TORONTO — Organigram Holdings Inc., a leading licensed producer of cannabis, reported its results for the fourth quarter and twelve months ended September 30, 2024. All financial information is expressed in Canadian dollars.
Comparable Periods The Company’s results for Q4 Fiscal 2024 and Fiscal 2024 reflect the three-month and 12-month periods ended September 30, 2024. The Company’s change in year-end effected in fiscal year 2023 resulted in its reporting periods of for the fourth quarter of 2023 and Fiscal 2023 having 4 months and 13 months, respectively. For comparative purposes and to more accurately reflect period-over-period performance, the Company’s financial results and period-over-period comparisons are presented for the unaudited and unreviewed three-month period ended September 30, 2023, and the unaudited and unreviewed 12-month period ended September 30, 2023, unless otherwise indicated.
Fourth quarter and fiscal 2024 highlights
- Fiscal 2024 adjusted EBITDA increased 55% compared to Comparative Fiscal 2023.
- Q4 Fiscal 2024 net revenue increased 10% compared to Q3 Fiscal 2024 and 22% versus Comparative Q4 2023.
- Q4 Fiscal 2024 adjusted EBITDA increased to $5.9 million, from $3.5 million in Q3 Fiscal 2024, and from $0.1 million in Comparative Q4 Fiscal 2023.
- Moved from the #2 spot in the Canadian market as of year-end to the #1 LP by market share post-acquisition of Motif Labs Ltd subsequent to year-end.
- Achieved adjusted gross margin of 37% in Q4 Fiscal 2024 due to efficiency increases across cultivation, manufacturing, and distribution.
- Realized $9.1 million in annual cost savings through extensive efficiency initiatives in Fiscal 2024.
- Achieved sequential quarterly growth in international sales throughout Fiscal 2024 and increased international customer base from five to eight supply partners in Fiscal 2024.
- Completed $21 million strategic investment in German cannabis leader Sanity Group GmbH, and expanded strategic investments in the US, leveraging dedicated Jupiter investment pool.
- EU-GMP (European Union good manufacturing practice) audit completed at the Company’s Moncton facility in November, 2024, and awaiting certification, which is expected to support growing demand from international markets and contribute to increases in international revenue with strong margins.
In Fiscal 2024, the Company enhanced its balance sheet by closing two tranches of the $124.6 million follow-on investment by BT DE Investments Inc., a wholly-owned subsidiary of British American Tobacco p.l.c. (“BAT”) for gross proceeds of $83.1 million, with the final $41.5 million tranche expected to close in February 2025. Separately, the Company completed a $28.8 million overnight marketed offering in April 2024.
“Fiscal 2024 was a transformative year where our entire team delivered on multiple fronts,” said Beena Goldenberg, Chief Executive Officer. “We received significant funding from BAT when capital for the cannabis industry was scarce. We made smart, strategic investments, including into seed-based technology and automation, which is increasing efficiency. We have also expanded our international footprint through a $21 million investment in Sanity Group, a leading German cannabis company, as well as through several new supply agreements to provide products to patients in Australia and the UK. As we integrate recently-acquired Motif into the Organigram ecosystem, we head into Fiscal 2025 as Canada’s #1 LP and we are very excited for the next phase of our growth plans focused on efficiency, consumer-centric innovation, and international expansion.”
Fiscal 2024 financial overview
- Net revenue increased 6% to $159.8 million from $150.4 million in Comparative Fiscal 2023 primarily due to an increase in recreational and international revenue.
- Cost of sales decreased to $111.4 million, compared to $128.1 million in Comparative Fiscal 2023, due to operational efficiencies.
- Gross margin before fair value changes to biological assets, inventories sold, and other charges increased to $48.5 million from $22.3 million in Comparative Fiscal 2023, primarily due to higher net revenue and operational efficiencies.
- Adjusted gross margin5 was $53.9 million, or 34% of net revenue, compared to $37.3 million, or 25% in Comparative Fiscal 2023. The improvement was primarily due to increased sales in higher margin categories, lower cultivation and post-harvesting costs, and higher international sales.
- Selling general and administrative expenses decreased to $65.7 million, compared to $67.7 million in Comparative Fiscal 2023. Annual SG&A expenses as a percent of net revenue decreased to 41% from 45%, due to cost savings initiatives, including lower technology costs associated with the implementation of a new ERP system, professional fees and lower depreciation resulting from impairment charges recorded in Fiscal 2023.
- Adjusted EBITDA increased 55% to $8.4 million in Fiscal 2024, compared to $5.4 million in Comparative Fiscal 2023 as a result of higher recreational cannabis revenue and a higher adjusted gross margin resulting from lower cultivation and post-harvest costs.
- Net loss was $45.4 million, compared to net loss of $247.0 million in Comparative Fiscal 2023. The decrease in net loss from the comparative period is primarily due to higher adjusted gross margins and lower impairment loss that was recorded in Comparative Fiscal 2023.
- Net cash provided by (used in) operating activities before working capital changes was $3.9 million, compared to $(52.1) million in Comparative Fiscal 2023. The improvement was primarily attributed to a reduced net loss.
Fourth quarter fiscal 2024 financial overview
- Net revenue increased 22% to $44.7 million, from $36.7 million in Comparative Q4 Fiscal 2023 primarily due to higher recreational cannabis sales and higher international sales.
- Cost of sales decreased to $30.9 million, from $34.3 million in Comparative Q4 Fiscal 2023, primarily as a result of operational efficiencies and lower inventory provisions in Q4 Fiscal 2024.
- Gross margin before fair value changes to biological assets, inventories sold, and other charges increased to $13.8 million from $2.4 million in Comparative Q4 Fiscal 2023, driven by a higher proportion of international sales with stronger margins, lower cost of sales achieved through operating efficiencies, and reduced inventory provisions.
- Adjusted gross margin was $16.5 million, or 37% of net revenue, compared to $7.2 million, or 20%, in Comparative Q4 Fiscal 2023, largely due to lower cost of sales and higher recreational and international sales.
- SG&A expenses decreased to $14.3 million from $15.8 million in Comparative Q4 Fiscal 2023, primarily due to lower technology costs including implementation expenses for a new ERP system, as well as reduced insurance costs, professional fees, and depreciation and amortization.
- Adjusted EBITDA was $5.9 million compared to $0.1 million in Comparative Q4 Fiscal 2023, primarily attributable to higher net flower revenue, lower general and administrative expenses and the increase in adjusted gross margins.
- Net loss was $5.4 million, compared to a net loss of $26.6 million in Comparative Q4 Fiscal 2023. The decrease in net loss from the comparative period is primarily due to higher adjusted gross margins and lower impairment losses in the current quarter.
- Net cash provided by (used in) operating activities before working capital changes was $8.9 million, compared to $(8.5) in Comparative Q4 Fiscal 2023.
“We are pleased with the growth we achieved every quarter in Fiscal 2024, ending the year on a high note with respect to net revenue and adjusted EBITDA,” said Greg Guyatt, Chief Financial Officer. “Efficiency improvements in our operations supported our strong adjusted gross margin in the quarter. Our operational improvements, combined with our recent acquisition of Motif, has laid the foundation for continued growth in Fiscal 2025.”
Canadian Recreational Market Introduction Highlights
As an industry leader and pure-play cannabis company, Organigram remains committed to delivering consumer focused innovations and products to the Canadian market. Some recent notable highlights include:
- SHRED X Tiger blood Heavies – Infused pre-rolls
- Big Bag O’ Buds Midnight M’mosa & First Class Funk – Large format flower
- Big Jar of Joints – 56 x 0.5g joints
- SHRED Captain Kush – 7g milled flower
- Edison Sonics – 2 x 5mg THC FAST Nanoemulsion gummies
- Research and Product Development
- Product Development Collaboration (“PDC”)
Organigram and BAT continue to work together through their PDC on new work streams to develop innovative technologies in the edible, vape and beverage categories in addition to new disruptive inhalation formats aimed at addressing the biggest consumer pain points that exist in the category today.
The first commercialized product resulting from PDC research is the Edison Sonics – gummies utilizing Organigram’s Fast Acting Soluble Technology (FAST), clinically validated through a PK study to have up to 50% faster onset and nearly twice as high peak cannabinoid concentration compared to traditional gummies.
Follow-on Strategic Investment from BAT and creation of “Jupiter” Investment Pool
On November 6, 2023, Organigram announced a $124.6 million follow-on investment from BAT and the creation of “Jupiter”, a strategic investment pool designed to expand Organigram’s geographic footprint and capitalize on emerging growth opportunities.
The first two $41.5 million tranches of the follow-on investment were closed in calendar 2024, with the final $41.5 million tranche expected to close in February 2025.
International Investments & Jupiter Strategic Investment Pool
As described above, the Company made its first significant European strategic investment to expand its presence in the European cannabis market with a $21 million investment in Sanity Group, a leading German cannabis company.
Jupiter has deployed capital to two international strategic investments: Steady State LLC (d/b/a Open Book Extracts) in the U.S. and Sanity Group in Germany.
Prior to the establishment of Jupiter, Organigram had already made a strategic investment in U.S.-based Phylos Bioscience Inc., a leading in seed-based technology. The Company achieved 9% of cannabis harvest from seeds in Q4 Fiscal 2024 and 22% by the end of calendar 2024, contributing to a reduction in cultivation costs and increased cultivation capacity. The Company expects to further leverage lower-cost seed-based technology by targeting approximately 20% of harvests from seeds in fiscal year 2025, with monthly fluctuations between 15% and 30% depending on the cultivar requirements.
Organigram is exploring additional U.S. and international investment opportunities that align with the Company’s strategy to establish itself as a global leader and enhance profitability, with the goal of delivering long-term shareholder value.
International Sales
In Fiscal 2024, the Company signed three new international supply agreements with customers in Germany, Australia and the UK.
The Company now has supply agreements with nine partners in Germany, the UK, Australia and Israel, and is evaluating additional global partnership opportunities.
The Company’s EU-GMP audit was completed in November. If successful in obtaining certification, the Company expects its international sales to increase.
Balance Sheet and Liquidity
On September 30, 2024, the Company had cash and short-term investments, including restricted cash, of $133.4 million compared to $51.8 million at September 30, 2023. The increase is primarily a result of closing the first two $41.5 million tranches of the BAT follow-on investment of $124.6 million, and the Company’s $28.8 million overnight marketed offering closed in April, 2024. The company expects the final $41.5 million tranche to close in February 2025.
Subsequent to year end, the Company’s cash on hand decreased by approximately $55 million due to the acquisition of Motif, consisting of cash consideration of $50 million and approximately $5 million in transaction costs.
Organigram believes its capital position is strong and that there is sufficient liquidity available to meet our strategic and operational objectives in fiscal 2025.
Non-IFRS Financial Measures
This news release refers to certain financial performance measures (including adjusted gross margin, adjusted gross margin % and adjusted EBITDA) 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. 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 is a non-IFRS measure that the Company defines as net income (loss) before: financing costs, net of investment income; income tax expense (recovery); depreciation, amortization, reversal of/or impairment, (gain) loss on disposal of property, plant and equipment (per the consolidated statement of cash flows); share-based compensation (per the consolidated statement of cash flows); share of loss from investments in associates and impairment loss (recovery) from loan receivable; unrealized loss (gain) on changes in fair value of contingent consideration; change in fair value of derivative liabilities; expenditures incurred in connection with research & development activities (net of depreciation); unrealized (gain) loss on changes in fair value of biological assets; realized loss on fair value on inventories sold and other inventory charges; provisions and impairment of inventories and biological assets; provisions (recoveries) to net realizable value of inventories; government subsidies and insurance recoveries; legal provisions (recoveries); incremental fair value component of inventories sold from acquisitions; ERP implementation costs; transaction costs; and share issuance costs. Adjusted EBITDA is intended to provide a proxy for the Company’s operating cash flow and derive expectations of future financial performance for the Company, and excludes adjustments that are not reflective of current operating results.
Adjusted gross margin is a non-IFRS measure that the Company defines as net revenue less cost of sales, before the effects of (i) unrealized gain (loss) on changes in fair value of biological assets; (ii) realized fair value on inventories sold and other inventory charges; (iii) provisions (recoveries) and impairment of inventories and biological assets; (iv) provisions to net realizable value. Adjusted gross margin % is calculated by dividing adjusted gross margin by net revenue. Management believes that these measures provide useful information to assess the profitability of our operations as it represents the normalized gross margin generated from operations and excludes the effects of non-cash fair value adjustments on inventories and biological assets, which are required by IFRS.
The most directly comparable measure to adjusted EBITDA, calculated in accordance with IFRS is net income (loss) and beginning on page 9 of this press release is a reconciliation to such measure. The most directly comparable measure to adjusted gross margin calculated in accordance with IFRS is gross margin before fair value changes to biological assets and inventories sold and beginning on page 8 of this press release is a reconciliation to such measure.
About Organigram Holdings Inc.
Organigram Holdings Inc. is a NASDAQ Global Select Market and TSX listed company whose wholly-owned subsidiaries include Organigram Inc., a licensed cultivator or cannabis and manufacturer of cannabis-derived goods in Canada, and recently acquired Motif Labs Ltd., a licensed cannabis processor.
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 legal adult-use recreational cannabis brands, including Edison, Big Bag O’ Buds, SHRED, Monjour and Trailblazer. Organigram operates facilities in Moncton, New Brunswick and Lac-Supérieur, Québec, with a dedicated manufacturing facility in Winnipeg, Manitoba. As a result of the acquisition of Motif Labs Ltd. on December 6, 2024, the Company now operates two additional cannabis processing facilities in Southwestern Ontario; one in Aylmer and the other in London. The facility in Aylmer houses best-in-class CO2 and Hydrocarbon extraction capabilities, and is optimized for formulation refinement, post-processing of minor cannabinoids, and pre-roll production. The facility in London will be optimized for labelling, packaging, and national fulfillment. The Company is regulated by the Cannabis Act and the Cannabis Regulations (Canada).
