Organigram Global Inc.

Good morning, my name is Rob and I will be your conference operator today. At this time, I would like to welcome everyone to the Organigram Holdings second quarter 2023 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 that you please limit yourself to one question and one follow-up question. You may re-queue if you have further questions. Thank you. Max Schwartz, you may begin your conference.

Good morning and thank you for joining us today. As a reminder, this conference call is being recorded and a replay will be available on Organigram's website. Listeners should be aware that today's call will include estimates and other forward-looking information from which the company's actual results could differ. Please review the cautionary language in today's press release on various factors, assumptions, and risks that could cause our actual results to differ. Further, reference will be made to certain non-IFRS measures during this call. including adjusted EBITDA, free cash flow, and adjusted gross margin, among others. These measures do not have any standardized meaning under IFRS and are intended to provide additional information and as such should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Our approach to calculating these measures may differ from other issuers, so these measures may not be directly comparable. Please see today's earnings report for more information about these measures. Listeners should also be aware that the company relies on reputable third-party providers when making certain statements relating to market share data. Unless otherwise indicated, all references to market data are sourced from High Fire in combination with data from Weed Crawler, provincial boards, retailers, and our internal sales figures. I will now introduce Bina Goldenberg, Chief Executive Officer of Organigram. 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 results for the three months ended February 28th, 2023 and the general business update. We will then open the call for questions. We continue to generate solid financial results in the second quarter of fiscal 2023. We achieved a 24% year over year net revenue increase. The quarter reflected the typical seasonality we have seen in previous years where sales into provincial boards declined from December through March. We delivered record adjusted gross margin in our fifth consecutive quarter of positive adjusted EBITDA while maintaining our number three market position among Canadian LPs. In Q2, we were number one in the milk flour segment, number three in gummies overall, number one in pure CBD gummies, and have had the number one hash brand nationally. I'd like to point out that the wins we've had in the hash segment are a great illustration of our core strengths. We acquired Laurentian Organics in December 2021. We leveraged our in-house sales and marketing team to achieve national distribution for Tremblay hash. We then expanded our presence in the segment by introducing Woola and Holy Mountain pressed hash. Additionally, we innovated in the category with the launch of ShredX Ripstrip hash, the first product of its kind in Canada. So to sum it up, we identified the right acquisition, applied our CPG expertise to gain share in a new segment and introduced a new product that created consumer excitement. Now let's talk about Shred. It is a well-recognized cannabis brand in Canada with SKUs in the most popular market segments. Shred milk flour holds the number one position in its category by a wide margin and with three of those SKUs, Tropic Thunder, Funkmaster and Narbury, have been the top-selling SKUs nationally for the six months ended February 28, 2023. Shred products are now available in almost 90% of retail stores in the country, and the brand has generated $190 million in retail sales in the past 12 months. This is a brand platform that continues to deliver success. Looking at regional board data, we have the leading market share in the Maritime, and we're number one in milled flour, gummies, and hash. In Ontario, we were the number two LP. We were number one in milk flour and capsules, number one in hash, and number three in gummies. We are also very pleased with our growth in Quebec, where we have held a strong number three position. This is partly from the addition of Laurentian's products, but also due to significantly increased sales of our overall portfolio. Based on the data from Weed Crawler, we had the number one hash SKU and were number one in milk flour. Our strong position in the market and our continued success comes from our focus on creating innovative products that excite consumers as their tastes evolve. In Q2, we introduced 18 new SKUs, including 8 new Holy Mountain SKUs. As I mentioned, we launched ShredX RipStrip Hash at the end of Q2, and the response has been extremely strong. It is an exciting new hash format that addresses many pain points consumers report when using hash products. and opens the hash segment to new consumers. The hash is formatted in 10 pre-cut strips that can be used to make your own infused pre-roll and offered in Tropic Thunder and Blueberry Blaster flavor profiles. Our patent-pending Edison jewels continue to lead in the ingestible extract category with 85% growth in sales compared to Q2 of fiscal 2022. On March 13th, we announced that Health Canada determined that JOLTS lozenges in the 100 milligram THC per package format were improperly classified as an extract rather than an edible. Health Canada has allowed us to continue to sell and distribute our inventory of JOLTS until May 31st. Now, Organigram launched JOLTS in 2021 following significant research, development, and regulatory work. We remain of the view that the patent-pending jolts are properly classified as cannabis extracts and compliant with cannabis regulations. We have filed an application with the Federal Court of Canada seeking judicial review of Health Canada's determination. As court proceedings can take some time, we intend to file a motion for a stay seeking to set aside the decision in the interim. In terms of production at Moncton, we are achieving scale benefits from the completion of the 4C expansion. We continue to implement environmental and technology improvements designed to increase both yield and cultivar quality. Also, new cultivars, including several developed by our plant science team, are being screened with a view to be added to our portfolio. Finally, CO2 extraction has been optimized to generate higher yields. In Winnipeg, we continue to increase our capacity to meet the high consumer demand for Mon Jour. As of February 2023, the facility produced an average of 3.1 million gummies per month. We also continue to see solid productivity on the packaging line, with 35,000 to 40,000 pouches per day being produced. Construction is complete at Lac Superior. And while we expect the greenhouse to come online in the summer, we have moved our hash production into the new facility. In February, we commissioned an ultrasonic blade with a capacity of 150 units per minute and automatic labeling equipment to help us meet the demand for our new ShredX Ripstrip hash. The vape category is an area of focus for our product development collaboration with British American Tobacco. This includes analysis of volume, particle size, and pressure. This will help us assess the quality of different devices. In parallel with this, we are conducting a quantitative sensory analysis with our in-house expert trained panel of over 200 individuals. This research will serve as a foundation for future development activities, including consumer safety, product quality, and performance. Further, these insights are expected to enable Organigram to capitalize on the new vapor heating technology garnered from our $4 million U.S. investment in GreenTank Technologies, a leader in vape hardware and technology. This investment, which took place after quarter end, is reflective of our commitment to grow in the vape category. We believe GreenTank's technology is the first true innovation in vaporization in almost a decade. It solves many of the clogging and performance issues associated with vapes and may also increase the perceived potency per puff. We have obtained exclusivity for this new technology in Canada for 18 months after it is introduced to the Ontario market and expect to launch this improved 510 format product by the end of our fiscal year. Moving on to international sales. In Q2, we delivered a record $10.7 million of dried flower to Israel and Australia. For the first six months of fiscal 2023, our international sales have reached $16.6 million, exceeding the $15.4 million of sales in the full year of fiscal 2022. The significant international sales in the quarter reflected the introduction of several new SKUs in Australia and Israel. Going forward, we expect international revenue to normalize to the level seen in the past two quarters. Now, before I turn the presentation over to Derek, I'd like to comment on the continued pricing pressure we are seeing in the market. While many producers have discussed not wanting to participate in a race to the bottom, we are seeing the opposite in the market. large format 28 gram offerings with a sub $100 retail price point increased by almost 300% over the past six months. Large format pricing in some markets has reached the point that concerning the cost of production and the excise tax burden, the products are being sold at a loss. This is not sustainable and hurts the cannabis industry. While our low cost structure allows us to compete at these reduced prices, We have not matched the aggressiveness of our competitors and have seen some market share erosion in our large format flower. At Organigram, we are focused on delivering value to all stakeholders. We are confident that our branding and marketing expertise, proven track record of innovation and operational efficiency will provide long-term success and leadership in the cannabis industry. This is supported by our strong balance sheet, which allows us to continue to evaluate investment opportunities that increase our competitive advantage. Over to you, Derek.