Results to August
31, 2018 showcase a Canadian leader in low-cost cultivation
while growing high-quality indoor product
MONCTON, NB, Dec. 14, 2018 /CNW/ - Organigram Holdings Inc.
(TSX VENTURE: OGI) (OTCQX: OGRMF), the parent company of Organigram
Inc. (the "Company" or "Organigram"), a leading licensed producer
of cannabis, is pleased to announce its 2018 fiscal year and
fourth quarter results. The Company's fiscal year-end and fourth
quarter encompasses operations up to and including August 31, 2018 and as a result, does not include
adult-use recreational cannabis revenue.
"The importance of 2018 can not be overstated for Organigram as
well as the industry," said Greg
Engel, the Company's Chief Executive Officer. "We are
incredibly proud of our ability to meet the challenges of scaling
our business in preparation for the adult recreational use market.
We are pleased with our progress to date and believe that we have
performed well in a highly competitive space while always
maintaining a sustainable cost structure. Ultimately, it is our
view that our Moncton Campus will be seen as a crown jewel in the
industry as it is able to produce consistent, high-quality indoor
grown product at scale to support our brands with the lowest dried
flower cultivation costs reported to date in Canada."
Select Highlights for Fiscal 2018
The Company is proud to report record net sales of $12.4 million for the 2018 fiscal year (up 131%
from $5.4 million in 2017).
Gross margin increased to $52.5
million in 2018 from $(3.3)
million in 2017. Excluding fair value adjustments on
biological assets those figures would be $6.5 million and $(1.9)
million, respectively.
Registered medical patients increased to 15,730 in 2018 from
7,404 in 2017 or 112%.
Reported net income of $20.5
million in 2018 up from $(10.9)
million in 2017.
Outlook
Fiscal 2019 sales will be dominated by adult recreational use
revenue and the Company estimates that Q1, 2019 sales will exceed
that of the full year for fiscal 2018, despite only a portion of
Q1, 2019 including adult recreational use market sales. Further,
the Company expects that Q2, 2019 sales will exceed Q1, 2019 sales
based on purchase orders received to date.
The Company reported biological assets and inventories of
$19.9 million and $45.0 million, respectively, as of August 31, 2018. The Company believes that these
balance sheet categories are an important indicator of a licensed
producer's ability to service its medical and adult recreational
customer.
The Company continues to add resources to refine and streamline
its packaging, excise stamp application and logistics processes to
draw down its dried flower and oil inventories to meet ongoing
demand.
Based on media coverage and physical presence in stores, the
Company is confident that it currently has the leading market share
position in the Maritime provinces of New
Brunswick, Nova Scotia and
Prince Edward Island with a strong
presence in Alberta, Manitoba, Newfoundland and Ontario.
Operational Highlights (also includes events after
year-end)
Sales and Marketing
- The Company has signed adult-use recreational supply deals or
listing agreements with customers in nine out of the ten Canadian
provinces (Quebec is the
exception) and has already shipped to all nine of those provinces.
Quebec remains a target for
2019.
- Organigram has received positive feedback from its
jurisdictional partners on fill rates as it has been proactive in
setting and managing expectations as a reflection of its focus on
long-term relationship building. Further to this, the Company has
hired a national sales force from Tier 1 organizations to detail
and educate retail staff on its brands.
- The Company has successfully launched its Edison Cannabis
Company brand focused on the four pillars of quality,
sophistication, creativity and innovation as well as the Edison
Reserve line which features hand-manicured and craft-cured top
flower. The Company has also launched the Trailblazer brand, as a
celebration of the industry's history for value-focused consumers.
The Company anticipates launching its ANKR Organics and
Trailer Park Buds lines in calendar 2019.
- In October 2018, the Company was
one of few licensed producers to successfully enter the adult
recreational use market with a full line of compliant products
including dried and milled flower, cannabis oil and pre-rolls.
Cultivation and Other Operations
- Completion of Phase 2 and Phase 3 expansions at the Moncton
Campus bring the total available grow rooms to 52 (13 smaller grow
rooms from Phase 1 and 39 larger rooms from Phases 2 and 3). When
fully utilized, these grow-rooms have a targeted production
capacity of 36,000 kg/yr of dried flower (or equivalent)
production.
- Significant improvements in cash and all-in "cost of
cultivation" from beginning of the year to end of the year. "Cost
of cultivation" is a non-IFRS measurement that the Company tracks
to assess the cost of the raw material that is ultimately sold or
before it is extracted. "Costs of cultivation" includes direct
labour, direct materials, and allocated overhead related to
cultivation as well as non-cash measures such as depreciation and
stock option compensation related to the operations department.
Readers should be cautioned that this figure excludes packaging,
shipping and SG&A and is not necessarily comparable between
licensed producers. For internal purposes, the Company estimates a
blended packaging estimate of $0.46
per dried flower gram equivalent and a blended shipping estimate of
$0.19 per dried flower gram
equivalent. These figures are estimates only.
- "Cost of cultivation" is tracked as follows throughout the
year:
|
Cash Cost
|
Non-Cash
|
Total
|
Q1-2018
|
$2.12
|
$0.53
|
$2.65
|
Q2-2018
|
$1.24
|
$0.24
|
$1.48
|
Q3-2018
|
$0.66
|
$0.14
|
$0.80
|
Q4-2018
|
$0.62
|
$0.21
|
$0.83
|
- On October 24, 2018 the Company
began utilizing power from a new 40 megawatt substation which
provides the Company with a cleaner electrical supply, improves the
Company's electrical consumption efficiency and lowers the
Company's maintenance cost on equipment.
- Phase 4 construction at the Moncton Campus began in
July 2018. Phase 4 itself will be
completed in stages: 4A, 4B and 4C.
Phase 4A is expected to come online in April
2019 with 31 grow rooms, 4B in
August 2019 with 32 grow rooms and 4C
in October 2019 with 29 grow rooms
bringing the Company's target production capacity to 62,000 kg/yr,
89,000 kg/yr and 113,000 kg/yr respectively.
Other Milestones and Strategic Initiatives
- First International Medical Shipments – on July 6, 2018 and on September 24, 2018 the Company fulfilled its
first shipments of dried flower and cannabis oil respectively to an
Australian medical cannabis enterprise.
- Investment in Hyasynth – on September
13, 2018 the Company entered into a strategic investment in
convertible secured debentures of Hyasynth Biologicals Inc., a
biotech company based in Montreal
and leader in the field of cannabinoid science and biosynthesis.
The initial investment of $5 million
can increase up to $10 million upon
achievement by Hyasynth of certain funding milestones. In addition
to the investment, pursuant to an offtake agreement, Organigram has
the right to purchase 25% of Hyasynth's cannabinoid production at a
discount. Hyasynth's patent‐pending enzymes, genetically engineered
yeast strains and processes make it possible to produce
phytocannabinoids and phytocannabinoid analogues through
biosynthesis. To date, Hyasynth has already used its proprietary
enzymes and yeast strains to produce CBG, CBD and THC and is
currently in the process of scaling up to commercial production for
cannabinoids to be used in novel and specialized products,
including vaporizable cannabis products and cannabis‐infused
beverages, as well as pharmaceutical ingredients for a fraction of
the cost of traditional plant‐based production. Hyasynth will
continue to develop a comprehensive platform of cannabinoids beyond
THC, CBD and CBG for both medical and adult recreational use.
- Investment in Eviana – on October 2,
2018 the Company completed a $5
million investment into Eviana Health Corporation, a CSE
listed company with hemp operations in Serbia. Organigram entered
into an offtake agreement with Eviana for up to 25% of the CBD
production of Eviana for a period of five years at 95% of the
wholesale price. Eviana holds certain assets in Serbia relating to
the cultivation of industrial hemp plant including but not limited
to: 310 metric tonnes of harvested hemp from 2017 to 2018; a 40,000
sq ft processing facility in Mladenovo, Serbia (near Novi Sad); and
a 22,000 sq ft. pharma-grade leased facility in Belgrade which houses ethanol and CO2
extraction equipment.
- Investment in Alpha-Cannabis Germany - on October 17, 2018 the Company announced a
definitive agreement whereby the Company makes a 1.625 million Euro (approximately $2.44 million CAD) investment in Alpha-Cannabis
Germany paid in cash with another 875,000
Euros (approximately $1.35
million CAD) payable on the achievement of certain
milestones. As part of the investment and effective upon the
closing of the investment, the Company's wholly‐owned subsidiary,
Organigram Inc. will enter into two supply agreements with ACG: one
for the supply of cannabidiol isolate from ACG to Organigram Inc.,
and the other for the supply of dried cannabis flower from
Organigram Inc. to ACG. In addition, ACG and Organigram Inc.
anticipate entering into an agreement pursuant to which the
companies will jointly evaluate and bid on certain licenses to
supply medical cannabis to the German market.
Financial Highlights
The following results do not include any of the sales to the
adult recreational use market which began in September to fill
supply pipelines for adult recreational use launch on October 17, 2018. Those sales will be reflected
in the first quarter of fiscal 2019 which includes the three-months
ended November 30, 2018.
Summary of Financial Results
(in $000 except for
per share amounts)
|
Q4-2018
|
Q4-2017
|
Inc.
(Decr.)
|
|
Fiscal
2018
|
Fiscal
2017
|
Inc.
(Decr.)
|
|
|
|
|
|
|
|
|
Sales
|
3,205
|
1,822
|
76%
|
|
11,936
|
7,417
|
61%
|
Sales recovery
(returns)
|
8
|
-
|
n/m
|
|
493
|
(2,028)
|
n/m
|
Net sales
|
3,213
|
1,822
|
76%
|
|
12,429
|
5,389
|
131%
|
Cost of sales (incl.
indirect production)
|
1,356
|
1,413
|
-4%
|
|
5,948
|
7,317
|
-19%
|
Gross margin
(excluding FV adjustment)
|
1,857
|
409
|
354%
|
|
6,481
|
(1,928)
|
n/m
|
FV adjust on bio
assets and inventories
|
30,846
|
265
|
11,540%
|
|
46,018
|
(1,369)
|
n/m
|
Gross
margin
|
32,703
|
674
|
4752%
|
|
52,499
|
(3,297)
|
n/m
|
|
|
|
|
|
|
|
|
General and
administrative
|
1,601
|
1,030
|
55%
|
|
5,552
|
3,276
|
69%
|
Sales and
marketing
|
2,326
|
761
|
206%
|
|
6,303
|
2,825
|
123%
|
Share-based
compensation (non-cash)
|
1,172
|
916
|
28%
|
|
4,228
|
1,703
|
148%
|
|
|
|
|
|
|
|
|
Net financing costs
(income)
|
3,860
|
(76)
|
n/m
|
|
8,639
|
(288)
|
n/m
|
Income tax
expense
|
5,653
|
-
|
n/m
|
|
5,653
|
-
|
n/m
|
Net income (loss)
from continuing operations
|
18,091
|
(1,957)
|
n/m
|
|
22,124
|
(10,813)
|
n/m
|
Loss from
discontinued operations
|
(74)
|
(76)
|
-3%
|
|
(1,611)
|
(76)
|
2020%
|
Net income
(loss) and comprehensive income
|
18,017
|
(2,033)
|
n/m
|
|
20,513
|
(10,899)
|
n/m
|
|
|
|
|
|
|
|
|
Net income (loss)
from continuing operations per common share, basic
|
$0.157
|
$(0.020)
|
n/m
|
|
$0.184
|
$(0.111)
|
n/m
|
Net income (loss)
from continuing operations per common shares, diluted
|
$0.152
|
$(0.020)
|
n/m
|
|
$0.174
|
$(0.111)
|
n/m
|
Net income (loss)
from discontinued operations per common share, basic
|
$(0.001)
|
$(0.001)
|
n/m
|
|
$(0.013)
|
$(0.001)
|
1200%
|
Net income (loss)
from discontinued operations per common shares, diluted
|
$(0.001)
|
$(0.001)
|
n/m
|
|
$(0.013)
|
$(0.001)
|
1200%
|
Selected Balance Sheet Highlights and Financial
Position
(in $000)
|
Aug-31-2018
|
Aug-31-2017
|
Inc.(Decr.)
|
|
|
|
|
Cash and short-term
investments
|
130,064
|
33,957
|
283%
|
Biological
assets
|
19,858
|
2,780
|
614%
|
Inventories
|
44,969
|
2,626
|
1,612%
|
Other current
assets
|
8,323
|
5,304
|
57%
|
Property, plant and
equipment
|
98,639
|
45,346
|
118%
|
Other non-current
assets
|
714
|
2,795
|
-74%
|
Total
assets
|
302,567
|
92,808
|
226%
|
|
|
|
|
Current
liabilities
|
11,250
|
6,649
|
69%
|
Non-current
liabilities
|
106,723
|
3,129
|
3,311%
|
Total
liabilities
|
117,973
|
9,778
|
1,107%
|
|
|
|
|
Shareholders'
equity
|
184,594
|
83,030
|
122%
|
Total Liabilities and
Shareholders' Equity
|
302,567
|
92,808
|
226%
|
Capital Structure
|
Aug-31-2018
|
Aug-31-2017
|
|
(in $000)
|
|
|
|
Long-term
debt
|
$
2,877
|
$
3,129
|
|
Convertible
debentures carrying value
(with face
value in parenthesis)
|
95,866
(110,329)
|
-
|
|
Deferred tax
liability
|
7,980
|
-
|
|
Shareholders'
equity
|
184,594
|
83,030
|
|
Total long-term debt
and shareholders' equity
|
$
291,317
|
$ 86,159
|
|
|
|
|
|
(in 000s)
|
|
|
|
Outstanding
shares
|
125,208
|
103,595
|
|
Options
|
7,710
|
6,352
|
|
Warrants
|
8,087
|
4,329
|
|
Restricted share
units
|
145
|
-
|
|
Convertible
debentures (if converted at $5.42)
|
20,845
|
-
|
|
Fully-diluted
shares
|
161,995
|
114,276
|
|
|
|
|
|
Prior to year-end August 31, 2018,
approximately $2 million of face
value of debentures were converted into common shares at a
$5.42 conversion price. Subsequent to
year-end, approximately $15 million
more of face value of debentures were converted into common shares
leaving approximately $98 million of
the face value of debentures outstanding.
Outstanding share count as at December
12, 2018 is as follows:
(in 000s)
|
|
Outstanding
shares
|
129,549
|
Options
|
7,571
|
Warrants
|
7,196
|
Restricted share
units
|
145
|
Convertible
debentures (if converted at $5.42)
|
18,095
|
Fully-diluted
shares
|
162,556
|
About Organigram Holdings Inc.
Organigram Holdings Inc. is a TSX Venture Exchange listed
company whose wholly owned subsidiary, Organigram Inc., is a
licensed producer of cannabis and cannabis-derived products in
Canada.
Organigram is focused on producing the highest-quality,
indoor-grown cannabis for patients and adult recreational consumers
in Canada, as well as developing
international business partnerships to extend the company's global
footprint. In anticipation of the legal adult use recreational
cannabis in Canada, Organigram has
developed a portfolio of brands including The Edison Cannabis
Company, Ankr Organics, Trailer Park Buds and Trailblazer.
Organigram's primary facility is located in Moncton, New Brunswick and the Company is
regulated by the Cannabis Act and
theregulations under the Cannabis Act.
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in policies of the TSX Venture
Exchange) accepts responsibility for the adequacy or accuracy of
this release.
This news release contains forward-looking information which
involves known and unknown risks, uncertainties and other factors
that may cause actual events to differ materially from current
expectations. Important factors - including the availability of
funds, consummation of definitive documentation, the satisfaction
of closing conditions including the receipt of any required
regulatory approvals, the results of financing efforts, supply
risks, construction risks, changes in law and regulation, industry
competition, crop yields - that could cause actual results to
differ materially from the Company's expectations are disclosed in
the Company's documents filed from time to time on SEDAR (see
www.sedar.com). The forward-looking estimates of additional
production capacity are based on a number of material factors and
assumptions including that: The facility sizes will be as estimated
with the same amount of cultivation space being used per grow room
for cultivation as in Phases 2 and 3; The ratio of dried cannabis
cultivated per canopy square foot of grow room will be consistent
with historical output in the Company's existing facilities; All
grow rooms designated as grow rooms will be utilized for their
intended purposes (from time to time rooms may be used for other
purposes, such as for storage); Construction of the facilities will
be on time in accordance with the estimates in time to meet the
target onboarding dates. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as
of the date of this press release. The Company disclaims any
intention or obligation, except to the extent required by law, to
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
The financial information in this news release contains certain
financial performance measures that are not defined by and do not
have any standardized meaning under IFRS and are used by management
to assess the financial and operational performance of the Company.
These include but are not limited to target production capacity;
cost of cultivation per dried flower harvested (both "cash" and
"all-in"); Gross margin (excluding fair value adjustments);
Adjusted net profit; Adjusted EBITDA and Cash flow. The Company
believes that these non-IFRS financial measures, in addition to
conventional measures prepared in accordance with IFRS, enable
investors to evaluate the Company's operating results, underlying
performance and prospects in a similar manner to the Company's
management. These non-IFRS financial performance measures are
defined in the sections in which they appear. As there are no
standardized methods of calculating these non-IFRS measures, the
Company's approaches may differ from those used by others, and
accordingly, the use of these measures may not be directly
comparable. Accordingly, these non-IFRS measures are intended to
provide additional information and should not be considered in
isolation or as a substitute for measures of performance prepared
in accordance with IFRS.
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SOURCE OrganiGram