OrganiGram Holdings Inc Q3 2022 Earnings Call Transcript

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

Question: Andrew Partheniou - Stifel Nicolaus Canada Inc., Research Division - Analyst : I just wanted to touch on your gross margin profile in the quarter. You had a pretty impressive revenue growth here, strong rec sales, but it seems the gross margin declined quarter-over-quarter. Trying to unpack that, and if you can give some more color on the puts and takes there?

Question: Andrew Partheniou - Stifel Nicolaus Canada Inc., Research Division - Analyst : Okay. And a segue about the 4C expansion. You mentioned 20 out of 29 rooms are online right now. First harvest is coming very soon here. Could you talk a little bit about what you expect -- foresee to be incrementally accretive on margin? How high could we go with 4C? And you talked just now about this really being a big impact in fiscal '23. Could we start to see those impacts in Q4 or is this really only you're going to start seeing on the income statement in Q1?

Question: Andrew Partheniou - Stifel Nicolaus Canada Inc., Research Division - Analyst : Is it possible to perhaps quantify the drag that 4C has had on the gross margin thus far? What kind of -- that could maybe allude to a kind of pick up once that expansion contributes?

Question: Ty Collin - Eight Capital, Research Division - Analyst : Given the turmoil we're seeing in the cannabis retail landscape right now, I'm curious whether you're seeing any changes in how retailers are ordering and whether there are any risks or opportunities to think about given the challenges downstream? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 14, 2022 / 12:00PM, OGI.TO - Q3 2022 OrganiGram Holdings Inc Earnings Call

Question: Ty Collin - Eight Capital, Research Division - Analyst : That's great color. And just for my follow-up, following up on a comment you made earlier in the call, you talked about the incremental international opportunities that might open up as the additional capacity from 4C comes online. I mean, are there any other new revenue opportunities to think about as that capacity opens up maybe in white label and new product categories? Just appreciate any thoughts on that.

Question: Ty Collin - Eight Capital, Research Division - Analyst : Congrats on the quarter.

Question: Matt Bottomley - Canaccord Genuity Corp., Research Division - Analyst : Just curious on your assessment on where the industry is when we sort of look on the capacity side of things. So you're one of the few LPs that is still adding incremental capacity on and it serves you very well. I think that OrganiGram is a good example of a company that hasn't overallocated to its CapEx spend with respect to the number of facilities. But we have seen some of your peers shutter even their flagship facilities, and I'm just curious on where you think the industry is with the ability to continue to service sort of vertically integrated supply versus leveraging wholesale channels to eventually build brands where you don't necessarily need 100% of your own biomass?

Question: Matt Bottomley - Canaccord Genuity Corp., Research Division - Analyst : Understood. I appreciate that. And then just one more for me, just pivoting now to maybe U.S. optionality and your thoughts on how to strategically position yourself for, I think, an eventual opening of that market. I think a lot of consensus out there, it's getting a little messier with respect to when that timing might actually be. But given some other Canadian LPs that have either bought existing businesses that might be THC adjacent or some of the options we've seen or financial instruments purchased, do you feel the need to execute on something in addition to what you've already done with BAT in maybe the next year or 2? Or is OrganiGram waiting to get a little more color on exactly when and if something might actually change down to the border?

Question: Tamy Chen - BMO Capital Markets Equity Research - Analyst : I just had a couple of quick follow-ups here. First is, Beena, I thought I saw recently that Israel might have halted imports because 2 of the distributors didn't have the right permits or something like that. Do you know anything about that, like could that be a bit of a disruption for your Israel shipments for the next little bit?

Question: Tamy Chen - BMO Capital Markets Equity Research - Analyst : Got it. Okay. And I wanted to ask if you could elaborate a bit on this language you had in your -- for your fiscal Q4 outlook, that one of the drivers for sequential growth you highlighted stronger forecast than market growth. And I was just curious if you could elaborate on that, what you're seeing? Is it more just seasonality? This is kind of more busier period of the year, that's what you're talking about? Or are you seeing some more fundamental green shoots with respect to the growth trajectory of the market?

Question: Tamy Chen - BMO Capital Markets Equity Research - Analyst : Got it. Okay. And if I could just squeeze in one last follow-up here. Your comment about the price competition that the retailers are now dealing with, it's not flowing back to the LPs. You said you feel and what you're seeing is not really further compression, especially on the flower side, through the LPs. So -- like can you just comment on that, so you're not worried about with these new value strategies that some of these retail chains are doing? You're not concerned that it might ultimately flow back to the pricing that you're going to get?

Question: Douglas Miehm - RBC Capital Markets, Research Division - Analyst : Yes, I'll just keep this short. With respect to the international market that you've commented on a couple of times now. I'm just wondering, before you go into other countries, are there any regulatory hurdles specific to your company that you need to address? And then as you look out into '23 and '24, how much of your new capacity, by looking at it from an aggregate perspective, would you hope to come from the international marketplace?