- Net revenue growth due to first shipments of adult-use
recreational product during the period
- Consists of gross revenue of $14.4
million less excise taxes and returns of $2.0 million
- Adjusted Gross Margin (a non-IFRS measure)1 equal
to $8.8 million up from $1.6 million in prior quarter
- Cash cost of cultivation (a non-IFRS measure)1
equal to $0.56/dried flower
equivalent gram ($0.74 "all-in"
including non-cash costs) down from $0.62 ($0.83
"all-in") in the prior quarter
MONCTON, NB, Jan. 28, 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 first quarter results
for fiscal 2019. The Company's fiscal first quarter encompasses
operations up to and including November 30,
2018 and as a result, includes the impact on revenue of
adult-use recreational cannabis for part of the quarter, which was
legalized on October 17, 2018.
"The first quarter of 2019 is just the start of what we expect
to be a year of tremendous growth," said Greg Engel, the Company's Chief Executive
Officer. "We've always believed the Moncton Campus would be a
competitive advantage for us being able to produce high-quality
indoor-grown product at low cash cost of cultivation. Our
first quarter results confirmed that as we reported an adjusted
gross margin of 71%."
The Company's net revenue for the quarter was limited by
post-harvest (extraction, packaging, excising and labelling)
capabilities which it aggressively looks to augment and gain
greater efficiencies on.
"While we continue to work hard to take advantage of our
enviable inventory build to drive increased sales we are already
well underway preparing for the derivative and edibles launch
during the fall of 2019," remarked Greg.
Note: financial figures relating to prior periods 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.
Select Highlights for the First Quarter of Fiscal
2019
- The Company is proud to report record net sales from continuing
operations for the three months ended November 30, 2018 (Q1'2019) of $12.4 million, up 419% from $2.4 million in Q1'2018, and up 287% from
$3.2 million in Q4'2018.
- Gross margin increased to $51.7
million in Q1'2019 from $1.3
million in Q1'2018 and $32.5
million in Q4'2018. Excluding fair value adjustments on
biological assets ("adjusted gross margin") these figures would be
$8.8 million, $0.6 million, and $1.6
million, respectively.
- Gross margin percentage, excluding fair value adjustments on
biological assets, increased to a record 71% during Q1'19 compared
to 25% in the prior year comparative quarter and 50% in
Q4'2018.
- Reported net income from continuing operations was $29.5 million, or $0.195 per share on a diluted basis, for Q1'2019,
up from a net loss of $(1.2) million,
or $(0.012) per share on a diluted
basis, in Q1'2018, and net income of $18.0
million, or $0.152 per share
on a diluted basis, in Q4'2018.
- Free cash flow, a non-IFRS financial measure1
defined by the Company as net income before income tax,
depreciation, share-based compensation, and the fair value
adjustment to biological assets and inventory, was positive for the
first time at $2.9 million for
Q1'2019 versus $(0.7) million for the
prior year comparative quarter and $(3.6)
million for Q4'2018.
Outlook
- Fiscal 2019 sales will continue to be dominated by adult-use
recreational revenue and Q2'19 will represent the first full
quarter of adult-use recreational sales for the Company.
- The Company is almost two months into Q2 and expects net
revenue for the quarter to be at least twice that of Q1 but reminds
investors that actual net revenue sales may deviate materially from
forecasts.2
- The Company reported inventories of $91.4 million up from $45.0 million at year-end August 31, 2018. Organigram continues to build
inventories as it continues to ramp up its packaging, labelling,
extraction and excise stamping capabilities.
- The Company is also actively looking at outsourcing part of its
"available for extraction" inventory balance as it represented
approximately $38.0 of the
$91.4 million inventory balance at
quarter-end.
- The budget for Phase 4 of the Moncton Campus expansion has
increased from the original $110
estimate to $120 to $125 million due to increased cost of steel,
timing of winter construction, and expedited timelines. Phase 4A is
expected to come online in April 2019
with 31 grow rooms, 4B in
August 2019 with 32 grow rooms, and
4C in the Fall of 2019 with 29 grow rooms bringing the Company's
target production capacity to 62,000 kg/yr, 89,000 kg/yr, and
113,000 kg/yr, respectively. The Company had spent approximately
$37 million on Phase 4 by the end of
Q1'19.3
Operational Highlights (includes events after
quarter-end)
Sales and Marketing
- Q1'2019 was the strongest sales quarter for Organigram yet.
With the launch of the adult-use recreational market coupled with
ongoing medical sales, the Company not only experienced its highest
sales quarter of all time, it also surpassed in a single quarter
what it has historically done in an entire year of sales on the
medical side.
- The Company is currently focused on becoming an official
supplier in the province of Quebec
which, if completed, would secure distribution for Organigram in
all 10 provinces.
- The Company continues to build its sales infrastructure with a
high-quality sales team including field sales representatives and
sales management to help to work with retailers and educate staff
at the retailer level on Organigram's various brands.
- Looking forward, the Company will continue to expand production
capacity and to make preparations for the introduction of a range
of derivative based products, including edibles and vaporizable
products.
Other Milestones and Strategic Initiatives
- Investment in Hyasynth – on September
13, 2018 the Company entered into a strategic investment by
way of convertible secured debentures of Hyasynth Biologicals Inc.,
a biotech company based in Montreal and leader in the field of
cannabinoid science and biosynthesis. The initial investment of
$5 million can increase up to
$10 million upon achievement by
Hyasynth of certain funding milestones. Please refer to the press
release dated September 13, 2018 for
further details on this transaction.
- Investment in Eviana – on October 2,
2018 the Company completed a $5
million private placement senior unsecured convertible
debenture investment in Eviana Health Corporation, a CSE listed
company with hemp operations in Serbia. Organigram also entered
into an offtake agreement with Eviana, whereby Organigram has the
right, but not the obligation, to purchase up to and including 25%
of Eviana's annual CBD production for a period of five years from
when it is first made commercially available by Eviana at 95% of
the agreed raw CBD oil wholesale market price. Please refer to the
press release dated October 2, 2018
for further details on this transaction.
- Investment in Alpha-Cannabis Germany - on October 17, 2018 the Company announced a
definitive agreement whereby the Company makes a €1.625 million
(approximately $2.44 million CAD)
investment in Alpha-Cannabis Germany paid in cash with another
€875,000 (approximately $1.35 million
CAD) payable in the form of Organigram shares on the achievement of
certain milestones. Please refer to the press release dated
October 17, 2018 for further details
on this transaction.
- On January 21, 2019, the Company
entered into an agreement with 1812 Hemp, a New Brunswick based industrial hemp research
company to secure supply and support research and development on
the genetic improvement of hemp through traditional plant breeding
methods. As part of the deal Organigram has access to approximately
6,000 kg of dried hemp flower harvested in the fall of 2018, which
it intends to purchase and begin to send for extraction within the
first calendar quarter of 2019.
Financial Highlights
The following results include sales to the adult-use
recreational market, which began in September to meet demand for
the launch on October 17, 2018.
Summary of Financial Results
|
|
|
|
|
|
|
|
|
(in CAD $000s except
for per share amounts)
|
|
|
|
|
|
|
%
Change
|
%
Change
|
|
Q1-2019
|
|
Q4-2018
|
|
Q1-2018
|
vs
Q4-2018
|
vs
Q1-2018
|
|
|
|
|
|
|
|
|
|
Gross
revenue
|
$
|
14,484
|
$
|
3,205
|
$
|
2,400
|
352%
|
504%
|
Sales recovery
(returns)
|
|
(5)
|
|
8
|
|
(1)
|
-163%
|
n/m
|
Excise
taxes
|
|
(2,040)
|
|
-
|
|
-
|
n/m
|
n/m
|
Net
revenue
|
|
12,439
|
|
3,213
|
|
2,399
|
287%
|
419%
|
Cost of sales (incl.
indirect production)
|
|
3,618
|
|
1,594
|
|
1,804
|
167%
|
101%
|
Gross margin
(excluding FV adjustment)1
|
|
8,821
|
|
1,619
|
|
595
|
375%
|
1,383%
|
FV adjust on bio
assets and inventories
|
|
42,925
|
|
30,846
|
|
722
|
39%
|
5,845%
|
Gross
margin
|
|
51,746
|
|
32,465
|
|
1,317
|
58%
|
3,829%
|
|
|
|
|
|
|
|
|
|
General and
administrative
|
|
2,171
|
|
1,601
|
|
921
|
36%
|
136%
|
Sales and
marketing
|
|
2,357
|
|
2,088
|
|
923
|
1%
|
155%
|
Share-based
compensation (non-cash)
|
|
972
|
|
1,172
|
|
746
|
-17%
|
30%
|
Total
expenses
|
|
5,500
|
|
4,861
|
|
2,590
|
8%
|
112%
|
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations
|
|
46,246
|
|
27,604
|
|
(1,273)
|
68%
|
n/m
|
|
|
|
|
|
|
|
|
|
Net financing costs
and investment (income)
|
|
3,944
|
|
3,860
|
|
(44)
|
2%
|
n/m
|
Income tax
expense
|
|
12,785
|
|
5,653
|
|
-
|
126%
|
n/m
|
Net income (loss)
from continuing operations
|
|
29,517
|
|
18,091
|
|
(1,229)
|
63%
|
n/m
|
Loss from
discontinued operations
|
|
(38)
|
|
(74)
|
|
(173)
|
-49%
|
-78%
|
Net income (loss)
and comprehensive income
|
$
|
29,479
|
$
|
18,017
|
$
|
(1,402)
|
64%
|
n/m
|
|
|
|
|
|
|
|
|
|
Net income (loss)
from continuing operations per common share, basic
|
$
|
0.231
|
$
|
0.157
|
$
|
(0.012)
|
47%
|
n/m
|
Net income (loss)
from continuing operations per common share, diluted
|
$
|
0.195
|
$
|
0.152
|
$
|
(0.012)
|
29%
|
n/m
|
Net income (loss)
from discontinued operations per common share, basic
|
$
|
(0.000)
|
$
|
(0.001)
|
$
|
(0.002)
|
-70%
|
n/m
|
Net income (loss)
from discontinued operations per common share, diluted
|
$
|
(0.000)
|
$
|
(0.001)
|
$
|
(0.002)
|
-70%
|
n/m
|
Selected Balance Sheet Highlights and Financial
Position
|
|
|
|
(in $000 except for
per share amounts)
|
November
30,
|
August 31,
|
%
|
2018
|
2018
|
Change
|
|
|
|
|
Cash and short-term
investments
|
$
95,949
|
$
130,064
|
-26%
|
Biological
assets
|
26,345
|
19,858
|
33%
|
Inventories
|
91,441
|
44,969
|
103%
|
Other current
assets
|
15,785
|
8,323
|
90%
|
Property, plant and
equipment
|
124,838
|
98,639
|
27%
|
Other non-current
assets
|
14,270
|
714
|
1,899%
|
Total
assets
|
$
368,628
|
$
302,567
|
22%
|
|
|
|
|
Current
liabilities
|
$
15,798
|
$
11,250
|
40%
|
Non-current
liabilities
|
119,862
|
106,723
|
12%
|
Total
liabilities
|
135,660
|
117,973
|
15%
|
|
|
|
|
Shareholders'
equity
|
232,968
|
184,594
|
26%
|
Total Liabilities
and Shareholders' Equity
|
$
368,628
|
$
302,567
|
22%
|
Capital Structure
|
Nov-30-2018
|
Aug-31-2018
|
(in CAD
$000s)
|
|
|
Long-term
debt
|
$
|
12,624
|
$
|
2,877
|
Convertible
debentures carrying value
|
85,672
|
95,866
|
(with face value in
parentheses)
|
(98,073)
|
(110,329)
|
Shareholders'
equity
|
229,089
|
184,594
|
Total long-term debt
and shareholders' equity
|
$
|
327,385
|
$
|
283,337
|
|
|
|
(in 000s)
|
|
|
Outstanding
shares
|
129,551
|
125,208
|
Options
|
7,546
|
7,710
|
Warrants
|
7,197
|
8,087
|
Restricted share
units
|
145
|
145
|
Convertible
debentures (if converted at $5.42)
|
18,095
|
20,845
|
Fully-diluted
shares
|
162,534
|
161,995
|
During the three months ended November
30, 2018, approximately $14.9
million of face value of debentures were converted into
common shares at a conversion price of $5.42, leaving approximately $98.1 million of the face value of debentures
outstanding.
Outstanding share count as at January 25,
2019 is as follows:
(in 000s)
|
|
Outstanding
shares
|
129,631
|
Options
|
8,429
|
Warrants
|
7,197
|
Restricted share
units
|
940
|
Convertible
debentures (if converted at $5.42)
|
18,095
|
Fully-diluted
shares
|
164,292
|
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 legal 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 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.
1The
financial information in this news release contains certain
financial performance measures that are not defined by and do not
have any standardized meaning under IFRS and are used by management
to assess the financial and operational performance of the Company.
These include but are not limited to target production capacity;
cost of cultivation per dried flower harvested (both "cash" and
"all-in"); Adjusted gross margin (excluding fair value
adjustments); Adjusted net income; Adjusted EBITDA and Free cash
flow. 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. These non-IFRS financial performance measures
are defined in the places in which they appear. 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.
|
|
This news release
contains forward-looking information which involves known and
unknown risks, uncertainties and other factors that may cause
actual events to differ materially from current
expectations.
|
|
2This news
release also contains forward looking financial information related
to expected net revenues for Q2 of Fiscal 2019. This is based
on management's review of fulfilled and existing purchase
orders. Management is providing this information to give
readers a sense of the Company's near-term performance in a nascent
sales environment and using this information for any other purpose
may not be appropriate.
|
|
3The
forward-looking estimates of additional production capacity and
costs related thereto are based on a number of material factors and
assumptions including that: the facility size will be as estimated
with the same amount of cultivation space being used per grow room
for cultivation as in Phases 2 and 3; the ratio of dried flower
cultivated per canopy square foot of grow room will be consistent
with historical output in the Company's existing facilities; all
grow rooms designated as production rooms will be utilized for
their intended purposes (from time to time rooms may be used for
other purposes, such as for storage); construction of the
facilities will be on time in accordance with the estimates set out
above and ready for final inspection by Health Canada in time to
meet the target onboarding dates; and costs of construction and its
various inputs will remain stable.
|
|
Important factors -
including the receipt of any required regulatory approvals, the
results of financing efforts, facility and technological risks,
agricultural risks, supply risks, construction risks, financial
risks, facility and technological risks, ability to maintain any
required licenses or certifications, changes in law and regulation,
industry competition, execution risks related to fulfilment of
purchase orders, third party transport risks, crop yields, expected
number of users of medical and adult-use recreational cannabis -
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 (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 press 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.
|
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