Organigram Reports A Net Profit In Q1

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Organigram Holdings Inc. (Nasdaq: OGI) (TSX: OGI), a licensed producer of cannabis and a constituent in the Canadian Cannabis LP Index, announced its results for Q1 of FY2023 ended November 30th, 2022, yesterday, as follows:

Q1 Financial Highlights

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

  • Net Revenue: decreased 4.8% to $43.3M
  • Adj. Gross Margin $: increased 23.1% to $12.8M
    • as a % on Net Revenue: increased to 30% from 23% 
  • Sales, General & Admin.: increased 12.2% to $15.7M
  • Adj. EBITDA: increased 75.0% to $5.6M 
  • Net Profit (Loss): increased to $5.3M from $(6.1)M 

Management Commentary

Beena Goldenberg, Chief Executive Officer, said:

  •  “...In the quarter, we achieved a record harvest and the lowest cost of cultivation in the history of the Company. We maintained our market position and are confident our disciplined approach to operations and innovation will drive further success in the rest of the year.”

Derrick West, Chief Financial Officer, said:

  • “In Q1 Fiscal 2023, we achieved the highest adjusted gross margin in the Company's history at $13 million, continued the trend of positive Adjusted EBITDA and delivered positive net income and cash flow.” added Derrick West, Chief Financial Officer. “With...continuous improvements in automation and cultivation, we have built a long-term platform to serve increasing market demands and generate value.”

Fiscal 2023 Outlook

Net Revenue

Organigram currently expects Fiscal 2023 revenue to be higher than that of Fiscal 2022...largely due to:

  • ongoing sales momentum,
  • stronger forecasted market growth,
  • the Company's expanded product line in multiple segments,
  • greater capacity to meet demand at the Moncton Campus,
  • increased throughput at the Winnipeg facility, 
  • contributions from the Lac-Supérieur facility,
  • anticipated continuation of shipments to Canndoc in Israel and Cannatrek and Medcan in Australia 

Adjusted gross margins

Organigram expects it will be able to achieve similar adjusted gross margin rates throughout Fiscal 2023 with further cost-saving initiatives being put into place to help offset anticipated price compression and with the potential to further improve adjusted gross margins over time based on the following sales mix opportunities:

  • International sales, which have historically attracted higher margins and are expected to represent a greater proportion of the Company’s revenue;
  • Sales from the Holy Mountain brand, which will include several product categories, in a number of higher margin formats with national distribution on most SKUs
  • The launch of new products across different derivative categories with expected attractive long-term margin profiles; and
  • The larger volume of higher margin sales expected from the Lac-Supérieur Facility, achievable from the increased capacity post-construction.

Adjusted EBITDA

  • The Company expects to maintain positive Adjusted EBITDA throughout Fiscal 2023.

Cash flow

  • The Company has a $29 million Capex budget for Fiscal 2023 and if completed as planned during Fiscal 2023, the Company expects to generate positive free cash flows by the end of calendar 2023. That being said, while the Company expects to continue to generate positive Adjusted EBITDA, periods when the Company achieves significant increases to sales will result in increases to receivables and this will negatively impact cash from operating activities. 

Stock Performance

Organigram's stock price was unchanged during Q1 (September, October, November) but has declined approximately 2% since then.

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