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OrganiGram Records Strong Growth and Sees Significant Margin Expansion

Jan 24, 2017 • 1:07 PM EST
2017 out.png
5 MIN READ  •  By Michael Berger
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Earnings are out and new information pertaining to the recent product recall has been provided…

Organigram Holdings (OGI.V) (OGRMF) reported its financial results for the quarter that ended on November 30th.

The company also provided an update in regard to its recent voluntary recall, the quantified impact to its financial statements, as well as some of the immediate and voluntary corrective actions and policies that have been implemented as a result of it.

Continues to Grow at Rapid Rates

The first quarter showed tremendous growth when compared to the same period last year and Organigram is well positioned for continued growth.

When compared to the same quarter last year, Organigram sold 82% more grams of cannabis flower and sales increased by more than 120% during this time. At the same time, the company also saw significant gross margin expansion (from 55% to 65%).

The company recorded a $750,000 net loss on $2.23 million in revenue. OrganiGram sold 260,291 grams of cannabis flower and 77,200 milliliters of cannabis oil. The company generated adjusted EBITDA of $272,839 and cash flow of $510,015.

Although Organigram reported a larger net loss when compared to the prior year’s quarter, adjusted earnings-before-interest-taxes-depreciation- amortization (EBITDA) and cash flow improved significantly.

Product Recall Update

In connection to the product recalls in December 2016 and January 2017, Organigram has communicated extensively with its customers, regulators, and licensed labs regarding the issue and origin of the ingredients.

As a result of the recall, the unrealized fair value adjustment of inventory includes a loss of $499,857 for the announced quarter and there may be further adjustments to the unrealized fair value of biological assets and inventory.

The company took immediate and comprehensive corrective measures within its operating and quality assurance procedures to ensure such an event does not re-occur. Organigram is working closely with Health Canada to determine the origin of the non-permitted ingredients.

Since the voluntary product recall, Organigram has successfully harvested and tested new batches of organic as well as non-organic medical cannabis and has maintained inventory in its online store to ensure Organigram patients do not go without medication.

From the CEO

Organigram CEO Denis Arsenault said, “Organigram, like many of the first movers in this emerging industry, has experienced incredible growth in our business, operating infrastructure, and within our team. We have also faced challenges and setbacks as the regulations that govern our industry and the market in which we operate continues to evolve. Thanks to the prompt action of our team, the understanding and loyalty of our patients and investors, the support of our licensed testing counterparties, and the collaboration and oversight of our industry’s regulators, the Company has been able to address these challenges and setbacks immediately and definitively. This process, the required action and disclosure, combined with the necessity for each producer to track every product in the regulated cannabis market highlights that the Canadian cannabis regulatory system works, that Canadian consumers are being protected, and that the regulations governing the cannabis market in Canada provide a gold standard for the world to follow”

Outlook is Bright as Company Expands

Organigram has made significant progress with its onsite expansion initiatives and provided additional details relating to the phase 3 expansion, which is expected to be completed and operational by December. The expansion should increase Organigram’s run-rate production capacity to 17,000 kg per year by early 2018.

We remain bullish on the company’s long-term outlook and see value on further weakness. Investors looking for an undervalued, long-term growth opportunity should keep an eye on OGI and OGRMF.



Important Investor Disclosures 

Disclosure.  Compensated Affiliate.  This report was authored by and is property of StoneBridge Partners LLC.  All information and data relied upon in drafting this report is publicly available.  The author believes and considers its sources to be reliable, but does not guarantee the accuracy or completeness of any information contained in this report.  Any and all information, data, analyses and opinions are provided for informational purposes only and is not intended, in any manner, as investment advice.  Any projections or other information generated by StoneBridge Partners LLC regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.  None of the material contained in this report is intended as a solution or offer to sell or purchase a specific stock or any other investment.  This report is not directed to, or intended for distribution or use by, any person or entity that is a citizen, resident or located in any municipality, state, country or other jurisdiction where the distribution, publication, availability, or use of this report is contrary to any governing law or regulation.  The securities discussed in this report may not be eligible for purchase and/or sale in certain jurisdictions or by particular individuals.  It is important that you check any and all governing laws and/or regulations that may be applicable in your jurisdiction.  Investing in securities of issuers organized outside of the United States, including ADRs, entail certain risks.  The securities of non-United States issuers may not be registered with, nor be subject to the reporting requirements of the United States Securities and Exchange Commission.  Please contact a Financial Advisor for professional advice regarding any and all securities investments.  This report is intended for informational purposes only.  StoneBridge Partners LLC’s officers, directors, employees, affiliates, or subsidiaries may have positions in securities covered by StoneBridge Partners LLC.  StoneBridge Partners LLC receives compensation from the company and/or has a position in the securities mentioned in this report

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Authored By

Michael Berger

Michael Berger is Managing Partner of StoneBridge Partners, LLC and Founder of Prior to entering the cannabis industry, Michael was an Equity Research Analyst at Raymond James Financial covering the Energy Sector. Michael has been featured in publications such as The Street, Bloomberg, US Money News, and hosts various cannabis events across North America.


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