Organigram Global Inc.

Good morning and welcome to Organigram Holding Inc's first quarter earnings conference call for the fiscal year 2022. 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 Bina Goldenberg, Chief Executive Officer of Organigram Holdings, Inc. Please go ahead, Ms. Goldenberg.

Thank you, and good morning, everyone. With me is Derek West, our Chief Financial Officer. For today's call, we'll discuss the financial results for the three months ended November 30th, 2021, and I will provide a general business update. We will then open the call for questions. The first quarter of fiscal 2022 showed continued momentum from the progress we achieved in the last quarter of 2021. We achieved record net revenue in the quarter, the highest in the history of the company. we solidified our number four market share position among Canadian LPs in the recreational market in Canada, becoming one of the few larger Canadian LPs registering market share growth. Subsequent to quarter end, we completed an accretive acquisition of Laurentian that expands our product and brand portfolio and bolsters our geographic presence in Quebec. And we made further progress on our goal to achieve profitable adjusted EBITDA, which should be accelerated with the purchase of Laurentian. Now net revenue in Q1 was $30.4 million, a 57% increase over Q1 in fiscal 2021. This record level of net revenue speaks to our success at innovating to best address consumer needs and introducing compelling brands that resonate with consumers. We continue to hold the number four market share position among Canadian LPs in the quarter at 7.5%. A year ago, before our product revitalization program, our market share was 4.4%. The HIFIRE data provides detail on how our products are being received in the market. Shred continues to be the most popular flower brand, with Tropic Thunder and Funkmaster SKUs holding the number one and two positions, respectively, for November, and Tropic Thunder and Narberry as the top two SKUs in December, based on sales and volume. Shred also remained the number one search brand on the OCS website for 13 of the past 14 months. These sustained positive results, while the price of Shred was increased in Alberta and Ontario, demonstrates its exceptional consumer demand. Shred and Gummies were introduced in August 2021 and are quickly gaining distribution and traction in the market. In November, they were ranked number three in terms of both sales and volume of units sold. Edison Jolt, our unique high-potency THC lozenge, maintains its best-selling position within the ingestible extracts category. Our momentum continues after quarter end. December data from High Fire highlights that Organigram achieved 7.6% market share, up 10 basis points from November, holding the number one position in the important flower category, number three position in gummies, and moving up to the number four position in pre-rolls. We're very pleased with these results, and you should also note that this market share does not reflect the contribution from the sales of Laurentian products that will get us closer to an 8% market share. In November, we launched Bonjour, a wellness brand providing large-format CBD-infused soft chews in berry-medley and citrus-medley flavors. Both flavors are available in vegan-friendly and sugar-free formats for maximum consumer choice. In the short time since its launch last month, Monjour has already shown strong momentum in the market. We are very pleased with the start and look forward to this new brand achieving the same success as our recent brand introductions. We continue to focus on the needs of premium cannabis consumers through our flagship Edison brand. As stated last quarter, Brightfield data has shown growth in Edison's brand awareness and a significant increase in its number of social mentions and positive consumer sentiment scores. Seven new high-potency strains were introduced in fiscal 2021, and fiscal 2022 started off with the launch of several new products, including the Edison Blue Velvet Vape and yet another first-to-market product, the Edison Pinners Combo Pack, the first pre-roll 10-pack in the market to offer consumers two unique genetics within one pack. Consumer demand has been strong on these innovations and we're excited to continue to offer new relevant products to the market throughout the rest of the year. Now let's look at our operations. In Q1, our yield per plant was 129 grams compared to 86 grams in Q1 of fiscal 2021. As we have brought on new grow rooms and improved operational efficiencies, our cost per gram has been reduced by half while increasing THC levels. At the Moncton Cultivation Centre, upgrades to the facility are currently underway. This includes increasing capacity through our 4C expansion, a second harvesting area, adding environmental enhancements and performing upgrades to the irrigation system. These will further enhance yields and flower quality. In terms of automation, the second pre-roll machine was commissioned last quarter, and investment in high-speed pouch lines for Big Bag of Buds and Shred is underway. Our product development collaboration with BAT advanced in the quarter with the completion of the Quality Assurance and Control Laboratory. Construction has also begun on the BioLab, which will conduct advanced plant science research, and on the GPP Food and Edibles Facility. Both of these are expected to be completed in February of 2022. This is an important milestone. The research conducted as part of our PDC will contribute to ongoing development activities, which could result in new products in the future, support market share growth, and our reputation as a consumer-centric innovator. Initial development is focused on CBD and other cannabinoid edibles, drinks, vapes, and ingestible products, with focus on products that improve delivery, efficacy, convenience, and create new usage occasions. Our commitment to innovation is also reflected in our increased investment in Hyacinth Biologicals. Hyacinth is a leader in cannabinoid science that is using biosynthesis to produce THC, CBD, and rare cannabinoids without the use of cannabis plants. This greatly reduces the cost and production time of the compounds with a smaller environmental footprint. In December, we increased our total investment in Hyacinth to $10 million. This provides us with approximately 49% interest in the company and two board seats. Once hyacinth commences commercial production, we have the option to purchase its cannabinoids at a discount to the wholesale market price for a period of 10 years. Producing any major or rare cannabinoid quickly and at scale opens up multiple possibilities for medical, wellness, and recreational products. As one of only three large LPs investing in biosynthesis, Organic Room is well positioned to take advantage of these opportunities. Finally, I'd like to highlight the acquisition of Laurentian we made in December. Laurentian is a Quebec-based LP of artisanal craft cannabis sold under the Laurentian brand and Quebec's top-selling hash sold under the Tremblant cannabis brand. Laurentian's current annual capacity is about 600 kilograms of flour and 1 million hash units. We intend to invest $7 million in growth capex behind Laurentian's expansion program, which will increase capacity to about 3,000 kilograms of flour and 2 million units of hash by the second half of 2022. We are excited to further expand the distribution of Laurentian's brands outside of Quebec, leveraging the strength of our national sales force. The acquisition cost was $36 million, consisting of $10 million in cash and $20 million in shares, as well as potential earn-out considerations. This is a significant acquisition, and that strengthens our premium portfolio with high-margin products and increases our presence in Quebec. It is also accretive, as Laurentian has been averaging since it entered the Ontario market in November, an annual net revenue run rate of $17 million, with $6 million in EBITDA. Now I will turn it over to Derek to present the financial overview. Derek?

Thanks, Vita. Turning to our earnings results for Q1 fiscal 2022. Gross revenue grew 75% from Q1 2021 to $44.3 million, and net revenue grew 57% from the same period in fiscal 2021 to $30.4 million. These revenue increases were primarily due to higher recreational net revenue, which grew 9% from Q4 fiscal 2021 and 49% from the same period in 2021. and the resumption of shipments to Israel under our agreement with CanDoc. While gross revenues grew 75%, cost of sales increased only 21% year-over-year to $28 million. There was no charge for unabsorbed fixed overhead for unused grow rooms in Q1 fiscal 2022 compared to $2.7 million in Q1 of the prior year. We harvested approximately 11.6,000 kilograms of flower during Q1 fiscal 2022, compared to about 3,900 kilograms in Q1 of the prior year, an increase of 197%. This increase was directly related to increased yield per plant, along with the increased cultivation planting during Q4 fiscal 21 and Q1 of fiscal 22 to meet the growing demands for our products. Largely due to lower cultivation and post-harvest costs, lower changes in fair value of biological offsets and inventory provisions, the gross margin in Q1 improved to $610,000 from negative $16.7 million in Q1 2021. On an adjusted basis, gross margin was $5.5 million compared to $1.9 million in Q1 2021. We expect that the price increase to shred The addition of higher-margin premium products to our offering and lower production costs will further improve margins. SGA, excluding non-pass share-based compensation, increased to $12.6 million in Q1 2022 from $10.5 million in the prior year's comparison quarter, largely due to higher employee costs due to increased headcount, general wage increases, increased professional fees due to technology fees and the auditor fees from the new requirement to have an integrated audit, and higher trade investment and marketing spend initiatives done to support the launch of our new gummy and other derivative products. Also, due to improved revenue and margins, the negative adjusted EBITDA was reduced from 5.7 million in Q1 of 2021 to 1.9 million in the current quarter. We also reduced our net loss year over year from $34.3 million to $1.3 million. Overall, we are pleased with our improving financials and the continued momentum we are seeing. In addition, starting in December of 2021, we began to recognize revenue from the Laurentian acquisition. Based on this, we have now advanced our view on achieving positive adjusted EBITDA by Q3 of fiscal 2022. In terms of our statement of cash flows, net cash used in operating activities was $9.3 million during Q1 of fiscal 2022, compared to cash generated of $294,000 in Q1 of the prior year. The change was primarily due to the current period's investment in working capital assets as we supported the growth of the business. Net cash used by financing activities was $270,000 during Q1 fiscal 2022, primarily driven by reduction of debt and lease liability. Net cash generated from investing activities was $54 million during Q1 fiscal 2022, an increase of $38 million from the prior year's comparison quarter. During the current period, there was $60 million from short-term investment proceeds. $1 million from restricted funds, net of $7 million incurred for capital expenditures. In terms of our balance sheet, on November 30, 2021, we had $168 million of unrestricted cash and short-term investments compared to $184 million at the end of fiscal 2021. The decrease during the period is primarily due to the company's investment in both its working capital assets and capital expenditures for facility improvements. This concludes my comments. Thank you. I would like to turn the call back to Dina.