Why Organigram Shares Are Trading Higher Today? Posts Record High Net Revenue In Q2, Still Among Top Canadian LPs

Organigram Holdings Inc. OGI OGI, the parent company of the cannabis company Organigram Inc, announced its results for the second quarter ended February 28, 2022.

Q2 2022 Financial Highlights

• Achieved gross revenue of $43.9 million, up 128% from the same prior-year period and consistent with the prior year’s period, despite the impact of seasonality.
• Compared to the prior year, net revenue increased 117% to $31.8 million, from $14.6 million in the second quarter of fiscal 2021, due to an increase in adult-use recreational revenue and international revenue.
• Cost of sales decreased by 20% to $25 million, from $31.1 million in the prior year’s period.
• Gross margin before fair value changes to biological assets, inventories sold, and other charges improved to $6.9 million from negative $16.5 million in the same quarter of last year largely due to higher net revenue and lower cost of sales as described above.
• Gross margin increased to a positive result from negative second quarter of 2021 gross margin.
• Adjusted gross margin was $8.3 million, or 26% of net revenue, compared to a negative $0.7 million, or -5%, in the prior year’s quarter.
• Selling, general & administrative expenses improved to $14 million from $10.3 million in the second quarter of 2021, primarily due to the higher spending to support the growth of the business combined with the acquisition of Laurentian.
• Adjusted EBITDA improved to positive $1.6 million compared to negative $7.8 million in the same quarter of 2021.
• Net loss was $4 million, compared to a net loss of $66.4 million in the second quarter of 2021.
• Net cash used in operating activities was $5.3 million.

Q2 2022 Business Highlights

• Reached 8.2% market share in February 2022, the #3 position among Canadian licensed producers for the second month in a row.
• Maintained #1 position in dried flower, the largest category, which represents approximately half of the Canadian cannabis market.
• Launched 18 new products, including extensions to the SHRED'ems gummies line and two new premium strains to the Edison brand, bringing the total number of core SKUs in market to 69.
• Shipped 1,692 kilograms of high margin flower to Israel and Australia, marking the highest quarterly International B2B shipments in the history of the company.
• Acquired Quebec-based hash and craft cannabis producer Laurentian, an immediately accretive transaction providing the Company with a broadened product portfolio and increased footprint in Quebec.
• Increased investment in Hyasynth, a pioneer in cannabinoid science.
• Launched SHRED-X vapes, 510 vape cartridges with flavour profiles inspired by the unique flavours of the SHRED milled flower products.
• Received $6.3 million investment from BAT through the exercise of its rights pursuant to an Investor Rights Agreement with BAT, to enhance its equity ownership position in the Company from 18.8% to 19.4% as at the date hereof.
• Subsequent to quarter-end, leveraged the high visibility of the SHRED brand to introduce two new products. SHRED-X kief-infused blends, is a 50%/50% blend of kief and the popular SHRED milled flower.

Management Commentary

“The culture of innovation and consumer focus we are building at Organigram has enabled us to not only create brands that are embraced by consumers, but continually innovate within those brands and across multiple product lines. We expect that leveraging these brands will allow us to continue to drive market share,” said Beena Goldenberg, the company's CEO. “In addition to our continued success at building beloved brands, our ability to increase sales in international markets and capitalize on our accretive acquisitions, such as Laurentian and EIC, continue to contribute to our solid gains in market presence and sales growth."

Price Action

Organigram’s shares traded 10.07% higher at $1.64 per share during the pre-market session on Tuesday morning.

Photo: Courtesy of Markus Winkler on Unsplash