Eastern Canada LP, Organigram Holdings closed yesterday up 45.37% to $3.14. This is after reporting revenue growth in fiscal Q1 2020 that beat expectations.
The company reported fiscal Q1 2020 net revenue of CAD$25.2 million, more than double CAD$12.4 million from fiscal Q1 2019. However, results look less rosy in quarter-over-quarter comparisons.
In fiscal Q4 2019, Organigram reported net revenue of CAD$16.3 million. On a quarter over quarter basis, revenue only rose by 48%. Worse, this was a big drop in net revenue from what Organigram reported in fiscal Q3 of 2019: CAD$24.8 million.
This means that two quarters of operational development have yielded only CAD$0.4 million in net revenue growth.
To a significant extent, Organigram has been a victim of its location. Based in Atlantic Canada, Atlantic provinces have also underperformed in licensing cannabis stores and opening up markets for legal cannabis. Cannabis sales were actually trending lower in several of these provinces toward the end of 2019.
Organigram’s assurances on its capital needs were somewhat less than reassuring.
With effectively zero revenue growth over the previous two quarters, if Organigram can’t generate substantial revenue growth in fiscal Q2, it’s difficult to see how the company can avoid raising further capital.
This makes the rollout of Organigram’s Cannabis 2.0 offerings of critical importance. Also critical will be a rebound in Organigram’s Atlantic Canada markets. CEO Greg Engel offered these thoughts for investors.
Phase 2 of cannabis legalization in Canada should provide a strong boost to revenues (and bottom lines) for Canadian cannabis companies. For Organigram, this is imperative as the company seeks to generate some operational momentum.
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