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OGI OrganiGram

Participants
Beena Goldenberg Chief Executive Officer
Derrick West Chief Financial Officer
Rupesh Parikh Oppenheimer & Co. Inc.
Tamy Chen BMO Capital Markets
Aaron Grey Alliance Global Partners
Ty Collin Eight Capital
Andrew Partheniou Stifel Nicolaus Canada Inc.
Rahul Sarugaser Raymond James Ltd.
Adam Buckham Scotiabank, Inc.
Douglas Miehm RBC Capital Markets
Frederico Gomes ATB Capital Markets Inc.
Call transcript
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Operator

Good morning, and welcome to OrganiGram Holdings 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 speakers' remarks, there will be a question-and-answer session with analysts. [Operator Instructions] 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. language risks press Company's that to cautionary factors, on actual the defer. and assumptions could review in release today's various results Please cause the measures, be this margin. to reference during EBITDA will Furthermore, certain adjusted call, non-IFRS including gross adjusted and made be do any so standardized these these approach calculating IFRS our meaning and not have measures other may issuers differ under directly measures measures in from These comparable. not and may that of more information Please about see today's report measures. earnings for these Chief Goldenberg, Beena Officer introduce to like now would Holdings OrganiGram Executive Inc. I of Please go Ms. ahead, Goldenberg.

Beena Goldenberg

Thank our you, and Derrick good morning, everyone. With Chief me is West, Financial Officer.

we the ended update. will For will today's three and a the provide results months call, XX, I XXXX discuss financial business for general November

call questions. open then the will We for

Quebec, bolsters further we Canadian achieved The of adjusted one in geographic share last We first Canadian few our of quarter to net EBITDA, product growth. fiscal end, accelerated record quarter the showed becoming the company. and solidified of quarter, four to be expands accretive with in market market portfolio profitable Laurentian completed progress in registering purchase progress Laurentian. number an XXXX. brand on and the history achieved quarter XXXX the our We continued Canada, of Subsequent we in the revenue LPs recreational market the acquisition the the in our in made highest share presence of LPs the among and of achieve larger we that our goal from which position momentum should

innovating best resonate brands of our fiscal introducing and $XX.X QX net address XXXX. level consumer million, record that revenue a to was needs of XX% in Now to consumers. net revenue success speaks with over in This QX compelling increase

on distribution in also remained search were positive These share its maintained the its the quarter sustained received high are the hold market year to and X.X%. and in continues positions brand A JOLTS, revitalization as X.X%. market. traction gaining are based Thunder Edison the in provides for volume popular SHRED'ems November, XX SHRED two December detail bestselling our the of Tropic before for and sold. respectively SHRED at number extracts number website position Gnarberry in SKUs Alberta products within our XX position The being demonstrates the category. one the be most Tropic Ontario quickly to in flower how while demand. with in price number In on sales three in program, past data August, the units volume. one holding two continued and ingestible our they four potency our of THC and terms XXXX product OCS unique was and and both and top HyFire ranked brand the Canadian the Thunder exceptional for the ago, market. was SKUs, of share consumer were introduced results increased number LPs sales among and market Master gummies We Funk SHRED months. the on lozenges November,

pre-rolls. the three HyFire OrganiGram position one continued the momentum the share, that basis data to flower achieved Our in up XX four end. important market number hoping number position from after and from category, up quarter November, in points December highlights number gummies moving X.X% position in

an closer note strong sugar-free not market of in will month, choice. does In flavors. wellness Laurentian since pleased In you should also share Both reflect momentum very the short Medley share. for launched this Berry already market. us are flavors launch results. in CBD-infused market these format to and that last the vegan-friendly get November, the time, the brand its large products shown and a consumer sales providing in formats contribution Medley available soft maximum from are we chews Monjour Citrus X% We that with And Monjour, has

very are pleased brand and success look to introductions. the same start our We brand forward with as recent this achieving the new

to needs our continue cannabis focus of premium brand. Edison through consumers on We the flagship

pack. growth in As and brand quarter, Edison data consumer vape, of launch last awareness new of number Seven with products, in the the started been we scores. and potency significant two Blue including the are sentiment stated Brightfield Velvet market another one XXXX, new relevant yet pre-roll fiscal strains the first-to-market rest these high increase has to pack, throughout a continue excited social the XX genetics products demand in were offer product, shown first of Edison's its mentions in the Pinners year. off unique XXXX and on Edison has positive to to several the new introduced fiscal strong and to combo consumers pack Consumer within market and the innovations offer

XX look XXXX. let's QX per grams grams In to Now at fiscal our our XXX of operations. compared QX, plant in was yield

currently flower our underway. cultivation new system. XC enhancements will grow yields and operational enhance our the half cost reduced the has levels. area, This Moncton environmental to includes on further THC performing brought have and increase rooms to upgrades At are second we facility As improved quality. These harvesting center, adding increasing the program by irrigation been efficiencies, and expansion, in a upgrades while capacity through

high machine O' pre-roll last In an pouch was SHRED speed underway. quarter, Big and second Buds investment in the for terms automation, lines is of Bag commissioned

result and advanced science other growth Control GPP future, completion improve to with drinks, and and with of on will reputation occasions. collaboration cannabinoid to development expected our share in advanced in and of CBD XXXX. Quality conducted these important both efficacy, market as also delivery, vapes Our create completed products of a could Edibles Initial on The the Food the and part milestone. with that product our an Facility, new of the convenience are is This begun usage development Assurance quarter be the which Construction PDC innovator. February products the will is has in on research products development focused edibles, focus BioLab, and contribute on the Laboratory. plant consumer-centric in research new activities, support BAT and which as ongoing conduct ingestible

environmental or Our using commitment that Hyasynth our we time reduces in have science purchase also to to leader a this of commercial and In in approximately in company cannabinoid for greatly produce with Producing period THC, opens discount the production a the a biosynthesis to recreational smaller the the XX% and cannabis wholesale compound $XX is cannabinoids option in rare million. market two wellness possibilities our Once increased in of production, investment Board the to and with to investment total and at products. at cannabinoids up cannabinoid any Hyasynth Biologicals. we multiple for quickly provides reflected and December, seats. interest This increased use of plants. a years. is Hyasynth innovation This us without is scale, the price medical, footprint. cost XX CBD rare Hyasynth major commences

of investing advantage one OrganiGram in only LPs three well take As biosynthesis, large is opportunities. of positioned these to

Cannabis to current top I'd kilograms expansion of to is flower Laurentian's a under December. Laurentian Laurentian made and $X flower invest XXX sold X,XXX program, Tremblant half selling in CapEx by behind kilograms like increase Quebec's the Laurentian's and sold capacity hash will craft of LP artisanal We annual million X units in units. million XXXX. the about X which and intend million of we the growth of to Finally, about capacity brand. the second under acquisition cannabis hash Quebec-based hash Laurentian brand is of highlight of

also leveraging Quebec acquisition as We presence and $XX $XX significant acquisition products Ontario in It outside as our of are and excited rate national well This since strengthens has strength cost shares to force. revenue accretive a our million million earnout the million distribution expand further considerations. of potential sales annual and in the $XX Quebec. averaging the consisting Laurentian's of our been $XX with increases of high $X is of was in it in cash with million as net brands million entered premium Laurentian EBITDA. The margin market November run in that is portfolio

I it to turn present overview. Derrick Now, will Derrick? financial the over to

Derrick West

Beena. Thanks,

grew QX period $XX.X fiscal XXXX grew increases Gross fiscal million. to earnings from were XXXX, our and in These from to results XXXX primarily due Israel same with to in period revenue X% and higher QX recreational from to QX and XX% from revenue, revenue under XX% agreement which Canndoc. net same of $XX.X revenue resumption to Turning the for grew net shipments XXXX our XX% million fiscal XXXX. the the

compared improved of plant Largely and changes along meet the cultivation only the While overhead products. and in lower cost value due for directly was to XXXX XX%, fair to XXX%. million cultivation during in in unabsorbed kilograms gross XX,XXX QX for fiscal QX of lower fiscal with of of QX year-over-year demands XXXX both increased of gross inventory $X.X approximately and provisions, QX million an charge prior fiscal compared increase in grow prior to to year, negative rooms $X.X in On the million unused $XXX,XXX fiscal QX $XX XXXX. XX% revenues XXXX. We million of an basis, in margin compared sales XXXX related kilograms fixed yield during the in gross for assets was There QX from of biological margin adjusted grew increased our to no $X.X to the post-harvest was million. growing X,XXX increase XXXX harvested year. flower per planning QX to $XX.X costs, QX QX to increased This

EBITDA years offering of million SG&A, $XX.X We compensation excluding marketing and to to increased initiative from in $XX.X integrated QX of prior current to higher the to increased million auditor due negative gummy due of requirement products in that higher was to million to general support due fees our to from improve revenue production lower non-cash $X.X launch employee due expect fees QX products. investment increases, new further tend headcount, addition the largely increase have in other the will to wage the margins, margin costs to improved the and reduced SHRED, share-based trade million from margins. and quarter. the quarter, the cost adjusted audit increased and $X.X fees our technology new to XXXX price premium and the professional spend higher derivative in and XXXX comparison an Also,

$X.X to our year-over-year with We million million. our financials we momentum Overall, $XX.X from loss also continued seeing. improving pleased are net and are we the reduced

have to revenue fiscal on from In Laurentian Based we in December addition, XXXX, of EBITDA starting we recognize positive QX acquisition. on XXXX. of adjusted began this, view by now our advanced the achieving

period's In activities in $XXX,XXX investment of in activities change during QX net cash operating current fiscal was we our statement The supported of due terms asset of the was cash capital cash of in $X.X QX year. the generated as working Net to and an million was to XXXX business. generated used financing cash of Net QX flows, primarily compared primarily the comparison driven by growth prior $XX during fiscal lease the fiscal prior of cash of of quarter. from year’s by $XX liabilities. investing used the was XXXX, XXXX, from activities $XXX,XXX debt of million reduction million increase QX during

period, million proceeds, $X the During from capital the $X million million of current investment restricted there short-term from expenditures. $XX incurred for was funds net

concludes terms I November million decrease and to we the working back sheet, Beena. to and the you. my XXXX. This capital at primarily like its both assets XX, facility fiscal $XXX company's In our due cash of the the unrestricted investment compared improvements. Thank balance comments. capital The in to on end $XXX in turn call of to short-term period would during million expenditures had investments XXXX, for is

Beena Goldenberg

quarter. are the pleased Thanks, we with the Derrick. very past results record close, To in

significant Thank our us margin. in for for look you you joining now, improvements revenue exciting positions further can questions. open to may a operator, generate increased you believe continue I updating today. brand expect and introductions, I and us successful volume forward more XXXX. penetration to progress. adjusted product new to And that on We strong fiscal growth, our momentum call Investors for continue and gross the

Operator

& Oppenheimer [Operator Instructions] from of of comes line the Your Rupesh Company. first question Parikh

Rupesh Parikh

question. Good for taking morning. Thanks my

that the guess market go drove in just area I share, a year-over-year. were share so wanted would you increase So guys increase? that markets the is What attribute first key I to market significant efforts

Beena Goldenberg

Thank for question. the you Sure.

attracted It's growth increased from significant strong the not quite the the only SHRED been we've really So flavor seen behind that to brand. consumers consumers we the our high profile interest but that saw convenience, growth an in demand and related of offering brand. in really really

significant quickly. into to In in the in November, last – into brand. traction have addition, – into and behind we launched competitive so We marketplace by after started of the category three the the a category number cost launched our and August we our pretty built gummies saw came we in EIC the market April, acquisition with cost back SHRED'ems position

building XX pack different And launched strains to our earlier, on as mentioned So Pinners, we It's is which in we Pinners, continue pre-roll to focus offering Edison our unique our offerings. that marketplace. addition, it. a derivatives in the has two a offering I

consumers, that has their to helped and meet understanding our listening what share. and looking launching our just for this products we're us So demand, gain market they're

Rupesh Parikh

That's color. maybe And question. Great. helpful one follow-up just

on have that so generates the unique the low about of on on $X fairly acquisition, it's already So EBITDA million EBITDA rate Laurentian What's sales a impressive, run strong base? Organic base business revenue $XX pretty they that million. already

Beena Goldenberg

Right.

selling on the products hash one predominantly selling their they're I number So is Laurentian mean the marketplace. hash in and Quebec focus in

offering premium and good consumer its taste margins a with for – on that really it of the great and and flavor it's product drove been appreciation So product. has feel

to they've flower that on good product. is really So strong a been know margin They We with able craft complement offering. craft flower. maintain some margins that

their continue expand overall We'll we to offerings market. So of those on higher to build take the advantage margin as capacity Quebec offerings our out been has to portfolio. focus those

Rupesh Parikh

Great. Thank you.

Operator

Your the comes Chen with question BMO of line Capital next Tamy Markets. from

Tamy Chen

Thanks the good question. Hi, for morning.

a bit about structure ask to and wanted margins. I the First, cost more

sales you what that need the from to of running which gaining is recall, minimum somewhere market I the and because, So change can would are of, fluctuate expanded XX,XXX level now, a you kilograms gaining up us you year, capacity level in EBITDA? understand maintain positive of at around share is does lot help and a while ask I positive, sort time-to-time. once capacity margins the you're a share who could on

leverage your flexibility or wanted operating structure? nature of cost So to I or understand the deleverage

Derrick West

Tamy. Hi, It's Derrick here.

we to But in capacity the outlook this demand the capacity. now to available, we able consistently launching on of we as we the last we of getting from operating new be yields plans three, the will add the in the our and and over such, revising products total today near for are on terms have from on at at are be point our we only we improved to or the from the based take positive us complete We and that products, and on based feel capacity XX,XXX operating move cost construction the to on our that have reduced the a rooms or and we've cost to over going we demand innovation rooms at last significantly that based XX,XXX element exceeds cost the the months, gross just rooms do we the planting quarters, four do XX,XXX to few margins. this gone be negative our point to There that's and that the plan to to And capacity variable gross increasing have fixed XX,XXX, the capacity as exceeds structure by is adjusted that based adjusted on labor. as our margins beyond been far we're our current the continues this current to products success capacity. outstrip facility

there the But, We just do capacity whereby have expect. the cost is and not based [indiscernible] XX,XXX. be cost based demand to that think the that course, operating to of in is on whereby is not of if be fixed in sufficient sales just there's won't cost reduction capacity a a at such. we're feel cannabis be be XX,XXX to is more given downside a that again, moving buffer. not but there this sufficient we the element can much products, on rate competition direct capacity, run from there doing operating expansion selling we Should cost on annualized XX,XXX with XX,XXX there a all it'll an perspective our well not you're the viewing so as our companies, charging from So to element marketplace, or that we today a this demand and today which moving from provide where significant we

Beena Goldenberg

just more top me is our available now, in on Ontario right let of Tamy, just add – really marketplaces provinces, very only said. Alberta. And in Great. brand Derrick popular and one comment in SHRED what two two

We We offering product of a there's have do But some us the opportunity to in we in for take small volume Quebec. that been supply. expand more marketplace. due believe lot is to lack of we the able brand is distribution haven't the a and markets advantage great out to what to expand that believe other

I – having swapping seen able So have SHRED between pretty expand sustained brands, to that to we're and looking continued while brand we're capacity and not great forward our be been your our extra comment some that on consumers performance, recognize we've demand to distribution.

Tamy Chen

to there. for comment Thanks actually it. the good Got a my question. That's follow-up segue

So very to demand was last in success SHRED because consumer the much more ask see how because so upside brand Beena in going SHRED you year. gotten interesting much that's on I over the it's

clarify, in and provinces. SHRED really Alberta the only other is really and to So Ontario in not

you. the So already upside the Alberta upside more and there in see Ontario How that is there. demand in? continue anticipate Do is even that still to SHRED or I on about provinces SHRED? you Thank see

Beena Goldenberg

Yes.

and capacity point, our is see and We This supply currently our product fulfill will looking on increase that why orders is our Alberta. meetings XX to to can't all So at having think we're that gram in in a have fact out us, business forward in. correct, just of business be big comes see there. we can't the format continue improved a gram they're it we're Quebec versus and basically competitively OCS, we to have really currently that's we as is from X offering that But us format demand we capacity demand joint the come in they the to back bit production absolutely on this SHRED with helping markets retailers a we also opportunities could I allocation. fulfill our that little supply so telling because demand priced market. do the But in the upside and those And do the demand. expanded should able we in Ontario deals the planning I to there's illicit we're

the through this bringing into we're them introducing offerings. illicit market brand, in high the so And people legal market from to quality

I upside of so there's the And from illicit think market lots do market to the over well. as more as move people legal

Tamy Chen

Great. Thank you.

Operator

comes Your question of from the AGP. of line Aaron Grey next

Aaron Grey

and good Hi, you the morning, thank questions. for

for first this question quarter. Israel So just again begin sales to me, want I [indiscernible] touch on

to So just first two for do Just maybe of they or in the on I forward, of a on first relative Israel? build-off should think margin to good products the comment guys all, the lumpy, And you you could want sales kind forward – going whether of are And should you. continue quarter, could not about you questions. that's of? Thank then profile receive to receiving the be to that go that continue in XXXX? it know we revenue think how base to some

Beena Goldenberg

Right.

this At resume – So the shipments we thank you had Israel question. strong of we fiscal in QX XXXX. to for point,

of in our they grown I interested premium shipment the Canada. sell they made we a ongoing performance They their that price the that is great cannabis with their stores XX product in product. see get draw. premium with of as from shipped we XXXX, were within We – very sold hours. that have pleased with our big from ongoing very they're it and in a And receiving MAC-X out strains. They in believe partnership – what fiscal Canndoc QX indoor for a market

So they're products. very pleased. They're looking for more

that expect to on at be a our strong have throughout obviously of to partnership to But no do point, year. on a shipment does environment. the this once of expect a and the We fiscal shipments cadence we to quarter depend see regulatory with we Canndoc changes ongoing balance Canndoc

Aaron Grey

any then are for you color seeing And on you you. the quick a profile just Thank just follow-up. margin Could Great. comment relative… Israel Okay. if

Beena Goldenberg

Sorry.

that. You have did

we sell the product the have markets, And have when you Yes, when Okay. you margins you impact that's that so excise certainly, because on recreational we have export sell the good you within obviously to Israel. tax market. that sell don't

for I revenue. know, us, provide if and our you And Derrick, so it it's a any to overall drive more net helps strong don't want color. margin

Derrick West

But BXB it's we guess simplified we packaging you're was margin within tax the get margins noted on by the terms in that consequence doing a as do excise of of just that well don't specifically. I have healthy as packaging and into process the normally labor export, a element. more product business on the the and sending the categories both

that allow enhanced for margins and the And market. to in so as margins Canadian flower it does are craft the compared

Aaron Grey

that. that's color. qualitative Well, helpful appreciate I

market high in on Second market the kind a question pressure potential some lever regain Then of view for about just peers me. of continued in pricing level terms pricing, talked using have pricing like and share. to as

was Just seen with potential as in your in prices as kind of different Thank share, mentioned going look and maintain especially brands? want we you're XXXX, overall gaps to in you. SHRED, relative price to different changes time with – terms we've pricing earlier, go of increases market of at fluctuations get kind through to how recent view over

Beena Goldenberg

Right.

getting the and other compression We compression in in seen we've in coming we've my flower in that's marketplace. happened level But is vapes I a sort So see where segments, supply place perspective, the The got basically demand seeing aligned flower think to category. the you in seen from significant off. now quite category. price the we're are more price coming compression of

competitive cost offered our to have the structure that of to be market know illicit prices in category to We competitive that in not compression. segment gummies, terms the good concerned so that maintain price for we're value We in in have momentum. a we

able year, the the strength watch really good of last a to certainly flower I SHRED of maintain indication and brand. the seen the category continue pricing. brand that to on you I the the our but compression pricing obviously So we're in have We to the think think, this take in category over have momentum

we've of that off. flower that's the end believe wrong. flower. segment. could compression the I proven on the we leveled certainly But SHRED. increase our think see to we've might segment, kind be in were leveled I – do I on sort But be There some on able get that So high of we as what craft price on value

Aaron Grey

jump the Okay. Great. much so Thanks color. queue. back into the Then for I'll

Operator

Your comes from Eight next Capital. question the line of Ty Collin of

Ty Collin

Hi. Thanks taking question. for my

the looking Just for some color additional outlook. QX on

sales the press think the not in year-over-year language QX, release sequential necessarily guided I higher towards in but growth.

So if the you of and in use? QX would great. there just of seeing What terms looking wondering is Some takes adult or Thanks. down? be flat puts are

Beena Goldenberg

Perfect. the Thanks for question.

well Obviously, momentum the We've consideration fact the but and very be we the which do the behind is incremental So we we into revenue had recognize that have are going December this could want growth careful some quarter-over-quarter, quarter-over-quarter, to we do from there good have on business. Laurentian. us. quarter. to coming But seasonality

second – February are as quarter the of as ends our quarter you The boards in month have that you the of have the quarter because is over lowest the shorter provincial our year usually second well March. shutdown Christmas, year sort

a certainly very significantly striving be the revenue that, So while we're are for quarter-over-quarter, to clearly prior same just cautious going are recognizing year. higher quarter we we being than

nobody restrictions stores. of Quebec the There people out Look, of infected shortages who's with some in and about is recognize. this, but to as There allowed are the limits to capacity in some is want talk stores are do there. impact retail I in thing likes labor the of COVID. into COVID terms other back The

quarter, have us being QX. just coming on that in, revenue coming incremental great we quarter this but from the certainly our momentum in for should certainly we're have deliver and a cautious solid statements we So Laurentian help

Ty Collin

the as just there. follow-up. my Appreciate color Great. And

in you. will the call SHRED, when can't with to Moncton? capacity this expect given expansions that keep left table you sales company Is mentioned on quarter? in for demand to You still the were how Thank balance much demand quantify example. earlier supply the there up any the And out picture for way do the start that

Beena Goldenberg

Right.

be So good our expansion XC once that question. and will up I we mean, of is out running. believe certainly supply we challenges

to out on So us should and demand mentioned the top XX,XXX earlier, feeding the distribution focusing we're SHRED markets to other able on the of address and to of as look we're Derrick the where be at expanding of of and we're currently on product allocation. kilos that facility, markets needs enable in

supply. the they terms demand it's or table? our sales can't one how see a of something large conversations that In know leaving on we certainly in their are as very We retailers to That's the looking much product hard answer. are with number, we OCS, certainly it for a and

over the quarter. So that some every fulfill We orders see and next started past quarter should quarter help us we to yields. improved more started to build extra supply this

once fiscal of those As end that unlock production of grow will you to see see we But you by out the I complete big XC next sort over plant continue the couple harvest. we year. our the between and and there's quarters. have of know, should is of But rooms delay in expansion when you improvements coming

Ty Collin

congrats and Thanks on quarter. the

Beena Goldenberg

you. Thank

Operator

of comes line Andrew Partheniou of next Your Stifel. the question from

Andrew Partheniou

could Maybe morning. starting QX? Good in to taking with just the How it products price SHRED. Thanks for made of possible my question. be continuing you've on more national even much in expect that further you standardized or a And SHRED QX? on to new there upside about increase into it price? markets, are as increases thinking having off some do you quantify you Is on SHRED price your bring by

Beena Goldenberg

you, thank So Andrew.

that biggest in volume. is Ontario, And the selling compressed their in currently know we that's the based which on SHRED, we're most to just of model. regard with margin So market our price bulk

prices have that on we margin there could out markets And some as margins do have believe and upside we to we for better as markets, so we better SHRED. other roll that get is our

pricing of able were in terms the Alberta quarter, to In through earlier by October. a the were the price Ontario in while bit pricing end able we to only the little we of the get increase, through get

there's of as full So we in think the in the Ontario. see we that upside do quarter next price impact increase the good

Andrew Partheniou

Is price it possible increases? to quantify the

Beena Goldenberg

take Derrick, do to you want that?

Derrick West

based – a here, be benefited Yes. range to a in QX But on the of terms not timing mean, the in reporting topline sales X% were impact sure effective we quarter quantification the partially as during I'm implementation it we timing. on transitional I our if it's noted the would just the in just the from on period.

Andrew Partheniou

that I profitability, you And over you outlook time transitioning profitability the I $XX and clarify, that believe take about expenses R&D about can spoke your we believe you three to thinking about R&D could account that level provide any when your the outlook? talking for of of other maybe into expenses. that R&D and last that's accelerated has to expenses talk maybe outlook it, color. Thanks excluding had all? cadence maybe expenses you R&D Could on about were years, to million you at color changed know nice

Derrick West

from Yes. of the of we, indicate that on spend the of pushed team are that have would or that over timing a the out the the more innovation – of R&D aggregate been work of to has our The is employees own budgeted and are few expenses spending Center in be programs forecasted. of and the just spend been I of have would of modest but the originally hired the program Excellence. And was spend are the originally the on similar. Center would timing of Center same less that some I and Excellence. as months, within Excellence, say above date total and But terms in it's the programs been that course, terms doing our R&D the the have

that get from increase to would've So bit we see the would this for run total can but that seen start year it a the R&D you would QX it lumpy, spend company. of in the QX terms rate and in of

Andrew Partheniou

Thanks. in I'll get the back queue.

Operator

the from of comes question line Rahul next Raymond of Your James. Sarugaser

Rahul Sarugaser

the was wanted much company you Thanks saw Derrick, capacity. and being and fully that do gross dip little about for in so our capacity extraordinarily the sort to of then with if of the And we a efficient end capacity drill close already. gross Derrick, I a potentially We transition now? thinking or little not Beena, sort operating to do in and know How just how about referred morning, margins expansion? as historically margins right gross capacity limiting Good upper now. you you the of about that in of into margins. you I bit talked rate capacity, taking And But I early bit the between to days think the at at terms we that margins that when step be see to a Paolo. legalization interplay see should expansion questions.

Derrick West

Yes.

proceed the extra I our see we getting added operational dollar The same expansion. not going added, costs per are it's to not would are that as costs margins the at the as dollar to any to are capacity Firstly, generate. pro dip that getting rata the

January. But that's the it Just XX,XXX. for period, by month XX,XXX example, QX capacity of we're reporting at for our when annualized was approximately say say we

where then here I of be output a an increase tying fixed reply to of sort to of from earlier terms variable going every Chen’s And And the increase room effectively structure back that go QX that our production component in and cost to question going today from again in QX of gave most positive a in XX%. nature. can our be had we these the costs we've is a that as per And is is margin, XX,XXX we over get and are compared increases just going going we've down as Tamy XX,XXX, XX,XXX available which on to to, where there we've unit will adjusted QX, seen significant. of rooms is our to we to as increase. consequence, from number that negative from we QX increased significant So gross volume to QX cost already as of cost

capacity think should of So we to full no not mathematical that continue we do that there's XX,XXX. reason get this as

Rahul Sarugaser

helpful. Hyasynth. maybe OrganiGram’s least the just when saw – its couple and start at That's important is very switching understand And And bit, –fermentation support then that investment see Hyasynth sense to the products a cannabinoids? CBDA. particularly of to Great. with particularly in terms Could production little OrganiGram milestones, starting in meet production continue of produced gears you of we to some shelves a your derived into us might given hitting major for incorporation molecules of one give the Hyasynth of see competitors we of we a your shelves, hit that fermentation we

Beena Goldenberg

Right.

that you for question. thank So

it's we've our with IP furthered that's why very at Hyasynth So investment. we're come this the point, pleased and from

manufacturer production or QX revenue to of by organization facility at XXXX the on calendar coming looking agreement their out around year a having XXXX, XXXX. of in sort contract scale of sort place the of expect end material by are and help that's calendar agreements of that We

that material significant coming cannabinoids before is – to of where and BAT and work And our between think terms about very some a believe coming of a the do it's opportunities products. the time products to by we these technology and that that the bringing than So production. have revenue approach revenue calendar development are about what that in use ways we're now still of and by we opportunities take But end talking seen in will innovation we we work greatest to then XXXX, of rare our terms We with up see only on away scale we've some IP. the in collaboration product out of out these in of excited of competitors. scaled we're while their that out simplified easier have little believe

do product use to the once research, that go to that is and time right scaled. the we'll ready sure to the So consumer work we're right make do

Rahul Sarugaser

helpful. Thanks Great. for our That's again questions. taking very

Operator

of the comes question next Adam Scotiabank. Your of Buckham from line

Adam Buckham

taking to half. detail you've for on of that some project Thanks of let's sales, want launched? the get and great I you spring, you quarter. versus, for undertaken really, premium some high flower to demand you're my products been those sort overall demand Beena, versus for on over last idea congrats I'm that Are just trying of seeing on SHRED. level morning. revitalization that's like sort year flower past for the to about and contribution more provide Good the say new or provided an last sort the and the able quarter color questions to a on focus

Beena Goldenberg

Right.

So a couple of question. points on that

in our a flower SHRED from growth our seen Big demand, seen obviously we've Bag but have O' in also standpoint, we the So Buds.

So that's capacity our well. XX again, gram as have our we're some distribution format, as work challenges, in And that unique but limited format we we growth seeing through strains.

market brand. an on brand sustained we've Our seen, share Edison it's Edison been

some Edison, premium flower our of start higher consistent our that of this half on consumer the brands. behind growth we the Edison in We expect see terpene genetics is to which for more brand on back offerings introducing some as year, higher with demand newer THC,

interim, live So on out under to continue Edison our our portfolio resin that is focus coming the packs with out behind market. vapes, have In will coming. we be vapes to that building we some

demand. have in in the space I which a the And was really out seeing we're We category. lozenge additional that because intro high JOLTS, that of talked our coming of potency about Edison into briefly script great SKUs sort

very a offering, to of for format that great So CBD-infused our again, and our CBD offering, derivatives, offering the in opportunity up good flower chews. soft marketplace, for there's larger we'll merge a through is us, margin not outside build Monjour which launched many of some distribution. we And consumers

is out think that some products traction. then our pre-rolls said And just past So as I did I And portfolio. see Edison as with some be going to margin a we with matter new of Pinners, think I there our we quarter. it's which improvement of build this were Edison, gaining our continue to the earlier,

answers that I So that hope question.

Adam Buckham

the certainly know. It does. I color. for Yes. Thanks

seems now if the shared expect just market. wondering anything market and dynamics in Israel what of but of sort that right on sort commentary Israel So kind many the table, right. the second, of to just course, given Canadians they for LPs wanted of And margins, competitive has your I on demand are any to basically forward on looking there It I'm touch that into again. partner put get attractive Canndoc

but anything you order anything on front every quarter, is terms front, I know said on share be forward a sort you of what one that expect there can of sequential on So that helpful. in would you basis?

Beena Goldenberg

Right.

discussions So Canndoc what gaining – Israeli is I what flowers. with market the is premium Canadian really clear think the best prices indoor what in in looking became our grown they're is

they it indoor as put grown So it brand unique opportunity identify us that I is facility indoor with marketplace. said as grown, product our as Canadian there the shelf. largest a out They've supplying flies we're think with just that provides what the off that one and of soon

marketplace. premium as in seen that really it's product So quality

our some we told certainly their market performance the strongly our products pretty sold that competition from think how cannabis, in and So in with be strains grown is while I think will were there Israeli quickly very some about that the Canndoc introduced feel we that and us pleased marketplace. of certainly new they out

build So continuing I'm relationship good and about to from feeling that there.

Adam Buckham

and color the on congrats the for again. quarter Thanks Great.

Beena Goldenberg

you. Thank

Operator

question next of Douglas Markets. line RBC of Your the Capital from comes Miehm

Douglas Miehm

Good of morning. questions. Couple

the in differential in price market, the take O' start where through the in us your in want with just you illicit particularly of market. far to the has you to do and that. question could like of product, price you maintain that Bag larger And the see to SHRED, from not you're take provinces between First maybe walk terms type to Just and is what do before you pricing differential Buds able how share need with that illicit pricing, can Big market?

Beena Goldenberg

Right.

Okay.

for that thank So question. you

I think market the of in illicit that crossed terms with we've actually pricing market.

the illicit of value offerings look the the price in If program price legal on price in we've seen program program, some fallen and the you the where at market market. has actually the overall below market

get demand across illicit on go we've whether we're say there, think that of a mean, right and that price differences in But the I see. SHRED. way Now, think bit sort THC, don't but it's the believe illicit our on market. gram indicated market getting price illicit that province that obviously and field, SHRED take terms has the right pricing And you that long hard strains dynamics I have gave sales – of of like to market still we're in there's that crossover already flower, kind a of level in. we've is legal of the now more But bit XX% crossed speaking I in we're on increase I a hit that that's versus playing the opportunity now, the I feel the of there that little depending market we've from of continued it's Obviously, us XX% the think into you're little that And different legal on I to to over. market to over, come generally at market. a I to mark. are per

Douglas Miehm

fair. That's Okay.

you're to months. into Second open perhaps of outside question while, XX about, was you're but Israel, next in doing or XX a the What's thinking sort in and selling wanted we other in there to company's be see going of the that the thinking what in are I expansion next markets to ask couple up for your of international Canada Europe Israel?

Beena Goldenberg

Right.

to a expand as had to in Australia have them them We also are while of first have So Cannatrek we and our export we all, well. shipped out looking with Australia. with partnership reengaged ago when a shipments

Israel, businesses certainly year. addition look in this fiscal that our current at fulfilling to that in So will

doing terms to of our GMP advantage certainly What designed as EU Moncton or over available months other to to another but it's the yet, opportunity the capacity as in derivative as markets export Moncton of That's next We XX some we're we in certification facility, EU that facility look become evaluating are well facilities build us. to have to well. our we'll how those The Europe in Germany how to out trying the of understand GMP to in as something that short-term? able status our at Europe. and get GMP. markets, facility. course We're watching market don't for legalization there consider Winnipeg that get markets all we're In some the take other and be in

Douglas Miehm

much. very Thanks Okay.

Beena Goldenberg

Thank you.

Operator

Your next of the comes Bond] [Andrew Jefferies. from question line of

Unidentified Analyst

I Andrew line to so taking our keep Thank Bennett. for call, it you one. the understand morning. Owen it's in the questions. Good for I'll on late Bond

agreements uncertain, other that Just transaction timing federal legalization, shown strategy from understanding with on for market has optionality traction as remains MSOs share CPG and around brand well approaches agreements we've like great data. oriented LPs OrganiGram U.S. different based and Obviously, plays. types as structured seen several

eventual you So develop as approach an thinking THC just you. about the market? specifically Thank you're to U.S. curious what

Beena Goldenberg

Great. Well, thank you.

market looking hold we've at been that a apologize, it's and second. the something U.S. on So we obviously – I

that. about Sorry

approach. rapidly So the going And two as U.S. of make you in don't competitors in getting have in we market, years now, changes I'm to looked the done some I when and our over option adjacencies. an track U.S. in changing the has to look the that not to the we if time the the sure this for and develop We two opportunities put have at believe necessarily other options right be market that years. what is regulation that CBD U.S. sure and market the market company offerings continue at We'll course you're how really given us. dynamics. of the know know We a significantly changed explore understand will you

right Quebec hash. it's in the a the Canadian us. both got last very move bolsters So when out into and short-term which at, but The gummies going we'll six the we're Laurentian, craft in goal us bigger has presence those which the and things to are us that way do into EIC, added with marketplace. it We just flower market Tremblant added quickly. foundation concentrates We've build in into our for our gets in look months to been

come look built as our But not see us. is sure at we start our for we'll and we Canada, I look to in was that we've right as outside we if the the market to look, the think of the continue internationally And base priority So U.S. U.S. I'm out first we'll opportunities or as will look. expanding

Unidentified Analyst

Great. quarter. on that Thanks color. the Congrats for

Beena Goldenberg

you. Thank

Operator

Your ATB of from the Frederico next line Markets. Gomes question Capital of comes

Frederico Gomes

keep it you Thank morning. good Hi, to question. my taking one. I’ll for

but share, competitive fragmented. momentum have market In of guys there, good the very, you going terms market a your so very is still

in can market? expect going until would or take Now you Thanks. in of share market would the market just is curve So you flatline that of organically continue expect how target the you have guys any of to share there kind you much mind terms gaining consolidate? to forward, share

Beena Goldenberg

question. Thanks for the

is we've what because we're so SHRED taking advantage offering our said full think are I of we obviously far not capacity constraint.

Buds Bag as gram believe we our we well to O' as there or more XX as format. out SHRED on our is So capacity, gain do our build upside Big

market business do those And grab out. we build there's believe we derivatives out build that have from we continue offerings. As our to do to we more capacity, share

gummy more we have lineup. offerings coming our So in

Monjour launch to benefits full We see the brand. really have of yet our our new behind

are have coming brand. pre-rolls out we coming category, pack vapes but underdeveloped both SHRED in innovation new coming more pinners some the under vapes some dual out, more we on our Edison vape new which have We brand and and out, our

that market do share. challenging think answer a marketplace. benefit that the limited good that say on because the I the also through a Quebec of data is to a gain to we I'll simply think of share larger the believe Laurentian. So have we'll market is of read acquisition that of there's certainly out market We while opportunity coming And take

Frederico Gomes

much. very you Thank Great.

Operator

Q&A I back session. the now Beena. today's concludes turn This will call to

Beena Goldenberg

to great about updating you forward joining the we excited for you, Thanks you business, the soon. Thank momentum listening the have thank questions. I for on look We're some everyone this for and and morning, very call. again

Operator

today's you call. for Thank participating in

disconnect. You may now