Organigram Holdings Inc. (NASDAQ: OGI) (TSX: OGI), the parent company of Organigram Inc. (the "Company" or "Organigram"), a leading licensed producer of cannabis, is pleased to announce its results for the fourth quarter and fiscal year ended August 31, 2019 ("Q4" or "Q4 2019").
(in 000s) |
Q4-2019 |
Q4-2018 |
% Change |
Fiscal 2019 |
Fiscal 2018 |
% Change |
Select Key Financial Metrics |
|
|
|
|
|
|
Gross revenue |
19,235 |
3,190 |
503% |
97,547 |
12,429 |
685% |
Excise taxes |
(2,945) |
- |
n/m |
(17,134) |
- |
n/m |
Net revenue |
16,290 |
3,190 |
411% |
80,413 |
12,429 |
547% |
Cost of sales (incl. indirect production) |
15,543 |
1,586 |
880% |
42,521 |
6,814 |
524% |
Gross Margin (GM) before fair value changes to biological assets & inventories |
747 |
1,604 |
(53%) |
37,892 |
5,615 |
575% |
Fair value changes to biological assets & inventories |
(11,806) |
30,846 |
n/m |
10,577 |
46,018 |
(77)% |
Gross margin |
(11,059) |
32,450 |
n/m |
48,469 |
51,633 |
(6)% |
Sales & marketing and general & administrative (SG&A) |
13,883 |
3,567 |
289% |
33,218 |
10,989 |
202% |
Net income (loss) from continuing ops |
(22,456) |
18,091 |
n/m |
(9,504) |
22,124 |
n/m |
|
|
|
|
|
|
|
GM before fair value changes to biological assets & inventories as % of net revenue |
5% |
50% |
(46)% |
47% |
45% |
2% |
SG&A as a % of net revenue |
85% |
112% |
(27)% |
41% |
88% |
(47)% |
|
|
|
|
|
|
|
Adjusted EBITDA4 |
(7,907) |
292 |
n/m |
19,900 |
(1,003) |
n/m |
Adjusted EBITDA as a % of net revenue4 |
n/m |
9% |
n/m |
25% |
n/m |
n/m |
Select Balance Sheet Metrics (in 000s) |
August 31, 2019 |
August 31, 2018 |
% Change |
Cash & Short-Term Investments |
47,935 |
130,064 |
(63)% |
Biological Assets & Inventories |
113,796 |
64,827 |
76% |
Other Current Assets |
34,550 |
8,323 |
315% |
|
|
|
|
A/P and Other Current Liabilities |
43,864 |
11,250 |
290% |
|
|
|
|
Working Capital |
152,417 |
191,964 |
(21)% |
|
|
|
|
Property, Plant & Equipment |
219,046 |
98,639 |
122% |
|
|
|
|
Long-Term Debt |
46,067 |
98,473 |
(53)% |
|
|
|
|
Total Assets |
428,525 |
302,567 |
42% |
Total Liabilities |
101,519 |
117,973 |
(14)% |
Shareholders' Equity |
327,006 |
184,594 |
77% |
"Our 2019 results reflected a successful year for Organigram. Not only did we report strong top-line growth and establish an enviable national market share position in Canada, we generated positive adjusted EBITDA - one of the key measures we use to evaluate our performance," said Greg Engel, Chief Executive Officer. "In 2019, we increased staffing and capacity to meet forecasted demand and maintain inventory in the market. Industry structural issues have challenged supply and demand dynamics in the short-term but we believe the growth opportunity in the Canadian cannabis market remains intact."
"As we were one of the first success stories to supply the market in the early days of legalization, we have had visibility for some time now on ultimate sell through to consumers and have adapted our production mix and product strategy to align with our understanding of emerging consumer preferences. We have great conviction in our strategy and ability to onboard the new retail store openings and to launch a portfolio of edible and derivative products appealing to adult consumers. With our state-of-the-art indoor facility and leading cultivation practices, strong brand equity, in-house expertise and strategic partnerships and a focus on cost management, we are well-positioned for the long term."
Key Financial Results for the Fourth Quarter and Fiscal 2019
Key Commentary on Q4 2019 Results vs Q3 2019
Adult-Use Recreational Launch 2.0 ("Rec 2.0") ? Derivative and Edible Products
Update on Phase 4C Expansion
Phase 5 Under Refurbishment
Outlook
Liquidity and Capital
Capital Structure
(in $000s except for share amounts) |
August 31, 2019 |
August 31, 2018 |
||
|
|
|
||
Current and long-term debt (excluding convert debs) |
$ |
49,576 |
$ |
3,298 |
Convertible debentures |
|
- |
|
95,866 |
Shareholders' equity |
|
327,006 |
|
184,594 |
Total debt and shareholders' equity |
$ |
376,582 |
$ |
283,758 |
Outstanding common shares |
|
156,196 |
|
125,208 |
Options |
|
8,833 |
|
7,710 |
Warrants |
|
- |
|
8,087 |
Restricted share units |
|
842 |
|
145 |
Convertible debentures (converted at $5.42) |
|
- |
|
20,845 |
Total fully-diluted shares |
|
165,872 |
|
161,995 |
Outstanding basic and fully diluted share count as at November 23, 2019 is as follows:
(in 000s) |
|
Outstanding common shares Options Restricted share units Performance share units |
156,243 9,091 1,061 142 |
Total fully-diluted shares |
166,537 |
Fourth Quarter and 2019 Fiscal Year Conference Call
The Company is scheduled to report its fourth quarter and full year earnings results for its fiscal year ended August 31, 2019 on Monday, November 25, 2019 before market open. The Company will host a conference call to discuss its results:
Date: |
November 25, 2019 |
Time: |
8:00 a.m. Eastern Time |
Toll Free (North America) Dial-In Number: |
1-866-211-4093 |
International Dial-In Number: |
647-689-6727 |
Webcast: https://event.on24.com/wcc/r/2081952/4BA98522DEFFE3F5758620EC23384882
A replay of the webcast will be available within 24 hours after the conclusion of the call at https://www.organigram.ca/investors and will be archived for a period of 90 days following the call.
Non-IFRS Financial Measures
This news release refers to certain financial performance measures that are not defined by and do not have a standardized meaning under International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board. These non-IFRS financial performance measures are defined below. Non-IFRS financial measures are used by management to assess the financial and operational performance of the Company. 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. 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.
Adjusted EBITDA
This is a non-IFRS measure and the Company calculates adjusted EBITDA from continuing operations as net income (earnings) before: interest expense, net of investment income; income tax; depreciation, amortization, impairment, and gain (loss) on disposal of PP&E (per the statement of cash flows); share-based compensation (per the statement of cash flows); share of loss and impairment loss from investments in associates; unrealized loss (gain) on changes in fair value of contingent consideration; expenditures incurred in connection with the NASDAQ cross-listing; and the fair value adjustment to biological assets and inventory. Management believes the exclusion of the fair value adjustment is an alternative representation of performance. The fair value adjustment is a non-cash gain (loss) and is based on the valuation of biological assets and inventory using a fair value less cost to sell model. The most directly comparable measure to adjusted EBITDA (excluding fair value adjustment to biological assets and inventory) calculated in accordance with IFRS is net income (loss) from continuing operations.
(in 000s) |
Q4-2019 |
Q4-2018 |
Fiscal 2019 |
Fiscal 2018 |
||||
Adjusted EBITDA |
|
|
|
|
||||
Net income (loss) from continuing operations |
$ |
(22,456) |
$ |
18,091 |
$ |
(9,505) |
$ |
22,123 |
Add: |
|
|
|
|||||
Interest expense (investment income) from continuing operations |
|
616 |
|
3,861 |
|
9,007 |
|
8,639 |
Income tax expense (recovery) |
|
(6,289) |
|
5,653 |
|
3,628 |
|
5,653 |
Depreciation, amortization, impairment, and gain (loss) on disposal of PP&E from continuing operations (per statement of cash flows) |
|
3,955 |
|
1,556 |
|
9,648 |
|
3,567 |
Less/(Add): fair value adjustment to biological assets and net realizable value adjustment to inventory |
|
(11,806) |
|
30,846 |
|
10,577 |
|
46,018 |
Adjusted EBITDA as Previously Reported |
$ |
(12,368) |
$ |
(1,685) |
$ |
2,201 |
$ |
(6,036) |
Add: |
|
|
|
|||||
Share-based compensation (per statement of cash flows) |
|
4,036 |
|
1,977 |
|
14,894 |
|
5,033 |
Share of loss and impairment loss from
|
|
1,289 |
|
- |
|
2,211 |
|
- |
Unrealized loss on changes in fair value
|
|
(864) |
|
- |
|
145 |
|
- |
Nasdaq cross-listing expenditures |
|
- |
|
- |
|
449 |
|
- |
Adjusted EBITDA Revised |
$ |
(7,907) |
$ |
292 |
$ |
19,900 |
$ |
(1,003) |
Divided by: net revenue from continuing operations |
|
16,290 |
|
3,213 |
|
80,413 |
|
12,429 |
Adjusted EBITDA margin % |
|
n/m |
|
9% |
|
25% |
|
n/m |
About Organigram Holdings Inc.
Organigram Holdings Inc. is a NASDAQ Global Select Market and a Toronto Stock Exchange ("TSX") 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 high-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 adult use recreational cannabis brands including The Edison Cannabis Company, Ankr Organics and Trailblazer. Organigram's primary facility is located in Moncton, New Brunswick and the Company is regulated by Health Canada under the Cannabis Act (Canada) and the Cannabis Regulations (Canada).
This news release contains forward-looking information. Forward-looking information, in general, can be identified by the use of forward-looking terminology such as "outlook", "objective", "may", "will", "could", "would", "might", "expect", "intend", "estimate", "anticipate", "believe", "plan", "continue", "budget", "schedule" or "forecast" or similar expressions suggesting future outcomes or events. They include, but are not limited to, statements with respect to expectations, projections or other characterizations of future events or circumstances, and the Company's objectives, goals, strategies, beliefs, intentions, plans, estimates, forecasts, projections and outlook, including statements relating to the Company's plans and objectives including around timing for launch of new product forms, or estimates or predictions of actions of customers, suppliers, partners, distributors, competitors or regulatory authorities ;statements regarding the market future of the Canadian cannabis market and, statements regarding the Company's future economic performance. These statements are not historical facts but instead represent management beliefs regarding future events, many of which, by their nature are inherently uncertain and beyond management control. Forward-looking information has been based on the Company's current expectations about future events.
Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual events to differ materially from current expectations. Important factors - including the receipt of regulatory approvals or consents and conditions imposed upon and the timing thereof, ability to meet regulatory criteria which may be subject to change, change in regulation including restrictions on sale of new product forms, timing to receive any required testing results and certifications, results of final testing of new products being inconsistent with preliminary expectations, changes in governmental plans including related to methods of distribution and timing and launch of retail stores, timing and nature of sales and product returns, customer buying patters and consumer preferences not being as predicated given this is a new and emerging market, material weaknesses identified in the Company's internal controls over financial reporting, the completion of regulatory processes and registrations including for new product forms, market demand and acceptance of new product forms, unforeseen construction or delivery delays including of equipment, increases to expected costs, competitive and industry conditions, customer buying patterns and crop yields - 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 under the Company's issuer profile on the Canadian Securities Administrators' System for Electronic Document Analysis and Retrieval ("SEDAR") at www.sedar.com and reports and other information filed with or furnished to the United States Securities and Exchange Commission ("SEC") and available on the SEC's Electronic Document Gathering and Retrieval System ("EDGAR") at www.sec.gov including the Company's most recent MD&A and AIF available from time to time. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this news 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.
1 Adjusted EBITDA is a non-IFRS financial measure not defined by and does not have any standardized meaning under IFRS; please refer to page 10 of this press release for definitions and a reconciliation to IFRS.
2 Based on the Company's analysis of available data including, but not limited to, market share from select provinces and various public sources
3 Sales and marketing and general and administrative expenses (excludes non-cash share-based compensation and impairment loss)
4 Adjusted EBITDA is a non-IFRS financial measure not defined by and does not have any standardized meaning under IFRS; please refer to page 10 of this press release for definitions and a reconciliation to IFRS.
5 Adjusted EBITDA is a non-IFRS financial measure not defined by and does not have any standardized meaning under IFRS; please refer to page 10 of this press release for definitions and a reconciliation to IFRS.
6 Cash and "all-in" costs of cultivation per gram of dried flower harvested are non-IFRS measures that are not defined by and do not have any standardized meaning under IFRS. "Cost of cultivation" per gram harvested includes "cash" costs such as direct labour, direct materials and manufacturing overhead (e.g. maintenance) as well as "non-cash" expenses such as employee share-based compensation for cultivation employees and depreciation related to buildings and equipment of the production facility. Cost of cultivation does not include packaging costs, which are added to arrive at the cost for inventory, nor distribution costs (shipping), both of which are included in the cost of sales (please note that the Company previously included shipping expense in "sales and marketing" in the statement of operations but revised this presentation in Q1 Fiscal 2019). Thus, readers are cautioned against comparing cost of cultivation per gram harvested with cost of sales for the same period(s) for at least two reasons: (1) Cost of sales includes packaging costs and distribution (shipping) costs which "Cost of cultivation" does not, and (2) there is a delay between when product is harvested and when it is sold. Sometimes that delay is one or two quarters (and longer with extraction material). Cost of cultivation also does not include indirect production costs, which are expensed directly against gross margin.
7 Adjusted EBITDA is a non-IFRS financial measure not defined by and does not have any standardized meaning under IFRS; please refer to page 10 of this news release for definitions and a reconciliation to IFRS amounts.
8 Target production capacity once licensed and fully operational; several factors can cause actual capacity and cost to differ from estimates. See "Risks and Uncertainties" at the end of this release.
9 Adjusted EBITDA is a non-IFRS financial measure not defined by and does not have any standardized meaning under IFRS; please refer to page 10 of this press release for definitions and a reconciliation to IFRS.
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