Organigram Revenues Jump, Easily Beats Estimates

Organigram Holdings Inc. (NASDAQ: OGI) (TSX: OGI) announced its results for the third quarter ending May 31, 2022. Organigram said that revenue increased 90% to $55 million, versus $29 million in the same time period in 2021. This beat the Yahoo Finance average analyst estimates for revenue of $26 million, however, it increased over the second quarter’s revenue of $43 million. The company attributed the increase to growth in adult-use recreational revenue, but it was partly offset by a lower average net selling price due to product mix and a decrease in medical revenue.

Organigram trimmed its net losses to $2.8 million versus last year’s net loss of $4.0 million. the company said this was due to higher gross margins, lower inventory provisions, and lower financing costs.

“We are pleased to see continued strength in our recreational business with our increasing market share. We achieved record net revenue results which we expect to surpass again in Q4 on the strength of new product listings, increased retail sales momentum, and international shipments,” said Beena Goldenberg, Chief Executive Officer. “We have built an enduring brand with SHRED that has proven to attract consumers across multiple product categories. This market strength is bolstered by introducing new SKUs in the derivative space, including Edison JOLTS, which are now available in three flavors, Edison live resin vapes, Tremblant hash, and Monjour soft chews in the wellness segment.”

Organigram also said it achieved the #3 position among Canadian licensed producers with 7.8% market share. In June 2022 the company had an 8.5% share of the recreational adult-use market. It said it continues to hold the #1 position in dried flower, the largest category of the Canadian cannabis market, and the #3 market position nationally in gummies.

Expenses

Organigram did note that its cost of sales increased sequentially to $29.4 million from $23.4 million and that this was due to an increase in sales volume in the adult-use recreational market. However, the net cash used in operating activities fell to $6.3 million and was primarily driven by the adjusted EBITDA net of the investment in working capital assets. In the fiscal third quarter of 2021, net cash used in operating activities was $10.8 million. The company had a comfortable cash cushion with unrestricted cash and a short-term investments balance of $127 million compared to $184 million on August 31, 2021. Organigram said it believes its capital position is healthy and that there is sufficient liquidity available for the near to medium term.

Outlook

Organigram said it currently expects the fiscal fourth quarter revenue to be higher than the third quarter. “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, contributions from the Lac-Supérieur facility and increased revenue from international shipments.”

The net revenue growth is expected from the company’s products as evidenced by Organigram’s growing national adult-use recreational retail market share from 7.4% in February 2022 to 8.5% in June 2022. The company said in a statement, “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 2022 as compared to Fiscal 2021.” The company also believes it is better equipped to fulfill demand in Fiscal 2023 with larger harvests expected compared to Fiscal 2022.

“Our success as a consumer-focused innovator continues to drive solid growth in the top line that is supported by a strong balance sheet and cash position,” stated Derrick West, Chief Financial Officer. “With our increased cultivation capacity and economies of scale from Phase 4C, and our investment in automation at all three of our manufacturing locations, we expect that both our adjusted gross and adjusted EBITDA margins will improve in Q4 and into Fiscal 2023.”

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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