Canada cannabis producer Organigram's Q2 net revenue falls more than expected

Overview

• Canada cannabis producer's fiscal Q2 net revenue fell 9% yr/yr, missing analyst expectations

• Adjusted EBITDA for fiscal Q2 dropped 82% yr/yr, reflecting lower recreational sales and higher returns

• Company completed acquisition of Germany's Sanity Group after quarter-end to expand in Europe

Outlook

• Organigram now projects fiscal 2026 net revenue to exceed C$350 mln

• Company expects adjusted EBITDA and adjusted gross margin to surpass fiscal 2025 levels

• Organigram anticipates free cash flow to be approximately break even and capex below C$10 mln in 2026

Result Drivers

• VAPE AND PRE-ROLL WEAKNESS - Co said net revenue decline was primarily due to underperformance in vapes and temporary challenges in infused pre-roll production

• PRODUCT MIX AND RETURNS - Lower adjusted gross margin was driven by a shift to lower-margin product categories and higher product returns

• INTERNATIONAL SPECIFICATION ISSUES - Flat international sales reflected an elevated proportion of product that did not meet international specifications

Company press release: ID:nBw4j21Kna

Key Details

Analyst Coverage

• The current average analyst rating on the shares is "buy" and the breakdown of recommendations is 4 "strong buy" or "buy", 1 "hold" and no "sell" or "strong sell"

• The average consensus recommendation for the healthcare facilities & services peer group is "buy"

• Wall Street's median 12-month price target for Organigram Global Inc is C$3.50, about 94.4% above its May 11 closing price of C$1.80

• The stock recently traded at 19 times the next 12-month earnings vs. a P/E of 75 three months ago

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