarily due to the “increased revenues, lower production costs and a decrease in inventory provisions and unabsorbed overheads.”
“In fiscal 2022, our innovative product launches, comprehensive retail distribution, sales execution, and operational excellence helped Organigram become a leading consumer products company in the cannabis sector,” CEO Beena Goldenberg said. “During the year, we increased and optimized production to meet consumer demand, drove market share gains nationally, and solidified our position as serious competitors in several new categories.”
The company posted adjusted gross margin of $10.4 million in the fourth quarter – 23% of net revenue – which was up from negative $3 million (12% of revenue) in the same time period last year.
For fiscal year 2022, adjusted gross margin was $33.4 million – 23% of net revenue – up from $3.6 million (5% of revenue). The company said that the improvements were largely due to “higher overall sales volumes and improved efficiency, net of the impact of a lower average selling price.”
Selling, general & administrative (SG&A) in the fourth quarter rose to $15.7 million from $12.4 million in the same quarter last year.
For the fiscal 2022, SG&A expenses increased to $59.8 million, versus $45.7 million in fiscal 2021. Annual SG&A expenses as a percent of net revenue fell from 57.8% to 40.9%. The company said that the increases were primarily due to “acquisitions and the higher spend to support the growth in the business.”
Adjusted EBITDA income was $3.2 million versus a loss of $4.8 million in the fourth quarter last year. For the fiscal year, adjusted EBITDA was $3.5 million versus $27.6 million in the previous fiscal year. The improvement could be attributed to the increase in adjusted gross margins from the higher volume of products sold alongside lower production costs.
Organigram said it believes its capital position is healthy and that there is sufficient liquidity available for the near to medium term. The company had unrestricted cash and short-term investments worth around $99 million, versus $184 million during the same time last year.
The company said that the $85 million slump was the result of the following:
- $49 million invested in capital expenditures across three facilities.
- $8 million in cash consideration towards the acquisition of Laurentian Organics Inc.
- $3 million into Hyasynth Biologicals.
- $25 million related to supporting the increase in the working capital assets.
Organigram said it has budgeted $29 million in capital expenditures for three facilities. This spend would relate to the completion of the expansion at the Laurentian operations and also include automation investments at the Winnipeg edibles and Moncton flower facilities.
CFO Derrick West said that the quarter’s record net revenue and the third consecutive period of positive adjusted EBITDA was a “reflection of our disciplined approach, the execution by our team and our success at integrating acquisitions. We enter fiscal 2023 well-capitalized and with a proven strategy to continue to generate shareholder value.”
In a statement, Organigram said that it plans on seeing higher revenue next fiscal year.
“This expectation is largely due to ongoing sales momentum, stronger forecasted market growth, the company’s expanded product line in multiple segments, greater capacity to meet demand at the Moncton Campus, increased throughput at the Winnipeg facility and contributions from the Lac-Supérieur facility,” the company stated in a release.
“In addition, the anticipated continuation of shipments to Canndoc in Israel and Cannatrek and Medcan in Australia is expected to generate higher sequential revenue in fiscal 2023 as compared to fiscal 2022. The company believes it is better equipped to fulfill demand in fiscal 2023 with larger harvests expected compared to fiscal 2022.”