Organigram Says Next Quarter Sales Will Rise Significantly

Organigram Holdings Inc. (NASDAQ: OGI) (TSX: OGI) delivered its results for the first fiscal quarter ending November 30, 2021, with revenue increasing 57% to $30.4 million, from $19.3 million for the same time period last year. This beat the Yahoo Finance average analyst estimate for revenue of just $23.9 million.

Organigram said the increase was primarily due to an increase in adult-use recreational revenue and international revenue, partly offset by lower average selling price due to product mix and a decrease in medical revenue. Organigram also trimmed its net loss to $1.3 million, versus last year’s net loss of $34.3 million. The company attributed it to the higher gross margin in the current quarter along with fair value adjustments on biological assets and inventories sold.

“Our record-breaking results in the first quarter of Fiscal 2022 are a testament to our successful strategy to create innovative, high-quality products that align with the evolving preferences of the various segments of cannabis consumers,” said Beena Goldenberg. “Our positive outlook for 2022 is further bolstered by the addition of Laurentian’s premium products to our portfolio, with an increased presence in Quebec and the resumption of international sales, which will continue through the year.”

In December, Organigram bought the Quebec-based Laurentian, a producer that specializes in high-quality, artisanal craft cannabis and premium Afghan hash. The acquisition accelerates and strengthens Organigram’s presence in the Quebec market and expands the company’s product portfolio. The company said it will invest at least $7 million in Laurentian to drive cultivation growth, expand processing and storage space and invest in automation. Organigram will use its direct sales team and national distribution to bring Laurentian’s products to additional Canadian provinces.

“We are also pleased with our continued progress at improving economies of scale in our operations, thus reducing operating costs and driving significant improvements in adjusted gross margin and adjusted EBITDA,” added Goldenberg. “While we previously projected to achieve positive adjusted EBITDA in Q4, with the purchase of Laurentian that will be accelerated to Q3 Fiscal 2022.”

Outlook

Looking ahead, Organigram said it expects the fiscal second-quarter revenue to be significantly higher than last year. The company said it is basing this forecast on stronger forecasted market growth and the increasing number of retail stores. In addition to that, Organigram said it is better able to fulfill the demand for its revitalized product portfolio with increased production, and revenue contributions from its newly acquired Laurentian facility. Net revenue growth is expected as the company’s adult-use recreational retail market share jumped from 4.4% in Q1 of Fiscal 2021 to 7.5% in Q1 of Fiscal 2022.

Organigram said it also expects to be positioned to generate more revenue growth from the production of soft chews and other edible products with the specialized equipment in the Winnipeg Facility under the direction of EIC leadership, who bring significant expertise in confectionery manufacturing. In Fiscal 2022, line extensions will be introduced to the company’s popular SHRED’EMS gummy and Edison Jolt lozenge SKUs.

The company also expects to realize additional revenue through the recent acquisition of Laurentian. Over the last two months of calendar 2021, Laurentian has been averaging an annual net revenue run rate of $17 million and an annual EBITDA run rate of $6 million. The Company will make growth capital expenditures at Laurentian which have the potential to further increase EBITDA generation. Laurentian’s hash and artisanal craft cannabis products complement the Company’s product line and will benefit from the company’s direct sales team and national distribution.

In addition, the resumption of shipments to Canndoc in Israel is expected to generate higher sequential revenue in Fiscal 2022 as compared to Fiscal 2021. The company believes it is better equipped to fulfill demand in Fiscal 2022 with larger harvests expected as compared to Fiscal 2021. Revenues in Fiscal 2022 to date including a shipment to Canndoc that was in excess of $3.0 million, and purchase orders received from customers, support the company’s expectation of revenue growth from Fiscal 2021 to Fiscal 2022.

 

 

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Master's degree in Business Journalism from New York University.


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