E Organigram Q2 Financials: Downward Trend Continues

Q2 Operational Highlights

  • launched three new Edison Indica strains 
  • launched milk chocolate, a new flavor of Trailblazer SNAX, a value-priced chocolate bar
  • establishing a “Center of Excellence” at the Company’s Moncton facility, per the PDC agreement with BAT, to focus on developing the next generation of cannabis products with an initial focus on CBD

Outlook

Net Revenue

The company:

  • expects Q3 2021 revenue to be higher than in Q2 2021 when the Company’s Moncton facility was shut down for deep cleaning after identifying positive COVID-19 cases and a significant number of staff employees had to isolate but cautions that:
    • there is the risk that net revenue could be negatively impacted again if positive cases are identified in the future and the Company needs to take similar measures and
    • COVID-19 restrictions for cannabis retail stores, particularly in the most populous province of Ontario, could suppress demand and negatively impact net revenue in Q3 2021
  • expects to generate more revenue growth beginning in Q4 2021from the production of soft chews and other confectionery products with the specialized equipment in the Winnipeg EIC facility. 

Adjusted Gross Margins

The company:

  • increased the yield per plant in Q2 2021 which resulted in a lower average cost of cultivation per gram and when that inventory is sold, starting in Q3 2021, it will positively impact Q3 2021 adjusted gross margins
  • identified the following opportunities which it believes have the potential to further improve adjusted gross margins over time:
    • economies of scale and efficiencies as it continues to scale up cultivation.
    • increased sales from the launch of new higher-margin dried flower strains under the Edison and Indi brands 
    • increased higher-margin international sales once the Company resumes shipments to Canndoc which is currently expected in Q4 2021 contingent upon regulatory approval from Health Canada, including obtaining an export permit, and the availability of the desired product mix
    • increased higher-margin multi-pack pre-rolls and 1g vape cartridges
  • continues to invest in automation to drive cost efficiencies and reduce dependence on manual labor resulting in a number of cost reduction opportunities that have been identified for implementation starting in Q4 2021
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