Organigram Global NASDAQ: OGI reported a weaker second quarter for fiscal 2026, with management attributing the decline to operational issues in key product categories, softer Canadian cannabis market growth and continued challenges with international flower specifications.
Chief Executive Officer James Yamanaka, who joined the company about four months ago, said the quarter was “challenging” but emphasized that Organigram has identified the issues affecting performance and is taking corrective steps. He said the company remains focused on execution, improving underperforming areas and integrating the recently acquired Sanity Group beginning in the third quarter.
Net revenue for the quarter was CAD 59.8 million, down from CAD 65.6 million in the prior-year period, a decline of about 9%. Chief Financial Officer Greg Guyatt said the decrease was primarily driven by market share erosion in vapes and infused pre-rolls, partially offset by strength in other parts of the portfolio.
Operational Issues Weighed on Vapes and Infused Pre-Rolls
Yamanaka said Organigram’s infused pre-roll business was affected by quality inconsistencies after the company internalized pre-roll production at its Aylmer facility. He said the transition, which included the use of new production equipment, introduced higher variability in fill rates and lower product consistency as processes were calibrated.
The result was lower repurchase rates and a 1.6 percentage point year-over-year share loss in overall pre-rolls, Yamanaka said. “That is not acceptable to us,” he told analysts. The company has tightened quality control processes and made production changes to improve consistency. Yamanaka said pre-rolls now coming off the line are “more consistently filled and coated,” and Organigram expects to add infused pre-roll coating automation in the near term.
In vapes, Yamanaka said parts of the portfolio fell below competitive benchmarks on pricing and potency. He said the company over-indexed toward lower-potency 1.2-gram vapes as consumer demand shifted toward higher-potency 1-gram formats, contributing to a 6.1 percentage point year-over-year share decline across 510 cartridges and all-in-one products.
To respond, Organigram is launching higher-potency products and refreshing both product and hardware, including BOXHOT liquid diamond all-in-ones in the coming weeks.
During the question-and-answer session, Yamanaka said the company had to internalize infused pre-roll production faster than desired because of the CCAA status of its previous supplier. He estimated the issues were roughly “70/30” internal versus competitive, with infused pre-roll weakness primarily tied to the internal production transition.
Flower, Edibles and Beverages Showed Strength
Despite the problems in vapes and infused pre-rolls, Yamanaka said Organigram remained the No. 1 licensed producer in Canada by market share in the quarter. The company maintained leadership positions in Ontario, British Columbia and Alberta, and continued gaining momentum in Quebec, where it ranked third with 11.3% market share at the end of March, up 2.6 percentage points year over year.
Yamanaka said the company gained 2.2 share points year over year in flower, driven by Big Bag o’ Buds and cultivars including Purple Punch-Out, Ultra Sour and Root Beer. Edibles gained 1.8 share points, while beverages and concentrates rose 0.7 and 3.1 share points, respectively.
The company’s SHRED, BOXHOT and Big Bag o’ Buds brands all ranked among the top eight brands nationally, Yamanaka said. He added that Big Bag o’ Buds was the fastest-growing flower brand in the country, BOXHOT was the No. 1 concentrates brand and No. 2 vape brand, and SHRED alone would rank as a top 10 licensed producer by market share.
Yamanaka said Organigram’s milled flower business saw more competition and modest year-over-year share declines, but returned to sequential growth and held a 38.9% share in the category.
International Growth Expected to Improve With Sanity Acquisition
International revenue was CAD 6.1 million in the quarter, flat from a year earlier but up from CAD 5 million in the first quarter. Guyatt said first-half international shipments totaled CAD 11.1 million, up from CAD 9.4 million in the first half of fiscal 2025.
Management said international performance was constrained by lower-than-typical volumes of flower meeting specifications. Yamanaka said on-spec pass rates improved from the first quarter after changes to post-harvest processes, but the company is still working to bring on-spec volumes to international levels.
In response to an analyst question, Guyatt said Organigram likely missed about CAD 4 million to CAD 5 million of international sales because of off-spec product.
The company completed its acquisition of Sanity Group in April, creating a combined business with positions in Canada and Germany. Yamanaka said Sanity is expected to generate an average of approximately EUR 25 million in quarterly revenue over the next year and will serve as a platform for expansion across Europe, including Switzerland, the U.K., Poland and the Czech Republic.
Organigram said Sanity will operate fairly independently during the first year, while receiving strategic support and supply from Organigram where appropriate. Yamanaka said Germany is the primary focus because it represents the largest growth opportunity in Europe, while Switzerland is viewed as a smaller but potentially high-margin market as it moves through a recreational pilot program.
Outside Europe, Organigram continues to supply flower to partners in Australia and recently launched vape and edible products under its BOXHOT and Edison brands. Yamanaka said those products are expected to be available to more than 4,000 pharmacies nationwide as distribution rolls out.
Margins Declined, but Cash Flow Improved
Adjusted gross margin was CAD 18.4 million, down from CAD 21.9 million a year earlier. The adjusted gross margin rate was 31%, down 200 basis points year over year. Guyatt said the decline reflected a higher mix of value products and higher-than-typical returns on vapes, infused pre-rolls and international flower.
Adjusted EBITDA was CAD 0.9 million, compared with CAD 4.9 million in the prior-year period. Net loss was CAD 0.9 million, compared with net income of CAD 42.5 million a year earlier. Guyatt said the year-over-year decrease in net income was mainly attributable to lower fair value gains on derivative liabilities and preferred shares, lower revenue and gross margins, and a $5.8 million impairment on the company’s U.S. hemp-derived products business because of changes in the U.S. regulatory environment.
Cash used by operating activities was CAD 6.8 million, compared with CAD 16.6 million in the prior-year period. Free cash flow was an outflow of CAD 7 million, compared with an outflow of CAD 23.1 million a year earlier, due mainly to lower working capital investment and lower capital expenditures.
As of the end of the quarter, Organigram had cash and equivalents of CAD 54.8 million, including CAD 4.3 million of unrestricted cash. After quarter-end, the company used most of its cash to fund the Sanity acquisition and secured CAD 60 million in financing from ATB Financial. Guyatt said the company had approximately CAD 40 million of available liquidity on its credit facilities after the transaction.
Guidance Raised Following Sanity Deal
Following the Sanity acquisition, Organigram updated its fiscal 2026 guidance. The company now expects net revenue to exceed CAD 350 million, with adjusted EBITDA and adjusted gross margin exceeding fiscal 2025 performance. It also expects free cash flow to be approximately break even and capital expenditures to be less than CAD 10 million.
Guyatt said the guidance assumes a strong innovation pipeline, increasing international sales, high cannabis quality, higher potency and receipt of EU GMP certification. Yamanaka said Organigram provided additional documentation to regulators in April to support closure of major findings from its EU GMP certification audit, and expects an update in the coming months.
On the U.S. market, Yamanaka said Organigram is monitoring cannabis rescheduling developments but is not currently a plant-touching operator in the country. He said the company’s near-term focus is fixing operational issues in Canada and supporting growth at Sanity, while evaluating U.S. opportunities as regulations evolve.
“It was a challenging quarter,” Yamanaka said in closing, adding that the company believes the issues were primarily operational and that management has “great confidence” in its ability to improve performance in the third and fourth quarters.
About Organigram Global NASDAQ: OGI
Organigram Global Inc NASDAQ: OGI is a licensed producer of cannabis and hemp products headquartered in Moncton, New Brunswick, Canada. Founded in 2013, the company operates a state-of-the-art cultivation and manufacturing facility spanning more than one million square feet. Organigram holds licenses from Health Canada to produce and sell both medical and adult-use cannabis, and it pursues Good Manufacturing Practice (GMP) certification to support international exports.
The company's product portfolio encompasses dried flower, pre-rolled joints, cannabis oils, capsules and soft gels, as well as vapourizer cartridges and extracts.
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