What happened
Organigram (OGI +0.00%) stock is seeing big sell-offs in Wednesday's trading. The Canada-based cannabis company's share price was down 13% as of 1:45 p.m. ET, according to data from S&P Global Market Intelligence.
Organigram published results for the second fiscal quarter after the market closed yesterday, and sales in the period fell significantly short of the market's expectations. While revenue in the period increased roughly 24% year over year to reach 39.5 million Canadian dollars, the average analyst estimate had called for sales of CA$43.6 million, and the shortfall has contributed to a big pullback for the stock. Meanwhile, the business posted a loss of CA$7.5 million when the average analyst estimate had targeted a loss of CA$5.8 million.
So what
While the company did miss sales estimates in Q2, it wasn't all bad news. The business managed to increase its non-GAAP (adjusted) gross margin to 34% -- up from 26% in the prior-year quarter. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) also increased to CA$5.6 million from CA$1.6 million in last year's quarter.
But despite margin and EBITDA gains powered by cost-cutting initiatives, the business continued to see pricing compression across its products. In addition to the missed analyst sales and earnings estimates, the market appears to be reacting negatively to Organigram's forward guidance.
TSX: OGI
Key Data Points
Now what
Management didn't break out specific sales targets, but it did say it anticipates revenue in this year's third quarter will increase on a sequential basis and be up from its results in the third quarter of 2022. While projections for ongoing sales growth would seem to be good news, Organigram's revenue guidance didn't provide much visibility beyond that point and likely failed to put the market at ease following the performance miss in Q2. On the other hand, the company does anticipate shifting into being free-cash-flow positive by the end of the year.
