Organigram Holdings Inc. (NASDAQ: OGI) (TSX: OGI) reported results for the third quarter ending May 31, 2022. Organigram said revenue rose 90% to $55 million from $29 million over the same period in 2021. beat Yahoo Finance analysts’ average estimate for revenue of $26 million, but was up from the $43 million revenue of the second trimester. The company attributed the increase to growth in adult recreational revenue, but was partially offset by a lower average net selling price due to product mix and lower medical revenue.
Organigram reduced its net loss to $2.8 million from a net loss of $4.0 million last year. the company said this was due to higher gross margins, lower inventory provisions and lower financing costs.
“We are pleased to see the continued strength of our recreational business as our market share increases. We achieved record net revenue results which we expect to surpass again in the fourth quarter on the strength of new product listings, increased retail sales momentum and international shipments,” said Beena Goldenberg. , President and Chief Executive Officer. “We have built an enduring brand with SHRED that has proven to appeal to consumers across multiple product categories. This market strength is reinforced by the introduction of new SKUs into the derivatives space, including Edison JOLTS, which is now available in three flavors, Edison Live Resin Vaporizers, Tremblant Hash and Monjour Chews in the wellness segment.
Organigram also said it reached the third position among Canadian licensed producers with a market share of 7.8%. As of June 2022, the company held 8.5% of the adult recreational use market. It said it continued to hold the number one spot in dried flower, the largest category in the Canadian cannabis market, and number three in the national gummies market.
Expenses
Organigram noted that its cost of sales increased sequentially to $29.4 million from $23.4 million and that this was due to increased sales volume in the adult recreational market. However, net cash used in operating activities fell to $6.3 million and was mainly attributable to adjusted EBITDA net of investment in working capital assets. In the third quarter of fiscal 2021, net cash used in operating activities was $10.8 million. The company had a comfortable cash cushion with unrestricted cash and a short-term investment balance of $127 million, compared to $184 million as of August 31, 2021. Organigram said it believes its cash position capital was sound and that there was sufficient liquidity available in the medium term.
Outlook
Organigram said it currently expects fiscal fourth quarter revenue to be higher than the third quarter. “This expectation is largely due to continued sales momentum, anticipated market growth, the company’s expanded product line across multiple segments, greater ability to meet demand at the Moncton campus , increased throughput at the Winnipeg facility, contributions from the Lake Superior facility and increased revenue from international shipments.
Net revenue growth is expected from the company’s products, as evidenced by Organigram’s growing domestic adult recreational retail market share from 7.4% in February 2022 to 8.5% in June 2022 The company said in a statement, “In addition, expected continued shipments to Canndoc in Israel and Cannatrek and Medcan in Australia are expected to generate higher sequential revenue in fiscal 2022 compared to fiscal 2021. The company also believes it is better equipped to meet demand in fiscal 2023 with larger harvests expected compared to fiscal 2022.
“Our success as a consumer-focused innovator continues to drive solid top line growth, supported by a strong balance sheet and cash position,” said Derrick West, Chief Financial Officer. “With our increased cultivation capacity and Phase 4C economies of scale, and our investment in the automation of our three manufacturing sites, we expect our gross and adjusted EBITDA margins to improve in the fourth quarter and in fiscal year 2023.”
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