Organigram Global Inc.

Good morning and welcome to our Gannogram Holding Inc. fourth quarter earnings conference call for the fiscal year 2021. 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 with analysts. We ask you to please limit yourself to one question and one follow-up question. You may re-queue if you have further questions. As a reminder, this conference call is being recorded and a transcript will be available on Organigram's website. Listeners should be aware that today's call will include estimates and other forward-looking information. Please review the cautionary language in today's press release on various factors, assumptions, and risks that could cause the company's actual results to differ. Furthermore, during this call, reference will be made 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 these measures may not be directly comparable. Please see today's earnings report for more information about these measures. I would now like to introduce Ms. Bina Goldenberg, Chief Executive Officer of Organigram Holdings, Inc. Please go ahead, Ms. Goldenberg.

Thank you, Operator, and good afternoon. Thank you for joining us today. With me is Derek West, our Chief Financial Officer. For today's call, we'll discuss the financial results for the three and 12 months ended August 31st, 2021, and I will provide a general business update. We will then open the call for questions. To begin, I'd like to say how pleased I am to be part of the Organigram team and host this call with investors. With Organigram's reputation for high quality products, our strong brand portfolio, and our proven ability to innovate in ways that meet consumer needs, I believe we are positioned for success. What's more, we have the strategic partner, the team, and the resources in place to ensure we will execute on our growth strategy. Our fourth quarter 2021 results demonstrate progress against all of our strategic objectives. We achieved double-digit growth in recreational revenue. We introduced innovative products that were quickly embraced by consumers. We continued to improve our adjusted gross margin. We enhanced operations through adding key team members and advanced our product development collaboration with BAT. Also, and importantly, according to High Fire data, we grew our recreational cannabis market share to 7% in Q4 from 5.4% in Q3, positioning Organigram as the number 4 LP in Canada. And the momentum continues. Our latest data shows a market share of 7.9% at the end of October. Starting with our brand, in the quarter, we continued the revitalization of our portfolio with the introduction of 16 new SKUs into the recreational market, bringing the total to over 100 new SKUs in fiscal 2021. In addition, we recently introduced two new brands, Shredin's Gummies in Q4, and our CBD Forward Wellness brand, Monjour, subsequent to quarter end. We have been refreshing our portfolio based on our ongoing consumer research to ensure it is aligned with current and expected evolutions in consumer preferences. The launch of Shred and Big Bag of Buds is a great example of our strategy to tackle the migration to large format, low price and high THC offerings. While Big Bag of Buds offers 28 grams of high quality flour at a consumer friendly price, Shred is a potent value segment product that has built leading brand equity through its unique and bold flavor profiles. It has captured the imagination of the cannabis consumer, with sales growing 67% from Q3. Shred has remained the number one search brand on the OCS website for 11 of the past 12 months. When it comes to addressing the evolving needs of the premium cannabis consumer, we continue to invest in our Edison brand. In fiscal 2021, we introduced seven new high-potency strains that were well received by consumers. Moving forward through our in-house genetic breeding program, that's why our R&D investments in our advanced cultivation facility, we plan to bring new cultivars to market with unique terpene profiles and the high THC content that consumers are looking for. We also devoted significantly marketing budget to Edison to elevate new product introductions and solidify its brand position. And we are seeing the results of our marketing efforts. According to Brightfield's survey of 3,350 panelists over the August to September period, Edison experienced a 4% growth in brand awareness and achieved a significant increase in its numbers of social mentions and positive consumer sentiment scores. In fact, over 80% of consumers indicated they would likely recommend Edison to a friend. We will continue to invest in building our flagship brands with consumers, both in marketing and product development, to ensure this momentum continues over time. While we are committed to improving our mix in favor of premium products, we do recognize the importance of the value segment and its pivotal role in converting illicit market users to the legal market. That's why we continue to focus on offering brands such as Shred and Big Bag of Buds to consumers seeking a high-quality legal product at a fair price. That said, we are committed to ensuring we can do so profitably. While Big Bag of Buds has always had reasonable margins for the segment, we were able to leverage the strong consumer demand and loyalty on Shred to take price, which improves the margin on this popular brand. On the premium side, we expect that in time, consumers will become more discerning and will start making choices based on genetics, bud structure, flavor, and aroma profile, as well as other quality attributes. Our product development strategy anticipates this evolution, and we will be ready as the shift in consumer behavior happens. Moving on from flour, in the fourth quarter we launched Shred'ems gummies to leverage the success and brand recognition of Shred. Shred'ems are available in Indica, Sativa, and hybrid versions with exciting flavors like Sour Cherry Punch, Sour Mega Melon, and Wild Berry Blaze. Shred'ems quickly gained momentum capturing 5.8% national market share in the gummy category as of last week. This is the first product launched from our recently acquired Edibles and Infusions Corporation and demonstrates the synergies achieved from combining EIC's confectionery expertise with the strength of our Shred brands and our keen focus on consumer insights. The efficiencies that are in place at EIC also allow Shredins to be one of the most competitively priced gummies on the market. Launched in August, Edison Jolts was another first-to-market offering in the quarter that demonstrated our R&D capabilities, our creativity, and our commitment to consumer-driven innovation. Jolts are Canada's first flavored, high-potency THC lozenges. They are available in a package of 10 mint-flavored lozenges with 10 milligrams per lozenge for a total of 100 milligrams per package. For the eight-week period ending November 6th, Jolt's reached the number one position within the ingestible extracts category. And finally, last week, we announced a major addition to our cannabis derivatives lineup with the introduction of a CBD-infused soft-shoes under our new wellness brand, Monjure. They are offered in berry-medley and citrus-medley flavors, as well as in both vegan-friendly and sugar-free formats. Monjure offers 20 milligrams per piece and is attractively priced with 30 pieces per pack. Monjure is also produced at our EIC facility in Winnipeg. Again, EIC's highly efficient production technology means we can produce high-quality, low-cost edible products at scale. In fiscal 22, we expect to add even more edible products to our lineup in both THC and CBD formulations. Moving on to our growing facility in Mountain. In the past quarter, we launched several initiatives to increase the average THC content per plant as well as the average yield. These initiatives are aligned with consumers' demand for high THC and are expected to continue the improvements in our margin. In Q4, our yield per plant was 127 grams compared to 117 grams in Q3 and 101 grams in Q4 of fiscal 2020. We harvested about 12,000 kilograms of dry product in Q4 compared to about 8,400 in Q3 of fiscal 2021. The increased harvest helped to meet the growing demand for our products and for the growing store build-out in Ontario. However, we are reaching capacity at our month-end campus. The higher consumer demand for our products has meant that we are not able to take advantage of all the sales opportunities presented to us. In order to better capture these opportunities, we have decided to complete the Phase 4C expansion of our growing facility at Moncton, which will significantly increase our capacity and ability to meet and monetize further demand. This is a rare situation in the Canadian cannabis industry. While other Canadian LPs are closing facilities, we are expanding. I think this speaks to both the prudent initial build-out of our growing infrastructure and our compelling product offering. Our current annual capacity at the facility is approximately 40,000 kilograms. When the Phase 4C expansion is complete, the facility will have an annual capacity of approximately 70,000 kilograms of flower. We are also making design improvements and environmental enhancements to the facility to improve yields and flower quality. In the fourth quarter, we significantly advanced the build-out of our Centre of Excellence, or COE, in Moncton that we are building as part of our product development collaboration with BAT. As has been discussed in prior quarters, the COE will develop the next generation of breakthrough cannabis products, IP and technologies. Both OrganiGround and BAT are contributing scientists, researchers and product developers. Currently, we have reached the first 100-day milestone in the project with staffing, construction, and project planning underway. In the next 8 to 10 weeks, we expect to have the remaining core construction projects completed with the bio lab to be completed in Q2 of fiscal 2022. Research collaboration has begun with the initial focus on CBD cannabis, vapor, and oral products. This is an exciting opportunity. This strategy should enable us to grow our market presence in Canada. What's more, having access to new IP from the collaboration and the ability to sub-license the technology opens up significant opportunities in the US and other markets. Finally, before Garrett provides the financial overview, I'd like to comment on our international sales to Israel. We recently resumed shipments to Kandahar and we expect to make further shipments in fiscal 2022. This is a high margin revenue source for us and one that provides our leading cultivars to markets outside of Canada. Over to you, Garrett.

Thanks. I will start with our strong financial position. In terms of liquidity, we ended fiscal 2021 with $184 million in unrestricted cash and short-term investments, compared to $75 million at the end of fiscal 2020. This $109 million increase was primarily due to the $65 million unit offering done during November of 2021, the $221 million private placement as part of a strategic investment from VAT, net of the allocation of $31 million to restricted funds for the C of E, along with $115 million used towards debt repayment. Our strong cash position and debt of $300,000 ensures we are well resourced to execute on our growth strategy. As Dina mentioned, earlier this year we made the decision to complete the Phase 4C expansion at our Moncton campus. The budget amount for Phase 4C is estimated to be $38 million and began in fiscal Q4 2021 with completion targeted during fiscal 2022. We have sufficient resources to support these expenditures and the corresponding growth to our working capital assets while still maintaining sufficient liquidity and financial flexibility. In addition, on August 31st, we filed a preliminary base shelf prospectus, which allows us to move quickly to access even more financial flexibility, if necessary, to pursue attractive growth opportunities should they arise. To date, we have not offered any securities under the space shelf prospectus. Net cash used in operating activities was $7.7 million during Q4 fiscal 2021, which was flat compared to the same prior year period. For the fiscal 2021 year, cash used was $28.6 million, down from $45.1 million in fiscal 2020, mainly as a result of improved inventory management. Net cash provided by financing activities was $55,000 during Q4 fiscal 2021, down from $46 million for the same prior year period, which had been driven by draws from the credit facility. For the fiscal 2021 year, cash provided by Finance and Activities was $174 million, up from $150 million in fiscal 20, with the current year's net amount driven by the net proceeds from the equity investments net of debt repayment. Turning to our earnings results for Q4 fiscal 2021. Gross revenue grew 24% from Q3 2021 and 43% from the same period in fiscal 2020 to $36.2 million. And net revenue grew 22% from both Q3 2021 and from the same period in fiscal 20, respectively, to $24.9 million. These increases to revenue was primarily due to higher recreational net revenue, which grew 36% from Q3 and 52% from the same period in 2020 due to an increase in sales from the flower categories. Cost of sales decreased 11% year-over-year to $26 million, primarily due to the current period's lower cost of cultivation and due to the nearly $11 million in inventory write-offs and provisions recorded in Q4 of last year. As expected, the charge related to unabsorbed fixed overhead and inclusion cost of sales continues to decline again sequentially. It is anticipated that we will no longer have unabsorbed fixed overhead, and we expect this to help our margin going forward. We harvested approximately 12,000 kilos of flour during Q4 fiscal 2021, compared to approximately 8,800 kilos of flour in Q4 fiscal 20, an increase of 38%. This increase was directly related to increased cultivation, planting and staffing during Q3 and Q4 of fiscal 2021, which was done to meet the growing demand for many of our new products as part of the product portfolio revitalization, as well as the increase in industry demand. Largely due to higher net revenue and lower cost of sales, gross margin in Q4 improved to negative $1 million from the negative $8.6 million in Q4 of 2020. On an adjusted basis, gross margin was $3 million compared to negative $700,000 in Q3 of 2021. We expect that the price increase to shred, as well as lower production costs, will further improve margins. SG&A, excluding non-cash share-based compensation, increased to $13.6 million in Q4 2020, from 10.8 million in Q4 2020, largely due to the establishment of the Organigram-BAT Centre of Excellence, increased data licensing fees with the continued goal of stores in Ontario, combined with marketing initiatives behind Edison and the launch of our new company products as well, as well as higher audit and related professional fees in connection with the company's regulatory requirement to obtain an integrated audit opinion for the first time for fiscal 2021 financial statements. Also, as a result of improved revenues and margins, adjusted EBITDA was negative $4.8 million in Q4 2021 compared to negative $9.2 million for Q3 2021, the most recent quarter. We also reduced our net loss year for year from $39 million to $26 million. Overall, we are pleased with our improving financials and the momentum we are seeing. Based on this, we currently believe that we will achieve positive adjusted EBITDA by Q4 of fiscal 2022. This concludes my comments. Thank you. I would like to turn the call back to Venus.