• Net Revenue: Increased 17% to $42.7 million compared to Q1 of last year.
• International Sales: Grew 2.3% year over year to $3.3 million.
• Adjusted Gross Margin: Increased to $14.3 million or 33% from $11.2 million or 31% in the prior year period.
• Operating Expenses: Increased 11% to $25.1 million from $22.6 million in the prior year period.
• SG&A Costs: Totaled $17 million, a 7% increase from the prior year, but decreased as a percentage of net revenue from 44% to 40%.
• Adjusted EBITDA: $1.4 million compared to $0.1 million in the prior year period.
• Net Loss: $23 million compared to a net loss of $15.8 million in Q1 fiscal 2024.
• Cash Used by Operating Activities: $6.3 million compared to $8.1 million in the prior year period.
• Total Cash Position: $71.2 million, including both restricted and unrestricted cash.
• Capital Expenditures: Planned investment of $8 million to $10 million in sustaining capital expenditures during fiscal 2025.

• Warning! GuruFocus has detected 2 Warning Signs with OGI.

Release Date: February 11, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• OrganiGram Holdings Inc (NASDAQ:OGI) achieved strong momentum as Canada's largest cannabis company by market share, with significant growth in pre-rolls and vapes.
• The company completed the Motif acquisition, which is expected to yield $10 million in annualized savings within 24 months, with early synergies already being realized.
• OrganiGram expanded its national market share by 500 basis points year over year, reflecting strategic positioning in high-growth segments.
• International sales grew to $3.3 million in Q1, with expectations for continued growth throughout fiscal 2025, supported by strategic investments and partnerships.
• The company is actively pursuing global expansion opportunities, with a focus on leveraging its strong balance sheet and strategic investments for international growth.

Negative Points

• OrganiGram faced competitive headwinds in the Edibles category, with market share declines due to low-cost single count gummies and price compression.
• Adjusted gross margin decreased sequentially from 37% to 33%, impacted by seasonally lower volume and competitive forces in the gummy category.
• Operating expenses increased by 11% to $25.1 million, primarily due to acquisition and transaction costs related to the Motif acquisition.
• The company reported a net loss of $23 million for the quarter, compared to a net loss of $15.8 million in Q1 fiscal 2024.
• There are concerns about potential oversupply in international markets, particularly in Germany, as more licensed producers enter the space.

Q & A Highlights

Q: Can you provide insights into your international expansion strategy, particularly regarding the EU-GMP certification and potential investments? A: Beena Goldenberg, CEO: The German medical market has grown significantly, and we have a strategic partnership with Sanity Group. We are also exploring opportunities in other medical markets like Australia, where we can export flower and potentially 2.0 products like vapes and gummies. Our EU-GMP certification will enhance our margins by eliminating middlemen. We are also considering investments in high-opportunity markets, excluding the US due to regulatory constraints.

Q: Could you elaborate on the company's pro forma financials, particularly regarding revenue and EBITDA trends? A: Beena Goldenberg, CEO: We emphasize year-over-year comparisons due to seasonality. We only included three weeks of Motif's numbers in our consolidated financials, but expect significant earnings next quarter. Greg Guyatt, CFO, added that consolidated EBITDA is expected to exceed last year's, with synergies from the Motif acquisition contributing to profitability in the latter half of the year.

Q: What are your thoughts on the growth potential in the German market and the impact of EU-GMP certification? A: Beena Goldenberg, CEO: The German market is growing, and our EU-GMP certification will increase demand from partners like Sanity Group. While more players are entering the market, our low-cost, high-quality product and strategic partnerships position us well. We also see opportunities in extracts and 2.0 products in markets like Australia.

Q: How might the upcoming Canadian federal election impact the cannabis industry, particularly regarding excise tax reform? A: Beena Goldenberg, CEO: A new conservative government might focus on reducing crime, axing taxes, and cutting red tape, potentially benefiting the cannabis industry. We expect a harmonized national stamp and excise tax reform to strengthen the industry. If the liberals remain, a change in leadership could lead to a renewed focus on economic growth and innovation.

Q: What are your expectations for the Canadian domestic market given the potential changes in government? A: Beena Goldenberg, CEO: Regardless of the election outcome, we anticipate a focus on strengthening the cannabis industry. Both potential governments may see the value in leveraging the industry for economic growth, reducing excise taxes, and supporting international expansion.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.