Organigram Q3 2019 Earnings Preview

Organigram Holdings Inc. (TSXV:OGI), one of the Canadian marijuana stocks, is expected to announce its Q3 2019 financial results on July 15, 2019

SmallCapPower | July 10, 2019: Organigram Holdings Inc. (TSXV:OGI) (NASDAQ:OGI), one of the Canadian cannabis stocks, is scheduled to report its Q3/19 financial results on Monday, July 15, 2019, before the markets open. Today we are going to look at what investors should expect from Organigram’s third-quarter results. Analysts are expecting revenues to grow modestly with an average estimate of $31.0M, (net of excise taxes) and are expecting the Company to generate $7.0M in net income.

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Moderate revenue growth expected to continue. During Q2/19, Organigram posted net revenue of $26.9M, a 115% sequential increase over the first quarter, when revenues came in at $12.5M. During the second quarter, the Company sold 4,987 kg (kilogram and kilogram equivalents) of cannabis and harvested 8,315 kg. On June 20, 2019, Organigram made its first shipment to the Société Québécoise du Cannabis (SQDC), making OGI one of three cultivators to have its product available in all 10 provinces. This follows an announcement on April 30, 2019, when the Company announced it had received Health Canada approval for an additional 163,000 sq. ft, bringing total annualized production capacity up to 113,000 kg. On May 20, 2019, the Company announced a $15M investment in a chocolate molding line, capable of producing 4M kg of cannabis-infused chocolate per year.

Industry-leading gross margins. In Q2, Organigram reported adjusted gross margin (excluding fair value of biological assets) of $16 million, or 60%. The Company generates high gross margins due to its industry-leading automation and its focus on efficient production and continuous improvement. Organigram utilizes three levels of grow in its cultivation rooms by stacking plants on top of each other, resulting in three times the yield per square foot. In addition, OGI uses data analytics to track grow cycles by harvest period, strain, room, environmental conditions, which helps them understand and refine the optimal methods to grow the plant. Organigram’s cash costs and all-in cost of cultivation were $0.65 and $0.85 per gram, respectively.

Key takeaways. Organigram is known for its top-quality cannabis, having won the 2017 Canadian Cannabis Cup award for top sativa strain (Wabanaki) and top blended strain (Blueberry Cheesecake). As such, it has a strong customer base with recurring revenues that are expected to grow. With the addition of extra grow space and a chocolate molding line, Organigram is expected to capitalize on the legalization of edible and derivatives on October 17, 2019. OGI has some of the best gross margins and lowest cost of cultivation and should show positive net income moving forward. Additionally, OGI generated $14M in adjusted EBITDA, which was positive for the third quarter in a row. Investors can anticipate SG&A expense to continue to drop, as increased cultivation space comes online in subsequent quarters, further improving adjusted EBITDA and net income margins.

Shares of Organigram ended Monday’s trading session 7.8% higher at C$9.24. Organigram stock trades at a market cap of C$1.4 Billion.

  • Market Cap: $1.4 Billion
  • YTD Return: 90.9%
  • 90-Day Average Trading Volume: 1,264,000
  • Q3/19 Consensus Revenue Estimate: $31.0 Million (11 estimates)
  • Q3/19 Consensus Net Income Estimate: $7.0 Million (11 estimates)
  • Earnings Date: Monday, July 15, 2019, before markets open

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