Organigram Holdings Shares Up Slightly As It Reports 13% Increase In Q3 Revenue, Recreational Net Revenue Spikes 40% QoQ

Organigram Holdings Inc. OGI OGI posted its latest financial earnings report Tuesday, touting a sequential increase in both gross and net revenue of 51% and 39%, respectively.

During the third quarter of 2021, gross revenue totaled $29.1 million, representing an increase of 31% year-over-year, while net revenue grew by 13% over the same period to $20.3 million.

The New Brunswick-based company reported that adult-use recreational net revenue had spiked 40% sequentially and 10% year-over-year, reaching $16.8 million in the quarter ended May 31.

"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," Paolo De Luca, the company's chief strategy officer, said.

Here's a breakdown of what the third-quarter earnings report revealed:

  • Cost of sales declined by 47% compared to the same quarter of 2020 to roughly $23.4 million, due to almost $30 million in inventory write-offs and provisions in addition to a reduced workforce as a result of the COVID-19 pandemic.
  • Gross margin, before fair value changes to biological assets and inventories sold, came in negative at approximately $3 million, representing a significant improvement during the quarter, or 88%.
  • The gross margin grew to a positive result of $2.12 million, representing a 104% year-over-year increase from the negative third quarter 2020 gross margin.
  • Sales, general and administrative expenses amounted to $13.5 million in the third quarter, up by 32% year-over-year.
  • Adjusted EBITDA, a non-IFRS financial measure, came in negative at $10.9 million, representing a 376% year-over-year increase.
  • Net loss totaled around $4 million.

"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," De Luca added.

Organigram's Recent Moves

In April, Organigram acquired for $22 million The Edibles & Infusions Corp., the soft chew manufacturer co-founded by AgraFlora Organics International Inc. AGRA and Cavalier Candies CEO James Fletcher.

Most recently, the company confirmed it's kicking off the Center of Excellence developed in partnership with tobacco giant British American Tobacco PLC BTI. In addition, Organigram said it is searching for 75 new employees that will cover a wide range of positions in several sectors, including production, operation, cultivation, marketing, sales, sanitation, research and quality assurance.

The establishment of the Center of Excellence, which is dedicated to the development of cannabis products with a focus on CBD and is located at Organigram's indoor facility in New Brunswick, is part of a larger deal with BAT. Earlier this year, BAT disclosed its plans to invest CA$221 million ($175.7 million) in OrganiGram by purchasing some 58.3 million shares of Organigram's subsidiary at CA$3.792 each, representing a 19.9% equity interest.

Price Action: Organigram Holdings shares were trading 7.72% higher at $2.85 per share at the time of writing Tuesday morning.

Photo by Daniel Norin on Unsplash

Posted In: Paolo De Lucathird quarter earningsCannabisEarningsM&ANewsPenny StocksSmall CapMarkets

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