Organigram (US:OGI)2021-01-12 18:22Financial Data and Key Metrics Changes - In Q1 2021, Canadian adult use recreational net revenue grew 30% to CAD 16.8 million from CAD 12.9 million in the prior year quarter, while gross recreational revenue grew 42% to CAD 22.5 million from CAD 15.9 million [42] - Total net revenue for Q1 2021 was CAD 19.3 million, down from CAD 25.2 million in the prior-year quarter, primarily due to lower wholesale revenue and a lower average selling price [43] - The net loss for Q1 2021 was CAD 34.3 million or CAD 0.17 per share, compared to a net loss of CAD 0.9 million or CAD 0.01 per share in the prior-year quarter [48] Business Line Data and Key Metrics Changes - The company launched 53 new SKUs since July, with 14 more expected to launch before the end of February [10] - Sales of the SHRED product significantly contributed to growth in recreational revenue in Q1, becoming the most searched brand on the Ontario cannabis store website for November and December [21] - The Edison flower portfolio is focused on higher margin products, with new strains launched that have THC ranges of 20% to 26% [12] Market Data and Key Metrics Changes - The Canadian recreational cannabis market is estimated at CAD 3.2 billion, with a significant driver being the increase in the number of retail stores, particularly in Ontario [50] - The number of cannabis retail stores in Ontario grew by approximately 47% to 1,414 stores as of early January 2021 [51] - The recreational cannabis beverage market in Canada represents a potential CAD 467 million opportunity, with a significant majority of consumers preferring to add cannabis to their beverages [27] Company Strategy and Development Direction - The company is focused on revitalizing its product portfolio and has plans to introduce new products under the Edison brand [8] - There is an emphasis on higher margin products and scaling up cultivation and staffing to meet increased demand [32] - The company is exploring opportunities in the U.S. market, particularly in CBD, but has not yet found suitable partners [86] Management's Comments on Operating Environment and Future Outlook - Management acknowledged potential dampening of industry demand due to COVID-19 lockdowns affecting retail sales in Ontario [34] - The company is optimistic about future growth opportunities as it ramps up staffing and production to meet market demand [32] - Management highlighted the importance of maintaining inventory levels to avoid being delisted from retail listings [103] Other Important Information - The company ended the quarter with CAD 134 million in cash and short-term investments, and after paying down a term loan, had a pro forma cash balance of CAD 79 million [39] - The company is investing in automation to drive cost efficiencies and reduce reliance on manual labor [37] - The introduction of a new pre-roll machine is expected to significantly reduce labor costs and increase production efficiency [94] Q&A Session Summary Question: Comments on gross margin profile and product mix - Management indicated that dried flower makes up the greatest proportion of revenue, with a shift towards higher margin Edison products expected to improve gross margins over time [64] Question: Seasonality effects in December - Management noted good responses to seasonal offerings but observed lower revenue in disposable vape pens due to COVID-19 impacts [72] Question: Unabsorbed costs and production utilization - Unabsorbed overhead fixed costs were CAD 2.7 million due to operating at approximately 40% capacity, with expectations for improvement as staffing increases [77] Question: Balance sheet and capitalization levels - Management expressed comfort with the balance sheet, highlighting CAD 79 million in cash and short-term investments after debt repayment [107] Question: Gross margin recovery expectations - Management indicated that achieving previous gross margin levels would depend on reaching higher net cannabis revenue, potentially around CAD 25 million [108]