E Organigram Q1 2021 Financial Results Are Unmasked And They Are Dismal

Organigram Holdings Inc. (OGI), a leading licensed producer of cannabis, announced its results for the Q1 2021 ended November 30, 2020 and they were dismal across the board and the stock is declining as a result.

Q1 Financial Highlights

(All results are presented in Canadian dollars and compared to the previous quarter. Go here to convert into other currencies.)

Interestingly, it would seem that ORGANIGRAM management has tried to mask its dismal financial results in Q1 2021 by comparing said results with those of 12 months previous (i.e. Q1 2020) instead of the more current - and more meaningful - results from the prior quarter (i.e. Q4 2020). That being said, this summary does just that to give a better picture of how ORGANIGRAM is trending.

  • Net Revenue: declined 5.2%% to $19.3M
    • primarily due to significantly lower wholesale revenue from licensed producers and a lower average selling price
  • Gross Profit (Loss): decreased to a loss of $(12.8)M from a profit of  $6.2M
    • largely due to similar factors impacting net revenue described above and reflected the increase in excise taxes as a percentage of gross revenue
  • Gross Margin: reduced to 10% from 30%
    • primarily due to lower net revenue as described above and excise sales taxes and value segment offerings comprising a larger proportion of total revenue
  • SG&A Expenses: increased 2.7%
    •  largely due to higher insurance costs and general wage increases.
  • Adj. EBITDA: decreased 139.8% to $(6.4)M
    • largely due to lower adjusted gross margin as discussed above.
  • Net Profit (Loss): improved 11% to $(34.3)M
    • largely due to greater negative gross margin as described above.
  • Cash/Equiv.: increased 79% to $133.9M
    • largely due to the prior period’s increase in working capital assets as the Company scaled operations ahead of Rec 2.0 legalization.

Management Commentary

Greg Engel, CEO, had the following comments:

  • “We are pleased with our double-digit sales growth in the Canadian adult-use recreational market this past quarter as it reflects the success of many of our new product launches, particularly in the dried flower value segment.
  • Now we look forward to our new higher margin Edison dried flower offerings contributing substantially to overall revenue with even more new products to come in the next few quarters.
  • We believe we are well position to generate further top-line growth and significantly improve gross margins as a result of:
    • product portfolio revitalization
    • additional resources to ramp up production and achieve greater economies of scale and
    • our relentless focus on increased automation and cost efficiency opportunities position.”
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