OGI stock exploded up more than 22% in after-hours trading on January 14, 2020, after the coming reported excellent Q1 results.
Organigram Holdings Inc. (NASDAQ: OGI) (TSX: OGI), a leading licensed producer of cannabis, is pleased to announce its results for the first quarter ended November 30, 2019.
Organigram reports Q1 adjusted EBITDA of $4.9M versus $6.8M last year. The company reports Q1 revenue of $25.2M versus $12.4M last year.
- Net revenue more than doubled to $25.2 million from $12.4 million in Q1 2019
- Gross margin before fair value changes to biological assets and inventory of $9.3 million or 37% of net revenue compared to $8.8 million or 71% of net revenue in Q1 2019
- Net loss of $0.9 million compared to net income from continuing operations of $29.5 million in Q1 2019 largely due to non-cash fair value changes to biological assets and inventories in the prior year quarter
- Adjusted EBITDA1 of $4.9 million compared to $6.8 million in Q1 2019
- As planned, the Company started shipping Trailblazer Torch vape cartridges on December 17, 2019 and expects to start shipping Edison + Feather ready-to-go distillate pens before the end of January 2020 followed by Edison + PAX ERA distillate cartridges in Q2 calendar 2020
- Received licensing for chocolate production and packaging areas in December 2019 and remain on track for initial sales of cannabis-infused chocolates in Q1 calendar 2020
- The Company believes it has enough capital to fund its operations and capital expenditure plans. The Company had $34.1 million of cash and short-term investments at quarter-end. Additionally, as of the date of this press release, Organigram has $30.0 million in undrawn capacity on its term loan and $32.1 million available to raise under its total $55 million at-the-market equity program (the “ATM Program”) after it raised $22.9 million subsequent to quarter-end
“Despite ongoing industry challenges, we are pleased with solid Q1 2020 results and our return to positive adjusted EBITDA during the quarter, said Greg Engel, CEO. Our team was also successful in shipping the first of our Rec 2.0 products as planned and on schedule in December of 2019. We also look forward to the launch of the remainder of our vape pen portfolio followed soon after by our premium cannabis-infused chocolate products. In addition to an exciting line-up of 2.0 products, we are rolling out a couple of new core strains, such as our high THC Edison Limelight, across the country following their success as limited-time-offers in smaller markets.”
Phase 4 Expansion:
- In December 2019, the Company received Health Canada licensing approval for the remaining 16 grow rooms for incremental target production capacity of about 13,000 kg per year of dried flower and sweet leaf. This brings the Company’s total licensed target production capacity to 89,000 kg per year7. Management has decided to fill these newly licensed rooms in Phase 4B at a slower pace in response to lower than anticipated consumer demand at this time which the Company believes is largely due to the lack of an inadequate retail store network at this time, particularly in Ontario.
- As previously reported with the release of Organigram’s Fiscal 2019 results on November 25, 2019, the Company’s management made a strategic decision to delay the completion of Phase 4C (the final stage of the Phase 4 expansion), previously targeted for the end of calendar 2019, largely due to less than anticipated consumer demand noted above and to more effectively manage and prioritize cash flow as well as potentially use the space in 4C for other opportunities (if strategic and/or market factors dictate).
- In December 2019, the Ontario government announced it is taking steps to move to an open market for retail cannabis stores beginning in January 2020. Store authorizations from this open application process are expected to be issued beginning in April, at an initial rate of approximately 20 per month. Management will assess its decision to delay the completion of Phase 4C on an ongoing basis based on the progress and extent of store openings and the impact on consumer demand.
- To date, the Company has completed a significant portion of Phase 4C, such that the Company’s management believes the remaining construction can be completed in a relatively short timeframe to be ready to respond to an increase in consumer demand which may result from additional store openings.
- The estimate to complete all of Phase 4 (including the remainder of Phase 4C) was approximately $16 million as of quarter-end.
- If and when the Company decides to complete 100% of Phase 4C for cultivation as currently designed, the Moncton Campus facility is expected to have a target production capacity of 113,000 kg per year7 of dried flower and sweet leaf.
- The Company believes that the Canadian market is positioned for growth with additional retail store openings planned in the largest markets of Ontario and Quebec collectively representing over 60% of the Canadian population.
- Legalization of edible and derivative products is also expected to significantly expand the legal market from its current state. Certain provinces have announced delays or other restrictions on the launch of vaporizable products in their markets including Newfoundland & Labrador, Quebec and Alberta. The Company is adjusting its distribution schedules and revenue expectations accordingly.
- Organigram has and continues to build excised finished product across a variety of SKUs and is ready to onboard the addition of Ontario retailers. The first few of Ontario’s new stores opened in December 2019. That same month, Ontario announced it is taking steps to move to an open market for retail cannabis stores beginning in January 2020. Store authorizations from this open application process are expected to be issued beginning in April, at an initial rate of approximately 20 per month. This is expected to set the stage for further growth for Organigram and the industry. The Société québécoise du cannabis also previously announced plans to double its number of stores and Alberta’s robust network of about 375 stores has continued to grow to meet consumer demand.