OrganiGram Holdings Inc (OGI) reported a robust second quarter for fiscal year 2025, highlighted by a 74% increase in net revenue year-over-year to $65.6 million. The company also achieved a significant turnaround in profitability, with net income reaching $42.5 million compared to a net loss of $27.1 million in the same period last year. Despite the earnings call providing no specific EPS or revenue forecasts, the market reacted positively, with premarket trading showing an 11.8% rise in stock price to $1.3192. According to InvestingPro analysis, OGI currently appears undervalued, with a "GOOD" overall financial health score of 2.89 out of 5.
Want deeper insights? InvestingPro subscribers have access to over 10 additional exclusive ProTips and comprehensive financial metrics for OGI, helping investors make more informed decisions.
Key Takeaways
- Record quarter with gross sales up 79% to over $100 million.
- Net income improved to $42.5 million from a loss of $27.1 million last year.
- Stock price surged 11.8% in premarket trading.
- Launched new product lines and expanded production capabilities.
- Strong market share in vapes and pre-rolls at 21.7%.
Company Performance
OrganiGram’s performance in Q2 2025 marked a significant improvement over the previous year, driven by strong sales growth and operational efficiencies. The company maintained its leadership in the Canadian cannabis market, particularly in the vapes and pre-rolls categories, which are the strongest segments in the industry. OrganiGram’s strategic initiatives, including the expansion of its beverage production and the integration of the Motif acquisition, have positioned it well against competitors in a growing market.
Financial Highlights
- Net Revenue: $65.6 million, up 74% year-over-year.
- Gross Sales: Increased 79% to over $100 million.
- Adjusted EBITDA: $4.9 million, compared to -$1 million last year.
- Cash Position: $83.4 million, with negligible debt.
Outlook & Guidance
OrganiGram is targeting a 40% gross margin by fiscal 2026 and expects to be cash flow positive for the full year. The company anticipates stronger international sales in the latter half of the year and is aiming for $5 million in synergies from the Motif acquisition, with an increase to $15 million next year. The development of fast nanoemulsion technology and expansion in the US market are expected to drive future growth. InvestingPro data shows analysts maintain a strong buy consensus with a significant upside potential, though they don’t expect profitability this fiscal year, with an EPS forecast of -$0.18 for FY2025.
Executive Commentary
"We’re very pleased to report a record-breaking quarter by revenue," said Bina Goldenberg, CEO. CFO Greg Guyatt added, "We expect to see stronger EBITDA margin improve as we move through the year." These statements underscore the company’s confidence in its strategic direction and financial health.
Risks and Challenges
- Market Saturation: The Canadian cannabis market is maturing, which could limit growth.
- Regulatory Changes: Potential changes in cannabis regulations could impact operations.
- Competition: Intense competition in the cannabis industry could pressure margins.
- Supply Chain Disruptions: Any disruptions could affect production and sales.
- Economic Conditions: Broader economic challenges could impact consumer spending on cannabis products.
OrganiGram’s Q2 2025 performance reflects its strategic focus on innovation and market leadership. As the company continues to expand its product offerings and international reach, it remains well-positioned to capitalize on growth opportunities in the evolving cannabis industry.
Full transcript - OrganiGram Holdings Inc (OGI) Q2 2025:
Krista, Conference Operator: Good morning. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the Organigram Global Second Second Quarter Fiscal twenty twenty five Earnings Conference Call. After the speakers’ remarks, there will be a question and answer session. Thank you.
Max Schwartz, you may begin your conference.
Max Schwartz, Unspecified, Organigram Global: Thank you very much, and good morning, everyone. Thanks for joining us today. As a reminder, this conference call is being recorded, and the recording will be available on Organigram’s website twenty four hours after today’s call. Listeners should be aware that today’s call will include estimates and other forward looking information from which the company’s actual results could differ. Please review the cautionary language in our press release dated 05/12/2025 on various factors, assumptions and risks that could cause our actual results to differ.
Further, reference will be made to certain non IFRS measures during this call, including adjusted EBITDA, adjusted gross margin and adjusted gross margin percentage. These measures do not have any standardized meaning under IFRS and are intended to provide additional information and as such should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Our approach to calculating these measures may differ from other issuers, so these measures may not be directly comparable. Please see today’s earnings report for more information about these measures. Listeners should be aware that the company relies on reputable third party providers in making certain statements relating to market share data.
Unless otherwise indicated, all references to market data are sourced from Hifyre in combination with data from WeedCrawler, provincial boards, retailers and our internal sales figures. Today, we’ll be hearing from key members of our senior leadership team, beginning with Bina Goldenberg, Chief Executive Officer, who will provide opening remarks and commentary, followed by Greg Guyatt, Chief Financial Officer, who will review our financial results for Q2 fiscal twenty twenty five. With that, I will now introduce Amdina Goldenberg, Chief Executive Officer of Organigram Global, Inc. Please go ahead, Ms. Goldenberg.
Bina Goldenberg, Chief Executive Officer, Organigram Global: Good morning, everyone, and thank you for joining us today for our Q2 fiscal twenty twenty five earnings call. We’re very pleased to report a record breaking quarter by revenue as well as some very encouraging operational results, which we anticipate will continue to improve as seasonal sales pick up in q three and q four. This marks our first earnings call since rebranding to Organigram Global, a name that better reflects our evolution into a diversified international cannabis leader. The refreshed brand identity aligns with our position as a market leader in Canada and underscores our active expansion across Europe, Australia, and most recently, The United States. It’s also the first quarter where the full impact of our Motif acquisition is reflected in our financial results.
Now let’s start with a look at the Canadian market and how we’re navigating the current landscape. In q two, Canada’s cannabis market grew 4% year over year with the strongest momentum in vapes and pre rolls, two categories that together make up about half the market. We’re especially well positioned here. By the end of the quarter, Organigram was the number one LP by market share in both, including a leading 21.7% share in vapes. When you add flower to the mix, these three categories, flower, vapes, pre rolls, represents around 85% of the total market, and we’ve built a strong dominant presence across all three.
To put today’s market structure in perspective, the top three LPs collectively hold just 27% of total market share, showing how fragmented and competitive many categories still are. But in categories like milk, flour, gummy, hash, infused pre rolls, vapes, The top three control between 45 to 70% of the market. These are the segments where scale, production capability, and execution matter more, contributing to higher barriers and more concentration compared to flower and traditional pre rolls. While part of our competitive edge lies in our ability to win and defend share in fragmented high volume categories like flower and traditional pre rolls, our strategy also includes reinforcing leadership in segments like flavor forward milk flour, where we have over a 40% share, cash, where we have a 20% share, and gummies, where we have over 17% share. These are categories where innovation is more scalable and defensible and where we continue to outperform.
Our recent entry into beverages through the collective project acquisition is a strong example of this dual strategy in action, entering a smaller, underpenetrated category with higher barriers to entry, where we see clear opportunity to build the dominant position as the market evolves. Collective project beverages in q two represented 5.4% of the beverage market share nationally, with the majority coming from sales in Ontario. While we currently have some distribution in five other provinces, we see a path to expanding that footprint by leveraging our sales team with the goal of delivering similar sales performance as we see in Ontario. In Canada, we believe beverages have significant runway for growth. The category has matured with better tasting products and higher consumer adoption, with the category now outpacing the growth of the overall market.
We’re optimistic that improved products combined with potential future regulatory changes, like selling outside cannabis retail stores, could unlock the growth potential of the category. Importantly, the Collector Project acquisition also marked our entry into The US Hemp Derived THC beverage market. Today, our products are distributed in 10 US states and carried by major retailers like Total Wine and Top ten Liquors. The US market for hemp derived THC beverages is booming, having already surpassed $1,000,000,000 in 2024 and projected to grow to over $4,000,000,000 by 2028 according to Euromonitor International Limited. Unlike in Canada, The US regulatory framework is more flexible, allowing these products to to be distributed directly to consumers or in mainstream channels like liquor, grocery, or convenience stores.
When the product is available where consumers already shop, it seems that consumers are buying in. As they do, we have the product to meet their growing demand. In fact, a few days ago, Collective Project won recognition at the twenty twenty five High Spirits Awards, only a few short months following the launch of the brand in The US. We received the gold award for blood orange yuzu and vanilla and a platinum award for mango, pineapple, and coconut hemp derived THC beverages. Organigram will begin consolidating revenue from US beverage sales immediately, beginning to tap into the world’s largest consumer cannabis market and setting the stage for broader international growth.
Further, we plan to launch beverages with our fast nanoemulsion technology soon, which we believe will give us a competitive edge in the category. The onset, duration, and offset for beverages with fast is even quicker than it is in gummies, more closely resembling alcohol. On the topic of international growth, we achieved $6,100,000 in international sales in q two, a 177% increase from q two of last year. We anticipate the upward trend in international sales will continue as we deepen our relationships with customers abroad, particularly Sanity Group, where we’ve made a significant strategic investment to secure our continuous supply to the rapidly growing germ German market. Germany continues to represent a large growth opportunity as approximately 10% of its 80,000,000 population self report cannabis use, while only point 5% are registered medical cannabis patients.
Mature medical jurisdictions experience two to 3% registration rate, so we believe there’s still a lot of growth potential in the German medical market, notwithstanding any movement on the recreational side. Outside Germany, we continue to supply cannabis to our customers in The UK and Australia. We’re also excited to share that we expect to launch branded vape products in Australia before the end of the calendar year. BoxHawk, which has grown into a hundred and $50,000,000 retail sales brand domestically, is poised to become a meaningful player on the international stage, and we see this as an important step in expanding our branded footprint globally. Also factoring into our international growth plans is our Jupiter strategic investment pool.
In February, we closed the final tranche of the $124,600,000 strategic investment we’ve received from British American Tobacco for gross proceeds of $41,500,000 The Jupiter pool started off as an $83,000,000 pool earmarked for international m and a and strategic investment opportunities. After our first two strategic investments in open book extracts in The US and Sanity Group in Germany, Jupiter has $58,000,000 remaining. We remain active in evaluating the best deployment opportunities for this capital, prioritizing strong ROI and increasing competitive advantages that will help accelerate growth in our international business. Now moving on to Motif. We’re making great progress integrating the Motif team, their facilities, and their operations into the broader Organigram business.
All personnel are now fully under the Organigram umbrella and collaborating across both operations and administrative functions. We’ve been particularly impressed by the depth of expertise and talent the Motif team brings, and we’re already seeing the benefits of this combined strength, such as being able to close listing gaps in our combined portfolio, thanks to a stronger, unified sales force and product lineup. Operationally, we’ve moved all commercial THC extraction to the Aylmer facility. That’s helping us scale more efficiently and freeing up space and people in Moncton to focus on international flower. In March, we added additional shifts to Aymer’s hydrocarbon line, which now runs twenty four seven.
With these changes, our monthly production capacity has grown significantly. We’re also currently investing $800,000 in capital to further expand the extraction capacity, more than doubling our distillate production to 2,900 kilograms and our hydrocarbon isolate to 1,400 kilograms annually. The enhanced capabilities give us better cost control of our derivative inputs while increasing our b to b opportunities, helping us realize some of the key synergies of the Motif acquisition. While we’re very pleased with our progress and now have a view to higher synergies than previously estimated, there’s more work to be done. Some ongoing projects include the integration of our ERP system, transitioning coated pre roll production to in house, streamlining workflow to enhance end to end production efficiencies across facilities, and enhancing our London warehouse facility to allow us to distribute Moncton products through London with faster turnaround, enabling us to obtain tier one status for flow through with the OCS, as well as cut freight costs and boost on time delivery, which should also drive demand.
All in all, we’re starting to feel the momentum that this integration adds to our business, and we expect to see larger contributions and synergy realization in the back half of the year. With collective projects, we now have another business to integrate. However, this is a much smaller asset light business. Our focus with collective projects is less about integrating a large operation footprint like Motif and more on expanding the distribution of collective projects across Canada and The US. At the same time, we’re pleased to share that we will begin bringing some beverage capabilities into our Winnipeg facility.
Near the end of Q1, we committed to investing approximately $1,200,000 into a beverage manufacturing line to leverage Winnipeg into a production hub for more of our ingestible products. While we continue to rely on co manufacturing for beverages in Canada and The US, bringing some of our production in house will help us scale up our beverage expertise, experiment with novel formulations, including our fast acting soluble technology, and address incremental demand. On the topic of capital investments, in q two, we began the installation of upgraded high intensity LED lights in Haffer Moncton grow rooms, which is currently estimated to increase our flower production capacity by roughly 7,000 kilograms annually and is expected to be completed by June. This $9,000,000 investment before government subsidies are applied is part of the $16,000,000 capacity enhancing CapEx projects we outlined in q one to be phased over the next eighteen months and will allow us to meet the needs of a market tightening supply and increased international demand. The other $7,000,000 project involves leveraging our London warehouse to open up space for additional grow rooms in Moncton, which is expected to increase capacity by another 7,000 kilograms annually.
The London warehouse construction and licensing is expected to be completed by the end of the fiscal year. And once completed, we will relocate inventory from Moncton, freeing up space for the construction of nine additional grow rooms. This incremental Moncton capacity enhancement is expected to commence in early fiscal twenty twenty six. In addition to ensuring we can supply our increasing domestic and international flower demand, higher capacity means spreading more of our fixed costs over a larger revenue base. And speaking of flower, a quick update on seed based production.
This is an enterprise level innovation, which we are pioneering on a scale on a large scale to modernize cannabis production and bring it to the same level as other mature agricultural industries. Seed based harvest from f one stabilized seeds are robust, uniform with dialed in characteristics, which together result in more consistent and repeatable flower. Given the demand for consistency and quality, both at home and abroad, this lower cost and faster alternative to clone based production has the potential to transform the way cannabis is cultivated at scale. In q two, ’20 ’2 percent of our harvest came from seed based production. We continue to work with our strategic investee, Bylos Bioscience, in The US to step up our efforts to stabilize strategic genetics while we continue genomics research to identify genetic markers that influence things like resistance to powdery mildew, terpene expression, THC potency, yield, and more.
Looking at where we are now and where we wanna go, we have a few key areas of focus in the coming quarter. One, we will focus on accelerating international revenue growth by capitalizing on increased export volume, initiating branded international sales in The US and Australia, and leveraging our forthcoming EU GMP certification. Two, we will look to gain market share in Canada, leveraging consumer sec centric innovations in the fastest growing categories, like box top diamond doobies, ShredX heavy slim, debunk liquid diamond vape, and ongoing growth in big bag of buds. Three, we will increase gross margins and deliver consistent cash flow from operating activities through motif synergies, higher scale and capacity, growth in international, and controlling costs. And four, as the market leader in Canada, we will continue to strongly advocate to key government officials through our enhanced government relations program, focusing not only on changes that will support our business, but the sector as a whole.
Our goal is to build consensus at the federal, provincial, and territorial level for the need for common sense cannabis regulations, excise reform, and a national export strategy that defends an industry that contributes more to the Canadian GDP than breweries or wineries and distilleries. On that note, I will turn it over to Greg to discuss our financial performance for the quarter.
Greg Guyatt, Chief Financial Officer, Organigram Global: Thank you, Vi. We are very pleased to report a record quarter ahead of key seasonality in Q3 and Q4 as we believe our results will continue to improve throughout the year in line with previous guidance. We experienced strong year over year growth in the quarter. Our gross sales were up 79% and surpassed $100,000,000 for the first time in any given quarter. Similarly, our net revenue was up 74% year over year to reach 65,600,000.0 These results were supported by a full quarter of financial contributions from our motif business as well as organic growth in our recreational and international businesses.
As we scale both domestic and international sales, fueled by growth in Germany, the launch of branded sales in The US, and the expected launch of branded sales in Australia this fiscal year, we are beginning to approach the milestone of becoming a $05,000,000,000 run rate business by ship sales. In q two, our international sales increased a 77% to 6,100,000.0 from 2,200,000.0 in the same prior year period and increased 84% sequentially since last quarter from 3,300,000. Building off of our leadership in Canada, we are aggressively pursuing growth in international markets through strategic acquisitions and growth markets, and we continue evaluating a robust pipeline of strategic opportunities supported by our Jupiter pool of approximately 58,000,000. Adjusted gross margin for the quarter increased to $21,900,000 or 33% compared to $11,600,000 or 31% in the same prior year period. This improvement was primarily driven by growth in our in in our recreational business following the Motif acquisition as well as increased contributions from international sales.
On a sequential basis, adjusted gross margin remained flat. While we benefited from greater scale and stronger international shipments, Motif margins were lower than the core Organigram business, which reduced our overall adjusted gross margin. Organigram standalone adjusted gross margin was 37% in the quarter. We expect Motif margins will benefit from the realization of integration synergies, which will build throughout the back half of the year to $5,000,000 this year, partially driven by recent capital expenditures designed to improve operational efficiency and capacity at Motif. As a result of the work done so far, we are now expecting our annual synergies to reach approximately $15,000,000 next year, up from the previously disclosed $10,000,000 Although these offsetting factors average as a flat adjusted gross margin in the quarter, we exited March with an adjusted gross margin of over 39%.
As noted in previous quarters, we continue to expect adjusted gross margin to stabilize around 35% for fiscal twenty twenty five, with stronger performance anticipated in Q3 and Q4 with our long term adjusted gross margin target of 40% in the second half of fiscal twenty twenty six. G and A costs in the quarter were flat at $14,900,000 compared to q two of last year, including the incremental costs from Motiv. This is reflective of controlling overhead and new business business integration. Included in our G and A cost were ERP expenditures of approximately $600,000 for the final phase of our ERP project, which is expected to be completed by the end of this year. Selling costs for the quarter, including marketing, were $7,500,000 versus $5,400,000 last year.
The increase was attributed to higher trade investments with retail partners to support the growth of the business. Total SG and A costs for the quarter were 22,400,000.0 a modest increase of 10% versus the prior period last year. As a percentage of net revenue, SG and A was 34%, down from 54% last year and 40% last quarter. Adjusted EBITDA in the quarter was $4,900,000 compared to negative $1,000,000 in the prior year period. The year over year increase was primarily due to higher gross margin as a result of higher international sales and increased operating efficiency and scale.
With $6,300,000 in adjusted EBITDA for the first six months and seasonally stronger quarters to come, we are on track to outperform fiscal twenty twenty four adjusted EBITDA this fiscal year. Net income for the quarter was $42,500,000 compared to a net loss of $27,100,000 in q two fiscal twenty twenty four. The largest contributing factor here was the change in fair in the fair value of derivative liabilities, of which just over 35,000,000 was associated with BAT top up rights and the issuance of preferred shares associated with the final 41,500,000.0 trough from BAT. On a smaller scale, we saw some additional noncash benefits from the appreciation of our investments in Filos, OBX, and Sanity Group. From a cash flow perspective, cash used by operating activities before working capital changes was $1,600,000 in the quarter compared to cash used of $8,300,000 in the prior year period.
The change in cash used is primarily due to improvements in adjusted gross margin versus the prior year. On the topic of cash, we maintain a strong balance sheet and remain confident in our liquidity position, which we believe is sufficient to fund operations and strategic growth initiatives following recent acquisitions while supporting our near to mid term goal of consistent profitability. As of March 31, we had total cash position of $83,400,000 including both restricted and unrestricted cash and negligible debt. We plan on investing 8,000,000 to $10,000,000 in sustaining capital expenditures during fiscal twenty twenty five. As Bina mentioned, we’ve started to invest in the previously mentioned Munson Flower capacity enhancement project.
These capital expenditures will be funded out of operating cash flow, and we will continue to evaluate our long term cash needs and optimize our capital structure accordingly. We are encouraged by our performance this quarter as our continued focus on efficiency, scale, and market leadership alongside the acceleration of our international strategy translates into meaningful year over year growth. As we move through fiscal twenty twenty five, we expect to reduce costs as a percentage of net revenue while increasing the mix of higher margin international sales. At the same time, we’re seeing tightening supply in the Canadian market, which presents an opportunity to expand flower capacity and take price on our category leading brand. We look forward to updating you on our progress in the quarters ahead.
With that, I’ll turn the call back to Bina.
Bina Goldenberg, Chief Executive Officer, Organigram Global: Thank you, Greg. As we progress through fiscal twenty twenty five, we are confident in our ability to execute on our strategic priorities. The integration of Motif, revenue expansion on collective projects, our international expansion efforts, and the continued success of our innovation pipeline all position us well for sustained growth and improved profitability. We appreciate the continued support of our shareholders, customers, and employees. We remain committed to driving innovation, operational excellence, and long term value creation.
Now let’s open up the floor for questions.
Krista, Conference Operator: Thank you. We will now begin the question and answer Your first question comes from Aaron Grey with Alliance Global Partners. Please go ahead.
Aaron Grey, Analyst, Alliance Global Partners: Good morning. Thank you very much for the questions. So first question for me, you guys talked a lot about international, some of your growth aspirations. So if we could just dive a little bit deeper into your outlook for 2025 and fiscal I know EU GMP certificate doesn’t change capacity and you’re already selling in the markets, but given the greater margin capture you’ll have with the EU GMP change, how do you think about allocating capacity internationally given the greater margins you’ll get there versus balancing the Canadian market share aspirations that you have? So any color on any capacity constraints you might have?
How you’re looking to balance between your goals domestically and internationally? Thank you.
Bina Goldenberg, Chief Executive Officer, Organigram Global: Yeah. Sure, Erin. Thanks for the question. So first of all, we will continue to work on balancing the demands between both domestic and international sales. While certainly international sales have higher margins today because they don’t have excise taxes.
We we wanna make sure we don’t walk away from our leading position in some of our domestic flower brands, such as our big bag of bugs with which are still experiencing very good growth. And the reason why this is very important and some of our competitors have chosen to walk away from the domestic market, is because we do see that there will be more price compression in international markets. We’re already seeing, value flower showing up in in Germany. And you’re gonna see supply from all over the world, not just from Canada in these markets. So in order to make sure that we have a long term plan, you know, we wanna make sure we’re balancing both.
Now we have, higher demand coming out of some of our international markets, and that’s part of the reason why we’re working on increased, capacity, flower capacity. We’ve done some work on improving some of our efficiencies, in our facility. The, 7,000 kgs coming from the LED upgrade, we’re already starting to see some benefits on on that as the project is coming to completion, and rooms that returned a couple months ago are starting to now generate extra flowers. So, we you know, the two projects together will give us an extra 14,000, kilos of capacity, and we keep driving better efficiencies in our flowers. So we’ll continue to look at growing our international sales.
Your question on, you know, how how much is the upside potential, We expect to sell more in the back half internationally than we did in the front half. And, you know, with international sales, you need to start generating the following through medical doctors prescribing those specific cultivars. So the cultivars are gaining momentum in Germany, and they will have higher demand and as we shift to those, those markets with those cultivars. So we’re pretty excited about, the following opportunity, but it’s gonna be a balancing act for sure. You know, obviously, we like the margins with international, but the truth is the margins in in the domestic market are getting better as there’s less competition, and we’ve been able to actually take some pricing in the domestic market.
Aaron Grey, Analyst, Alliance Global Partners: Really appreciate that color there, Bina. That was helpful. Second question for me. You know, I just wanna talk a little bit about the the margin evolution. Gave some great color there on the gross margin.
So as we think about EBITDA profitability, where do you believe EBITDA margins have the potential to get to in the medium term? And what are some of the most meaningful levers? You gave some color in terms of incremental synergies that you found going from 10,000,000 to $15,000,000 Was that more so on the gross margin side or on the SG and A side? And then how much of those synergies have been realized today? So any color in terms of the margins, how we should think about the evolution would be helpful.
Thanks.
Greg Guyatt, Chief Financial Officer, Organigram Global: Sure. Thanks for that question. So so first of all, I’ll touch touch on the synergies. So we’ve realized, I’d say, about a a million 5 worth of the 5,000,000 that that we’re we’re targeting for for this year. And the majority of that is in, is in COGS, but there is certainly some some overhead expenses from from cost avoidance and the the general the general integration of the two businesses.
So I’d say in terms of what’s gonna drive, EBITDA growth in the future, it’s gonna be a combination of margin growth. As I’m as I mentioned earlier, we’re targeting about 40%, gross margin in the back half of of fiscal twenty twenty six. And then also, you know, just general cost management. It’s something we’re always looking at and making sure that we’re spending our capital prudently. But but by by and large, you know, we’re not as revenue grows, we’re not expecting our SG and A to grow materially, and and that’s gonna be an important driver as we start seeing the the the scaling of our our top line, and we’ll get the leverage on the p and l, which will drop drop straight down to EBITDA.
So in our longer term target for EBITDA, we expect it to continue to to grow as a percentage of sales. So, certainly, you know, as we look forward to to the back half of the year when the key seasonality, and stronger parts of our business kick in, we are expecting to see the EBITDA margin improve as well.
Aaron Grey, Analyst, Alliance Global Partners: Okay. Great. Really appreciate that color. I’ll go ahead and jump back into the queue.
Krista, Conference Operator: Your next question comes from the line of Federico Gomes with ATB Capital Markets. Please go ahead.
Federico Gomes, Analyst, ATB Capital Markets: Hi, good morning. Thanks for taking my questions. First question is on the cash flow. We saw negative cash flow this quarter. I think a good portion of that was related to working capital.
So first, could you maybe talk about the drivers behind those working capital changes this quarter? Maybe the key items here that drove that? And second, could you talk about your cash flow expectations for the remainder of the year? You know, things like movements in working capital, CapEx, as well as the the potential margin expansion and the seasonality that that you mentioned as well. Thanks.
Greg Guyatt, Chief Financial Officer, Organigram Global: Sure. May may I start with the cash question? Thanks thanks, Frederico. So the last in q two, we actually spent 6,000,000 at the end of the quarter on on the the collective project acquisitions. That had a negative impact on cash flow just from a timing perspective.
But, you know, primarily, the the biggest driver, as you mentioned, was our investment in working capital, which was very intentional. You know, q three, q ’4 is really our our strongest time of the year. So in q two, our plan was to invest into working capital to ensure that we’re prepared for the strong growth that’s to come. You know, with working capital, there’s there’s a number of puts and takes, but the most significant increase was an increase in inventory, which is required to be prepared for the for the growth that’s coming for the the next the next two quarters. That did I cover did I cover everything with that, Fred?
Federico Gomes, Analyst, ATB Capital Markets: Yeah. Maybe just the the second part of the question related for your expectations for the remainder of the year. I I I guess you answered sort of the the question about the working capital for the second half, but also CapEx and and the impact of the potential margin expansion. Yeah.
Greg Guyatt, Chief Financial Officer, Organigram Global: From a CapEx perspective, we’re expecting to spend the on a regular sustaining capital, 8 to 10,000,000 for the full year, as well as the the 9,000,000 that was mentioned for for the the month in LED grow room expansion. The timing of that, we expect most of it to happen this year. And so you’ll see that being funded through operations, which as we mentioned, you know, q three, q ’4 is gonna be our strongest period for for the year of cash flow. So we actually expect to be cash flow positive for the for the full year, and you will see that starting to come through in the third quarter.
Federico Gomes, Analyst, ATB Capital Markets: Perfect. I appreciate that, Greg. And then maybe just a second question for me. If you could comment on your strategy for The US Hemp derived KT market. I know that you talked a little bit about that.
We know that’s a lot of brands in the marketplace today. A lot of other companies investing in that market as well. So how how do you plan to differentiate? And and in regards to margins in that segment, when do you think, you know, they could be accretive and they could be meaningful to your overall margins? Thank you.
Bina Goldenberg, Chief Executive Officer, Organigram Global: Sure. So let’s start off by saying, listen. We’re early days in in expanding the collective project brand in The US market, and we’re very excited about the results so far in the markets where it’s, you know, on the store shelves. We’re talking to retailers, and the offtake is strong. It is our intention to continue to build out the distribution.
Right now, we’re selling into 10 provinces. We expect to see stronger distribution probably in another six provinces before the end of the fiscal year, and we expect our direct to consumer website to start to launch this this month. So continuing to build that way, the priority right now in The US is to drive trial and awareness. We have a very strong summer support program kicked off to drive velocity, at retail, so off take, really get to consumers. What we think is the benefit of collective project, and you’re right, there are many brands in The US, but some of them are not very good.
They don’t taste very good. We have great tasting products with collective project, as I mentioned, the awards we just received, and we’re excited about getting people to try. So we have a lot of sampling programs during the summer. In places where you can’t have infused samples, we’ll have non infused samples. We’ll have a lot of POS and and programs.
So back to your question about margins in the short term, our we’re investing to drive the growth of this product. So we expect to do roughly a million dollars US in retail sales. So it’s it’s still small, but we’re investing that margin back to drive the off take and to increase awareness. This is key part of our strategy in The US. Obviously, in Canada, we expect to see growth in our business, and that will grow and and appreciate the the gross margin that comes with that business.
So not a strong investment programs in Canada, although, you know, we will leverage our sales relationships and gain distribution. And, you know, the product talks for itself in Ontario, really a strong, performance in that market. And we just need to get other provinces to take on the top selling SKUs because we know they perform. So it’s, a strategy of investment right now, more focused on investment in The US to gain, that consumer adoption and really breakthrough. As you mentioned, lots of players in The US, but not a lot of them have the money to invest behind the growth and or the product, that delivers to the consumer expectation.
Federico Gomes, Analyst, ATB Capital Markets: Thank you very much, Tina.
Krista, Conference Operator: Your next question comes from the line of Yiwon Kang with Canaccord Genuity. Please go ahead.
Yiwon Kang, Analyst, Canaccord Genuity: Hi, good morning. Thank you for taking my question. Apologies if I missed some of the remarks in the opening statements, but the international sales saw a significant sequential increase. So just wondering if you could provide some color on what drove that growth. Was it primarily due to the expanded orders from existing partners like the Sanity Group, or did you onboard new customers during the period?
Thank you so much.
Bina Goldenberg, Chief Executive Officer, Organigram Global: Sure. No. It wasn’t new customers. It was meeting incremental demand for our existing customers and not just Sanity Group. We have some strong customers in Australia as well that continue to to see, a higher demand in their market.
You know, there’s a demand for high quality product. And while there’s a lot of discussion of of international flower coming from, you know, Colombia or South Africa, you know, Canadian cannabis, we’ve been growing it for a while. The quality is great. It’s recognized worldwide. So there’s increased demand.
And one of the things that I mentioned earlier was the thing about medical markets is once a cultivar is established, you know, that that a doctor is prescribing it and they see the benefits, consumers come back to that cultivar. So you start you might start small, but it continues to build off of the repeat purchases of those cultivars in those markets. You have to make sure that when you go into international markets, have stability data for cultivars. So it takes a while to build that that demand. But once it’s there, it continues to drive incremental, you know, orders, and and we’re we’re really starting to see that.
You know, we expect to see our EU GMP certification in the upcoming months. That won’t increase demand. That will just speed up our fulfillment because you take out the middleman, you take out the converter, product will get to the market faster, repeat purchases will come in faster. So we’re excited to leverage that. And, sorry, I also forgot to mention that once we have EU GMP, pricing will go up because you take out the converter in the middle.
So we’re excited about what what this international business will continue to grow, but it is not from increased customers. We have significant demand from our existing customers, and we continue to prioritize fulfilling those customer requests.
Yiwon Kang, Analyst, Canaccord Genuity: Thanks for that color. Just the second one from me here is on the collective project acquisition. It’s been a few weeks and, obviously, very early days, since integrating that brand into your platform. But I was wondering if you guys could provide any color into any insights that you might have gained from having exposure into The U. S.
Hunter ed space. Any differences between how the recreational market functions even on the consumer level? And any insights there would be helpful. Thank you.
Bina Goldenberg, Chief Executive Officer, Organigram Global: Certainly. So, you know, we closed the collective project on March 31, so the last day of the quarter. And so, you know, it’s it’s still early days, but I I could tell you a couple of things on, collective projects. So first of all, in Canada, we have some great relationships with our, command. They currently were the life licensed producer, as well because the collective arts team weren’t a licensed producer.
We’re working on converting those relationships that where we’re the licensed producer. There’s some efficiencies we gained through excising and distributing the product and, obviously, leveraging our sales team to gain more distribution. And we obviously have relationships, with the the boards and could drive some of that. So we’re pretty excited about the revenue growth opportunity in Canada. I also mentioned that we have, invested $1,200,000 in our Winnipeg facility, and this is where we’re looking to, look at new formulations, looking at where we bring in our fast nanotechnology to really differentiate our products further.
So there’s lots of upside potential. And, clearly, taking some of the product in house will better leverage our infrastructure and and improve our margins. In The US, it’s a little bit different. US, obviously, we’re dependent on co man, relationships. We’ve actually just changed our co, manufacturer for collective project because we got better costs and better quality of of ultimate product that’s important for us.
We have a great relationships with some key distributors to get the products out into, more of the markets and build that distribution and establish relationships with some of the key retailers. Really, the focus on collective project in The US is distribution and driving awareness trials so we get some offtake, really really seeing that momentum behind the brand. There there are only, four big players in The US that have, hemp derived THC beverages that have the dollars behind it that could help drive that trial. And we’re excited to be one of those, and that is our intention to continue to drive, and grow in that market in The US.
Yiwon Kang, Analyst, Canaccord Genuity: Thank you for the color. I’ll hop back into the queue.
Bina Goldenberg, Chief Executive Officer, Organigram Global: Thank you.
Krista, Conference Operator: And we have no further questions in our queue at this time. I will now turn the conference back over to management for closing comments.
Bina Goldenberg, Chief Executive Officer, Organigram Global: Well, thank you, everybody, for joining our call today, and thanks for your insightful questions. We are really looking forward to our key seasonality coming up in Q3 and Q4, looking forward to seeing the expansion of our collective project acquisition, the realization of the Motif synergies, the growth in our international sales, and we look forward to updating you further next quarter. Thanks, and have a good day.
Krista, Conference Operator: Ladies and gentlemen, this does conclude today’s conference call. Thank you for your participation and you may now disconnect.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.