Organigram Global Inc.

My name is Michelle, and I will be your conference operator today. At this time, I would like to welcome everyone Organigram Holding Inc.' 's fourth quarter full year 2020 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. We ask you to limit yourself to one question and one follow-up question. You may recue if you have further questions. As a reminder, this conference call is being recorded and replay will be available on Organigram's website. At this time, I would like to introduce Amy Schwamm, Vice President, Investor Relations. Please go ahead.

Thank you, Michelle. Joining me today are Organigram's Chief Executive Officer, Greg Engel, Chief Financial Officer, Derek West, and our Chief Strategy Officer, Paolo De Luca. Before we begin, I would like to remind you that today's call will include estimates and other forward-looking information from which our actual results could differ. Please review the cautionary language in today's press release regarding various factors, assumptions and risks that could cause our actual results to differ. Furthermore, during this call, we will refer to certain non-IFRS measures, including adjusted EBITDA and adjusted gross margin. These measures do not have any standardized meaning under IFRS and our approach in calculating these measures may differ from that of other issuers and so may not be directly comparable. Please see today's earnings report for more information about these measures. I will now hand the call over to Greg.

Thanks, Amy. Good morning and thank you for joining us today. This morning we reported our fourth quarter and full year fiscal 2020 results for the period ended August 31st. For the full year, gross revenue was $103.4 million and we grew net revenue, which excludes excise taxes to approximately $87 million. We are also very pleased to report positive adjusted EBITDA for the second year in a row. Most of our discussion today will be centered on our Q4 results as the first three quarters of the year have been addressed in past calls. Since we last spoke with you in July, our product portfolio has changed quite dramatically as we said it would. We've launched 40 new SKUs, including some novel products across a number of categories and segments, and there's still more to come. At the same time, this is all being against a backdrop of meaningful growth for the Canadian adult rec market. It's been exciting to do this as we continue to plant the seeds for long-term growth and challenges presented by the global pandemic. Our Q4 2020 net revenue grew 25% from the prior year period and 13% from Q3 2020. We had higher flower sales in Q4 2020 as the large format value segment continued to grow and our expanded offerings in this segment resonated well with consumers. And of course, REC 2.0 sales contributed to our growth as a year ago the products were not yet legal. Lastly, we were extremely pleased to make our first shipment to Israel under our supply agreement with CanDoc, a leading Israeli medical cannabis producer. To date, this is Organigram's largest international deal and we're CanDoc's exclusive supplier of indoor-grown cannabis. As you may know, the Israeli Ministry of Health recently amended its quality standards for imported medical cannabis. Very encouragingly, we recently identified a plan to comply with these updated standards and believe that we can continue to supply the product into the Israeli market once it is successfully implemented. Q4 2020 gross revenue increased 32% versus the net revenue increase of 25% from the same period last year. Gross revenue better reflects the magnitude of sales volume shipments, especially since dried flower represents the largest category in cannabis by far. As average selling prices per gram had decreased in the industry, the percentage of excise tax of the gross sale price has increased significantly. Therefore, to achieve the same level of net revenue, more dried flower has to be sold as compared to last year. As we guided with last quarter's results, we did not expect significant growth in our adult use rec sales in Q4 due to the timing of our launches as part of a broad portfolio revitalization. Introducing 40 new SKUs since July has been extremely busy, particularly as the industry began growing at an accelerated pace. Coupling this with the fact that we had a leaner workforce, which not only reduced cultivation levels, but also processing and packaging capacity, these factors contributed to certain launch delays and missed purchase order fulfillments in late Q4 and to some degree in Q1 too. In some ways, a number of our products were a victim of their own success, with better than expected initial sales such that we had stock outs. Shred was one example. We are valuing our processes and supply chain, including the benefit of gradually scaling up staffing to improve order fulfillment rates and realize more sales opportunities. We are progressing well through our portfolio revitalization with up to 18 new SKUs expected in Q2 fiscal 2021 and remain committed to offering innovative products, We conduct proprietary consumer research to help us identify the attributes that cannabis consumers want most, and we're very encouraged by the initial reaction we're getting and early signs of success for many of our new products. I will take a moment to recap some of the more notable ones. Across REC 1.0 and 2.0, dried flower remains the largest category in the Canadian adult use REC market, and we believe it will continue to dominate based on what we've seen in more mature markets in the U.S., There has been significant growth in the dried flower large format value segment, and competition has intensified. With the onset of the pandemic, value products in large format were increasingly the focus of consumers, as many of them either were forced to or preferred to order online or take advantage of curbside pickup or delivery. Our first value offering in a large format, originally entitled Trailer Park Buds, which is now simply known as Buds, launched in fiscal Q3, and we believe it doesn't just compete on price alone. It offers product that is indoor grown, whole dried flower, and strain specific. Our value segment strategy also includes dried flower offerings that were launched in larger format sizes of 7 gram and 15 gram under the Trailblazer brand. In mid-September, we expanded our value portfolio with the launch of Shred. This product continues to perform well for us, and we are seeing retail stores sell out where it is carried. It really resonates with consumers that it is high-quality, high-potency dried flower that is pre-shredded for convenience at our Granogram's most affordable price currently offered on a per gram basis, and it is made from whole flower. High-potency THC continues to be a key attribute for consumers as well as cultivar diversity. In early August, we launched three new THC strains under the Edison Cannabis Company brand. The General, or under its street name Grapefruit GG4, Chemdog, and a limited time offering Samurai Spy or its cultivar named Ninja Fruit. Going forward, we will consider using street generic names for many dried flower products to the extent we believe they will resonate even better with consumers. We are making investments in new genetics and improved cultivation process to increase THC potency and will introduce new strains into the highly important dried flower and pre-rolls category. In addition to REC 1.0, we plan to expand our REC 2.0 offerings. which we think will become a larger relative category, more in line with mature U.S. legal markets. At the end of July, we launched Trailblazer Snacks, our cannabis-infused chocolate bar in mint and mocha flavors. With 10 milligrams of THC in every bar, each of the five sections of the bar are filled separately, which allows for a higher accuracy of infusion and microdosing. Treblazer Snacks is our value segment chocolate offering and our second product type in the chocolate category after launching Edison Bites in four SKUs earlier this year. In time for the holidays, we also announced the launch of a fifth Edison Bite chocolate in the seasonal gingerbread flavor for a limited time. These only came to market recently, but initial sales have been amongst the top sellers in their subcategories. In addition to the gingerbread bites, we've also offered another limited time only seasonal product, Trailblazer Kushma Sticks, an affordable 0.5 gram pre-roll in a festive green box that is a perfect basket add-on or stocking stuffer just in time for the holiday season. Turning to our vape portfolio, we offer products for the value mainstream and premium segments of the market already with the Trailblazer Torch Cartridges, Edison Plus Feather Disposable Pens, and Pax Era Cartridges. Before the end of fiscal Q2, we expect to launch Trailblazer 510 torch vape cartridges in a 1 gram format. This will extend our lineup to a suite of trial size at 0.5 gram and full size 1 gram cartridges for the 510 vaporizer. Lastly, branding out our Rec 2.0 portfolio is our reticin remix dissolvable powder. This product just landed in some provincial retail stores, so we don't have an initial sales read yet, but recent data in Colorado, for example, show cannabinoid-infused powders have quickly risen in popularity, comprising 55% of the state's beverage market. In fact, 46% of cannabis consumers reported enjoying cannabinoid-infused beverages multiple times a day, according to headset data. In Canada, estimates suggest that the cannabis adult-use beverage market is a $467 million opportunity, as it is expected to increase by 15-fold its current market size over the next five years as per the Brightfield Group. We also conducted a survey recently which indicated a large majority of consumers would prefer to add cannabis to their drink rather than consume a pre-mixed cannabinoid-infused beverage. With traditional edibles, beverages, and ingestible oil-based extracts, the body spends significant time breaking down fat-soluble cannabinoid particles before they can be absorbed and before effects are felt. Our R&D team developed a proprietary nanomulsification technology that generates nanodroplets which are very small and uniform for Edison Remix. We believe Remix provides enhanced bioavailability, both improved speed of absorption and improved total absorption compared to traditional edibles and beverages, potentially allowing for a more reliable and controlled experience. The nanomulsion technology is also anticipated to have increased stability to temperature variations mechanical disturbance, salinity, pH, and sweeteners. The powder formulation also offers the discretion, portability, and shelf life expected of a dried powder formulation. Before I pass the call over to Derek, I do want to highlight a couple of recent achievements that occurred subsequent to quarter end. First, as announced in October, we invested an additional $2.5 million in Hyacinth Biological Zinc, a cannabinoid biosynthesis company. Additional investment was tied to a successful completion of a milestone linked to the first commercial sale of CBDA. CBDA is a natural precursor to the naturally occurring form of CBD, which is converted to CBD in processing. The product was manufactured through the enzymatic conversion of a protein produced from genetically modified yeast, which is the process of biosynthesis. The additional investment brings our total investment in the biotech company to $7.5 million. representing a potential ownership interest of up to 46.5% on a fully diluted basis. We believe the biosynthesis process has some definite advantage over traditional cultivation, particularly as it relates to the feasible production of minor and rare cannabinoids, and as an alternative path to producing pure major cannabinoids, so we are very excited to watch this space evolve and Heisen's progress in it. Also post-quarter end, we raised approximately $69 million in gross proceeds from an underwritten public offering, including the exercise of the overall option. We opportunistically took advantage of financing with strong institutional support that became available. We believe that deleveraging our balance sheet puts us in a more agile position as the sector continues to see both growth as well as capital markets volatility. This raise substantially strengthened our balance sheet, which Derek will describe further. So I'll pass the call over to him now and then come back to wrap before we take your questions.