Organigram Global, Inc. Q3 FY2025 earnings call

Canadian Business - Canada's recreational cannabis market grew 6.6% Y/Y to $1.4B in Q3. Organigram maintained #1 national market share (11.6%), led in vapes (20.4% share) and pre-rolls (8.3% share), and had 10.6% flower share. Big Bag of Buds was #3 flower brand in June, SHRED had over 40% milled flower share and 69% repurchase rate. - Operational updates: Moncton facility harvested over 24,000 kg in Q3 (+15% Q2), 54 grow rooms upgraded with LED lighting, average THC >29% in Moncton facility; Winnipeg beverage production line to commission in Sept; Elmer facility hydrocarbon extraction expansion nearly complete, saving costs; London distribution center CapEx to complete in fall, expected to save $3.4M annually. ### International Business - International revenue grew 208% Y/Y to $7.4M in Q3. Pending EU GMP certification expected to boost international flower exports volume and margin. Launched new products in Australia, completed first international shipment of seed-based cultivar, and has $59M available for international strategic investments.

In Q3, Canada's recreational cannabis market saw a 6.6% year-over-year growth, reaching $1.4 billion in retail sales. Organigram maintained its #1 national market share with 11.6%, having a 2.5 point lead over competitors. It led in vapes (20.4% national share) and pre-rolls (8.3% share), and had a 10.6% share in flower, up 60 basis points from Q2. International revenue in Q3 was $7.4 million, a 208% year-over-year increase and 21% sequential increase, driven primarily by exports to Germany along with contributions from Australia and the U.K.

Guidance - Adjusted gross margin is forecasted to average approximately 35% for fiscal 2025, with Q4 expected to contribute to expansion, and adjusted gross margin percentage expected to approach 40% in the second half of fiscal 2026. - Anticipates positive free cash flow in Q4 and throughout fiscal 2026. - International revenue growth is expected to be bolstered by pending EU GMP certification, which, once granted, is expected to increase both volume and margin from international flower exports.

Risks - Temporary disruptions to on-time in full service due to Motif ERP integration. - Uncertainty in the timing of EU GMP certification approval. - Balancing domestic and international demand while maintaining the strength of domestic branded business.

Q: Could you talk about the adjusted gross margins outlook and the drivers behind the expected expansion in Q4?

A: Greg Guyatt stated that the full-year adjusted gross margin is forecasted to be approximately 35%. It's driven by normal seasonality with more throughput in Q4, realization of Motif acquisition synergies (already $4M year-to-date, with more to flow in Q4 and Q1 next year), product mix shift with increasing international business (higher margin), and capacity enhancement projects in Moncton.

Q: How is cultivation capacity being balanced between domestic and international demand?

A: Beena Goldenberg mentioned that there's growing international demand. They are reevaluating previous CapEx plans related to grow room expansion at Moncton, leveraging current assets to increase capacity. They aim to optimize usage while maintaining the strength of domestic branded business like Big Bag of Buds and SHRED.

Q: Talk about the EU GMP certification timing and its impact on international business?

A: Beena Goldenberg said EU GMP certification will be achieved eventually. Once granted, it will remove the middleman, increase pricing and margin on international flower exports, allow quicker product flow without delays, and boost both volume and margin from international flower exports.