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OrganiGram Posted Its Q2 Earnings, Stock Fell 12%


Apr. 15 2020, Published 11:41 a.m. ET

OrganiGram (NASDAQ:OGI) reported its results for the second quarter of fiscal 2020 on April 14 before the market opened. As analysts expected, the results weren’t impressive. The stock fell 12% yesterday. OrganiGram missed analysts’ revenue estimates for the second quarter. The company also reported a negative EBITDA, which was a surprise. Let’s discuss how the company performed in the second quarter.

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OrganiGram’s Q2 earnings were disappointing

OrganiGram reported net revenue of 23.2 million Canadian dollars—a decline of 13.7% YoY (year-over-year). The company also missed analysts’ estimate of 24.5 million Canadian dollars. Sequentially, the revenue declined from 25.1 million Canadian dollars in the first quarter of 2020. The company’s recreational net revenue rose 16% YoY to 15 million Canadian dollars. Cannabis 1.0 products represented 52% of the net revenue, while Cannabis 2.0 products represented 13% of the net revenue in the second quarter.

OrganiGram attributed lower recreational flower and oil sales volumes to the decline in its total revenue in the quarter. Also, increased competition caused a reduction in the average net selling price, which also impacted the revenue.

The company reported a lower gross profit of 7.4 million Canadian dollars compared to 16.0 million Canadian dollars in the first quarter of 2020. Sequentially, the gross profit also declined from 9.3 million Canadian dollars in the first quarter.

Profitability took a hit in Q2

Analysts hoped that OrganiGram would continue reporting a positive EBITDA but slightly at the lower end of 2.7 million Canadian dollars. Surprisingly, the company reported a negative EBITDA of 1.09 million Canadian dollars. OrganiGram reported a positive EBITDA of 4.8 million Canadian dollars.

The company stated that the negative EBITDA was due to a higher cost of sales and SG&A expenses in the second quarter. OrganiGram reported a higher cost of sales of 15.8 million Canadian dollars and higher SG&A expenses of 14 million Canadian dollars. The company had 41.2 million Canadian dollars in cash and short-term investments at the end of the quarter.

OrganiGram also discussed the launch and shipment of its Cannabis 2.0 products in December 2019. The products include Trailblazer Spark, Flicker, and Glow 510-thread Torch vape cartridges.

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OrganiGram plans to launch Edison + PAX ERA® distillate cartridges and other vape products by the second quarter of 2020. The company also received Health Canada’s approval for its Phase 5 expansion during the second quarter. However, due to the COVID-19 situation, the company plans to expend its funds at a slower pace.

Outlook and COVID-19 situation

OrganiGram stated that it will stay operational to meet demands. The company will take all of the necessary measures as instructed by health authorities. Recently, the company also announced that it will temporarily lay off approximately 400 employees amid the COVID-19 crisis. OrganiGram thinks that cultivation, harvest, and production will be challenging. However, the company thinks that it has enough inventory to handle short-term demand. OrganiGram will postpone the production of lower-margin products and products that require higher manual labor.

OrganiGram stock took a hit after its second-quarter results. Although analysts expected disappointing results, the numbers still missed the estimates. At 10:27 AM ET, the stock has fallen 3.4% today.

Meanwhile, Aphria (NYSE:APHA) reported impressive third-quarter results on Tuesday. The stock closed 4.9% higher. To learn more, read Aphria Reported Impressive Q3 Results, Beat Expectations.

Today, Aphria stock has risen 3.4%, while Aurora Cannabis (NYSE:ACB) stock is trading lower due to its reverse stock split decision. Aurora Cannabis stock has fallen 5.1% today. Other cannabis stocks including Hexo (TSE:HEXO) and Cronos Group (NASDAQ:CRON) have risen 2.3% and 1.5%, respectively, today.


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