Organigram blames Ontario’s slow retail build-out in lower revenue guidance

Citing Ontario’s slow cannabis retail build-out, Organigram Holdings issued revenue guidance for expected fourth-quarter net revenue of 16.3 million Canadian dollars ($12.3 million), a substantial decline from the previous quarter’s CA$24.8 million.

Analysts had expected the New Brunswick producer to report quarterly net revenue of about CA$27 million.

That prompted a downgrade from Bank of Montreal analyst Tamy Chen to Market Perform.

However, the cannabis company on Monday said it expects to report year-over-year net revenue growth of 547% to CA$80.4 million as well as positive adjusted EBITDA for the year.

Organigram is scheduled to report its fourth-quarter and full-year earnings Nov. 25.

“A sufficient retail network and slower than expected store openings in Ontario continued to impact sales in Q4 2019 and were further exacerbated by increased industry supply,” Organigram said in a news release.

The company also noted it is “encouraged” by Ontario’s plan to allow “click-and-collect” sales, though the province failed to offer any new details on its retail expansion.

Ontario is stuck on 24 cannabis store authorizations as the second wave of lottery winners prepares to open their doors. Alberta sits at 323 store approvals.

“While Q4 2019 did not meet our overall expectations, we have not only emerged as one of the national leaders in the industry with significant growth expected in net revenue and strong market share, we expect to report positive adjusted EBITDA for the year,” Organigram CEO Greg Engel said.

The company said it has “sufficient liquidity and capital” to fund operations and complete its expanded Moncton facilities.

For the period ending Aug. 31, the company expects to report CA$47.9 million in cash.

Last week, Organigram filed a base shelf prospectus, which would clear the way for the company to issue shares as well as preferred shares, debt securities, subscription receipts, warrants or units for an amount up to CA$175 million for a 25-month period.

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