What happened
Shares of OrganiGram Holdings (OGI +0.70%) were up 34.3% as of 10:20 a.m. EST on Wednesday. The huge jump came after the Canadian cannabis producer reported its fiscal 2020 first-quarter results following the market close on Tuesday.
OrganiGram announced net revenue in Q1 of 25.2 million in Canadian dollars, a 55% increase from the prior quarter. The company also posted positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of CA$4.9 million after having slipped into negative territory in the previous quarter.
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So what
Investors had been hoping that OrganiGram would rebound solidly from its disappointing fiscal 2019 Q4 results three months ago. And that's exactly what the company did.
Although OrganiGram still booked around CA$1.1 million related to a provision for product returns and price adjustments, that was a far cry from the CA$3.7 million for product returns in the previous quarter. It made more revenue in the Canadian adult-use recreational and medical cannabis markets than it did in total revenue in Q4. OrganiGram also sold around CA$9.5 million in the wholesale and international markets.
While many of its peers are struggling to generate positive EBITDA, OrganiGram returned to its winning ways in Q1. The company's improved plant yield and lower inventory write-offs helped boost its adjusted EBITDA.
Also, OrganiGram stated that it won't need to raise additional capital to fund operations. That's welcome news for investors who look around the Canadian cannabis industry and see plenty of companies that could soon have to sell more shares to raise cash.
Now what
After a disastrous 2019 for many Canadian marijuana stocks, 2020 should be a much better year. OrganiGram's solid Q1 performance shows that the company ranks among the strongest plays in the industry. With the prospects of more retail stores opening in Ontario and Quebec and the launch of new products in the Cannabis 2.0 cannabis derivatives market, OrganiGram could have even better quarterly updates on the way.
