- Record net revenue of $26.9
million or more than double the net revenue of
Q1-2019
- Adjusted gross margin of $16.0
million or 60%1
- Adjusted EBITDA of $13.3
million or adjusted EBITDA margin of
49%1
- As planned, an amendment to our licence for Phase 4a and
4b of the Moncton facility was submitted to Health
Canada in March for the security perimeter as well as the initial
13 grow rooms in Phase 4a
- The Phase 4 expansion is being completed in a series of
stages which once fully licensed will bring our annualized
production up to 113,000 kg by the end of 2019
- Phase 5 refurbishment underway for an edibles and derivative
facility and additional in-house extraction capacity
- Signed a letter of intent with the Société québécoise du
cannabis (SQDC); one of only three licensed producers in
Canada to be in all ten
provinces
- Subsequent to quarter-end, all remaining convertible
debentures converted which has removed approximately $49.3 million in current liabilities from the
balance sheet
MONCTON, NB, April 15, 2019 /CNW/ - Organigram Holdings Inc.
(TSX VENTURE: OGI) (OTCQX: OGRMF), the parent company of Organigram
Inc. (the "Company" or "Organigram"), a leading licensed producer
of cannabis, is pleased to announce its results for the second
quarter ended February 28, 2019 ("Q2"
or "Q2 2019"). The Q2 2019 includes the first full quarter of
adult-use recreational sales for the Company.
"We executed very well again this quarter and have established
Organigram as one of the leaders in the Canadian adult-use
recreational market," said Greg
Engel, Chief Executive Officer.
"For the second consecutive quarter, our results reflected
operational excellence which translated into record revenue for the
Company, industry-leading adjusted gross margin, and positive
adjusted EBITDA, all of which differentiates us from most of the
Canadian industry today. Our team has already progressed
several key initiatives in preparation for the derivative and
edibles launch in the fall of 2019. We are excited about the
significant growth ahead expected from these new products, our
expanding capacity, our strategic partnerships, and our relentless
focus on continuous improvement to consistently deliver high
quality product to our customers."
Select Highlights for the Second Quarter of Fiscal
20192
- Q2-2019 gross revenue of $33.5
million and net revenue of $26.9
million (less excise taxes) increased exponentially from the
same prior year period (Q2-2018) as Q2 2019 included the first full
quarter of adult-use recreational sales.
- Cash cost of cultivation of $0.65
and "all-in" cost of cultivation of $0.85 (including non-cash depreciation and
share-based compensation) per gram of dried flower
harvested3 decreased from $1.24 and $1.48,
respectively, in Q2-2018 largely due to higher yields per
plant.
- Adjusted gross margin (a non-IFRS measure that excludes the
effects of fair value adjustments on biological assets and
inventories) increased to $16.0
million or 60% (of net revenue) from $1.8 million or 52% (of net revenue) in Q2 2018
as explained by increased unit volume sales. Q2-2019 reported
gross margin (includes fair value adjustments on biological assets
and changes in inventory) equalled $8.0
million compared to $6.2
million in Q2-2018.
- Adjusted EBITDA of $13.3 million
or 49% (of net revenue) was positive for the third consecutive
quarter and increased from adjusted EBITDA loss of $0.3 million in Q2-2018 driven by exponentially
higher unit sales.
- Sales and marketing and general and administrative ("SG&A")
expenses were $5.7 million (excluding
non-cash share-based compensation), up from $2.7 million in Q2-2018. As a percentage of
net revenue, SG&A expenses excluding share-based compensation
decreased to 21% from 79% in Q2-2018 as management continued with
their disciplined approach to overhead spending during this high
growth period.
- Net loss from continuing operations of $6.4 million or $(0.05) per share on a diluted basis, compared to
$1.2 million net income, or
$0.01 per share on a diluted basis in
Q2-2018.
Significant Events
- During the quarter, the Company signed:
-
- a letter of intent with SQDC, making it one of only three
Canadian licensed producers to be in all provinces; and
- a multi-year extraction agreement with Valens GroWorks
Corporation ("Valens") to extract cannabis from Organigram's
Moncton operation and hemp
purchased from 1812 Hemp4, to produce
extract concentrate for oil production and build up inventory of
concentrate in advance of the expected launch of derivative based
products this fall.
- Subsequent to quarter end, the Company's remaining convertible
debentures at a carrying value of $49.3
million (approximately $53.7
million of face value as at February
28, 2019) were either voluntarily converted by holders or
force converted at a conversion price of $5.42 by the Company as at April 1, 2019 resulting in an issuance of
approximately 9.9 million common shares of the Company. The
conversion of the debentures has removed the $49.3 million liability from the balance sheet
and eliminated a 6% cash coupon payment to the previous maturity of
January 31, 2020.
Phase 4 Production Expansion
- The Phase 4 expansion of the Moncton facility will add 92 incremental grow
rooms in stages and construction is anticipated to be complete by
the end of calendar 2019. Additional grow rooms are expected
to more than triple current production capacity to 113,000 kg per
year5 from 36,000 kg/yr, once it is complete.
- The Company submitted an amendment to its license to Health
Canada for the entire perimeter of Phase 4a and Phase 4b as well as for 13 of the Phase 4a grow rooms
in March 2019.
- In anticipation of receiving licensing, the Company has already
begun cloning for these initial 13 rooms. As per previous
Phases of expansion, the Company will stagger the licensing
amendment submissions and initial use of the remaining rooms to
coincide with its production schedule.
- The expected capital cost for the entire Phase 4 remains
unchanged from Q1-2019 at approximately $125
million5 and Organigram spent $27 million on this Phase in Q2-2019.
Phase 5 Expansion Under Refurbishment
- The Company owns an additional 56,000 square feet within its
existing facility which became available for its use in
March 2019 and is currently being
refurbished and designed under European Union GMP standards for
additional extraction capacity, its own derivatives and edibles
facility and additional office space.
- Organigram expects primary construction on Phase 5 to be
substantially complete by October
2019. The initial capital cost estimate is approximately
$48 million5.
Adult-Use Recreational Launch 2.0 –Derivative and Edible
Products
- The Company believes it is well-positioned for the derivatives
launch in the fall of 2019. Organigram is expanding capacity
with the Phase 4 and Phase 5 expansions of its Moncton facility as well as the extraction
agreement with Valens.
- Organigram has an exclusive consulting agreement with TGS
International LLC, a vertically integrated cannabis company and
proven market leader in Colorado6, to better understand
demand for certain derivative-based products, market share trends
over time and for the development of commercial scale extraction
and product development and processing.
- The Company is currently focusing its interests on vaporizable
pen technologies and a selection of edible products. A
chocolate molding line and additional fully automated packaging
equipment for product lines such as edibles and other derivative
based products have been ordered and short path distillation
equipment for edibles and vape pens has been
purchased.
- Organigram believes it has also developed a shelf stable,
water-soluble and tasteless cannabinoid nano-emulsion formulation
that provides an initial onset within 10 to 15 minutes if used in a
beverage. Non-cannabis formulations with a similar molecule size
are water-soluble in humans (i.e., absorbed through the bloodstream
rather than requiring first-pass liver metabolism, which results in
longer onset and duration). The Company expects to receive
appropriate research and development licensing in the very near
future at which point it will be able to confirm the onset of
action and duration of effect. At this point, the Company is not
planning to launch its own cannabinoid infused beverages and is
actively seeking a strategic partner with proven experience in
beverage product development.
Balance Sheet
- As of February 28, 2019,
Organigram has approximately $63.4
million in cash and short-term investments and a low debt to
adjusted EBITDA ratio at quarter-end and also generated positive
adjusted EBITDA (a non-IFRS measure) in the last three reported
quarters.
- On April 1, 2019, the Company
converted the principal amount outstanding of the remaining
debentures and eliminated a $49.3
million current liability from its balance sheet.
- Subsequent to quarter-end, Organigram signed an indicative term
sheet with a Canadian Schedule 1 chartered bank, as arranger and
lead lender and, subject to the completion of due diligence and
definitive loan documentation, expects to receive debt financing in
the aggregate amount of approximately $140
million, which would include both a term loan to finance the
Company's ongoing expansion plans and revolving debt for general
working capital and corporate purposes.
Financial Highlights
|
|
|
|
(in $000s except for
per share amounts)
|
|
|
|
Q2-2019
|
Q2-2018
|
%
Change
|
|
|
|
|
Gross
revenue
|
$
|
33,473
|
$
|
2,926
|
1,044%
|
Sales recovery
(returns)
|
-
|
469
|
(100)%
|
Excise
taxes
|
(6,539)
|
-
|
n/m
|
Net
revenue
|
26,934
|
3,395
|
693%
|
Cost of sales (incl.
indirect production)
|
10,890
|
1,624
|
571%
|
Gross margin
(excluding FV adjustment)1
|
16,044
|
1,771
|
806%
|
FV adjust on bio
assets and inventories
|
(8,086)
|
4,384
|
(284)%
|
Gross
margin
|
7,958
|
6,155
|
29%
|
|
|
|
|
General and
administrative
|
2,603
|
1,734
|
50%
|
Sales and
marketing
|
3,138
|
934
|
236%
|
Share-based
compensation (non-cash)
|
3,985
|
1,154
|
245%
|
Total
expenses
|
9,726
|
3,822
|
154%
|
|
|
|
|
Income (loss) from
continuing
operations
|
(1,768)
|
2,333
|
(176)%
|
|
|
|
|
Net financing costs,
investment (income)
and other loss
|
5,238
|
1,143
|
358%
|
Income tax
recovery
|
(620)
|
-
|
n/m
|
Net income (loss)
from continuing
operations
|
(6,386)
|
1,190
|
(637)%
|
Loss from
discontinued operations
|
-
|
(114)
|
n/m
|
Net income (loss) and
comprehensive
income
|
$
|
(6,386)
|
$
|
1,076
|
(693)%
|
|
|
|
|
Net income (loss)
from continuing
operations per common share, basic
|
$
|
(0.049)
|
$
|
0.010
|
|
Net income (loss)
from continuing
operations per common share, diluted
|
$
|
(0.049)
|
$
|
0.009
|
|
|
|
|
|
|
|
|
|
(in $000 except for
per share amounts)
|
February
28,
2019
|
August
31,
2018
|
%
Change
|
|
|
|
|
Cash and short-term
investments
|
$
|
63,359
|
$
|
130,064
|
(51)%
|
Biological
assets
|
19,835
|
19,858
|
0%
|
Inventories
|
95,134
|
44,969
|
112%
|
Other current
assets
|
29,416
|
8,323
|
253%
|
Property, plant and
equipment
|
153,282
|
98,639
|
55%
|
Other non-current
assets
|
15,124
|
714
|
2,018%
|
Total
assets
|
$
|
376,150
|
$
|
302,567
|
24%
|
|
|
|
|
Current
liabilities
|
$
|
66,428
|
$
|
11,250
|
490%
|
Non-current
liabilities
|
32,838
|
106,723
|
(69)%
|
Total
liabilities
|
99,266
|
117,973
|
(16)%
|
|
|
|
|
Shareholders'
equity
|
276,884
|
184,594
|
50%
|
Total liabilities and
shareholders' equity
|
$
|
376,150
|
$
|
302,567
|
24%
|
Capital Structure
|
Feb 28,
2019
|
Aug 31,
2018
|
(in $000s)
|
|
|
Current and long-term
debt
|
$
|
12,947
|
$
|
3,298
|
Convertible
debentures
(face
value)
|
49,332
(53,653)
|
95,866
(112,982)
|
Shareholders'
equity
|
276,884
|
184,594
|
Total debt and
shareholders' equity
|
$
|
339,163
|
$
|
283,758
|
|
|
|
(in 000s)
|
|
|
Outstanding
shares
|
139,569
|
125,208
|
Options
|
8,292
|
7,710
|
Warrants
|
5,836
|
8,087
|
Restricted share
units
|
940
|
145
|
Convertible
debentures (converted at $5.42)
|
9,899
|
20,845
|
Fully-diluted
shares
|
164,535
|
161,995
|
|
|
|
During the quarter, approximately $44.4
million of face value of debentures were converted into
common shares of the Company at a conversion price of $5.42, leaving approximately $53.7 million of the face value of debentures
outstanding. Subsequent to quarter-end, the remaining face value of
debentures outstanding were converted into common shares at a
conversion price of $5.42 per share,
leaving $nil face value of debentures outstanding.
Outstanding share count as at April 12,
2019 is as follows:
(in 000s)
|
|
Outstanding
shares
|
151,844
|
Options
|
8,272
|
Warrants
|
3,835
|
Restricted share
units
|
1,024
|
Fully-diluted
shares
|
164,974
|
Second Quarter Fiscal 2019 Conference Call
The Company will host a conference call to discuss Q2 2019
earnings results. The details are as follows:
Date:
|
April 15,
2019
|
|
|
Time:
|
8:00 a.m. Eastern
Time
|
|
|
Toll Free (North
America) Dial-In Number:
|
1-888-231-8191
|
|
|
International Dial-In
Number:
|
647-427-7450 or
778-371-9827
|
|
|
Webcast:
https://event.on24.com/wcc/r/1976562/F9C96D11DAF178EB80B684B2404ADD3F
|
A telephone replay of this conference call will be available
shortly after the call's completion until April 22nd, 2019. To access the recording, use
the following dial-in number 1-855-859-2056 and conference ID
1387326. A replay of the webcast will be available at the
conclusion of the call at the aforementioned webcast link and on
the Company's investor relations website at
https://www.organigram.ca/investors/ and will be archived for a
period of 90 days following the call.
About Organigram Holdings Inc.
Organigram Holdings Inc. is a TSX Venture Exchange listed
company whose wholly owned subsidiary, Organigram Inc., is a
licensed producer of cannabis and cannabis-derived products in
Canada.
Organigram is focused on producing the highest-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 adult use
recreational cannabis brands including The Edison Cannabis Company,
Ankr Organics, Trailer Park Buds and Trailblazer. Organigram's
primary facility is located in Moncton,
New Brunswick and the Company is regulated by the Cannabis
Act (Canada) and the Cannabis
Regulations (Canada).
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in policies of the TSX Venture
Exchange) accepts responsibility for the adequacy or accuracy of
this release.
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, projections and outlook, including statements
relating to the Company's plans and objectives, or estimates or
predictions of actions of customers, suppliers, partners,
distributors, competitors or regulatory authorities; 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 availability of funds, consummation of due diligence
and definitive documentation, the receipt of regulatory approvals
or consents, the completion of regulatory processes and
registrations, unforeseen construction delays, 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 on SEDAR including the Company's Annual and
Q2 MD&A and AIF (see www.sedar.com). 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.
This news release refers to certain financial performance
measures 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. These
non-IFRS financial performance measures are defined in the
MD&A. 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.
_______________________________________________
|
1
|
Adjusted gross margin
and adjusted EBITDA are non-IFRS measures that are not defined by
and do not have any standardized meaning under IFRS; please see the
Company's Q2 2019 Management's Discussion and Analysis ("MD&A")
for definitions and calculations. The Company adjusted the
calculation of adjusted EBITDA in Q2 2019 to add back share-based
compensation per the Company's Q2 2019 Condensed Consolidated
Interim Statement of Cash Flows. Using this new methodology,
the Q1 2019 adjusted EBITDA would equal 55% compared to 40% under
the old methodology.
|
2
|
Financial figures
relating to 2018 have been restated due to the reclassification of
discontinued operations and the reclassification of shipping
expense from selling and marketing expense to cost of
sales.
|
3
|
Cash cost of
cultivation per gram of dried flower harvested is a non-IFRS
measure that are not defined by and does not have any standardized
meaning under IFRS; please see the Company's Q2 2019 MD&A for
definitions and calculations. Cash cost of cultivation
excludes significant post-harvest costs including but not limited
to extraction, packaging and shipping which need to be added to
arrive at cost of sales when inventory is sold.
|
4
|
703454 N.B.
Inc.
|
5
|
The forward-looking
estimates of additional production capacity and costs related
thereto are based on a number of material factors and
assumptions. Please see the Company's Q2 2019
MD&A.
|
6
|
The Company has no
investment or ownership in any entity in the United States nor does
it provide any products or services to entities in the United
States.
|
SOURCE OrganiGram