40-F: Organigram Holdings Inc. Reports Fiscal 2024 Results, Achieves Record Adjusted EBITDA in Q4

Organigram Holdings Inc. reports a 6% increase in net revenue for fiscal 2024, alongside a record adjusted EBITDA of $5.9 million in Q4, and becomes Canada's largest cannabis company by market share following the acquisition of Motif Labs.

Summary

• Organigram Holdings Inc. reported a 6% increase in net revenue for fiscal 2024, reaching $159.8 million, compared to $150.4 million in the comparative fiscal 2023 period.
• The company's adjusted gross margin for fiscal 2024 was 34%, a significant increase from 25% in the comparative fiscal 2023 period, driven by higher international sales and lower production costs.
• Adjusted EBITDA for fiscal 2024 increased by 56% to $8.4 million, compared to $5.4 million in the comparative fiscal 2023 period.
• The company reported a net loss of $45.4 million for fiscal 2024, a significant improvement from the net loss of $247 million in the comparative fiscal 2023 period.
• In Q4 Fiscal 2024, Organigram achieved a record adjusted EBITDA of $5.9 million, or 13% of net revenue, compared to $0.1 million in Comparative Q4 Fiscal 2023.
• The Company's Q4 Fiscal 2024 net revenue increased 22% to $44.7 million, compared to $36.7 million in Comparative Q4 Fiscal 2023.
• Organigram's cash flow from operations was $8.9 million in Q4 Fiscal 2024.
• The Company became Canada's largest cannabis company by market share following the acquisition of Motif Labs subsequent to year end.
• The Company harvested 23,323 kg of flower in Q4 Fiscal 2024, a 10% increase compared to Q4 Fiscal 2023.
• The Company produced 41.5 million gummies in Fiscal 2024, an increase of over 36% compared to Fiscal 2023.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial improvements, strategic investments, and operational efficiencies. The company is showing strong growth and is well positioned for future success.

Positives

• The Company achieved a record adjusted EBITDA of $5.9 million in Q4 Fiscal 2024.
• The Company's adjusted gross margin for fiscal 2024 was 34%, a significant increase from 25% in the comparative fiscal 2023 period.
• The Company's net loss for fiscal 2024 was $45.4 million, a significant improvement from the net loss of $247 million in the comparative fiscal 2023 period.
• The Company's cash flow from operations was $8.9 million in Q4 Fiscal 2024.
• The Company became Canada's largest cannabis company by market share following the acquisition of Motif Labs subsequent to year end.
• The Company harvested 23,323 kg of flower in Q4 Fiscal 2024, a 10% increase compared to Q4 Fiscal 2023.
• The Company produced 41.5 million gummies in Fiscal 2024, an increase of over 36% compared to Fiscal 2023.

Negatives

• The Company reported a net loss of $45.4 million for fiscal 2024.
• The Company's average selling price of recreational flower decreased to $1.50 per gram in fiscal 2024 compared to $1.65 per gram in the comparative fiscal 2023 period.

Risks

• The Company is subject to risks inherent in a high growth, heavily regulated enterprise.
• The Company faces competition from unlicensed and unregulated market participants.
• The Company is subject to risks related to the listing of its Common Shares on the TSX and NASDAQ.
• The Company is subject to risks related to the strategic equity investment from BT DE Investments Inc.
• The Company is subject to risks related to the war between Israel and Hamas and its impact on the supply of product and collection of accounts receivable and the demand for product in Israel.
• The Company is subject to risks related to the outcome of the final Anti-Dumping Investigation in respect of Canadian cannabis exports to Israel.
• The Company is subject to risks related to the ability to develop current and future vapour hardware, and the Company's ability to enter into and expand its share of the cannabis vapour products market.
• The Company is subject to risks related to the ability to generate cost savings from operational effectiveness and automation initiatives.
• The Company is subject to risks related to the ability to meet target production capacity, scale of operations, supply chain and distribution disruptions, facility and technological risks, packaging and shipping logistics.
• The Company is subject to risks related to the potential time frame for the implementation of legislation to legalize cannabis internationally.
• The Company is subject to risks relating to the ability of the Company to obtain and/or maintain their status as a licensed producer.
• The Company is subject to risks relating to the potential size of the regulated adult-use recreational cannabis market, demand for and changes to products.
• The Company is subject to risks relating to the Companys designation as a large accelerated filer, differing shareholder protections across jurisdictions, increased volatility for dual-listed shares, market liquidity risks, investment risk, risks relating to the Companys status as a foreign private issuer in the U.S., risks relating to expansion into new markets, foreign investment risk, risk of corruption and fraud in emerging markets and relating to ownership of real property.

Future Outlook

Organigram expects adjusted gross margin to exceed 35% for Fiscal 2025. It also anticipates positive full-year Adjusted EBITDA surpassing Fiscal 2024 levels, along with positive cash flow from operations.

Management Comments

• 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.
• 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.

Industry Context

The cannabis industry is highly competitive and has historically experienced oversupply. Recently, supply and demand dynamics have stabilized as many LPs have reduced surplus cultivation capacity through M&A and liquidation, with increasing levels of cultivation surplus being directed toward international markets. Consumer trends and preferences continue to evolve, including strong demand in the large format value segment, a desire for higher THC potency particularly in dried flower, as well as a penchant for newness, including new genetic strains and ready to consume products such as infused pre-rolls, vapes, beverages and novel edibles.

Comparison to Industry Standards

• Organigram's adjusted gross margin of 34% for fiscal 2024 is a significant improvement compared to the 25% reported in the comparative fiscal 2023 period, indicating a strong performance relative to industry averages.
• The Company's adjusted EBITDA of $8.4 million for fiscal 2024, a 56% increase compared to the comparative fiscal 2023 period, demonstrates a positive trend in profitability compared to many other cannabis companies.
• The Company's net loss of $45.4 million for fiscal 2024 is a significant improvement from the net loss of $247 million in the comparative fiscal 2023 period, indicating a positive trend in financial performance compared to many other cannabis companies.
• The Company's Q4 Fiscal 2024 adjusted EBITDA of $5.9 million, or 13% of net revenue, is a strong performance compared to the $0.1 million in Comparative Q4 Fiscal 2023, indicating a positive trend in profitability compared to many other cannabis companies.
• The Company's Q4 Fiscal 2024 net revenue increased 22% to $44.7 million, compared to $36.7 million in Comparative Q4 Fiscal 2023, indicating a positive trend in revenue growth compared to many other cannabis companies.
• The Company's cash flow from operations was $8.9 million in Q4 Fiscal 2024, indicating a positive trend in cash flow compared to many other cannabis companies.
• The Company's harvest of 23,323 kg of flower in Q4 Fiscal 2024, a 10% increase compared to Q4 Fiscal 2023, indicates a positive trend in production compared to many other cannabis companies.
• The Company's production of 41.5 million gummies in Fiscal 2024, an increase of over 36% compared to Fiscal 2023, indicates a positive trend in production compared to many other cannabis companies.

Management Changes

Corporate Governance

Legal Proceedings

• The Company was subject to a class action lawsuit related to medical cannabis that was voluntarily recalled in December 2016 and January 2017. The Company reached a settlement in the matter and the Supreme Court of Nova Scotia approved the settlement on August 31, 2022.
• The Company was subject to an Anti-Dumping Investigation in respect of its cannabis exports to Israel. The Israeli Anti-Dumping Commissioner issued a final decision, finding dumping by all Canadian exporters, including the Company. The Israeli Ministry of Health has opposed the Anti-Dumping Commissioner's decision and a final decision on the question of dumping is expected in 2025.
• The Company received a dispute notice from the Laurentian vendors purporting to cover the first year and second year earnout. The Company and the Laurentian vendors have entered into an engagement letter appointing BDO Canada LLP as neutral accountant to review the items in the dispute notice in accordance with the share purchase agreement dated December 21, 2021.

Related Party Transactions

• The Company has transactions with related parties, as defined in IAS 24 Related Party Disclosures, all of which are undertaken in the normal course of business.
• Under the Product Development Collaboration Agreement between the Company and BAT, BAT incurred $3,708 of direct expenses and the Company incurred $9,623 of direct expenses and capital expenditures of $96 related to the Center of Excellence.

Stakeholder Impact

• The Company's commitment to transparency in reporting its carbon emissions is evident in its decision to report emissions by category, showcasing advancements in energy consumption, and logistical optimizations.
• The Company is committed to providing equal opportunity in all aspects of employment and will not tolerate any illegal discrimination, violence or harassment of any kind.
• The Company is committed to investment in the training and development of its employees.
• The Company is committed to its mission of delighting consumers with trusted brands that deliver innovative cannabis products and experiences while promoting education and industry advocacy.
• The Company is committed to its mission of delighting consumers with trusted brands that deliver innovative cannabis products and experiences while promoting education and industry advocacy.
• The Company is committed to its mission of delighting consumers with trusted brands that deliver innovative cannabis products and experiences while promoting education and industry advocacy.

Next Steps

• The Company expects to continue to focus on efficiency, consumer-centric innovation, and international expansion in Fiscal 2025.
• The Company expects to launch new genetics, ready-to-consume innovations, and products containing minor cannabinoid stacks in various formats.
• The Company expects to continue to expand its international sales and customer base.
• The Company expects to continue to leverage lower-cost seed-based technology by targeting approximately 20% of harvests from seeds in Fiscal 2025.
• The Company expects to complete the final tranche of the Follow-on BAT Investment in February 2025.

Key Dates

Keywords

cannabis, licensed producer, Organigram, THC, CBD, vape, edibles, hash, international, market share, financial results, adjusted EBITDA, gross margin, revenue, Motif Labs, BAT, Phylos, Sanity Group, Open Book Extracts, FAST