Organigram Holdings (OGI) Reports Q4 Loss of $0.199 on Revenues of $20.4M

Organigram Holdings (NASDAQ: OGI) reported Q4 EPS of ($0.199), versus ($0.14) reported last year. Revenue for the quarter came in at $20.4 million, versus $16.29 million reported last year.

“We are excited about Organigram’s prospects as we continue to reinvigorate and diversify our product portfolio with new offerings aimed at delivering the attributes that matter most to consumers,” said Greg Engel, CEO. “Overall, we are very encouraged by the initial responses to our new products and the increased awareness and traction they are receiving against a backdrop of national retail store growth and a growing legal market that continues to displace the illicit market. Our team is more focused than ever on enhancing our agility and execution to capture top-line growth and we believe we have the capital resources and liquidity to support us. We have always operated with financial discipline to pursue profitable growth which is again reflected in positive adjusted EBITDA in full-year fiscal 2020 for the second year in a row.”

Key Financial Results for the Fourth Quarter Fiscal 2020

Net revenue:

Q4 2020 net revenue of $20.4 million compared to $16.3 million in Q4 2019 primarily due to:

Higher flower sales on higher volumes due to the large format, value segment growing and the Company having a number of offerings in this segment
Adult-use recreational derivative and edible (“Rec 2.0”) product sales that were not yet legal in Q4 2019 and a significant increase in international sales largely due to the supply agreement with Canndoc Ltd., leading Israeli medical cannabis producer, that did not exist in Q4 2019; and
A lower sales provision for returns and price adjustments in Q4 2020 compared to Q4 2019.

Gross revenue:

Q4 2020 gross revenue of $25.4 million compared to $19.2 million in Q4 2019 primarily due to similar factors impacting net revenue described above.
Q4 2020 gross revenue increased 32% from the prior year period compared to the 25% increase in net revenue reflecting more shipments and the increase in excise taxes as a percentage of gross revenue in Q4 2020.

Cost of sales:

Q4 2020 cost of sales of $29.0 million compared to Q4 2019 cost of sales of $15.5 million.
Higher cost of sales in Q4 2020 was primarily due to:

Increased sales volumes in Q4 2020;
Q4 2020 write-offs of excess and unsaleable inventories of $11.1 million, of which $8.3 million related to excess trim and concentrate; and $2.8 million of write-downs and adjustments to net realizable value and
$3.5 million in unabsorbed fixed overhead as a result of lower production volumes, and $0.2 million related to lump-sum payments paid to temporarily laid-off workers in Q4 2020.

Gross margin before fair value changes to biological assets and inventories sold:

Q4 2020 negative gross margin before fair value changes to biological assets and inventories sold of $8.6 million compared to positive $0.7 million in Q4 2019.
Negative and lower gross margin in Q4 2020 was largely due to higher cost of sales as described above.

Adjusted gross margin1:

Q4 2020 adjusted gross margin increased to $6.2 million from $1.5 million in Q4 2019 primarily due to a lower sales provision for returns and price adjustments in Q4 2020 compared to Q4 2019 as discussed above.

Gross margin:

Q4 2020 negative gross margin of $28.8 million compared to Q4 2019 negative gross margin of $11.1 million, largely due to negative Q4 2020 gross margin before fair value changes to biological assets and inventories sold as described above as well as greater net non-cash negative fair value changes to biological assets and inventories sold of $20.1 million in Q4 2020 versus $11.8 million in Q4 2019.

Selling, general & administrative (SG&A) expenses:

Q4 2020 SG&A of $10.8 million decreased 22% from Q4 2019’s amount of $13.9 million and Q4 2020 SG&A as a percentage of net revenue was 53% compared to 85% in Q4 2019.
Q4 2019 SG&A included approximately $2.0M of licensing and professional fees that were not expected to recur at the same level and Q4 2020 SG&A reflected the Company’s reduced spending during the ongoing COVID-19 pandemic.
Q4 2020 SG&A was largely in line with Q3 2020 SG&A of 10.3 million and declined from Q3 SG&A as a percentage of net revenue of 57%.

Adjusted EBITDA1:

Q4 2020 negative adjusted EBITDA of $2.7 million improved from Q4 2019 negative adjusted EBITDA of $7.2 million primarily due to higher adjusted gross margin in Q4 2020 as discussed above.

Net Loss:

Q4 2020 net loss of $38.6 million, or ($0.199) per share on a diluted basis, compared to Q4 2019 net loss of $22.5 million, or $(0.144) per share, largely due to greater negative gross margin in Q4 2020 as described above.

Net cash used in operating activities:

Q4 2020 net cash used in operating activities of $10.1 million decreased from $15.7 million used in Q4 2019 largely due to the prior period’s increase to working capital assets as the Company scaled operations ahead of Rec 2.0 legalization.

For earnings history and earnings-related data on Organigram Holdings (OGI) click here.

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