OrganiGram Holdings Inc Q1 2022 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Tamy Chen - BMO Capital Markets Equity Research - Analyst : First, I wanted to ask a bit more about the cost structure and margins. So can you help us understand, once you are up and running on the expanded capacity of, I recall, somewhere around the 70,000 kilograms a year, what sort of minimum sales level would you need at that level of capacity to maintain positive margins and EBITDA? I asked because while you're gaining share now, which is a positive, the market does change a lot and who is gaining share could fluctuate from time to time. So I wanted to understand the flexibility or operating leverage or deleverage nature of your cost structure?

Question: Tamy Chen - BMO Capital Markets Equity Research - Analyst : Got it. That's actually a good segue to my follow-up question. So Beena, that's very interesting on SHRED because I was going to ask how much more upside in consumer demand you see in the SHRED brand because it's gotten so much success over the last year? So to clarify, SHRED is really only in Alberta and Ontario and not really in the other provinces. So I see the upside there. How about in the provinces, Ontario and Alberta that SHRED is already in? Do you continue to anticipate or see that there is still even more demand upside on SHRED?

Question: Ty Collin - Eight Capital, Research Division - Analyst : Just looking for some additional color on the Q2 outlook. I think the language in the press release guided towards higher year-over-year sales in Q2, but not necessarily sequential growth. So just wondering if Q2 is looking flat or down, what are you seeing in terms of adult use? Some of the puts and takes there would be great.

Question: Ty Collin - Eight Capital, Research Division - Analyst : And just as my follow-up, you mentioned earlier in the call that the company still can't keep up with demand for SHRED, for example. Is there any way to quantify how much sales were left on the table this quarter? And when do you expect that the supply-demand picture will start to balance out given the capacity expansions in the Moncton?

Question: Andrew Partheniou - Stifel Nicolaus Canada Inc., Research Division - Analyst : Maybe just starting on with some of your products continuing on SHRED. Is it possible to quantify the price increases that you've made in Q1? How much more do you expect to increase it by in Q2? And as you bring SHRED into new markets, are you thinking about having a standardized national price on SHRED? Or could there be even further upside on price?

Question: Andrew Partheniou - Stifel Nicolaus Canada Inc., Research Division - Analyst : Is it possible to quantify the price increases?

Question: Andrew Partheniou - Stifel Nicolaus Canada Inc., Research Division - Analyst : And maybe transitioning to your R&D expenses that you had that nice outlook of accelerated profitability. Could you clarify, I believe that's excluding R&D expenses and when thinking about R&D expenses, I believe the last time we spoke about it, you were talking about maybe $30 million over 3 years. Has that outlook changed at all? Could you maybe talk about cadence and any other color you can provide on the level of R&D expenses to take into account your profitability outlook?

Question: Douglas Miehm - RBC Capital Markets, Research Division - Analyst : Couple of questions. First question just has to do with the illicit market. Maybe you could do just walk us through where you see the pricing in that market, particularly in larger provinces? And the price differential between your SHRED, Big Bag O' Buds products and the type of differential that you need to maintain in terms of pricing, like how far price can you take before you're not able to take share from the illicit market? Just want to start with that.

Question: Douglas Miehm - RBC Capital Markets, Research Division - Analyst : Okay. That's fair. Second question I wanted to ask was about -- you see that you're selling into Israel, but there are going to be a couple of other markets that open up in Europe in the next little while perhaps in the next 12 to 24 months. What's your thinking or the company's thinking for international expansion outside of Canada and what you're doing in Israel?