Organigram Holdings Inc. (NASDAQ: OGI) (TSX: OGI), the parent company of Organigram Inc. (together, the “Company” or “Organigram”), a leading licensed producer of cannabis, announced its results for the third quarter ended May 31, 2021 (“Q3 2021”).
“We are pleased with the growth in revenue in Q3 as we were better staffed to fulfill the demand for our revitalized product portfolio, which continues to resonate well with consumers,” said Paolo De Luca, Chief Strategy Officer. “The ongoing investment in our genetics and cultivation program has yielded some exciting new dried flower products with more genetics and derivative product launches planned for the near term. Sales are trending higher to date in Q4 supported by a strong outlook for the industry as the number of cannabis retail stores continues to grow and existing stores are permitted to re-open their doors to customers.”
Select Key Financial Metrics (in $000s unless otherwise indicated) | Q3 2021 | Q3 2020 | % Change | |||
Gross revenue | 29,105 |
| 22,241 |
| 31 | % |
Excise taxes | (8,781 | ) | (4,220 | ) | 108 | % |
Net revenue | 20,324 |
| 18,021 |
| 13 | % |
Cost of sales | 23,381 |
| 44,375 |
| -47 | % |
Gross margin before fair value changes to biological assets & inventories sold | (3,057 | ) | (26,354 | ) | 88 | % |
Fair value changes to biological assets & inventories sold | 5,176 |
| (23,862 | ) | 122 | % |
Gross margin | 2,119 |
| (50,216 | ) | 104 | % |
Adjusted gross margin* | (722 | ) | 4,114 |
| -118 | % |
Adjusted gross margin %* | -4 | % | 23 | % | -27 | % |
Selling (including marketing), general & administrative expenses** | 13,559 |
| 10,258 |
| 32 | % |
Adjusted EBITDA* | (10,182 | ) | (2,138 | ) | -376 | % |
Net loss | (4,008 | ) | (89,871 | ) | 96 | % |
Net cash provided by (used in) operating activities | (10,754 | ) | 313 |
| -3536 | % |
* 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; please refer to the Company’s Q3 2021 MD&A for definitions and a reconciliation to IFRS.
** Excluding non-cash share-based compensation.
Select Balance Sheet Metrics (in $000s) | 2021-05-31 | 2020-08-31 | % Change | |
Cash & short-term investments | 196,446 | 74,728 | 163 | % |
Biological assets & inventories | 46,638 | 71,759 | -35 | % |
Other current assets | 22,060 | 23,717 | -7 | % |
Accounts payable & accrued liabilities | 19,276 | 17,486 | 10 | % |
Current portion of long-term debt | 80 | 11,595 | -99 | % |
Working capital | 245,788 | 141,123 | 74 | % |
Property, plant & equipment | 247,698 | 247,420 | 0 | % |
Long-term debt | 247 | 103,671 | -100 | % |
Total assets | 576,715 | 435,127 | 33 | % |
Total liabilities | 73,536 | 135,600 | -46 | % |
Shareholders’ equity | 503,179 | 299,527 | 68 | % |
“On the expense front, we are encouraged by the progress we have made in reducing cultivation costs and capturing economies of scale as we ramp up cultivation,” said Derrick West, Chief Financial Officer. “In combination with commercial strategic initiatives, we have also identified a number of additional cost efficiency opportunities focused on enhancing our gross margin profile. We anticipate starting to see the benefits from these cost reductions during Q4 Fiscal 2021.”
Key Financial Results for the Third Quarter Fiscal 2021
Canadian Adult-Use Recreational Market
Rec 1.0 new launches
Higher margin Edison and Indi dried flower strains
Value segment offerings
Rec 2.0 new launches
Vapes
Research and Product Development
Outlook5
Net revenue
Adjusted gross margins
SG&A expenses
International
Liquidity and Capital Resources
Capital Structure
in $000s | 2021-05-31 | 2020-08-31 |
Current and long-term debt | 327 | 115,266 |
Shareholders’ equity | 503,179 | 299,527 |
Total debt and shareholders’ equity | 503,506 | 414,793 |
in 000s | ||
Outstanding common shares | 298,645 | 194,511 |
Options | 7,655 | 9,264 |
Warrants | 16,951 | - |
Top-up rights | 6,570 | - |
Restricted share units | 1,192 | 912 |
Performance share units | 481 | 120 |
Total fully-diluted shares | 331,494 | 204,807 |
Outstanding basic and fully diluted share count as at July 11, 2011 is as follows:
in 000s | 2021-07-11 |
Outstanding common shares | 298,773 |
Options | 7,842 |
Warrants | 16,944 |
Top-up rights | 6,611 |
Restricted share units | 1,186 |
Performance share units | 472 |
Total fully-diluted shares | 331,828 |
Third Quarter Fiscal 2021 Conference Call
The Company will host a conference call to discuss its results with details as follows:
Date: July 13, 2021
Time: 8:00am Eastern Time
To register for the conference call, please use this link:
http://www.directeventreg.com/registration/event/7967758
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://event.on24.com/wcc/r/3193534/E2AEBA0AF448A414915F1361BA7BC8F1
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 performance measures (including 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. Please refer to the Company’s Q3 2021 MD&A for definitions and, in the case of adjusted EBITDA, a reconciliation to IFRS amounts.
About Organigram Holdings Inc.
Organigram Holdings Inc. is a NASDAQ Global Select Market and TSX listed company whose wholly owned subsidiaries include: Organigram Inc., a licensed producer of cannabis and cannabis-derived products in Canada and The Edibles and Infusions Corporation, a licensed manufacturer of cannabis-infused soft chews and candy 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 The Edison Cannabis Company, Indi, Bag o’ Buds, SHRED and Trailblazer. Organigram's facility is located in Moncton, New Brunswick with another manufacturing facility in Winnipeg, Manitoba. The Company is regulated by the Cannabis Act and the Cannabis Regulations (Canada).
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, expected increase in SKUs, expected improvement to gross margins before fair value changes to biological assets and inventories, expectations regarding higher revenue, the Company’s plans and objectives including around its credit facility, availability and sources of any future financing; expectations regarding the impact of COVID-19, availability of cost efficiency opportunities, the increase in the number of retail stores, the ability of the Company to fulfill demand for its revitalized product portfolio with increased staffing, 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 market dried flower strains, expectations around market and consumer demand and other patterns related to existing, new and planned product forms including by EIC; 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; resumption of shipments to Canndoc Ltd.; 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.
Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual events to differ materially from current expectations. Important factors - including the heightened uncertainty as a result of COVID-19 including any continued impact on production or operations, impact on demand for products, effect on third party suppliers, service providers or lenders; general economic factors; receipt of regulatory approvals or consents and any conditions imposed upon same and the timing thereof, ability to meet regulatory criteria which may be subject to change, change in regulation including restrictions on sale of new product forms, changing listing practices, ability to manage costs, timing to receive any required testing results and certifications, results of final testing of new products, timing of new retail store openings being inconsistent with preliminary expectations, changes in governmental plans including related to methods of distribution and timing and launch of retail stores, 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, customer buying patterns and crop yields - that could cause actual results to differ materially from the Company's expectations 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 Document Analysis and Retrieval (“SEDAR”) at www.sedar.com and reports and other information filed with or furnished to the United States Securities and Exchange Commission (“SEC”) and available on the SEC’s Electronic Document Gathering and Retrieval System (“EDGAR”) at www.sec.gov including the Company’s most recent MD&A and AIF available from time to time. 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 “Risk Factors” section of the MD&A dated July 12, 2021 and there can be no assurance whatsoever that these events will occur.
1 January to June 2021 as well as November and December 2020
2 Based on the outstanding balance of $58.5 million at the time of repayment
3Adjusted gross margin is a non-IFRS financial measure not defined by and does not have any standardized meaning under IFRS; please refer to the Company’s Q3 2021 MD&A for definitions and a reconciliation to IFRS.
4 Adjusted EBITDA is a non-IFRS financial measure not defined by and does not have any standardized meaning under IFRS; please refer to the Company’s Q3 2021 MD&A for definitions and a reconciliation to IFRS.
5 Without limiting the generality of risk factor disclosures referenced in the “Risk Factors” section of the Company’s Q3 2021 MD&A, the expectations concerning revenue, adjusted gross margins and SG&A are based on the following general assumptions: consistency of revenue experience with indications of fourth quarter performance to date, consistency of ordering and return patterns or other factors with prior periods and no material change in legal regulation, market factors or general economic conditions. The Company disclaims any obligation to update any of the forward-looking information except as required by applicable law. See cautionary statement in the “Introduction” section at the beginning of the Company’s Q3 2021 MD&A.
6The forward-looking estimate of costs is based on a number of material factors and assumptions. Please see the cautionary statement in this press release and in the Company’s Q3 2021 MD&A.
Last Trade: | US$1.75 |
Daily Change: | -0.07 -3.85 |
Daily Volume: | 310,891 |
Market Cap: | US$181.650M |
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