Organigram Global Inc.

Good morning. My name is Gilles, and I will be your conference operator today. At this time, I would like to welcome everyone to the Organigram Holdings Second Quarter Fiscal 2024 Earnings Conference Call. After the speaker's remarks, there will be a question and answer session. We ask you to please limit yourself to one question and one follow-up question. You may re-queue if you have any further questions. Thank you. Max Schwartz, you may begin your conference.

Thank you. Good morning, everyone, and thanks for joining us today. As a reminder, this conference call is being recorded, and a recording will be available on OrganiGrants' website 24 hours after today's call. 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 our press release dated May 14, 2024 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. In this call, references to fiscal 2023 are to the 13-month period from September 1st, 2022 through September 30th, 2023. 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 HIFIRE in combination with data from Weedcrawler, provincial boards, retailers, and our internal sales figures. Today, we will be hearing from key members of our senior leadership team, beginning with Fina Goldenberg, Chief Executive Officer, who will provide opening remarks and commentary, followed by Greg Guyot, Chief Financial Officer, who will review our quarterly financial results for Q2 fiscal 2024. Also joining us for the question and answer segment is Tim Emberg, Chief Commercial Officer. Before I hand the call over to Bina, I would like to extend a thank you to those on the call today who made it out to our investor day and facility tour in April. We received a lot of positive feedback, but by far the most common thing we heard from attendees was how compelling it was to see the initiatives we've been talking about in our communications in person. In the months to come, we will be developing a digital version of this experience so our current shareholders and industry stakeholders can gain a better understanding of where our business is headed. With that, I will now introduce Beena Goldenberg, Chief Executive Officer of Organigram Holding. Thanks. Please go ahead, Ms. Goldenberg.

Thank you, Max. And good morning, everyone. We appreciate you all joining our call today and for your continued support of Organigram. It's hard to believe that we're already halfway through our fiscal year and we're pleased to report that the events and changes that Organigram has undergone in the first half of the year have truly set us up for success in Canada and internationally for the balance of the year and in years to come. As we venture into the second half of 2024, we are confident that we will be in a position to truly accelerate our performance in Canada and internationally while putting the building blocks in place to allow us to deliver on our ambition to be a global leader in the cannabis industry. During today's call, we'll be discussing our performance highlights for the quarter and some important themes that will illustrate why, despite some ongoing headwinds, we remain confident in our ability to continue to deliver on our growth plans. These are innovation as a continued focus area of ours and a growing competitive advantage for our company, international development as part of our ambitions to be a global leader in the cannabis space, and Canadian recreational business and how we'll poise to continue on our growth trajectory. Before we dive into these exciting topics, I'd be remiss to not address one important factor enabling us to comfortably weather the headwinds and support our growth plan, and that's the increase in our cash position. This year, we significantly enhanced our already strong cash position by raising capital at a substantial premium to our share price. In Q2, shareholders approved a $124.6 million follow-on investment from BAT, with the first $41.5 million tranche successfully closed and the second $41.5 million tranche expected to close by the end of August. Additionally, towards the end of the quarter, we announced and subsequently closed an oversubscribed financing round, generating an additional $28.8 million in gross proceeds. By the close of the final tranche from BAT at the end of February 2025, Organigram will have nearly $200 million in pro forma cash on hand, an enviable position in today's challenging environment. Once again, I'd like to emphasize our disappointment with the Canadian government's reluctance to address critical issues impacting the cannabis industry in Canada. The biggest challenge most Canadian cannabis LPs for most Canadian cannabis LPs lies in the struggle to achieve sustainable profitability with excise duties representing up to 35% of sales. Despite the federal government's collection of almost $900 million in excise revenue from cannabis in 2023, surpassing revenues from beer and wine combined, no relief measures close to those extended to the beverage alcohol sector have been offered to the cannabis industry. To make matters worse, the recently announced federal budget did not address any form of improvement to the excise framework, despite recommendations from the industry, the Standing Committee on Finance, the Competition Bureau, and the expert panel reviewing the Cannabis Act. Given Organigram's leadership position in the Canadian market, we remain steadfast in advocating for a fair and equitable excise framework that serves both industry interests and federal government's objective of safeguarding public health by diverting consumers from the illicit market. Despite this ongoing challenge, Organigram is well equipped to weather today's taxing regulatory environment and remain a leader in the sector. Not only have we demonstrated our ability to thrive in Canada, demonstrated by our 21% year-over-year growth in our recreational business this quarter, but we are also in an excellent position to invest in the growth of our international business with our robust balance sheet. Organigram's ambition to be a global leader in the cannabis space will be achieved by exporting our high-quality, high-margin products to international markets and through the expansion of our footprint in emerging markets like the U.S. and Germany, enabled by the $83 million Jupiter Strategic Investment Pool, funded by two-thirds of BAT's follow-on investments. In Q2, the company made its inaugural Jupiter investment and second U.S.-based investment in OpenBook Extracts, a leading provider of hemp-derived extracts and products. Through this investment, Organigram stands to gain invaluable insights into the U.S. landscape by leveraging OBX's extensive experience with key players in the U.S.-Canada's market. Moving forward, we expect to collaborate with OBX on product launches in the U.S., capitalizing on the explosive growth of the hemp-derived THC market for edibles and beverages. With the DEA reportedly moving towards rescheduling cannabis, the opportunity in the U.S. is compelling, and we are carefully monitoring the regulatory landscape while we expand our footprint. Outside of the U.S., there are also a number of very compelling investment opportunities unfolding that we're well positioned to take advantage of. The decriminalization of cannabis in Germany, growth in Australia and the UK, pilot programs in Switzerland, and medical frameworks being introduced in a growing number of markets, to name a few. We've also made considerable progress with our international export business and are yielding tangible results from our efforts. In January, we completed our first shipment of medical flower to Sanity Group in Germany, and shortly after, we successfully shipped cannabis to Forsey Labs for distribution in the UK. Subsequent to quarter end, we completed our second shipment to Sanity. Further, we signed two new supply agreements with medical cannabis suppliers in Australia and the UK, all while exploring additional opportunities in entirely new markets for organograms. Our international revenue saw significant decline versus Q2 fiscal 2023, driven by a large reduction in sales to Israel as we await payment of an outstanding receivable. We are working with our Israeli customer on a payment plan and are optimistic that we will resume shipments to Israel in due course. That said, we are very encouraged by our return to international sales growth over the last three quarters, supported by our new international customers. Furthermore, our growth in flower exports is poised to receive a significant boost from Organigram's EU GMP licensing at our Mountain facilities. Following a successful preliminary audit in February, we are optimistic that obtaining the certification, thereby enhancing our export margins and further expanding our international customer base. Now, if Organigram is synonymous with one thing, I think we could all agree that it's our relentless pursuit of consumer-centric innovation as a competitive advantage. Where other companies are cutting back, we're doubling down. You've heard me speak about the nano emulsion technology that is being worked on by the product development collaboration team. Excitingly, the PDC have received the preliminary results from a groundbreaking clinical study that was undertaken to validate this technology. The team is now analyzing the data and we're excited to share the results with you soon. The patent-pending nanoemulsion technology aims to unlock the full power of ingested cannabinoids that will enable consumers to navigate and control their dosage experience more accurately, a key consumer pain point in the ingestible space. The nanoemulsion production equipment was recently transported to Organigram's Winnipeg facility in April. and the company is preparing to scale up production and sales for these gummies in the fall. Another differentiated innovation play we remain bullish on stems from our first U.S. investment in Philo's Bioscience in May of 2023. As a result of this investment, we are the only company in Canada offering whole-flower-derived THCV. Our introduction into THCV products has garnered significant attention, with retail sales surpassing $3.7 million since their launch in August of 23, and the completion of our first international shipment of THCV flowers subsequent to quarter end. Consumer feedback for the Super Sativa Powerhouse has been very positive to date, and we plan to continue to expand our portfolio of THCV products. The Phylos investment also brought us seed-based production that many of you have seen showcased during our Investor Day in April. Phylose's seed-based technology presents a transformative growth opportunity for organograms. We are now systematically transitioning a portion of our Moncton facility to seed-based production, which promises to increase plant yields, significantly reduce cultivation costs, shorten harvest cycles, and deliver more consistent and robust plants. The anticipated cost savings of seed-based production per gram versus clone-based methods range between 30 to 40%. As of now, we have four seed-based production rooms online, which is a slower ramp-up than we originally had planned due to the time involved in obtaining seed characteristics, which satisfied changing consumer preferences. However, we are encouraged by the yield and potency results of our first harvest. As we streamline our selection processes and further build out our pipeline of seed candidates, we anticipate that we will meet our goal of 30% seed-based production by the end of calendar 2024. Regarding vape, we previously highlighted our investment in GreenTank as a means to bring innovation to our vape portfolio and finally address our underperformance in this category. In Q2, we conducted a test launch of GreenTank's new atomizing technology in select markets. At the end of the test launch, we saw higher than expected consumer returns, and given our firm commitment to quality, the consumer, and our provincial board partners, We are working to address the issue before our anticipated national rollout. In parallel, extensive work within the PDC has taken place on several innovative vape solutions that we believe will begin to add to Organigram's portfolio of compelling and differentiated vape products. On the research innovation front, Organigram's recent achievements include significant reductions in THC to CBN conversion time by 75%. We are now able to produce 100% of our CBN demand in-house and are on our way to doing the same with CBG. We have also developed an isolation method to produce zero THC THC-B isolate with an 85% purity level. We are identifying more genetic markers for disease and powdery mildew resistance, terpene synthesis, and other markers, which will allow us to select cultivars with more of the properties we want and less of the ones we don't. As we continue to identify new genetic markers, it's only a matter of time until we can selectively breed F1Cs that result in the consistent expression of the desired genetics. Research like this is what sets OrganiGram apart from other producers and provides us with a long-term advantage. Now on the domestic front, OrganiGram maintains a leadership position in every major product category except FAPE. As of Q2, Organigram held the number one position in milled flour, number one in hash, number one in ingestible extracts, number one in pure CBD gummies, number two in overall edibles, number two in infused pre-rolls, number three in all pre-rolls, and number three in dried flour, bringing us to the overall number three market position in Canada. Our continued success in almost every category is owed to our relentless dedication to quality, innovation, and focus. As the top pure play cannabis company in Canada, everything we do at Organigram is geared towards creating the most exciting cannabis brands and products on the market, developed in Canada to delight consumers around the world. Regionally, we achieved remarkable growth in Atlantic Canada, with retail sales surging by over 36% to achieve a 16.1% share. Additionally, our market share in Quebec reached a record high 9.1% in March, signaling that we're building a stronghold in Canada's second most populous province, all while maintaining a top five position in every other province across Canada. It goes without saying that we're committed to innovation, but innovations are stronger when they're carried by great brands. The success of our Shred brand underscores our commitment to innovation and market leadership, With retail sales now exceeding $200 million annually, Shred has introduced several industry-first innovations, including flavor-forward milk flour, ripped strip hash, whole-flour-derived THC-V gummies, and milled THC-V flour. In Q2, we introduced our first carton-style box of joints, Shred Rainbow Lounge Dark, offering consumers seven packs of 10 darts in four different flavors. Our newly launched Shred Rainbow Heavies, which consists of three flavored IPRs with over 40% THC, achieved over $450,000 in retail sales within their first month of the market. Among our other successful brands are Monjour, which continues to dominate the pure CBD gummy segment with 51% market share, growing 65% year over year. Trombone, which leads in hash, resulting in our 23% share in the category. and Big Bag of Buds, which is a leader in our large format flower category. We don't often speak about Big Bag of Buds, but this quarter we launched Cereal Jealousy, a new cultivar from Organigram. This was our fastest ever launch to reach $1 million in sales and our highest sales achieved for a new launch within two months of hitting the market. We are also particularly excited about the revitalization of our Trailblazer brand, aimed at meeting the needs of a very large and underserved consumer segment, the passionate female believer. The new Trailblazer flower line was unveiled, showcasing hang-dried, smart-cured, hand-packed, premium and potent flower pre-roll in vibrant glass jars, with shipments that began in April. So to recap, the latter half of fiscal 2024 presents many opportunities for Organigram. Our growth in the domestic market continues due to our focus on innovation and understanding consumers. Our $83 million Jupiter fund and excellent balance sheet allow us to explore more strategic investments like silos and open book extracts geared towards garnering competitive advantages and growing our international footprint. And we are growing our export customer base, which contributes to expanding our international revenue. With that, I will turn the call over to Greg to discuss our financial performance for the quarter.