OrganiGram Holdings Inc. (OGI) stock declines by 8.75% in the current market trading. Organigram is focused on growing high-quality, indoor-grown cannabis for Canadian patients and adult recreational users, as well as forming foreign commercial relationships to expand the company’s global presence. The Edison Cannabis Company, Indi, Bag o’ Buds, SHRED, and Trailblazer are among the adult-use recreational cannabis products produced by Organigram
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Financial Results
On April 13, 2021, OGI has reported its second-quarter fiscal 2021 financial results. Given below is the summary:
- The decline in net revenue from Q2 2020 to Q2 2021 was largely attributed to lower wholesale revenue and a lower effective selling price in Q2 2021. Owing to lost business opportunities as a result of some workers testing positive for COVID-19, a large amount of facility personnel had to isolate in Q2 2021, net income was also smaller.
- Higher Q2 2021 cost of sales was largely characterized by higher inventory provisions, a higher cost of revenue, and a charge attributable to unabsorbed fixed overhead as a result of lower Q2 2021 production levels.
- Because of the negative Q2 2021 gross margin before fair value changes to biological properties, inventories sold, and other costs as mentioned above, as well as net non-cash negative fair value shifts to biological assets and inventories sold in Q2 2021 versus positive changes in Q2 2020, Q2 2021 gross margin was negative relative to positive Q2 2020 gross margin.
- Negative adjusted EBITDA in Q2 2021 fell from positive adjusted EBITDA in Q2 2020, owing to lower adjusted gross margin in Q2 2021.
- The unfavorable improvement in the market valuation of the derivative warrant obligations and the negative operating margin in Q2 2021 contributed to a higher net loss in Q2 2021 than in Q2 2020.
Liquidity and Capital Resources
- OGI repaid all revolving balances under its credit arrangement with BMO and a syndicate of lenders on April 1, 2021, preserving $2.7 million in annual interest (based on the outstanding balance at the time of repayment).
- As of now, OGI has $232 million in liquidity and short-term deposits on hand.
- Currently, Organigram plans to terminate the Credit Agreement and release the associated protections.
