Q3 2024 Organigram Holdings Inc Earnings Call

August 13, 2024

Operator: Good morning. My name is Kayla, and I will be your conference operator today. At this time, I would like to welcome everyone to OrganiGram Hldg's third quarter fiscal 2024 earnings conference call.

Kayla: Good morning. My name is Kayla, and I will be your conference operator today. At this time, I would like to welcome everyone to OrganiGram Hldg's third quarter fiscal 2024 earnings conference call. After the speaker's remarks, there will be a question and answer session. We ask you to please limit yourself to one question and one follow-up question. You may recur if you have further questions.

Good morning, My name is Kaitlin I will be your conference operator today.

Operator: After the speaker's remarks, there will be a question and answer session. We ask you to please limit yourself to one question and one follow-up question. You may recur if you have further questions. Thank you. Max Schwartz, you may begin your conference.

Speaker Change: At this time I would like to welcome everyone to the organic Graham Holdings third quarter fiscal 2024 earnings conference call. After.

Speaker Change: After the Speakers' remarks, there will be a question and answer session.

Speaker Change: We ask to please limit yourself to one question and one follow up questions. You may re queue. If you have further questions. Thank you Mack Swartz you may begin your conference.

Max Schwartz: Thank you. Max Schwartz, you may begin your conference. Thank you very much and good morning, everyone, and thank you for joining us today.

Max Schwartz: Thank you very much, and good morning, everyone, and thank you for joining us today. As a reminder, this conference call is being recorded, and a recording will be available on OrganiGram's website 24 hours after the call. Listeners should be aware that today's call will include estimates and other forward-looking information from which the company's actual results could differ. Please review the cautionary language in our press release dated August 13, 2024, on various factors, assumptions, and risks that could cause our actual results to differ.

Mack Swartz: Thank you very much and good morning, everyone and thank you for joining us today.

Max Schwartz: As a reminder, this conference call is being recorded, and a recording will be available on OrganiGram's website 24 hours after today's call. Listeners should be aware that today's call will include estimates and other forward-looking information from which the company's actual results could differ. Please review the cautionary language in our press release dated August 13, 2024, on various factors, assumptions, and risks that could cause our actual results to differ. Further reference will be made to certain non-IFRS measures during this call, including adjusted EBITDA, adjusted gross margin, and adjusted gross margin percentage.

Speaker Change: As a reminder, this conference call is being recorded and a recording will be available on our website 24 hours. After todays call listeners should be aware that today's call will include estimates and other forward looking information from which the company's actual results.

Speaker Change: Could differ please review the cautionary language in our press release dated August 13, 2020 for various factors assumptions and risks that could cause our actual results to differ.

Speaker Change: Further references will be made to certain non <unk> measures during this call, including adjusted EBITDA adjusted gross margin gross margin percentage. These measures do not have any standardized meaning under arrest and are intended to provide additional information and as such should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IRS.

Speaker Change: Our approach to calculating these measures may differ from other issuers. So these measures may not be directly comparable please see today's earnings report for more information about these measures in this call references to fiscal 2023 or did the 13 month period from September one 2022 through September 30 of 2023 references to Q3 fiscal 2024.

Or did the three month period ended June 32020 for references to Q3 fiscal 2023.

Speaker Change: The three month period ended May 31, 2023.

Speaker Change: Is there should also be aware that the company relies on third party providers and making certain statements relating to market share data unless otherwise indicated all references to market data are sourced from high fire and combination with data from wheat colored provincial boards retailers in our internal sales figures.

Max Schwartz: These measures do not have any standardized meaning under IFRS and are intended to provide additional information and, as such, should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Our approach to calculating these measures may differ from that of other issuers, so these measures may not be directly comparable.

Max Schwartz: In addition, reference will be made to certain non-IFRS measures during this call, including adjusted EBITDA, adjusted gross margin, and adjusted gross margin percentage. These measures do not have any standardized meaning under IFRS and are intended to provide additional information, and as such, should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Our approach to calculating these measures may differ from that of other issuers, so these measures may not be directly comparable.

peanut Goldenberg: We will be hearing from key members of our senior leadership team beginning with peanut Goldenberg, Chief Executive Officer, who will provide opening remarks and commentary followed by Greg who yet Chief Financial Officer, who will review our quarterly results for Q3 fiscal 2024.

Peter Goldberg: With that all said I will now introduce Peter Goldberg, Chief Executive Officer Graham Holdings, Inc. Please go ahead Ms Goldberg.

Max Schwartz: Please see today's Earnings Report for more information about these measures. In this call, references to fiscal 2023 refer to the 13-month period from September 1, 2022, through September 30, 2023. References to Q3 fiscal 2024 refer to the 3-month period ended June 30, 2024, and references to Q3 fiscal 2023 refer to the 3-month period ended May 31, 2023. Listeners should also be aware that the company relies on reputable third-party providers when making certain statements relating to market share data.

Max Schwartz: Please see today's earnings report for more information about these measures. In this call, references to Fiscal 2023 refer to the 13-month period from September 1, 2022, through September 30, 2023. References to Q3 Fiscal 2024 refer to the 3-month period ended June 30, 2024, and references to Q3 Fiscal 2023 refer to the 3-month period ended May 31, 2023. Listeners should also be aware that the company relies on reputable third-party providers when making certain statements relating to market share data. Unless otherwise indicated, all references to market data are sourced from HiFiR in combination with data from weed crawler, provincial boards, retailers, and our internal sales figures.

Thank you Mac and good morning, everyone. We appreciate you all joining our call today and for your continued support of organic Gram one of Canada's leading and most innovative cannabis company.

Max Schwartz: Unless otherwise indicated, all references to market data are sourced from HIFIRE in combination with data from weed crawler, provincial boards, retailers, and our internal sales figures. Today, we'll be hearing from key members of our senior leadership team, beginning with Beena Goldenberg, Chief Executive Officer, who will provide opening remarks and commentary, followed by Greg Guyatt, Chief Financial Officer, who will review our quarterly results for Q3 Fiscal 2024. With that all said, I will now introduce Beena Goldenberg, Chief Executive Officer at OrganiGram.

Max Schwartz: Today, we'll be hearing from key members of our senior leadership team, beginning with Beena Goldenberg, Chief Executive Officer, who will provide opening remarks and commentary, followed by Greg Guyatt, Chief Financial Officer, who will review our quarterly results for Q3 Fiscal 2024. With that all said, I will now introduce Beena Goldenberg, Chief Executive Officer, OrganiGram Hldg. Please go ahead, Ms. Goldenberg.

Beena Goldenberg: Thank you, Max, and good morning, everyone. We appreciate you all joining our call today and for your continued support of OrganiGram, one of Canada's leading and most innovative cannabis companies. Q3 Fiscal 2024 saw OrganiGram achieve significant milestones in targeted growth areas that we highlighted in our earnings call at the start of our fiscal year. Those areas include continuing to grow our domestic business by focusing on innovation and quality, expanding our global footprint, and diversifying our international revenue. Achieving cost savings associated with our previously completed CAPEX programs and strategic investments and maintaining a strong balance sheet that allows us to be opportunistic in an evolving market landscape that is rationalizing.

Beena Goldenberg: Thank you, Max, and good morning, everyone. We appreciate you all joining our call today and for your continued support of OrganiGram, one of Canada's leading and most innovative cannabis companies. Q3 Fiscal 2024 saw OrganiGram achieve significant milestones in targeted growth areas that we highlighted in our earnings calls at the start of our fiscal year. Those areas include continuing to grow our domestic business by focusing on innovation and quality, expanding our global footprint, and diversifying our international revenue.

Speaker Change: Q3 fiscal 2024 solid organic <unk> achieved significant milestones in targeted growth areas that we highlighted in our earnings call at the start of our fiscal year.

Speaker Change: Those areas include continuing to grow our domestic business by focusing on innovation and quality, expanding our global footprint and diversifying our international revenue.

Beena Goldenberg: Achieving cost savings associated with our previously completed CAPEX programs and strategic investments and maintaining a strong balance sheet that allows us to be opportunistic in an evolving market landscape that is rationalizing. First, I want to highlight our domestic performance this quarter.

Speaker Change: Achieving cost savings associated with our previously completed capex programs and strategic investments.

Speaker Change: And maintaining a strong balance sheet that allows us to be opportunistic in an evolving market landscape. It is rationalizing.

Beena Goldenberg: First, I want to highlight our domestic performance this quarter. Our Canadian recreational business in Q3 grew 25% year-over-year, driving our overall net revenue for the same comparison period. We have also grown our net revenue sequentially every quarter of fiscal 2024 thus far, achieving over 9% growth versus Q2, and we expect continued revenue growth in Q4. There's no question that Canada is a tough market owing to high competition and onerous regulations. As of the end of Q3, there were 25 LPs with 1% or more market share, up from 20 last year. And there are now 153 LPs with at least $1 million in sales, contributing to average market share erosion for the top 10 LPs of 0.4 points year over year.

First I wanted to highlight our domestic performance this quarter.

Beena Goldenberg: Our Canadian recreational business in Q3 grew 25% year-over-year, driving our overall net revenue for the same comparison period. We have also grown our net revenue sequentially every quarter in fiscal 2024 thus far, achieving over 9% growth versus Q2, and we expect continued revenue growth in Q4. There's no question that Canada is a tough market owing to high competition and onerous regulation.

Beena Goldenberg: In contrast, OrganiGram has outperformed these statistics, gaining 0.6 points year over year in Q3, and has maintained a market share of over 7% for 8 consecutive months as of the end of July. It's tough to hold on to market share in this landscape, let alone grow it. OrganiGram has further narrowed the gap between itself and the number one LP in the market to only 2.4 percentage points as of June. Q4 should be the largest quarter in Canadian cannabis history, on track to hit $1.5 billion in aggregate retail sales for the industry.

Speaker Change: Canadian recreational business in Q3 grew 25% year over year driving our overall net revenue for the same comparison period.

Speaker Change: We have also grown our net revenue sequentially every quarter in fiscal 2024, thus far achieving over 9% growth versus Q2, and we expect continued revenue growth in Q4.

Speaker Change: There's no question that Canada is a tough market owing to high competition and onerous regulation.

Beena Goldenberg: As of the end of Q3, there were 25 LPs with 1% or more market share, up from 20 last year. And there are now 153 LPs with at least $1 million in sales, contributing to average market share erosion for the top 10 LPs of 0.4 points year over year. In contrast, OrganiGram has outperformed these statistics, gaining 0.6 points year over year in Q3, and has maintained a market share of over 7% for 8 consecutive months as of the end of July.

Speaker Change: As of the end of Q3, there were 25, Lps with 1% or more market share up from 20 last year.

Speaker Change: And there are now a 153 mlps with at least $1 million in sales contributing to average market share erosion for the top 10, Lp's up <unk> four points year over year.

Speaker Change: In contrast, organic ground has outperformed these statistics, gaining six points year over year in Q3 and has maintained the market share of over 7% for eight consecutive months as of the end of July.

Beena Goldenberg: It's tough to hold on to market share in this landscape, let alone grow it. OrganiGram has further narrowed the gap between itself and the number one LP in the market to only 2.4 percentage points as of June.

Speaker Change: It's tough to hold on to market share in this landscape let alone grow it.

Speaker Change: Organic ground has further narrowed the gap between itself and the number one LP in the market to only two four percentage points as of June.

Beena Goldenberg: Q4 should be the largest quarter in Canadian cannabis history, on track to hit $1.5 billion in aggregate retail sales for the industry. OrganiGram maintains a highly competitive position and should benefit disproportionately from this growth over time. This quarter marked the third consecutive quarter that OrganiGram was a top 5 LP in every jurisdiction in Canada. Our market share performance was punctuated by gains in Canada's second most populous province, Quebec. Our Quebec market share grew to 9.3% in the quarter compared to 8.2% in the prior year comparative period.

Speaker Change: Q4 should be the largest quarter in Canadian cannabis history on track to hit $1 5 billion in aggregate retail sales for the industry organic brand maintains a highly competitive position and should benefit disproportionately from this growth over time.

Beena Goldenberg: OrganiGram maintains a highly competitive position and should benefit disproportionately from this growth over time. This quarter marked the third consecutive quarter that OrganiGram was a top 5 LP in every jurisdiction in Canada. Our market share performance was punctuated by gains in Canada's second most populous province, Quebec. Our Quebec market share grew to 9.3% in the quarter compared to 8.2% in the prior year comparative period.

Speaker Change: This quarter marked the third consecutive quarter that organic <unk> was a top five LP in every jurisdiction in Canada, our market share performance was punctuated by gains in Canada. The second most populous province, Quebec.

Speaker Change: Our Quebec market share grew to nine 3% in the quarter compared to eight 2% in the prior year comparative period.

Beena Goldenberg: We also hit our highest market share in the province in June, finishing the month with 9.5%. We are proud to have achieved our highest market share ever of 25.8% in our home province of New Brunswick, compared to 20% in the prior year's comparative period. Our dominance in Atlantic Canada continues to be unmatched with 16.8% combined market share.

Beena Goldenberg: We also hit our highest market share in the province in June, finishing the month with a 9.5% share. We are proud to have achieved our highest market share ever of 25.8% in our home province of New Brunswick, compared to 20% in the prior year's comparative period. Our dominance in Atlantic Canada continues to be unmatched with 16.8% combined market share. From a product standpoint, we continue to show our strength in several categories, holding the number one position in milled flour, hash, and pure CBD gummies. We hold the number three positions in dried flour, edibles, and overall pre-roll.

Speaker Change: We also hit our highest market share in the province in June, finishing the month with nine 5% share.

Speaker Change: We are proud to have achieved our highest market share ever of 25, 8% in our home province of New Brunswick compared to 20% in the prior years comparative period, our dominance in Atlantic Canada continues to be unmatched with 16, 8% combined market share.

Beena Goldenberg: From a product standpoint, we continue to show our strength in several categories, holding the number one position in milk flour, hash, and pure CBD gummies. We hold the number three position in dried flour, edibles, and overall pre-roasted. As of the end of Q3, OrganiGram held the overall number three market position in Canada. As we have said for some time, our success is driven by our commitment to innovation. We shared some exciting news last week regarding the first new technology to be commercialized by OrganiGram, leveraging the output of the product development collaboration with BAT, our new fast nano emulsion technology.

From a product standpoint, we continued to show our strength in several categories holding the number one position in milled flower cash and pure CBD gummies, we hold the number three positions and dried flower edibles and overall pre rolls as of the end of Q3 organic ground healthy overall number three market position.

Beena Goldenberg: As of the end of Q3, OrganiGram held the overall number three market position in Canada. As we have said for some time, our success is driven by our commitment to innovation. We shared some exciting news last week regarding the first new technology to be commercialized by OrganiGram, leveraging the output of the product development collaboration with BAT, our new fast nano emulsion technology. FAST, which stands for Fast-Acting Soluble Technology, has shown promising preliminary results from what we believe was the largest PK study ever undertaken to understand the effects of recreational cannabis products.

Speaker Change: And in Canada.

Speaker Change: We have said for some time, our success is driven by our commitment to innovation.

Speaker Change: Sure some exciting news last week regarding the first new technology to be commercialized by organic Graham leveraging the output of the product developed in collaboration with.

Speaker Change: Our new fast nano emulsion technology.

Beena Goldenberg: FAST, which stands for Fast-Acting Soluble Technology, has shown promising preliminary results from what we believe was the largest PK study ever undertaken to understand the effects of recreational cannabis products. The results of the study have given early indications of technological advances, including, but not limited to, faster onset compared to traditional ingestible products from the control group.

<unk>, which stands for fast acting soluble technology has shown promising preliminary results from what we believe is the largest PK study ever undertaken to understand the effects of recreational cannabis products.

Beena Goldenberg: The results of the study have given early indications of technological advances, including, but not limited to, faster onset compared to traditional ingestible products from the control group. Depending on the ingestible format, up to approximately 50% faster onset of the effects of cannabis was observed.

The results of the study have given early indications of technological advances, including but not limited to faster onset compared to traditional ingestible products from the control group.

Beena Goldenberg: Depending on the ingestible format, up to approximately 50% faster onset of the effects of cannabis was observed. Additionally, improved bioavailability of cannabinoids, up to double the cannabinoid delivery at peak compared to the control group, and early indicators of a more predictable duration of the effects of cannabis, showing promising signals for the development of future offset claims subject to additional supporting studies. Manufacturing scale-up for gummies utilizing this technology is underway at our Winnipeg facility, and we are currently on track to launch them in the fall.

Speaker Change: Pending an injectable format up to approximately 50% faster onset of the effects of candidates was observed.

Beena Goldenberg: Improved bioavailability of cannabinoids, up to double the cannabinoid delivery at peak compared to the control group, and early indicators of a more predictable duration of the effects of cannabis, showing promising signals for the development of future offset claims subject to additional supporting studies. Manufacturing scale-up for gummies utilizing this technology is underway in our Winnipeg facility, and we are currently on track to launch them in the fall. We feel confident that our investment in this technology will contribute to our continued success in edibles domestically, where we hold 16.7% market share, and help us penetrate ingestible markets abroad in the future. Now, I'd like to discuss our international...

Speaker Change: Improved bioavailability of cannabinoid up to double the cannabinoid delivery at peak compared to the control group.

Speaker Change: And early indicators of a more predictable duration of the effects of candidates showing promising signals for the development of future offset claims subject to additional supporting studies.

Speaker Change: Manufacturing scale up for Gummies utilizing this technology is underway in our Winnipeg facility and we are currently on track to launch them in the fall.

Beena Goldenberg: We feel confident that our investment in this technology will contribute to our continued success in edibles domestically, where we hold 16.7% market share, and help us penetrate ingestible markets abroad in the future. Now, I'd like to discuss our international...

Speaker Change: We feel confident that our investment in this technology will contribute to our continued success and edibles domestically, where we hold 616, 7% market share and helped us penetrate ingestible markets abroad in the future.

Beena Goldenberg: In Q3, we announced the most significant development relating to our international expansion to date, an approximately $21 million investment into German cannabis leader Sanity Group, deployed from our Jupiter investment pool, which is focused on emerging opportunities in international markets. The investment is exciting for several reasons. One, it allows us to establish our first foothold in Europe through Germany, which, as of April 1st, paved the way to become the world's largest federally legal adult use cannabis jurisdiction.

Speaker Change: Now I'd like to discuss our international business in Q3, we announced the most significant development relating to our international expansion to date and approximately $21 million investment into Germany cannabis leader sanity groups deployed from our Jupiter investment pool, which is focused on emerging opportunities.

Speaker Change: The international market.

Speaker Change: The investment is exciting for several reasons.

One it allows us to establish our first foothold in Europe through Germany, which as of April 1st paved the way to becoming the world's largest federally legal adult use cannabis jurisdiction.

Beena Goldenberg: Sanity is already a leading cannabis company in Germany, with the number two flower brand in that market, and is also operating two dispensaries in Switzerland through its pilot project. We believe they are well positioned for growth in Germany and the wider EU market, where there is currently less saturation than in the US or Canada, so first mover advantage will likely matter.

Beena Goldenberg: Sanity is already a leading cannabis company in Germany, with the number two flower brand in that market, and is also operating two dispensaries in Switzerland through its pilot project. We believe they are well-positioned for growth in Germany and the wider EU market, where there is currently less saturation than in the US or Canada, so first-mover advantage will likely matter.

Speaker Change: Two <unk> is already a leading cannabis company in Germany with the number two flower brand in that market and is also operating two dispensaries in Switzerland through their pilot project. We believe they are well positioned for growth in Germany, and the wider EU market, where they are currently less saturation than in the U S or Canada so far.

Speaker Change: First mover advantage will likely matter more.

Beena Goldenberg: The investment enhances the previous supply agreement that was already in place between OrganiGram and Sanity Group, with Sanity having now increased its purchase commitment. Upon OrganiGram receiving EU GMP certification at its Monckton facility, which is expected in the near term, Sanity will switch to purchasing a percentage of its total flower assortment from OrganiGram. And four, Germany is viewed as the most important new legal cannabis market in the world due to its large cannabis-friendly population, its political influence, and geographic adjacencies to markets contemplating adult use for medical cannabis.

Speaker Change: Three the investment enhances the previous supplier agreement that was already in place between organic Grandma's Sanity group with Fannie Mae has now increased its purchase commitments.

Speaker Change: Upon organic ground, receiving EU GMP, Sir certification added smoking facility, which is expected in the near term sanity will switch to purchasing a percentage of its total flower assortment for organic ground.

Speaker Change: And for Germany is viewed as the most important new legal cannabis market in the world due to its large candidates friendly population, it's political influence and geographic adjacencies to market's contemplating adult use your medical candidates.

Beena Goldenberg: Now, in addition to the anticipated increase in cannabis volumes found in Germany, resulting from our investment in Sanity, OrganiGram continued to diversify its list of international customers in Q3, signing two new supply agreements with customers in Australia and the UK. OrganiGram now has seven supply agreements across Germany, Israel, Australia, and the UK and is currently evaluating additional global partnership opportunities and strategic investments. Moving on, I'd like to focus for a moment on our savings initiatives and efficiency achievements in this quarter, resulting from investments in automation, adjustments in our manufacturing methods, and advantages garnered from our strategic investments.

Beena Goldenberg: Now, in addition to the anticipated increase in cannabis volumes found for Germany, resulting from our investment in Sanity, OrganiGram continued to diversify its list of international customers in Q3, signing two new supply agreements with customers in Australia and the UK. OrganiGram now has seven supply agreements across Germany, Israel, Australia, and the UK, and is currently evaluating additional global partnership opportunities and strategic investments. Moving on, I'd like to focus for a moment on our savings initiatives and efficiency achievements in this quarter, resulting from investments in automation, adjustments in our manufacturing methods, and advantages garnered from our strategic investments.

Speaker Change: Now in addition to the anticipated increase in Canada volumes bound for Germany, resulting from our investment insanity organic brand continued to diversify its list of international customers in Q3, signing two new supply agreements with customers in Australia, and the U K.

Speaker Change: Organic room now has seven supply agreements across Germany, Israel, Australia, and the U K and is currently evaluating additional global partnership opportunities and strategic investments.

Speaker Change: Moving on I'd like to focus for a moment on our savings initiatives and efficiencies achievements in this quarter, resulting from investments in automation adjustments in our manufacturing method and advantages garnered from our strategic investments.

Beena Goldenberg: In Q3, OrganiGram harvested 21,420 kilograms of dried flour, representing an increase of 15% compared to the same prior year period. 42% of our harvests in Q3 exceeded 26% THC compared to 25% of our harvest last quarter, an increase of 17 percentage points. Our average yield this quarter broke an OrganiGram record at 185 grams per plant.

Beena Goldenberg: In Q3, OrganiGram harvested 21,420 kilograms of dried flour, representing an increase of 15% compared to the same prior year period. 42% of our harvests in Q3 exceeded 26% THC compared to 25% of our harvests last quarter, an increase of 17 percentage points. Our average yield this quarter broke an OrganiGram record at 185 grams per plant.

In Q3 organic ground harvested 21420 kilograms of dried flower, representing an increase of 15% compared to the same prior year period.

Speaker Change: 42% of our harvest in Q3 in Q3 exceeded 26% THC compared to 25% of our harvest last quarter, an increase of 17 percentage points.

Speaker Change: Our average yield this quarter broken organic ground record at a 185 grams per plant.

Beena Goldenberg: While yields have historically fluctuated and may continue to do so from time to time due to changes in our cultivar mix, we are encouraged by this achievement. The yield increase of 28% versus the same prior year period and almost 13% sequentially is supported by changes we have made to our cultivation processes and by realization of benefits from our strategic investment in phyllis. At our Monckton facility, consolidation of plant care and harvesting roles reduced waste and contributed to an enhanced quality during the harvesting process. It seems to get a better product when the person who cares for the plant is also the person who harvests it.

Beena Goldenberg: While yields have historically fluctuated and may continue to do so from time to time due to changes in our cultivar mix, we are encouraged by this achievement. The yield increase of 28% versus the same prior year period and almost 13% sequentially is supported by changes we have made to our cultivation processes and by realization of benefits from our strategic investment in phyllo. At our Monckton facility, consolidation of plant care and harvesting rules has reduced waste and contributed to enhanced quality during the harvesting process.

Speaker Change: Yields have historically fluctuated and may continue to do so from time to time due to changes in our culture of our mix. We are encouraged by this achievement the yield increase of 28% versus the same prior year period, and almost 13% sequentially and supported by changes we have made to our cultivation processes.

Speaker Change: And by realization of benefits from our strategic investment in pilots.

Speaker Change: At our <unk> facility consolidation of plant care and harvesting rules reduced waste and contributed to our enhanced quality during the harvesting process.

Beena Goldenberg: It seems to get a better product when the person who cares for the plant is also the person who harvests it. And we know our customers will notice the difference this additional care makes to our already great products.

Speaker Change: It seems to get a better product when the person who cares for the plant is also the person who harvested.

Beena Goldenberg: And we know our customers will notice the difference this additional care makes to our already great product. We saw further efficiencies in post-processing through streamlining testing, increased throughput, and waste reduction. At our edibles facility in Winnipeg, we completed trials for reducing cannabinoid waste that is expected to deliver meaningful savings in fiscal 2025 by changing to in-line active dosing tanks for our continuous edibles line. And in Lac Superior, our expanded cultivation is providing cannabis for our revitalized Trailblazer and Woola brands, which are meeting the needs of our Quebec customers with Quebec-grown premium cannabis.

Speaker Change: And we know our customers will notice the difference this additional care makes to our already great product.

Beena Goldenberg: We saw further efficiencies in post-processing through streamlining testing, increased throughput, and waste reduction. At our Edibles facility in Winnipeg, we completed trials for reducing cannabinoid waste that is expected to deliver meaningful savings in fiscal 2025 by changing to in-line active dosing tanks for our continuous Edibles line. And in Lac Superior, our expanded cultivation is providing cannabis for our revitalized Trailblazer and Woola brands, which are meeting the needs of our Quebec customers with Quebec-grown premium cannabis.

Speaker Change: We saw further efficiencies and post processing through streamlining testing increased throughput and waste reduction.

Speaker Change: At our edibles facility in Winnipeg, we completed trials for reducing cannabinoid waste that is expected to deliver meaningful savings in fiscal 2025 by changing to inline active dosing tanks for our continuous edibles line.

And then last superior our expanded cultivation is providing cannabis for a revitalized trailblazer and <unk> brands, which are meeting the needs of our Quebec customers with Quebec grown premium candidates.

Beena Goldenberg: Also in Q3, we harvested, and completed harvests of three seed-based production rows. Our seed-based capabilities stem from our strategic investment in phyllos bioscience, which is exceeding our expectations to date. This led to our decision to fast-track the partial funding of the final investment tranche and phylos, which we announced in July. The early funding resulted in an expanded final milestone, which requires phylos to deliver 21 unique autoflower seed varieties for testing and phenotyping by the end of this year, followed by a second cohort of 21 more by January 2025.

Beena Goldenberg: Also in Q3, we harvested, and completed harvests of three seed-based production rows. Our seed-based capabilities stem from our strategic investment in phytoscience, which is exceeding our expectations to date. This led to our decision to fast-track the partial funding of the final investment tranche and phylos, which we announced in July. The early funding resulted in an expanded final milestone, which requires phylos to deliver 21 unique autoflower seed varieties for testing and phenotyping by the end of this year, followed by a second cohort of 21 more by January 2025. Further, OrganiGram receives an expanded genetic license from Philostat, in addition to the whole flower THC-V, for which we have exclusive rights in Canada, and includes access to high-potency CBG, CBC, and CBDV seed-based cultivars.

Speaker Change: Also in Q3, we harvested we completed harvests of three seed based production rooms are seat based capabilities stem from our strategic investment in <unk>, Bioscience, which is exceeding our expectations to date.

Speaker Change: This led to our decision to fast track the partial funding of the final investment tranche in silos, which we announced in July.

Speaker Change: The early funding resulted in an expanded final milestone, which requires <unk> to deliver 21 unique auto cloud recede varietals for testing and Phenotyping by the end of September. This year, followed by a second cohort of 21 more by January 2025.

Beena Goldenberg: Further, OrganiGram receives an expanded genetic license from Philos that, in addition to the whole flower THCV for which we have exclusive rights in Canada, includes access to high potency CBG, CBC, and CBDV seed-based cultivars. Our first three seed-based harvests yielded an impressive 200 grams per plant and an average THC potency of 25.5%. Four additional rooms were harvested in July, and by the end of the calendar year, OrganiGram expects to achieve its goal of approximately 30% of production coming from seed.

Further organic bran received an expanded generic license from followed that in addition to the whole flower to HCV for which we have exclusive rights in Canada include access to high potency CPG CVC and CBD VC based cultivars.

Beena Goldenberg: Our first three seed-based harvests yielded an impressive 200 grams per plant and an average THC potency of 25.5%. Four additional rooms were harvested in July, and by the end of the calendar year, OrganiGram expects to achieve its goal of approximately 30% of production coming from seed. We further anticipate averaging between 20 to 30% seed-based production throughout fiscal 2025 as we optimize production schedules and business requirements. Other benefits from seed-based production include faster cycle time, which we expect will allow OrganiGram to increase its production output without additional CAPEX, and improve plant consistency, quality, and resilience.

Speaker Change: Our first <unk> based harvest yielded an impressive 200 grams per plant and an average Tc potency of 25, 5%.

Speaker Change: For additional rooms were harvested in July and by the end of the calendar year organic <unk> expects to achieve its goal of approximately 30% of production coming from <unk>.

Speaker Change: We further anticipate averaging between 20% to 30% seat based production throughout fiscal 2025, as we optimize production schedules and business requirements.

Speaker Change: Other benefits from seed based production includes pasture cycle time, which we expect will allow organic brand to increase its production output without additional capex and improved client consistency quality and resilience.

Beena Goldenberg: We continue to measure against our guidance of $10 million of savings this year that we outlined at the end of fiscal 2023, resulting from investments in automation, in-house lab testing and remediation, freight optimization, and changes in production processes. In Q3, we realized approximately $2.7 million of these savings. Fiscal year to date, we have delivered approximately $7.9 million, and we are on track to meet this $10 million target. Finally, OrganiGram continues to maintain one of the healthiest balance sheets in the industry, with $173 million in pro forma cash as of the closing of the final BAP funding trunk.

Speaker Change: We continue to measure against our guidance of $10 million of savings. This year that we outlined at the end of fiscal 2023, resulting from investments in automation in house lab testing and remediation freight optimization and changes in production processes.

Speaker Change: Q3, we realized approximately $2 $7 million of these savings.

Beena Goldenberg: Fiscal year to date, we have delivered approximately $7.9 million, and we are on track to meet this $10 million target. Finally, OrganiGram continues to maintain one of the healthiest balance sheets in the industry, with $173 million in pro forma cash as of the closing of the final BAP funding trunk. As a reminder, we expect to close the second $41.5 million tranche later this month, and the final tranche of BAT's $124.6 million follow-on investment at $3.22 per share is expected to close in February 2025.

Speaker Change: Fiscal year to date, we have delivered approximately seven $9 million and we are on track to meet this $10 billion target.

Speaker Change: Finally organic ground continues to maintain one of the healthiest balance sheets in the industry with a $173 million in pro forma cash as of the closing of the final funding.

Speaker Change: Funding tranche as a reminder, we expect to close the second $41 $5 million tranche later this month.

Beena Goldenberg: As a reminder, we expect to close the second $41.5 million tranche later this month, and the final tranche of BAT's $124.6 million follow-on investment at $3.22 per share is expected to close in February 2025. In addition to our ample cash position, we maintain effectively zero debt, which makes us a rare company.

And the final tranche of $124 $6 million follow on investment at $3 22 per share is expected to close in February 2025.

Beena Goldenberg: In addition to our ample cash position, we maintain effectively zero debt, which makes us a rare find in the cannabis industry and allows us significant financial flexibility. This concludes my comments, and I will now turn the call over to Greg to discuss our financial results for the quarter. Thank you, Beena.

Speaker Change: In addition to our ample cash position, we maintain effectively zero debt, which makes us a rare find in the cannabis industry and allows us significant financial flexibility.

Speaker Change: This concludes my comments and I will now turn the call over to Greg to discuss our financial results for the quarter.

Greg Guyatt: Thank you, Beena. We are pleased with the progress OrganiGram has made from a financial perspective, with the return to generating adjusted EBITDA in the quarter. As Beena mentioned in her comments, our net revenue grew by 25% versus Q3 last year and over 9% sequentially. At the same time, our gross margins have seen a significant improvement owing to higher yields and increased operating efficiencies in the business. While yields and THC content will fluctuate over time, the trend we have seen over the last two years has been higher yields and higher potency.

Greg Guyatt: We are pleased with the progress OrganiGram has made from a financial perspective with the return to generating adjusted EBITDA in the quarter. As Beena mentioned in her comments, our net revenue grew by 25% versus Q3 last year and over 9% sequentially. At the same time, our gross margins have seen a significant improvement owing to higher yields and increased operating efficiencies in the business. While yields and THC content will fluctuate over time, the trend we have seen over the last two years has been higher yields and higher potency.

Greg: Thank you Dana we are pleased with the progress organic ground has made from a financial perspective, where the returns are generating adjusted EBITDA in the quarter.

Greg: As Deanna mentioned in her comments, our net revenue grew by 25% versus Q3 last year and over 9% sequentially.

Greg: At the same time, our gross margins have seen a significant improvement owing to higher yield and increased operating efficiencies in the business.

Speaker Change: While yields on THC content will fluctuate over time the trend we have seen over the last two years has been higher yields and higher potency.

Greg Guyatt: In our Q2 earnings call, we highlighted that we would begin to see lower cost flour harvested in Q2 flow through in Q3. That is indeed what we have seen, and the record yield of 185 grams per plant that Beena mentioned contributed to the improved adjusted gross margins in the quarter. Our adjusted gross margin rates in Q3 showed a meaningful increase to 36% from 19% in Q3 last year, an improvement of 17 percentage points. Additionally, sequentially, we saw a 5 percentage point increase.

Greg Guyatt: In our Q2 earnings call, we highlighted that we would begin to see lower-cost flour harvested in Q2 flow through in Q3. That is indeed what we have seen, and the record yield of 185 grams per plant that Beena mentioned contributed to the improved adjusted gross margins in the quarter. Our adjusted gross margin rates in Q3 showed a meaningful increase of 36% from 19% in Q3 last year, an improvement of 17 percentage points.

And our Q2 earnings call, we highlighted that we would begin to see lower cost flower harvested in Q2 flow through in Q3.

Speaker Change: It is indeed, what we have seen and the record yield of 185 grams per plant that Stephen mentioned contributed to the improved adjusted gross margins in the quarter.

Speaker Change: Our adjusted gross margin rates in Q3 showed a meaningful way.

Speaker Change: 2% in Q3 last year, an improvement of 17 percentage points sequentially, we saw a 5% five percentage point increase.

Greg Guyatt: sequentially, we saw a 5 percentage point increase. The combination of higher sales and a higher adjusted gross margin rate resulted in a 139% increase in gross margin dollars year-over-year to $14.6 million. The year-over-year increase was attributable to several factors, including lower cultivation and post-harvest costs, reduced inventory provisions, and lower depreciation resulting from impairment charges recorded last year. In addition to our gross margin improvements, we also reduced our operating expenses in Q3. Adjusting for impairments realized in the prior year period, total operating expenses in Q3 decreased by 20%.

Greg Guyatt: The combination of higher sales and a higher adjusted gross margin rate resulted in a 139% increase in gross margin dollars year-over-year to $14.6 million. The year-over-year increase was attributable to several factors, including lower cultivation and post-harvest costs, reduced inventory provisions, and lower depreciation resulting from impairment charges recorded last year. In addition to our gross margin improvements, we also reduced our operating expenses in Q3. Adjusting for impairments realized in the prior year period, total operating expenses in Q3 decreased by 20%.

Speaker Change: The combination of higher sales and higher adjusted gross margin rate resulted in a 139% increase in gross margin dollars year over year to $14 $6 million.

Speaker Change: The year over year increase was attributable to several factors, including lower cultivation and post harvest costs.

Speaker Change: Inventory provisions and lower depreciation, resulting from impairment charges recorded last year.

Speaker Change: In addition to our gross margin improvements, we also reduced our operating expenses in Q3.

Speaker Change: Justin for impairments realized in the prior year period total operating expenses in Q3 decreased by 20% driving the lion's share of that change was a 22% decrease in SG&A to $14 8 million in Q3 from $19 million in the prior year period.

Greg Guyatt: Driving the lion's share of that change was a 22% decrease in SG&A to $14.8 million in Q3, from $19 million in the prior year period, resulting from lower costs associated with the implementation of the first phase of our new ERP system, lower professional fees, and cost savings on our insurance program. As a result of our increased sales, improved margins, and lower SG&A costs, we are pleased to report adjusted EBITDA of $3.5 million compared to negative $2.9 million in the same prior year period.

Speaker Change: <unk> from lower costs associated with the implementation of the first phase of our new ERP system, lower professional fees and cost savings on our insurance programs.

Speaker Change: As a result of our increased sales improved margins and lower SG&A costs. We are pleased to report adjusted EBITDA of $3 5 million compared to negative $2 9 million in the same prior year period.

Greg Guyatt: As we mentioned last quarter, Fiscal 2024 adjusted EBITDA is expected to outperform Fiscal 2023. Net income this quarter came in at $2.8 million compared to a net loss of $213.5 million in the same prior year period. The increase in net income versus the comparative period is primarily due to higher revenues from recreational cannabis in Q3, and net fair value gains on our investments and financial assets. Last year included an impairment charge of $191 million.

Speaker Change: As we mentioned last quarter fiscal 2024, adjusted EBITDA is expected to outperform fiscal 2023.

Speaker Change: Net income this quarter came in at $2 8 million compared to a net loss of $213 5 million in the same prior year period. The increase in net income versus the comparative period is primarily primarily due to higher revenues from recreational cannabis in Q3.

Greg Guyatt: The increase in net income versus the comparative period is primarily due to higher revenues from recreational cannabis in Q3, and net fair value gains on our investments in financial assets. Last year included an impairment charge of $191 million. From a cash flow perspective, net cash used in operating activities before working capital charges or changes was $0.2 million in Q3 fiscal 2024, compared to a use of $14.8 million in the prior year period.

Speaker Change: Net fair value gains on our investments in financial assets last year included an impairment charge of $191 million.

Greg Guyatt: From a cash flow perspective, net cash used in operating activities before working capital charges or changes was $0.2 million in Q3 fiscal 2024, compared to a use of $14.8 million in the prior year period. The improvement was primarily due to higher recreational cannabis revenue and the reduced costs realized during the quarter. Cash used in investing activities in Q3 was $14.9 million, which was driven primarily by the Investment Insanity Group and partially offset by a net change in restricted funds and proceeds from investment data.

Speaker Change: From a cash flow perspective, net cash used in operating activities before working capital charges or changes was zero point $2 million in Q3 fiscal 2024 compared to a use of $14 8 million in the prior year period.

Kayla: Good morning, my name is Kayla, and I will be your conference operator today. At this time, I would like to welcome everyone to the OrganiGram holdings 3rd quarter fiscal, 2024 earnings conference call. After the speakers remarks, there will be a question and answer session.

Kayla: We ask to please limit yourself to one question and one follow-up question. You may req if you have further questions.

Greg Guyatt: The improvement was primarily due to higher recreational cannabis revenue and the reduced costs realized during the quarter. Cash used in investing activities in Q3 was $14.9 million, which was driven primarily by the Investment Insanity Group and partially offset by a net change in restricted funds and proceeds from investment data.

Speaker Change: Improvement was primarily due to higher recreational cannabis revenue and reduce costs realized during the quarter.

Speaker Change: Cash used in investing activities in Q3 was $14 9 million, which was driven primarily by the investment in Santander group and partially offset by a net change in restricted funds and proceeds from investment income. This compares to cash used in investing activities in Q3 fiscal 2023 of $3 4 million.

Max Schwartz: Thank you, Max Schwartz, you may begin your conference.

Greg Gouillette: Thank you very much, and good morning, everyone, and thank you for joining us today. As a reminder, this conference call is being recorded and recording will be available on OrganiGram's website 24 hours after today's call. This should be aware that today's call will include estimates and other follow-up looking information from which the company's actual results was to differ.

Greg Guyatt: This compares to cash used in investing activities in Q3 fiscal 2023 of $3.4 million, which was comprised of our investments in Greentank and Philos, partially offset by proceeds from the net redemption of short-term investments, proceeds from investment income, and a net change in restricted funds. On the topic of cash, we are pleased to reiterate that we have one of the healthiest balance sheets in the industry. As of June 30, 2024, we had a total cash position of $89.5 million, including both restricted and unrestricted cash. We had negligible debt.

Greg Guyatt: This compares to cash used in investing activities in Q3 fiscal 2023 of $3.4 million, which was comprised of our investments in Green Tank and Philos, partially offset by proceeds from the net redemption of short-term investments, proceeds from investment income, and a net change in restricted funds. On the topic of cash, we are pleased to reiterate that we have one of the healthiest balance sheets in the industry. As of June 30, 2024, we had a total cash position of $89.5 million, including both restricted and unrestricted cash. We had negligible debt.

Which was comprised of our investments in <unk> bylaws, partially offset by proceeds from the net redemption of short term investment proceeds for investment income and the net change in restricted funds.

Greg Gouillette: Please review the cautionary language and our press release date at August 13th, 2024. A very spactor is assumptions and risks that could cause our actual results to differ. Further, reference will be made to certain non-IFRS measures during this call, including a just-to-be-vita, adjusted close margin, and adjusted close margin percentage. These measures do not have any standardized meaning under IFRS, and are intended to provide additional information, and as such should not be considered in isolation for as a substitute for measures of performance prepared in accordance with IFRS. Our approach to calculating these measures may differ from other issuers, so these measures may not be directly comparable. We see today's earnings reports for more information about these measures.

Speaker Change: On the topic of cash we are pleased to reiterate that we have one of the healthiest balance sheets in the industry as of June 32024, we had a total cost of this and of $89 5 million, including both restricted and Nonrestricted cash we had negligible debt and as Deanna mentioned, our pro forma cash position.

Greg Guyatt: And, as Beena mentioned, our pro forma cash position after the closure of the second and third GAT tranches is approximately $173 million. At the end of last quarter, we mentioned on our Q2 earnings call that we felt the back half of this fiscal year would demonstrate our ability to generate sustainable, positive financial results. Given the results we have reported today, supported by increased operational efficiency and OPEX savings, a five-quarter trend of incrementally higher sales, higher margins, and a growing international footprint, we feel confident that we have demonstrated that trajectory.

Greg Guyatt: And, as Beena mentioned, our pro forma cash position after the closure of the second and third tranches is approximately $173 million. At the end of last quarter, we mentioned on our Q2 earnings call that we felt the back half of this fiscal year would demonstrate our ability to generate sustainable, positive financial results. Given the results we have reported today, supported by increased operational efficiency and OPEX savings, a five-quarter trend of incrementally higher sales, higher margins, and a growing international footprint, we feel confident that we have demonstrated that trajectory.

Deanna: After the close of the second and third tranche.

Deanna: Approximately $173 billion.

Speaker Change: At the end of last quarter, we mentioned on our Q2 earnings call that we felt the back half of this fiscal year with demonstrated our ability to generate sustainable positive financial results. Given the results. We have reported today supported by increased operational efficiency in Opex savings.

Greg Gouillette: In this call, references to fiscal 2023 are to the 13th month period from September 1st, 2022 to September 30th, 2023. References to Q3, fiscal 2024 are to the three month period ended June 30th, 2024, and references to Q3, fiscal 2023 are to the three month period ended May 31st, 2023. This research should also be aware that the company relies on repeatable third-party providers when making certain statements relating to market share data, unless otherwise indicated all references to market data are sourced from high-fire, in combination with data from weed crawler, provincial boards, retailers, and our internal sales figures.

Speaker Change: Five quarter trend of incrementally higher scale higher margin and a growing international footprint, we feel confident that we have demonstrated that trajectory.

Greg Guyatt: Q4 is already shaping up to be exciting as we ramp up production for the launch of our nano emulsion gummies, continue to lean in on seed-based production, realize more of the cost savings we have already outlined, and drive international growth. This concludes my comments. I will now turn the call back over to Beena.

Speaker Change: Q4 is already shaping up to be exciting as we ramp up production for the launch of our nano emulsion gummy continue to lean in on fee based production realize more of the cost savings we have already underlined and drive international growth. This concludes my comments I will now turn the call back over to Peter.

Max Schwartz: Today, we'll be hearing from key members of our senior leader, 15, beginning with Tina Goldenberg, chief executive officer, who will provide opening remarks and commentary.

Beena Goldenberg: I will now turn the call back over to Beena. Thank you, Greg. We are pleased with our solid financial results. Revenue is up, margins are up, and costs are being managed. We have built a strong foundation on which to execute our growth plans and are well positioned to capitalize on the opportunities ahead of us at Bowman Abroad. Once again, I'd like to thank everyone on the call for their support and interest in OrganiGram.

Greg Gouillette: Solid by Greg Gouillette, chief financial officer, who will review our quarterly results for Q3, fiscal 2024.

Beena Goldenberg: Thank you, Greg. We are pleased with our solid financial results. Revenue is up, margins are up, and costs are being managed. We have built a strong foundation on which to execute our growth plans and are well positioned to capitalize on the opportunities ahead of us at home and abroad. Once again, I'd like to thank everyone on the call for their support and interest in OrganiGram. I will now open the call up for questions.

Peter Goldberg: Thank you Greg.

Peter Goldberg: We're pleased with our solid financial results revenue was up margins are up and costs are being managed we have built a strong foundation on which to execute our growth plans and are well positioned to capitalize on the opportunities ahead.

Beena Goldenberg: With that all said, I will now introduce Tina Goldenberg, chief executive officer of Organic Grant Holding Think. Please go ahead, Ms. Goldenberg. Thank you, Max. And good morning, everyone. We appreciate you all joining our call today, and for your continued support of Organic Grant, one of Canada's leading and most innovative cannabis companies. Q3, fiscal 2024, saw Organic Grant achieve significant milestones in targeted growth areas that we highlighted in our earnings calls to start of our fiscal year.

Peter Goldberg: Ahead of us at home and abroad. Once again I'd like to thank everyone on the call for their support and interest in organic growth I will now open the call up for questions.

Beena Goldenberg: I will now open the call up for questions. At this time, if you would like to ask a question, press star then 1 on your telephone keypad. Please limit yourself to one question and one follow-up question.

Operator: At this time, if you would like to ask a question, press star then 1 on your telephone keypad. Please limit yourself to one question and one follow-up question. Our first question comes from the line of Aaron Grey with AGP. Your line is open.

Speaker Change: At this time, if you would like to ask a question Press Star then one on your telephone keypad. Please limit yourself to one question and one follow up question.

Beena Goldenberg: Those areas include continuing to grow our domestic business by focusing on innovation and quality, expanding our global footprint and diversifying our international revenues, achieving cost savings associated with our previously completed CAPEX programs and strategic investments. And maintaining a strong balance sheet that allows us to be opportunistic in an involving market landscape that is rationalizing. First, I want to highlight our domestic performance this quarter. Our Canadian recreational business in Q3 grew 25% year over year, driving our overall net revenue for the same comparison period.

Kayla: Our first question comes from the line of Aaron Grey with AGP. Your line is open. Have a good morning and thank you for the questions.

Speaker Change: Our first question comes from the line of Aaron Grey with AGP. Your line is open.

Aaron Grey: Have a good morning, and thank you for the questions. Congratulations on a nice quarter there.

Aaron Grey: Hi, good morning, and thank you for the questions congratulations on a nice quarter there.

Aaron Grey: Congratulations on a nice quarter there. So, first question for me, just on the EU GMP, Beena, I believe you said that that's expected in the near term. Could you just provide any more additional color on when you're expecting that and are there any additional things you would need in terms of export licenses or otherwise that would hold you up to be able to utilize that EU GMP for export?

Aaron Grey: So, first question for me, just on the EU GMP, Beena, I believe you said that's expected in the near term. Could you just provide any additional color on when you're expecting that and are there any additional things you would need in terms of export licenses or otherwise that would hold you up to be able to utilize that EU GMP for export? And then, secondly, on that, just with standard grouping and purchaser and how you just look to allocate capacity domestically versus international once you receive the EU GMP approval. Thank you.

Aaron Grey: Thank you. So first question for me just on the EU GMP being I believe you said that's expected in the near term could you just provide any more additional color on what are you expecting that and are there any additional.

Speaker Change: Things you would need in terms of export licenses or otherwise that would hold you up to be able to utilize that EU GMP to export and then secondly on that just with any degree of being a purchaser and.

Beena Goldenberg: We have also grown our net revenues sequentially every quarter of fiscal 2024 thus far achieving over 9% growth versus 2.2 and we expect continued revenue growth in Q4. There's no question that Canada is a tough market owing to high competition and onerous regulations. As of the end of Q3 there were 25 LPs with 1% or more market share up from 20 last year and there are now 153 LPs with at least $1 million in sales, contributing to average market share erosion for the top 10 LPs of 0.4 points year over year.

Speaker Change: And how you just look to allocate capacity domestic versus international once you receive the <unk> approval. Thank you.

Beena Goldenberg: And then, secondly, on that, just with standard grouping a purchaser and how you just look to allocate capacity domestically versus international once you receive the EU GMP approval. Thank you. Sure, so thank you for the question. So, we have been EU GMP ready since much earlier this year and are just awaiting the German regulator to come out to do the audit of the facility. We would have liked them to come out already.

Beena Goldenberg: Sure, so thank you for the question. So, we have been EU GMP ready since much earlier this year and are just awaiting the German regulator to come out to do the audit of the facility. We would have liked them to come out already, but this is just a scheduling issue. So we expect it will happen in the fall. Once you have the audit, it will take a couple of months for the paperwork to get the certification.

Speaker Change: Sure. So thank you for the question so.

Speaker Change: We have been EU GMP ready.

Beena Goldenberg: In contrast, OrganiGram has outperformed these statistics, gaining 0.6 points year over year in Q3 and has maintained a market share of over 7% for 8 consecutive months as of the end of July. It's tough to hold on to market share in this landscape, let alone grow it. OrganiGram has further narrowed the gap between itself and the number 1 LP in the market to only 2.4 percentage points as of June. Q4 should be the largest quarter in Canadian cannabis history.

Speaker Change: Since much earlier this year and are just awaiting the German regulator to come out to do the audit of the facility.

Speaker Change: We would have liked them to come out already this is just a scheduling issue. So we expect it will happen in the fall and once you have the audit we expect that it'll take a couple of months for the paperwork to get the certification.

Beena Goldenberg: This is just a scheduling issue. So, we expect it will happen in the fall. And once you have the audit, we expect it'll take a couple of months for the paperwork to get the certification.

Beena Goldenberg: So, we feel comfortable that early in calendar year 2025, we should have our certification and be ready to start capitalizing on using that certification. Until such time, we continue to supply our GACP flower internationally, but obviously, it has to go through additional steps. So we look forward to leveraging that certification in the future. In terms of your question with regard to how you're going to allocate your volume, we would obviously prioritize international sales simply because, without the excise, it's a higher-margin business.

Beena Goldenberg: So, we feel comfortable that early in calendar year 2025, we should have our certification and be ready to start capitalizing on using that certification. Until such time, we continue to supply our GACP flour internationally, but obviously, it has to go through additional steps. So we look forward to leveraging that certification in the future. In terms of your question with regard to how you're going to allocate your volume, we would obviously prioritize international sales simply because, without the excise, it's a higher-margin business.

Speaker Change: So we feel comfortable that early in calendar year 2025, we should have our certification and be ready to start capitalizing on using that certification.

Speaker Change: Until such time, we continue to supply <unk> ACP flower internationally, but obviously it has to go through additional steps. So we look forward to.

Speaker Change: Leveraging that certification in the future.

Speaker Change: In terms of your question with regard to how we are going to allocate our volume.

Speaker Change: We would obviously prioritized international sales simply because without the exercise, it's higher margin business and then protect our branded business and domestic recreational sales.

Beena Goldenberg: On track to hit 1.5 billion in aggregate retail sales for the industry, OrganiGram maintains a highly competitive position and should benefit disproportionately from this growth over time. This quarter marked the third consecutive quarter that OrganiGram was a top 5 LP in every jurisdiction in Canada. Our market share performance was punctuated by gains in Canada's second most popular province Quebec. Our Quebec market share grew to 9.3% in the quarter compared to 8.2% in the prior year comparative period.

Beena Goldenberg: And then, you know, protect our branded business, domestic recreational sales. This past quarter, we've had some opportunistic sales to B2B customers in the domestic market. That is an area that we would reduce as we continue to expand our international business. Obviously, both from a margin and competitive standpoint, that makes sense.

Speaker Change: This past quarter, we've had some opportunistic.

Speaker Change: Yes.

Speaker Change: Sales to <unk> customers in the domestic market.

Speaker Change: That is the area that we would reduce as we continued to expand our international business, obviously, both from a margin and competitive standpoint that makes sense.

Beena Goldenberg: We also hit our highest market share in the province in June, finishing the month with 9.5% share. We are proud to have achieved our highest market share ever of 25.8% in our home province of New Brunswick compared to 20% in the prior year's comparative period. Our dominant Atlantic Canada continues to be unmatched with 16.8% combined market share. From a product standpoint, we continue to show our strengths in several categories, hoping the number one position in milk flour, hash and pure CBD gummies.

Aaron Grey: Okay, great. Thanks for that helpful color.

Aaron Grey: Second question for me, a really nice uptick in gross margin came ahead of our estimate. So, I just want to get some color in terms of how much more room there is for gross margin expansion there. You talked about some of the seed-based initiatives you had, and some more benefits come from them. You're also going to have initial margin capture once you get the EU GMP flowing through in 2025, it now sounds like. So just some expectations in terms of where you believe gross margins can get you for you guys. Thank you.

Speaker Change: Okay, great. Thanks, that's really helpful color.

Speaker Change: Question for me a real nice uptick in the gross margin came ahead of our estimate.

Aaron Grey: Second question for me, a really nice uptick in gross margin came ahead of our estimate, so I just want to get some color in terms of how much more room there is for gross margin expansion there. You talked about some of the seed-based initiatives you had and some more benefits to come there. You're also going to have initial margin capture once you get the EU GMP flowing through in 2025, it now sounds like. So just some expectations in terms of where you believe gross margins can get you for you guys.

I just want to get some color in terms of how much more room. There is for gross margin expansion. There you talked about some of the seed based initiatives you had some more benefits to come there.

Speaker Change: You're also going to have initial margin capture once you get the EU GMP flowing through in 2025, but now it sounds like so.

Speaker Change: Or just some expectation in terms of where you believe gross margins can get to three guys. Thank you.

Greg Guyatt: Yeah, thanks for the question. Look, we're really happy with where we are at 30% adjusted gross margin, and we're going to do everything we can to try to work on that trajectory. I think in the short term, maintaining margins around this sort of range of 36% is probably reasonable. As the international business scales up further next year, I think that's where we'll be looking to get some benefit from that. But at this point, you know, we're really happy with where we are and, you know, the cost savings initiative that we put in place, the increased yield per plant, and our lower cost per gram are really the contributors there.

Beena Goldenberg: We hold the number three positions in dried flour, edibles and overall pre-rolls. As of the end of Q3, OrganiGram held the overall number three market position in Canada. We have said for some time our success is driven by our commitment to innovation. We shared some exciting news last week regarding the first new technology to be commercialized by OrganiGrams, leveraging the output of the product development collaboration with BAT. Our new, fast nano-emotion technology, fast, which stands for fast-acting soluble technology, has shown promising preliminary results from what we believe was the largest PK study ever undertaken to understand the effects of recreational cannabis products.

Speaker Change: Yeah. Thanks, Thanks for the question.

Speaker Change: Look we're really happy with where we are at 30% adjusted gross margin.

Speaker Change: We're going to do everything we can to try to work on that trajectory I think in the short term maintaining margins around this sort of range.

Speaker Change: 36% is probably reasonable as the international business scales out further next year I think that's where we'll be looking to get some benefit from that but at this point.

Speaker Change: We're really happy with where we are in.

Speaker Change: The cost savings initiatives that we put in place the increased deal for plant and our lower cost for draft for Graham earlier, the contributors there, but at this point I think in the range that we're at.

Greg Guyatt: But at this point, I think, you know, the range that we're at is where we think we'll be for the next quarter or two at least. And your next question comes from the line of Pablo Zunich with Zunich & Associates. Your line is open. Thank you. Good morning, everyone.

Speaker Change: Where we think it will be for the next quarter or two at least.

Beena Goldenberg: The results of the study have given early indications of technological advances, including but not limited to faster onset compared to traditional adjustable products from the control group. Depending on adjustable format, up to approximately 50% faster onset of the effects of cannabis was observed, improved bioavailability of cannabinoids, up to double the cannabinoid delivery at peak compared to the control group, and early indicators of a more predictable duration of the effects of cannabis, showing promising signals for the development of future offset claims subject to additional supporting studies.

Operator: And your next question comes from the line of Pablo Zunich with Zunich & Associates. Your line is open.

Pablo <unk>: And your next question comes from the line of Pablo <unk> with <unk> Associates. Your line is open.

Pablo Zunich: Thank you. Good morning, everyone.

Pablo Zunich: Beena, can you comment on any color or feedback that Saniti may have given you in terms of what happened in Germany in the second quarter? I mean, some companies have talked about significant growth from April to July. Any color you can give in that sense would be helpful.

Thank you and good morning, everyone.

Pablo <unk>: Could you comment any corner of the feedback that <unk> may have given you in terms of what happened in Germany in the second quarter. I mean, some companies have talked about significant growth from April to July any color you can give in that sense would be helpful. And I asked this question in the context.

Beena Goldenberg: And I ask this question in the context of the reported data coming out of Germany saying that imports, you know, were up about 50% between 1Q and 2Q. But when we look at the large LP numbers that have been reported, we didn't see much growth there. So I wonder where that's coming from. So it's a two-part question. Sure, Pablo.

Speaker Change: The reported data coming out of Germany is that imports were up about 50% between <unk> and <unk>.

Speaker Change: But when we look at the larger piece numbers that have been reported we didn't see much kudos there. So wondering where that's coming from so it's a two part question. Thank you.

Beena Goldenberg: Manufacturing scale-up for gummies utilizing this technology is underway in our Winnipeg Facility, and we are currently on track to launch them in the fall. We feel confident that our investment in this technology will contribute to our continued success in edibles domestically, where we hold 6.16.7% market share, and help us penetrate in just the markets abroad in the future. Now I'd like to discuss our international business. In Q3, we announce the most significant development relating to our international expansion today, an approximately $21 million investment into German cannabis leaders sanity groups, deployed from our Jupiter investment pool, which is focused on emerging opportunities in international markets.

Beena Goldenberg: So thanks for the question. Absolutely. We have heard the same from Sanity in terms of business doubling since April 1st. The challenge that most German companies are running into right now is securing the incremental revenue, sorry, incremental volume to deliver even more upside to their revenue. So, you know, here's the challenge with a product that takes five months from the time you plant it until you harvest it and you get it out to the market. When business grows exponentially, it's hard for the volume to catch up, so we have to supply the market. And that's why you're not seeing as much product shipping from the LPs in Canada.

Speaker Change: Sure Pablo so thanks for the question absolutely we have heard the same from sanity in terms of business doubling.

Pablo Zunich: And I ask this question in the context of the reported data coming out of Germany saying that imports were up about 50% between 1Q and 2Q. But when we look at the large LP numbers that have been reported, we didn't see much growth there, so I wonder where that's coming from. So it's a two-part question. Thank you.

Speaker Change: Since April 1st.

The challenge that most German companies.

Beena Goldenberg: Sure, Pablo. So, thanks for the question. Absolutely, we have heard the same from Sanity in terms of business doubling since April 1st. The challenge that most German companies are running into right now is securing the incremental revenue, sorry, incremental volume to deliver even more upside to their revenue. So, here's the challenge with a product that takes five months from the time you plant it until you harvest it, and you get it out to the market.

Speaker Change: Running into right now is securing the incremental revenue.

Speaker Change: Sorry incremental volume to deliver even more upside to the revenue so.

Beena Goldenberg: The investment is exciting for several reasons. One, it allows us to establish our first football in Europe through Germany, which as of April 1, pays the way to becoming the world's largest federally legal adult-used cannabis jurisdiction. Two, sanity is already a leading cannabis company in Germany with the number two flower brand in that market, and is also operating two dispensaries in Switzerland through their pilot project. We believe they are well positioned for growth in Germany and the wider EU market, where there is currently less saturation than in the US or Canada, so first mover advantage will likely matter more.

Speaker Change: Here's the challenge with a product that takes five months from the Chinese plant until you harvest it and you get it out to the market.

Beena Goldenberg: When business grows exponentially, it's hard for the volume to catch up to be able to supply the market. And that's why you're not seeing as much product shipping from the LPs in Canada. That will go up because Germany wants the product. Sanity Group has asked for more. They certainly feel like they are being restrictive; they are restricting their upside opportunity because they don't have the volume. And we're doing everything we can to get the product ready to ship over there.

Speaker Change: When business grows exponentially its hard for the volume to catch up to be able to supply the market and thats why youre not seeing as much product shipping from.

Beena Goldenberg: Three, the investment enhances the previous supply agreement that was already in place between organogram and sanity groups, with sanity having now increased its purchase commitment. Upon organogram receiving EUGMP certification at its monk and facility, which is expected in the near term, sanity will switch to purchasing a percentage of its total flower assortment for organogram. And four, Germany is viewed as the most important new legal cannabis market in the world, due to its large cannabis-friendly population, its political influence, and geographic adjacencies to markets, contemplating adult-user medical cannabis.

Speaker Change: Lps in Canada, if that will go up.

Beena Goldenberg: That will go up. Germany wants the product. Sanity Group has asked for more. They certainly feel like they are restricting their upside opportunity because they don't have the volume. And we're doing everything we can to get the product ready to ship over there. And it's just a time challenge on the ramp-up really that you're facing right now. But it's an exciting opportunity.

Speaker Change: Germany wants the product Sanity group has asked for more they certainly feel that they are being.

Speaker Change: They are restricting their upside opportunity because they don't have the volume and we're doing everything we can to to get the product.

Speaker Change: <unk> to ship over there and it's just.

Speaker Change: Time challenge on the ramp up really that you are facing right now, but it's an exciting opportunity.

Beena Goldenberg: And it's just a time challenge on the ramp-up really that you're facing right now. But it's an exciting opportunity. Sanity is very, you know, has told us about the growth. We're seeing it from other German customers, and, you know, Sanity has more initiatives they want to do. So, we're excited to get that product ready to be able to ship it over.

Beena Goldenberg: Sanity is very, you know, has told us about the growth. We're seeing it from other German customers, and, you know, Sanity has more initiatives they want to do. So, we're excited to get that product ready to be able to ship it over. Thank you.

Speaker Change: <unk> is very is.

Speaker Change: Has told us about the growth we're seeing it from other German customers and.

Speaker Change: <unk> has more initiatives they want to do so we're excited to get that product ready to be able to ship it over to them.

Pablo Zunich: Thank you. If I can just follow up here, In terms of Jupiter's investments in the U.S., in the case of OBX, right, on hemp extracts, you know, any concerns about the bans we're seeing at the state level, or haven't really materialized bans on hemp derivatives? What are the people from OBX telling you? And then, the second part, would you be looking at making investments through Jupiter in US MSOs, right? We've seen other companies do that with guardrails. Is that something that you would also consider? Thank you. So let's have some.

Pablo Zunich: If I can just follow up here, in terms of Jupiter's investments in the U.S., in the case of OBX, right, on hemp extracts, any concerns about the bans we're seeing at the state level, or they haven't really materialized bans on hemp derivatives? What are the people from OBX telling you? And then the second part, would you be looking at making investments through Jupiter in USMSOs, right? We've seen other companies do that successfully, with guardrails. Is that something that you would also consider?

Speaker Change: Thank you if I could I just follow up here in terms of Jupiter's investments in the U S.

Speaker Change: I guess it will be X right on Jim Thanks drugs.

Speaker Change: Any any.

Speaker Change: Concerns about the bonds, we are seeing at the state level or they haven't really materialized bounce on him derivatives, what other people, whom we'll be extending your and then.

The second part.

Speaker Change: Would you be looking at making investments through Jupiter and use them as source right. We've seen other companies do that through with.

Beena Goldenberg: Now in addition to the anticipated increase in cannabis volume found for Germany, resulting from our investment in sanity, organic grant continued to diversify lists of international customers in Q3, finding two news supply agreements with customers in Australia and the UK. Organogram now has seven supply agreements across Germany, Israel, Australia, and the UK, and is currently evaluating additional global partnership opportunities and strategic investments. Moving on, I'd like to focus for a moment on our savings initiatives and efficiencies achievements in this quarter, resulting from investments in automation, adjustments in our manufacturing methods, and advantages garnered from our strategic investments.

Speaker Change: We got rails is that something that you would also want to see them. Thank you.

Beena Goldenberg: So, let's answer the question about OBX. We are tracking with them, you know, what's happening on the front of hemp-derived derivatives. We are following what's happening with the Miller Amendment to check what's going on state-by-state. We have confidence that there are some states who have already put in regulations that will maintain the availability of hemp-derived cannabis products. So, you know, we feel good that there will be a market there, but we're watching the regulations closely with OBX to understand how this will roll out, and it will influence our next steps in the Delta 9 space in the US. So, that's, you know, a bit of a regulatory watch and then decisions coming out of there.

So let's answer the question about obs.

Speaker Change: We are tracking.

Speaker Change: Tracking with them, what's happening on the front of hemp derived derivatives.

Speaker Change: <unk>.

Speaker Change: We are following what's happening with the mill or amendment to check what's happening what's going on state by state.

Beena Goldenberg: We have confidence that there are some states who have already put in regulations that will maintain the availability of hemp-derived cannabis offerings. So, you know, we feel good that there will be a market there, but we're watching the regulations closely with OBX to understand how this will roll out, and it will influence our next steps in the Delta 9 space in the U.S. So, that's, you know, a bit of a regulatory watch and then decisions coming out of there.

Speaker Change: We have confidence that there are some states who have already put in regulations.

Speaker Change: That will maintain the availability of hemp derived Ken.

Speaker Change: Cannabis offerings so.

Speaker Change: We feel good that that there will be a market there.

Beena Goldenberg: In Q3, organogram harvested 21,420 kilograms of dried flower, representing an increase of 15 percent compared to the same prior year period. 42% of our harvest is in Q3. In Q3, exceeded 26% THC compared to 25% of our harvest last quarter, an increase of 17% forms. Our average yields is quarter broken OrganiGram records at 185 grams per plant. While yields have historically fluctuated and may continue to do so from time to time due to changes in our cultivar mix, we are encouraged by this achievement.

Speaker Change: But we're watching the regulations closely with <unk> to understand how this will roll out and it will influence our next steps in the Delta nine space in the U S.

Speaker Change: So that's a bit of a regulation Watson and then make decisions coming out of there.

Beena Goldenberg: In terms of the second part of your question about US opportunities, look, there were a lot of inbounds as soon as we announced the Jupiter Investment Pool. There are a lot of companies that are strapped for capital that would, you know, would like an investment, but we're at this point where we have to make sure what we do in the US is obviously compliant with our listings. We have watched what some of our peer groups have done.

Beena Goldenberg: In terms of the second part of your question about U.S. opportunities, look, there were a lot of inbounds as soon as we announced the Jupiter Investment Pool. There are a lot of companies that are strapped for capital that would, you know, would like an investment, but we're at this point where we have to make sure what we do in the U.S. is obviously compliant with our listings. We have watched what some of our peer groups have done.

Speaker Change: In terms of your your second part of your question about U S opportunities look there were a lot of inbounds.

Speaker Change: As soon as we announced that Jupiter investment pool, there are lot of companies that are strapped.

Speaker Change: Strapped for capital that would.

Speaker Change: I would like an investment, but we're at this point, where we have to make sure what we do in the U S. Obviously is.

Beena Goldenberg: The yields increase of 28% versus the same prior year period, and almost 13% sequentially, is supported by changes we have made to our cultivation processes, and by realization of benefits from our strategic investment in violence. At our Monkan facility, consolidation of plant care and harvesting rules reduced waste and contributed to enhanced quality during the harvesting process. It seems to get a better product when the person who cares for the plant is also the person who harvest this, and we know our customers will notice the difference this additional care makes to our already great products.

Speaker Change: Compliant with our listings we have watched some of our peer group have done.

We've historically said that our priority is to make sure that our investments are not passive investments.

Beena Goldenberg: We have historically said that, you know, our priority is to make sure that our investments are not passive investments. You could always invest in the real estate arm of one of the MSOs and meet the guardrails, but that's not something that we would typically want to do. We're looking for more strategic investments that have long-term opportunities for us. We're looking at how to leverage some of our IP in the US market, and those are things that we'll continue to look at.

Speaker Change: You could always invest in our real estate arm of one of the Msos.

Speaker Change: And meet the guardrails.

Speaker Change: But that's not something that we would typically wanted to we're looking for more.

Beena Goldenberg: We're looking for more strategic investments that have long-term opportunities for us. We're looking at how to leverage some of our IP in the U.S. market, and those are things that we'll continue to look at. The U.S. is a priority market for us. It's taking us a little bit more time just because it's a little bit more challenging, but it's a focus, and hopefully, we'll have something to report soon on that front. And your next question comes from the line of Frederico Gomes with ATB Capital Markets. Your line is open. Hi, good morning.

Speaker Change: More strategic investments that have long term opportunities for us.

Speaker Change: Looking at how to leverage some of our IP in the U S market.

Speaker Change: And those are things that we'll continue to look at U S is a priority market for us, it's taking us a little bit more time, just because it's a little bit more challenging, but it's a focus and hopefully we'll have something to report soon.

Beena Goldenberg: The US is a priority market for us. It's taking us a little bit more time just because it's a little bit more challenging, but it's our focus, and hopefully, we'll have something to report soon on that front.

Beena Goldenberg: We saw further efficiencies in post-processing through streamlining testing, increased throughput and waste reduction. At our edible facility in Winnipeg, we completed trials for reducing cannabinoid waste that is expected to deliver meaningful savings in fiscal 2025 by changing to in-line active dosing tanks for our continuous edible lines. In last period, our expanded cultivation is providing cannabis for our revitalized trailblazer and Woolab brand, which are meeting the needs of our Quebec customers with Quebec grown premium cannabis.

Soon on that front.

Operator: And your next question comes from the line of Frederico Gomes with ATB Capital Markets. Your line is open.

Speaker Change: And your next question comes from the line of Fred Rico Combs with ATB capital markets. Your line is open.

Frederico Gomes: Good morning. Congratulations on the quarter.

Frederico Gomes: Congratulations on the quarter. Thanks for taking my question. Beena, you mentioned the improvement that you saw, I guess, in yield per plant, a record for OGI. Does that have any relation to your seed-based production, or is it related to other factors? And then, just in terms of seed-based production, can you remind us about what's the impact in terms of margin? That would have to be you.

Speaker Change: Hi, good morning, congrats on the quarter, Thanks for taking my questions.

Frederico Gomes: Thanks for taking my question. Beena, you mentioned the improvement that you saw, I guess, in yield per plant, a record for OGI. Does that have any relation to your seed-based production, or is it related to other factors? And then, just in terms of seed-based production, can you remind us about what the impact in terms of margins that could have on you would be? Thanks.

Speaker Change: Yes.

Speaker Change: You mentioned the improvement that you saw I guess in yield per plant at a record store for OTI does that have any relation to your seat based production or is it related to two other factors and then just in terms of the seat based production can you remind us about what the impact in terms of margins.

Beena Goldenberg: Also in Q3, we harvested, we completed harvests of three seed-based production rooms. Our seed-based capability stem from our strategic investment in violence by the science, which is exceeding our expectations to date. This led to our decision to fast track the partial funding of the final investment trunch and filoes, which we announced in July. The early funding resulted in an expanded final milestone, which requires filoes to deliver 21 unique auto-flower seed varietals for testing and phenotyping by the end of September this year, followed by a second cohort of 21 more by January 2025.

That could have to you. Thanks.

Beena Goldenberg: Okay, certainly. First of all, as I mentioned in my remarks, the three rooms we harvested in Q3 from seed-based production generated an average of 200 grams per plant. So, certainly that helps the overall number, but three rooms out of, you know, somewhere between 55 and 60 rooms aren't going to drive the numbers. So, our overall yield is coming up on our regular clone-based production as well as the benefit of seed-based production. We will try.

Beena Goldenberg: Okay, certainly. First of all, as I mentioned in my remarks, the three rooms we harvested in Q3 from seed-based production generated an average of 200 grams per plant. So certainly that helps the overall number, but three rooms out of, you know, somewhere between 55 and 60 rooms aren't going to drive the numbers. So our overall yield is coming up on our regular clone-based production, as well as the benefit of a We will.

Speaker Change: Okay, certainly so so first of all as I mentioned in my remarks, the three rooms, we harvested in Q3 from seed based production generating an average 200 grams per plant.

Speaker Change: Certainly that helps the overall number but three rooms.

Speaker Change: Aldo somewhere between 55% to 60 rooms arent going to drive the numbers. So our overall yield is coming up on our regular clothing based production as well and if it is based.

Beena Goldenberg: Further, organic ram received an expanded genetic license from filoes that in addition to the whole flower THCV for which we have exclusive rights in Canada, include access to high-potency CBG, CBC, and CBDV seed-based cultivars. Our first three seed-based harvest yielded an impressive 200 grams per plant and an average THC potency of 25.5%. For additional rooms or harvested into July, and by the end of the calendar year, organic ram expects to achieve its goal of approximately 30% of production coming from seeds.

Speaker Change: We will.

Beena Goldenberg: We will continue to add some more seed-based production, and that will help us. Obviously, we will optimize our production as we continue to go. But what seed-based production does for us is a couple of things. Number one, the cycle time is shorter. So you don't go through the whole pre-veg stage.

Speaker Change: We will continue to.

Speaker Change: Add some more seed based production and that will help us obviously, we will optimize our production.

Speaker Change: And as we continue to go.

Beena Goldenberg: So you have perhaps a cycle time of around 70 days versus 100 days in a normal clone-based production. So that gives us more turns in our facility, which will give us more volume, obviously, that we could sell. So that increases capacity. But secondly, it also increases with as we move from elite seed. So we're now currently using elite seeds. But as I mentioned, one of the reasons we fast-tracked the phyllos, sort of a partial payment of their final tranche was to get some autoflowers. And the difference with auto flower seeds is that not only do you get the benefit of the cycle time, so extra capacity, but there's less plant care required for those.

Speaker Change: But what <unk> does for US is a couple of things number one the cycle time is shorter. So you don't go through the whole pre veg stage. So you have perhaps a cycle time of around 70 days versus 100 days in a normal chrome based production. So that gives us more turns in our.

Beena Goldenberg: We further anticipate averaging between 20 to 30% seed-based production throughout fiscal 2025 as we optimize production schedules and business requirements. Other benefits from seed-based production include pasture cycle times, which we expect will allow organogram to increase its production output without additional capex, and improves plant consistency, quality, and resilience. We continue to measure against our guidance of $10 million of savings this year that we outlined at the end of fiscal 2023, resulting from investments in automation, in-house lab testing and remediation, freight optimization, and changes in production processes.

Speaker Change: Facility, which will give us more volume that obviously that we could sell so that increases capacity.

Speaker Change: But secondly.

Speaker Change: And also.

Speaker Change: With as we move from a week. So we are now currently using elite seats, but as I mentioned that one of the.

Beena Goldenberg: In Q3, we realize approximately $2.7 million of the savings. This year, today, we have delivered approximately $7.9 million, and we are on track to meet this $10 million target. Finally, OrganiGram continues to maintain one of the healthiest balance sheets in the industry, with $173 million in pro forma cash as of the closing of the final BAP funding tranche. As a reminder, we expect to close the second $41.5 million tranche later this month, and the final tranche of BAT's $124.6 million follow-on investment at $3.22 per share is expected to close in February 2025. In addition to our ample cash position, we maintain effectively zero debt, which makes us a rare find in the cannabis industry, and allows us significant financial flexibility.

Speaker Change: The reasons, we fast tracked the silos.

Speaker Change: A partial payment of their final tranche was to get some auto flower seeds and the difference with auto flower seeds not only do you get the benefit of the cycle time, so extra capacity, but theres less there.

Beena Goldenberg: And the difference with auto flower seeds is that not only do you get the benefit of the cycle time, so extra capacity, but there's less plant care required for those. So there's a significant labor savings. So as we convert over from elite seeds to auto flower seeds, there's further margin improvement to be had. Exactly the quantity, well, we have to still run our trials to provide that number, but the plant science work that we've done already suggests that there is significant labor savings that will help with our overall cost program.

Speaker Change: There is less client care required for those seats. So there is a significant labor savings so as we convert over between elite seeds to auto flower seeds. There is further margin improvement to be had exactly the quantity well we have to still run our trials.

Beena Goldenberg: So there's significant labor savings. So as we convert over between elite seeds to auto flower seeds, there's further margin improvement to be had. Exactly the quantity, well, we have to still run our trials to provide that number, but the plant science work that we've done already suggests that there is significant labor savings that will help with our overall cost per gram. Thanks for that.

Speaker Change: To provide that number but.

Speaker Change: The plant science work that we've done already suggests that there is significant labor savings that will help on our overall cost per gram.

Speaker Change: Yes.

Frederico Gomes: Thanks for that. Then, in terms of the pricing, I guess, environment in Canada, I believe your average selling price for flour was sort of flat quarter over quarter. So could you just comment on that in terms of, you know, how do you see that market evolving? Do you think we're finally going to be stable here and maybe increasing prices? Any comment there? Because I know that the market remains very challenging, but we're seeing some stabilization here. Yes, absolutely.

Frederico Gomes: Then in terms of the pricing, I guess, environment in Canada, I believe your average selling price for flour was sort of flat quarter over quarter. So could you just comment on that in terms of, you know, how do you see that market evolving? Do you think we're finally going to be stable here and maybe increase prices? So just any comment there? Because I know that the market remains very challenging, but we're seeing some stabilization. Yes, absolutely, Fred.

Speaker Change: Thanks for that.

Speaker Change: And then in terms of the pricing environment in Canada.

Speaker Change: I believe your average selling price for flower.

Speaker Change: What's sort of flat quarter over quarter. So could you just comment on that in terms of how do you see that market evolving do you think we're finally.

Speaker Change: That would be stable here and maybe.

Speaker Change: Increasing prices so just any comment there because I know that the market remains very challenging.

Greg Gouillette: This concludes my comments, and I will now turn the call over to Greg to discuss our financial results for the Porter.

Speaker Change: We're seeing some some stabilization here.

Beena Goldenberg: Yes, absolutely, Fred. So we are seeing that pricing on flour has stabilized. As a matter of fact, it's picked up a bit. We certainly saw it on our B2B sales that we were able to sell for a higher price per gram than a year ago. So there is a benefit there.

Beena Goldenberg: So we are seeing that the pricing on flour has stabilized, and, as a matter of fact, it's picked up a bit. We certainly saw it on our B2B sales that we were able to sell for a higher price per gram than a year ago. So there is a benefit there.

Speaker Change: Yes, absolutely so we are seeing.

Greg Gouillette: Thank you, Bina. We are pleased with the progress OrganiGram has made from a financial perspective, with a return to generating adjusted EBITDA on the Porter. As Bina mentioned in her comments, our net revenue grew by 25% versus Q3 last year, and over 9% sequentially. At the same time, our growth margins have seen a significant improvement, owing to higher yields and increased operating efficiencies in the business. While yields and THC content will fluctuate over time, the trend we have seen over the last two years has been higher yields and higher potency.

Speaker Change: That pricing on flower has stabilized.

Speaker Change: As a matter of fact, it's ticked up a bit we certainly saw it on our <unk> sales that we were able to sell for.

Beena Goldenberg: And we've also taken some pricing on our large format big bag of buds because there's opportunity. So we are seeing supply and demand come into play. And that's good for flour.

Speaker Change: A higher price per gram than a year ago. So there is benefit there and we've also taken some pricing.

Speaker Change: Our large format big bag of blood.

Speaker Change: Because theres opportunity. So we are seeing supply and demand come into play and thats good on flower.

Beena Goldenberg: And we've also taken some pricing on our large format big bag of buds because there's opportunity. So we are seeing supply and demand come into play. And that's good for flour. Our business has remained flat in terms of average price. And that one is purely a mix issue.

Speaker Change: Our business has remained flat in terms of average price and that one is purely a mix issue. So if you sell less.

Beena Goldenberg: You know, our business has remained flat in terms of average price. And that one is purely a mix issue, you know, so if you sell less on international sales, or you sell more big format versus small format, you'll get that mix impact. But, like to like, on a 28 gram format, we've actually seen a pickup in pricing. So I think that the low is behind us at this point in the supply and demand picture in Canada.

Greg Gouillette: In our Q2 earnings call, we highlighted that we would begin to see lower cost flour harvested in Q2 flow through in Q3. That is indeed what we have seen, and the record yield of 185 grants per plant that Bina mentioned contributed to the improved adjusted growth margins in the Porter. Our adjusted growth margin rates in Q3 showed a meaningful increase to 36% from 19% in Q3 last year, an improvement of 17% points.

Beena Goldenberg: So if you sell less on international sales, when you sell more big format versus small format, you'll get that mix impact. But, like to like, on a 28 gram format, we've actually seen a pickup from pricing. So I think that the low is behind us at this point in the supply and demand picture in Canada. That being said, we do see price compression in other segments. So, for example, on the edible side, we are feeling some price compression there on edibles, which has historically been more focused on flour pricing.

Speaker Change: On international sales.

Speaker Change: You sell more big format versus small format youll get that mix impact, but like to like on a 28 Gram format, we've actually seen a pickup from pricing. So I think that the low.

Speaker Change: LOE is behind US at this point in the supply and demand.

Speaker Change: Picture in Canada that being said.

Speaker Change: We do see price compression in other segments.

Greg Gouillette: The clenchally, we saw a 5% increase. The combination of higher sales and higher adjusted growth margin rates resulted in a 139% increase in growth margin dollars year over year to 14.6 million dollars. The year over year increased with attributable to several factors, including lower cultivation and post-harvest cost, reduced inventory provisions, and lower depreciation resulting from impairment charges recorded last year. In addition to our growth margin improvements, we also reduced our operating expenses in Q3, adjusting for impairments realized in the prior year period, total operating expenses in Q3 decreased by 20%.

Beena Goldenberg: That being said, we do see price compression in other segments. So, for example, on the edible side, we are feeling some price compression there on edibles, which has historically been more focused on flour pricing. Now with a little bit of excess capacity, or maybe some competitors that are, you know, just on the verge of, you know, being around sort of needing to generate revenue to just handle some of their cash requirements, they're taking prices down, which is not really the greatest thing for the overall industry.

Speaker Change: For example on the edible side, we are feeling some price compression there on edibles.

Beena Goldenberg: Now with a little bit of excess capacity, or maybe some competitors that are just on the verge of being around, needing to generate revenue to just handle some of their cash requirements, they're taking prices down, which is not really the greatest thing for the overall industry and for the edible segment. Over time, we hope that irrational behavior will go away, and we have great quality products. We're really excited about our nano emulsion gummies that are coming out, and we hope to see pricing come back into that segment as more differentiated products come out.

Speaker Change: Which has historically been more focused on flower pricing now with a little bit of excess capacity or may be some competitors that are.

Speaker Change: Just on the verge of being.

Speaker Change: Being around meeting meeting to generate revenue to just handle some of their cash.

Speaker Change: Cash requirements, they're taken pricing down which is not really the greatest thing for the overall industry and for the edible segment, but over time, we hope that sort of irrational behavior will go away and that.

Beena Goldenberg: And for the edible segment, but over time, we hope that sort of irrational behavior will go away and that, you know, we have great quality products. We're really excited about our nano emulsion gummies that are coming out. And we hope to see pricing come back into that segment as more differentiated products get out. And as a reminder, if you would like to ask a question, please press star then the number one on your telephone keypad. Your next question comes from the line of Yewon Kang with Canaccord Genuity. Your line is open. Hi, good morning.

Greg Gouillette: Driving the lion's share of that change with a 22% decrease in FGNA to 14.8 million in Q3 from 19 million in the prior year period, resulting from lower cost associated with the implementation of the first phase of our new ERP system, lower professional fees, and cost savings on our insurance programs. As a result of our increased sale, improved margins, and lower SG&A costs, we are pleased to report an adjusted EBITDA $3.5 million compared to negative $2.9 million in the same prior year period.

Speaker Change: We have great quality products, we're really excited about our nano emulsion gummies that are coming out and we hope to see pricing come back into that segment.

Speaker Change: More differentiated products get out there.

Speaker Change: Yeah.

Operator: And as a reminder, if you would like to ask a question, please press star then the number one on your telephone keypad. Your next question comes from the line of Yewon Kang with Canaccord Genuity. Your line is open.

Speaker Change: And as a reminder, if you would like to ask a question. Please press Star then the number one on your telephone keypad. Your next question comes from the line of <unk> <unk> with Canaccord Genuity. Your line is open.

Yewon Kang: Thank you for the question. Obviously, congratulations on a fantastic quarter. It is nice to see sequential increases across virtually all metrics. My first question here is regarding Germany. Now that we're a few months past the April 1st KNG enactment, can you comment on any of the trends that you've been seeing with respect to the increased consumer demand for medical cannabis there, along with increased supply becoming available in the market, particularly from Canadian LP exports, and its impact on the pricing dynamics in the initial days there? Thank you.

Yewon Kang: Hi, good morning. Thank you for the question. Obviously, congratulations on a fantastic quarter. Nice to see sequential increases across virtually all metrics. My first question here is about Germany.

Speaker Change: Hi, Good morning, Thank you for the question.

Greg Gouillette: As we mentioned last quarter, fiscal 2024 adjusted EBITDA is expected to outperform fiscal 2023. Net income discordor came in at $2.8 million compared to a net loss of $213.5 million in the same prior year period. The increase in net income versus the comparative period is primarily due to higher revenue from recreational cannabis and Q3. Net fair value gains on our investments in financial assets. Last year included an impairment charge by $191 million.

Speaker Change: Obviously, congratulations on a fantastic quarter nice to see.

Speaker Change: These sequential increases cost structurally all metrics.

Speaker Change: My first question here is regarding Germany, now that we're still months past the April <unk> announcement.

Speaker Change: Can you comment on any of the trends that you've been seeing with respect to the increase consumer demand for medical cannabis there along with increased apply becoming available in the market, particularly by Canadian LP exports and its impact on the pricing dynamics in the initial days there. Thank you.

Beena Goldenberg: Sure, so, as I said, we certainly have seen an increase in, through, we've heard from Sanity, there is an increase in demand for medical cannabis, definitely the sense that people who are buying from the illicit market are moving over to a farm and picking up their cannabis at pharmacies. I think, you know, again, this is something that is, there was a pent-up demand, but we do expect it to continue to increase as supply becomes more readily available.

Yewon Kang: Now that we're a few months past the April 1st cannabis enactment, can you comment on any of the trends that you've been seeing with respect to the increased consumer demand for medical cannabis there, along with increased supply becoming available in the market, particularly by Canadian LP exports and its impact on the pricing dynamics in the initial days there? Thank you.

Beena Goldenberg: Sure. So, as I said, we certainly have seen an increase through, we've heard from Sanity, there is an increase in demand for medical cannabis, definitely the sense that people who are buying from the illicit market are moving over, you know, and picking up their cannabis at pharmacies. But I think, you know, again, this is something that is, there was a pent-up demand, but we do expect it to continue to increase as supply becomes more readily available.

Greg Gouillette: From a cash flow perspective, net cash used in operating activities before working capital charges or changes was $0.2 million in Q3 fiscal 2024 compared to a use of $14.8 million in the prior year period. The improvement was primarily due to higher recreational cannabis revenue and the reduced cost realized during the quarter. Cash used an investing activity in Q3 was $14.9 million which was driven primarily by the investment and sanity group and partially offset by a net change in restricted funds and proceeds from investment income.

Speaker Change: Sure. So so again like I said, we certainly have seen an increase in.

Speaker Change: We've heard some sanity, there is an increasing demand for medical cannabis, there's definitely the sense that people who were buying from the illicit market.

Speaker Change: Moving over a farm.

Speaker Change: And picking up their cannabis at pharmacies I think again and this is something that is it.

Beena Goldenberg: In the early days, the pharmacies were even having trouble getting product out to the people who were coming in to purchase cannabis, and there's still this delay between supply getting out from all international markets into Germany. So, as we work through those challenges, I think we're going to see even greater volume going through that market, and we're very excited about it. I mean, it's a good indication.

Speaker Change: With pent up demand, but we do expect it to continue to increase as supply becomes more readily available. So early days, the pharmacies, where you've been having trouble getting product out to.

Beena Goldenberg: So, in the early days, the pharmacies were even having trouble getting product out to the people who were coming in to purchase cannabis, and there's still this delay between supply getting out from all international markets into Germany. So, as we work through those challenges, I think we're going to see even greater volume going through that market, and we're very excited about it. I mean, it's a good indication and, you know, Sanity Group is just ready to open up their telemedicine platform.

Greg Gouillette: This compared to cash used in investing activities in Q3 fiscal 2023 at $3.4 million which was comprised of our investments in green tank and filo partially offset by proceeds from the net retention of short term investments proceeds from investment income and a net change in restricted funds.

Speaker Change: People, who are coming in to purchase cannabis and they are still the delay between supply.

Speaker Change: Getting out from from all international markets.

Beena Goldenberg: And, you know, Sanity Group is just ready to open up their telemedicine platform. And again, that one, they're just waiting on getting the right amount of supply to make sure they kick it off and can supply their customers. So, all the signals out of Germany are that there is upside, and there are a lot of LPs ready to supply that market. We're excited because, obviously, our investment in Sanity guarantees us a certain amount of flower being shipped in, but there are other customers in Germany that are looking for volume as well.

Speaker Change: So as we work through those challenges I think we're going to see even greater volume going through.

Greg Gouillette: On the topic of cash, we are pleased to reiterate that we have one of the healthiest balance seats in the industry. As of June 30th, 2024, we had a total cash position of $89.5 million including both restricted and unrestricted cash. We had negligible debt and as being mentioned, our pro forma cash position after the closure of the second and third BAT tranches is approximately $173 million. At the end of last quarter, we mentioned on our Q2 earnings call that we felt the back half of the fiscal year would demonstrate our ability to generate sustainable, positive financial results.

Speaker Change: <unk>.

Speaker Change: Going through that market and we're very excited about it I mean, it's a good indication and sanity group is.

Speaker Change: Just ready to open up there.

Speaker Change: Telemedicine platform and again that one they are just waiting on getting the right amount of supply to make sure. They kicked it often to supply their customers. So all signals out of Germany are there was upside happening.

Beena Goldenberg: And again, that one, they're just waiting on getting the right amount of supply to make sure they kick it off and can supply their customers. So, all signals out of Germany are that there is upside, and there are a lot of LPs ready to supply that market. We're excited because, obviously, our investment in Sanity guarantees us a certain amount of flower being shipped in, but there are other customers in Germany that are looking for volume as well. So, you know, it's an exciting market. Like, Germany is going to be the next big phase wave of growth, and it's a very good opportunity for us.

Speaker Change: And there are a lot of Lps ready to supply that market. We're excited because obviously, our investment and sanity guarantees us a certain amount of flower being shipped in but theres other customers in Germany that are looking for volume as well so.

Greg Gouillette: Given the results, we have court reported today, supported by increased operational efficiency and affect savings, a five-quarter trend of incrementally higher sales, higher margins, and a growing international footprint, we feel confident that we have demonstrated that trajectory. Q4 is already shaping up to be exciting as we wrap up production for the launch for a nano-emulsion gummy. Continue to lean in on seat-based production, realize more of the cost savings we have already outlined and drive international growth.

Beena Goldenberg: So, you know, it's an exciting market. Germany is going to be the next big wave of growth, and it's a very good opportunity for us. Thanks for that. And if I could just ask my second question as a follow-up.

Speaker Change: It's an exciting market like Germany is going to be the next big phase wave of growth and it's a very good opportunity for us.

Yewon Kang: Thanks for that. And if I could just ask my second question as a follow-up, Regarding the yields and potency KPIs that you guys maintain in terms of operational improvement, I think it was mentioned as part of the prepared remarks that these operational KPIs will fluctuate from time to time and that they will have an impact on margin performance over time. I was just wondering what kind of activities would make them more stable throughout and your expectation of margin performance going forward should the yields and potency results become more stable throughout. So, just to be clear,

Speaker Change: Thanks for that.

Speaker Change: And if I could just ask my second question's a follow up.

Yewon Kang: Regarding the yields and potency KPIs that you guys maintain in terms of operational improvement, I think it was mentioned as part of the prepared remarks that these operational KPIs will fluctuate from time to time and that they will have an impact on margin performance over time. I was just wondering what kind of activities would make it more stable throughout and your expectation of margin performance going forward should the yields and potency results become more stable throughout.

Speaker Change: Regarding the yield and potency.

Speaker Change: But you guys maintain in terms of operational improvement.

Speaker Change: I think it was.

Beena Goldenberg: This concludes my comments. I will now turn the call back over to Vienna. Thank you, Greg. We are pleased with our solid financial results. Revenue is up, margins are up, and costs are being managed. We have built a strong foundation on which to execute our growth plans and our well-positioned to capitalize on the opportunity to ahead of us as foam and abroad.

As part of the prepared remarks that these operational Kpis will fluctuate from time to time and that it will have an impact on margin performance over time.

Speaker Change: I was just wondering what kind of activities would make it more stable throughout and.

Speaker Change: And your expectation on the margin performance going forward should.

Speaker Change: The yield and potency results become more stable throughout.

Beena Goldenberg: Once again, I'd like to thank everyone on the call for their support and interest in organogram. I will now open the call up for questions. At this time, if you'd like to ask a question, press star then one on your telephone keypad. Please limit yourself to one question and one follow-up question.

Beena Goldenberg: So just to be clear, the yield and potency are very predictable for a specific cultivar. But again, demand for the different cultivars changes, and that will be why you have fluctuations. So, you know, if more people want a cultivar that perhaps has a slightly lower yield when you grow it versus another cultivar that has higher yields, right? There's a mix between not all plants grow exactly the same. You know, obviously, we continue to improve the yield on all plants as we work on them, but just physiologically, some plants will grow bigger and higher yields.

Yewon Kang: So, just to be clear, yield and potency are very predictable for a specific cultivar, but again, demand for the different cultivars changes, and that will be why you have fluctuations. So, for example, if more people want a cultivar that perhaps has a slightly lower yield when you grow it versus another cultivar that has higher yields, right? There's a mix of not all plants grow exactly the same. You know, obviously, we continue to improve the yield on all plants as we work on them, but just physiologically, some plants will grow bigger and higher yields.

Speaker Change: So just to be clear.

Speaker Change: The yield and potency is.

Speaker Change: Very predictable for us specific cultivar, but again demand on the different cultivars changes and that will be why you have fluctuations. So if more people want a cultivar that perhaps has a slightly lower yield when you grow it versus another cultivar that has higher yields right. There is a mix.

Aaron Grey: Our first question comes from the line of Aaron Grey with AGP, Your Line is Open. Hi, good morning, and thank you for the questions. Congratulations on a nice quarter there. Thank you.

Speaker Change: Between not all plants grow exactly the same.

Beena Goldenberg: So first question for me, just on the UGMP, being I believe you said that's expected in the near term, could you just provide in any more additional color when you're expecting that and are there any additional things you would need in terms of export licenses or otherwise that would hold you up to be able to utilize that EU GMP to export. And then secondly on that, just with standard grouping of purch, and how you just look to allocate capacity, domestic, most international, once you receive the EUGMP approval.

Speaker Change: Obviously, we continue to improve the yields on all plants as we work on them, but just physiologically some plants well, we'll grow bigger higher yields and so the fluctuations are going to be there as long as theres a cultivar mix fluctuation.

Beena Goldenberg: And so the fluctuations are going to be there as long as there's a cultivar mix fluctuation. Over time, you know, it would be simple if everybody bought just one cultivar and you just grew your whole facility in one cultivar, but that's not reality. I know our operations people would have loved that, but because there's a mix and consumer demand for different types of terpene profiles, aromas, different, you know, there will be that mix impact.

Yewon Kang: And so the fluctuations are going to be there as long as there's a cultivar mix fluctuation. Over time, you know, it would be simple if everybody bought just one cultivar and you just grew your whole facility on one cultivar, but that's not reality. I know our operations people would have loved that, but because there's a mix and, you know, consumer demand for different types of terpene profiles, aromas, different, you know, there will be that mix impact, and that's what's causing the fluctuation. I think over time, we will continue to drive higher numbers, but we will still see ups and downs depending on the rooms that are harvested in that quarter and what we've grown in those rooms.

Over time.

Speaker Change: It would be simple if everybody's just one coffee bar and you just grew your whole facility of one cultivar, but that's not reality I know our operations people would've loved that but.

Beena Goldenberg: Thank you. Sure, so thank you for the question. So we have been EUGMP ready since much earlier this year and are just awaiting the German regulator to come out to do the audit of what this will look like. We would have liked them to come out already. This is just a scheduling issue. So we expect it will happen in the fall. And once you have the audit, we expect it'll take a couple of months for the paperwork to get the certification.

Speaker Change: Because theres mix and consumer demand for different types of European profiles of Roma is different.

Speaker Change: There will be that mix impact and thats whats, causing the fluctuation I think over time, we will continue to drive higher numbers, but we will still see ups and downs, depending on the rooms that are harvested in that quarter and what we've grown in those rooms.

Beena Goldenberg: And that's what's causing the fluctuation. I think over time, we will continue to drive higher numbers, but we will still see ups and downs depending on the rooms that are harvested in that quarter and what we've grown in those rooms.

Kayla: And at this time, I would like to thank everyone so much for joining us today. This does conclude today's conference call, and you may now disconnect. Please wait; the conference will begin shortly.

Beena Goldenberg: And at this time, I would like to thank everyone so much for joining us today. This does conclude today's conference call, and you may now disconnect. Please wait; the conference will begin shortly.

Speaker Change: And at this time I would like to thank everyone. So much for joining US today. This does conclude today's conference call and you may now disconnect.

Beena Goldenberg: So we feel comfortable that early in calendar year 2025, we should have our certification and be ready to start capitalizing on using that certification. Until such time, we continue to supply our GTP flower internationally, but obviously it has to go through additional steps. So we look forward to leveraging that certification in the future. In terms of your question with regard to how you're going to allocate our volume, we would obviously prioritize international sales simply because without the X size, it's higher margin business and then protect our branded business domestic recreational sales.

Operator: Please wait; the conference will begin shortly. Please wait; the conference will begin shortly. Please wait; the conference will begin shortly.

Please wait the conference will begin shortly.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: Sure.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

Beena Goldenberg: This past quarter, we've had some opportunistic sales to be to be customers in the domestic market. That is the area that we would reduce as we continue to expand our international business. Obviously, both from a margin and a competitive standpoint, that makes sense.

Aaron Grey: Okay. Great. Thanks for that. It was a helpful color.

Greg Gouillette: Having questioned for me, a real nice uptick in the gross margin came ahead of our estimate. So you just want to get some color in terms of how much more room there is for gross margin expansion there. You talked about some of the seed-based initiatives you have and some more benefits come there. You're also going to have initial margin capture once you get the UGMP flowing through in 2025. It now sounds like so.

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: [music].

Greg Gouillette: Just an expectation in terms of where you believe gross margins can get you three guys. Thank you. Thanks for the question. Look, we're really happy with where we are at 30% of just the gross margin. We're going to do everything we can to try to work on that trajectory. I think in the short term, maintaining margins around the range of 36% is probably reasonable. As the international business gales up further next year, I think that's where we'll be looking to get some benefit from that.

Greg Gouillette: But at this point, we're really happy with where we are. And the cost savings initiative that we put in place, the increased yield per plant and our lower cost per gram are really the contributors there. But at this point, I think in the reins that we're at is where we think we'll be for the next quarter to at least.

Paolo Zunek: And your next question comes from the line of Paolo Zunek with Zunek and Associates, your line is open. Thank you. Good morning, everyone. Beena, can you comment any color or feedback that sanity may have given you in terms of what happened in Germany in the second quarter? I mean, some companies have talked about significant growth from April to July. Any color you can give in that sense would be helpful. And I asked his question in the context of the reported data coming out of Germany says that imports, you know, where about 50% between 1, Q and 2, Q. But when we look at the large LPs numbers that have been reported, we didn't see much growth there. So I wonder what that's coming from. So it's a two-bar question. Thank you.

Beena Goldenberg: Sure, Pablo. So thanks for the question. Absolutely. We have heard the same from sanity in terms of business doubling from since April 1st. The challenge that most German companies are running into right now is securing the incremental revenue and sorry incremental volume to deliver even more upside to their revenue. So, you know, here's the challenge with the product that takes, you know, five months from the time you planted till you harvested and you get it out to the market.

Beena Goldenberg: When business grows exponentially, it's hard for the volume to catch up to be able to supply the market. And that's why you're not seeing as much products shipping from the LPs in Canada. If that will go up, Germany wants the product. So, you know, if you're going to get the product, sanity group has asked for more. They certainly feel that they are being, they are restricting their upside opportunity because they don't have the volume.

Beena Goldenberg: And we're doing everything we can to get the product ready to ship over there. And it's just a time challenge on the ramp up really that you're facing right now. But it's an exciting opportunity. Sanity has told us about the growth. We're seeing it from other German customers and you know, sanity has more initiatives that they want to do. So, we're excited to get that product ready to be able to ship it over to them. Thank you.

Beena Goldenberg: If I can just follow up here. In terms of Jupyter's investments in the US, in the case of OVX, right on Hempeg Strux, you know, any, any, you know, concerns about the bands we're seeing at the state level or they haven't really materialized bands and on hem derivatives, what are the people from OVX telling you? And then the second part, would you be looking at making investments through Jupyter in US MSOs, right?

Beena Goldenberg: We've seen other companies do that through with with with Garre also is that something that you could also consider. Thank you. So, let's answer the question about OVX. We are tracking with them, you know, what's happening on the front of Hempeg drive derivative. In we are following what's happening with the Miller amendment to check what's what's going on state by state. We have confidence that there are some states who have already put in regulations that will maintain the availability of hemp derived cannabis offerings.

Beena Goldenberg: So, you know, we feel good that there will be a market there, but we're watching the regulations closely with OVX to understand how this will roll out. And it will influence our next steps in the Delta 9 space in the US. So, that's, you know, a bit of a regulation watch and then make decisions coming out of there. In terms of your second part of your questions about US opportunities, look, there were a lot of in bounds as soon as we announced the Jupyter investment pool.

Beena Goldenberg: There are a lot of companies that are strapped for capital that would, you know, would like an investment, but we're at this point where we have to make sure what we do in the US obviously is, you know, compliant with our listings. We have watched some of our peer groups have done. We have historically said that, you know, our priorities to make sure that our investments are not passive investments. You know, you could always invest in a real estate arm of one of an MSO and meet the guardrails, but that's not something that we would typically want to do.

Beena Goldenberg: We're looking for more strategic investments that have long term opportunities for us. We're looking at how to leverage some of our IP in the US market and those are things that will continue to look at US is a priority market for us. It's taking us a little bit more time just because it's a little bit more challenging, but it's a focus and hopefully we'll have something to report soon on that front.

Frederico Gomes: And your next question comes from the line of Fred Rico Gomes with ATB Capital Markets. Your line is open. Hi, morning, congrats on the quarter. Thanks for taking my questions. You mentioned the improvement that you saw, I guess, in youth per plant and a record for OGI. Does that have any relation to your seed based production or is it related to other factors? And then just in terms of the seed based production, can you remind us about what's the impact in terms of margins that would have to you?

Frederico Gomes: Thanks. Okay, certainly. So first of all, as I mentioned in my remarks, the three rooms we harvested in Q3 from seed based production generate in an average 200 gram per plant. So certainly that helps the overall number, but three rooms out of, you know, somewhere between 55 and 60 rooms aren't going to drive the numbers. So our overall yield is coming up on our regular clone based production, as well as an effective based.

Frederico Gomes: We will continue to add some more seed based production, and that will help us. Obviously, we will optimize our production as we continue to go. But what seed based does for us is a couple of things. Number one, the cycle time is shorter. So you don't go through the whole pre-vege stage. So you have perhaps cycle time of around 70 days versus 100 days in a normal clone based production. So that gives us more turns in our facility, which will give us more volume that obviously that we could sell so that increases capacity.

Frederico Gomes: But secondly, it also with as we move from elite seed, so we're now currently using elite seeds. But as I mentioned, that one of the reasons we fast tracked the filo sort of a partial payment of their final trunk was to get some auto flower seeds. And the difference with auto flower seeds, not only do you get the benefit of the cycle time, so extra capacity, but there's less, there's less plant care required for those seeds.

Frederico Gomes: So there's a significant labor savings. So as we convert over between elite seeds to auto flower seeds, there's further margin improvement to be had. Exactly the quantity. Well, we have to still run our trials to provide that number. But the plant science work that we've done already suggests that there is significant labor savings that will help on our overall cost program. Thanks for that. Then in terms of the pricing, I guess, environment in Canada, I believe your average selling price or flower was sort of flat quarter recorder.

Frederico Gomes: So just comment on that in terms of, you know, how do you see that market evolving? Do you think we're finally going to be stable here and maybe increasing prices? So just any comment there because I know that the market remains very challenging, but we're seeing some some stabilizations. Yes, absolutely Fred. So we are seeing that that pricing on flower has stabilized in a matter of fact, it's ticked up a bit.

Frederico Gomes: We certainly saw it on our B2B sales that we were able to sell for a higher price program than a year ago. So there is benefit there and we've also taken some pricing on our large format big bag of buds because there's opportunity. So we are seeing supply and demand coming into play and that's good on flower. You know, our business has remained flat in terms of average price and that one is purely a mix issue.

Frederico Gomes: You know, so if you sell less on international sales, you know, when you sell more big format versus small format, you'll get that mix impact, but like to like on on a 28 gram format. We've actually seen a pick up from pricing. So I think that the low is behind us at this point in the supply and demand picture in Canada that being said, we do see price compression in other segments.

Frederico Gomes: So for example, on the edible side, we are feeling some price compression there on edibles, which has historically been more focused on flower pricing now with a little bit of excess capacity or maybe some competitors that are, you know, just on the verge of, you know, being around sort of needing needing to generate revenue to just handle some of their cash requirements, they're taken pricing down, which is not really the greatest thing for the overall industry and for the edible segment. But over time, we hope that sort of irrational behavior will go away and that, you know, we have great quality products. We're really excited about our nano emulsion gummies that are coming out. And we hope to see pricing come back into that segment as more differentiated products get out there.

Kayla: And as a reminder, if you would like to ask a question, please press star in the number one on your telephone keypad.

Yewon Kang: Your next question comes in the line of you won king with can accord genuity. Your line is open. Good morning. Thank you for the question. Obviously, congratulations on a fantastic quarter. Nice to see sequential increases across virtually all metrics. Just my first question here is regarding Germany. Now that we're a few months past the April 1st can she enactment. Can you comment on any of the trends that you've been seeing with respect to the increasing consumer demand for medical cannabis there, along with increased supply, becoming available in the market, particularly by Canadian LP exports and its impacts on the pricing dynamics and the initial days there.

Yewon Kang: Thank you. Sure. So again, like I said, we certainly have seen an increase in through we've heard from sanity. There was an increase in demand for medical cannabis is definitely the sense that people who were buying from the illicit market are moving over farm, you know, and picking up their cannabis at pharmacies. I think, you know, again, this is something that is it was a pent up demand, but we do expect it to continue to increase as supply becomes more readily available.

Yewon Kang: So early days, the pharmacies were even having trouble getting product out to the people who are coming into purchase cannabis. And there's still this delay between supply getting out from all international markets into. So as we work through those challenges, I think we're going to see even greater volume going through the going through that market and we're very excited about it. I mean, it is good indication. And you know, sanity group is just ready to open up their telemedicine platform.

Yewon Kang: And again, that one, there's just waiting on getting the right amount of supply to make sure they kick it off and to supply their customers. So all signals out of Germany are there is upside happening and there are a lot of LPs ready to supply that market work cited because obviously our investment in sanity guarantees us a certain amount of flower being shipped in. But there's other customers in Germany that are looking for volume as well.

Yewon Kang: So, you know, it's an exciting market like Germany is going to be the next big phase wave of growth. And it's a very good opportunity for us. Thanks for that. And if I could just ask my second question, follow-up. Regarding the yields and potency KPIs that you guys maintain in terms of operational improvement, I think it was mentioned as part of the preparatory remarks that these operational KPIs will fluctuate from time to time and that it will have an impact on large performance over time.

Yewon Kang: I was just wondering what kind of activities would make it more stable throughout and your expectation on the large performance going forward should the yield and potency results become more stable throughout. So, just to be clear, the yield and potency is very predictable for a specific cultivar. But again, demand on the different cultivars changes and that will be why you have fluctuations. So, if more people want a cultivar that perhaps has a slightly lower yield when you grow it, versus another cultivar that has higher yields, there's a mix between not all plants grow exactly the same.

Yewon Kang: Obviously, we continue to improve the yield on all plants as we work on them, but just physiologically some plants will grow bigger or higher yields and so the fluctuations are going to be there as long as there's a cultivar mix fluctuation. Over time, it would be simple if everybody bought just one cultivar and you just grew your whole facility at one cultivar, but that's not reality. I know our operations people would have loved that, but because there's mix and consumer demand for different types of terpene profiles, aromas, different, you know, there will be that mix impact and that's what's causing the fluctuation.

Beena Goldenberg: I think over time, we will continue to drive higher numbers, but we will still see ups and downs depending on the rooms that are harvested in that quarter and what we've grown in those rooms. At this time, I would like to thank everyone so much for joining us today. This does conclude today's conference call and you may now disconnect.

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Q3 2024 Organigram Holdings Inc Earnings Call

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