Organigram Holdings Inc., the parent company of Organigram Inc., a leading licensed producer of medical marijuana based in Moncton, New Brunswick, announced its financial results for the three and nine-months ended May 31, 2018.
Operational Highlights
- Organigram began harvesting from its Phase 2 expansion facility (23 grow rooms) on April 20, 2018 bringing its target production of dried flower equivalent to 22,000 kg/annum;
- In May the Company launched its adult recreational brand strategy which included house brands such as The Edison Cannabis Company, ANKR Organics and Trailer Park Buds;
- In May Organigram received a “License for Controlled Drugs and Substances” from Health Canada making the Company a Licensed Dealer;
- In May the Company received its “Permit to Export Cannabis” license which allowed Organigram the ability to make its first international medical shipment to Australia (completed in July);
- Shortly after quarter-end the Company began use of its Phase 3 expansion filling six of the 16 grow rooms with the remaining rooms filled in June and July bringing its target production of dried flower equivalent to 36,000 kg/annum; and
- Announced strategic investments in: Hyasynth Biologicals, Alpha-Cannabis Germany, and Eviana (see previous press releases for more details) which all are expected to close in the calendar third quarter.
Financial Highlights
- Record net sales for both the three-months and nine-months ended May 31, 2018 of $3.7 million and $10.1 millionrespectively vs. $1.9 million and $3.6 million respectively for 2017;
- Record sale volume of cannabis oil for the three-months ended May 31, 2018 (768,400 milliliters) up 39% from Q2/18 (552,250) and up 452% from Q3/17 (139,200 milliliters);
- Record sales volume of dried flower (303,428 grams) for the three-months ended up 28% from Q2/18 (237,650 grams) and up 55% from Q3/17 (196,129 grams);
- Record yields per plant in the quarter ended May 31, 2018 (see MD&A for further details);
- Cost of cultivation per gram of dried flower harvested of $0.80 per gram “all-in” (direct labour and materials, allocated overhead and depreciation) and $0.58/gram excluding depreciation. Note that cost of cultivation is a non-GAAP measure used by management internally and does not include indirect production, packaging or shipping costs (see financial statements and MD&A for further details);
- Registered medical patients climbed to a record 15,316 by the end of Q3 up 18% since Q2 (12,957);
- Impairment of goodwill on its 2017 acquisition of Trauma Healing Centres in the amount of $1.2 million related to “right sizing” of the business opportunity;
- Net interest expense of $3.7 million for the quarter primarily attributable to the interest expense on $115 million of convertible debentures issued on January 31, 2018; and
- Net income of $2.8 million, an increase of 162% compared to $1.1 million in Q2-2018 and a loss of $2.3 million in Q3-2017.
Summary of Financial Results
Three-months ended May 31 |
Inc. (Decr.) |
Nine-months ended May 31 |
Inc (Decr.) |
|||
(in $000 except EPS) |
2018 |
2017 |
2018 |
2017 |
||
Gross sales |
$ 3,705 |
$1,917 |
93% |
$ 9,612 |
$ 5,593 |
72% |
Sales recovery (return) |
$ 21 |
$- |
n/m1 |
$ 490 |
$(2,026) |
n/m |
Net sales2 |
$ 3,726 |
$1,917 |
94% |
$ 10,102 |
$3,567 |
183% |
Cost of sales (incl. indirect production) |
$ 1,671 |
$2,097 |
-20% |
$ 5,012 |
$5,905 |
-15% |
Gross margin (excluding FV adjustment) |
$ 2,055 |
$(180) |
n/m |
$5,090 |
$ (2,338) |
n/m |
FV adjust. on bio assets and inventories |
$ 10,066 |
$(578) |
n/m |
$ 15,172 |
$ (1,634) |
n/m |
Gross margin |
$ 12,121 |
$(758) |
n/m |
$ 20,262 |
$ (3,972) |
n/m |
General and admin |
$1,556 |
$ 790 |
97% |
$ 4,743 |
$2,245 |
111% |
Sales and marketing |
$1,754 |
$691 |
154% |
$ 4,033 |
$2,063 |
95% |
Share-based compensation (non-cash) |
$1,156 |
$222 |
421% |
$ 3,056 |
$787 |
288% |
Impairment of goodwill |
$1,156 |
$ – |
n/m |
$ 1,156 |
$ – |
n/m |
Net financing costs (income) 3 |
$3,679 |
$ (115) |
n/m |
$4,778 |
$ (211) |
n/m |
Net income (loss) |
$ 2,820 |
$(2,346) |
n/m |
$ 2,496 |
$(8,856) |
% |
EPS (basic) |
$ 0.023 |
$(0.023) |
n/m |
$ 0.021 |
$ (0.093) |
n/m |
EPS (diluted) |
$0.021 |
$(0.023) |
n/m |
$ 0.019 |
$ (0.093) |
n/m |
Sales volume of: |
||||||
Dried cannabis flower (gr) |
303,428 |
196,129 |
55% |
736,153 |
598,060 |
23% |
Cannabis oil sold (ml) |
768,400 |
189,600 |
305% |
1,739,250 |
406,000 |
328% |
1 Not meaningful |
2 Net sales consist of gross sales and sales recovery (return) and includes dried flower and cannabis oil sales, sales of accessories and revenues from the Company’s wholly-owned subsidiary Trauma Healing Center. |
3 Net financing costs consist of financing costs less any investment income earned. |
Balance Sheet Highlights
At the end of the third-quarter 2018 the Company reported:
- $156 million in cash and short-term investments (up from $34 million at the August 31, 2017 year-end);
- $26.9 million in combined biological assets and inventories (up from $5.4 million at year-end);
- $83 million in property, plant and equipment (up from $45 million at year-end);
- $9 million in current liabilities (up from $6 million at year-end);
- $98 million in long-term debt and convertible debentures (up from $3 million at year-end);
- 124.6 million outstanding shares (103.5 million at year-end); and
- 140.5 million fully-diluted shares (114.2 million at year-end) – including 7.8 million options (6.3 million at year-end), 8.1 million warrants (4.3 million at year-end), and 21.2 million shares (–Nil at year-end) if the convertible debentures are converted at their conversion price of $5.42.
Outlook
- Phase 4a (26 grow rooms) and 4b (27 grow rooms) construction expansions began in Q4 including a substantially complete 40-megawatt (peak capacity) substation worth $4 million – total cost of Phases 4a and 4b (including the $4 million spent on the substation) estimated to be $70 million bringing target production capacity to 89,000 kg/annum;
- Phase 4c (24 grow rooms) which has an estimated cost of $40 million would bring target production capacity to 113,000 – construction scheduled to begin in January 2019;
- Organigram expects to close its previously announced investments by the end of the quarter and is looking to augment its domestic and global capabilities with further investments and/or acquisitions; and
- Company is confident it will be able to announce further provincial agreements in the adult recreational market in the current quarter.