Organigram revenue stalls on erratic inventory, unfulfilled demand

New Brunswick-based cannabis producer Organigram continues to struggle, reporting lower sales and a bigger loss for its first quarter ended Nov. 30, 2020.

Net revenue for the three-month period fell to 19.3 million Canadian dollars ($15 million), lower than the previous quarter’s CA$20.4 million.

Organigram’s adjusted EBITDA loss grew to CA$6.4 million from a loss of CA$2.6 million in the previous quarter.

Net loss for the quarter was CA$34.3 million.

In a conference call with analysts, the company’s CEO said inconsistent inventory and lower international sales hit Organigram’s bottom line.

“We had unfulfilled (product orders) in the quarter. One of the challenges we’ve had, truly, is inconsistent supply of many of our products,” CEO Greg Engel said.

“There’s kind of a lost opportunity there, where we’ve not been able to fulfill the market demand,” he said. ”

We believe with increased production, we are in a great position to be able to continue to increase share on products like (Shred, a pre-shredded dry flower) and some of our core new offerings.”

The CEO said the company had between CA$5 million and CA$6 million in product orders it was not able to fulfil in the quarter, though some of those orders were addressed after the Nov. 30 quarter ended.

International sales collapsed to only CA$240,000, considerably lower than the previous period’s CA$2.6 million in global revenue.

Organigram said the Israeli Ministry of Health amended its quality standards for imported medical cannabis last year, requiring the New Brunswick producer to seek Good Agricultural Practices certification.

The company expects to resume shipments to Israel after receiving the certification as early as the third quarter.

Organigram’s CA$19.3 million in revenue consisted of:

  • Adult-use cannabis products (CA$16.8 million).
  • Medical cannabis sales (CA$2.2 million).
  • International sales (CA$240,000).
  • Wholesale sales and other revenues (CA$115,000).

In a regulatory filing, Organigram said its decrease in gross margin quarter-over-quarter was partly attributable to inventory write-downs (CA$3.1 million) and unabsorbed overhead (CA$2.3 million).

As of Dec. 1, Organigram had cash and short-term investments of CA$79 million, with CA$60 million owing on its term loan.

Engel told analysts the company continues to see the United States as an opportunity but added: “There isn’t a clear path as a Canadian company dual listed (as OGI) on the Nasdaq and (Toronto Stock Exchange), with the regulations that exist there currently, to enter the U.S. in the THC market.

“Our approach is really about developing branded products, innovation and technology we feel will lend itself to the market, and that may be something we look to license out or we look to do ourselves in the future as the regulations allow.”

On the proposed merger of Canadian cannabis giants Aphria and Tilray, announced in December, Engel said “bigger does not necessarily mean better.”

“Some of our larger peers have shuttered multiple facilities,” he said, adding that the potential merger might be more about international markets than the Canadian market.

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