Rubicon Organics Reports Second Quarter 2021 Financial Results and Operational Milestones

Rhea-AI Summary

Rubicon Organics Inc. (TSXV: ROMJ) (OTCQX: ROMJF) reported its Q2 2021 results showing significant progress in revenue and product listings. The company achieved $4.6 million in net revenue, a $3.6 million increase year-over-year and a sequential rise of $0.5 million. Key activities include repaying $9 million in loans and issuing US$8 million in debentures. Despite a net loss of $5.1 million, a company-wide restructuring is expected to yield annualized savings of $2.6 million. New product launches are set for Q3, reflecting strong consumer demand in the premium cannabis segment.

Positive

• Net revenue increased by $3.6 million year-over-year to $4.6 million.
• Secured new product listings with major provincial distributors.
• Restructuring achieved annualized savings of $2.6 million.
• Expansion in SKU count by 132% expected to drive revenue growth.

Negative

• Net loss of $5.1 million, up from $4.0 million in Q1 2021.
• Adjusted EBITDA loss of $3.4 million unchanged sequentially despite revenue growth.

VANCOUVER, British Columbia, Aug. 20, 2021 (GLOBE NEWSWIRE) -- Rubicon Organics Inc. (TSXV: ROMJ) (OTCQX: ROMJF) (“Rubicon Organics” or the “Company”), a licensed producer focused on cultivating and selling organic certified and premium cannabis, today reported its financial results for the second quarter ended June 30, 2021 (“Q2 2021”). All amounts are expressed in Canadian dollars.

“Our share of the premium cannabis segment in Canada remains strong and we remain the go to organic brand among consumers. With 44 SKUs across five brands, we can focus on meeting the rising demand from provincial distributors which is beginning to reflect both a return to normalized buying patterns and our new SKUs in high growth product categories. It is very important for us to emphasize Rubicon Organics’ success in getting its new products listed with major provincial distributors in the face of significant curtailments by these buyers. As 1964 Supply Co™ and Homestead Cannabis Supply™ in particular hit the market across new provinces in Q3 2021, we will be seeing the results of our extension in the premium and mainstream flower segments which represent large volume and incremental revenue pools for the Company,” said Jesse McConnell, Chief Executive Officer.

Q2 2021 Highlights:

• Earned $4.6 million of net revenue, an increase of $3.6 million versus the prior year and a $0.5 million sequential increase;
• Repaid $9.0 million in second mortgage loans;
• Issued an US$8 million principal amount secured debenture in connection with a debt financing transaction.
• Published the Company’s inaugural Environmental, Social and Governance Report;
• Completed company-wide restructuring and has achieved annualize savings of $2.6 million;
• Announced a Cannabis Purchase and Sale Agreement with the Yukon Liquor Corporation for the distribution of its portfolio of cannabis products to consumers in Yukon territory;
• Received its first direct purchase order from Manitoba Liquor & Lotteries;
• Received its first purchase order from Cannabis NB, New Brunswick’s provincial cannabis distributor and retailer; and
• Received initial purchase orders for its Simply Bare™ Organic live rosin solventless concentrate and PAX® pod products.
  

Highlights Subsequent to Q2 2021:

• Launch of 1964 Supply Co™ and Homestead Cannabis Supply™ across with new provincial listings obtained in BC, Alberta, Manitoba, Ontario and Saskatchewan;
• Granted a Research & Development License by Health Canada;
• Announced the creation of the Cannabis Cultivators of B.C. with leading cannabis producers Pure Sunfarms and Tantalus Labs; and
• Reduced foreign exchange (“FX”) risk associated with US$8 million secured debenture by placing FX swaps to fix the deliverable Canadian dollars on future principal and interest payments.

Q2 2021 Select Financial and Operational Results:

	Three months ended				Six months ended
	June 30, 2021 $		June 30, 2020 $		June 30, 2021 $		June 30, 2020 $
Net revenue	4,595,591		992,003		8,706,154		1,446,046
Other income	31,450		307,289		31,450		438,462
Loss from continuing operations	(5,096,459	)	(1,568,361	)	(9,083,775	)	(5,264,603	)
Loss from discontinuing operations	-		(246,691	)	-		(358,617	)
Net loss for the period	(5,096,459	)	(1,815,052	)	(9,083,775	)	(5,623,220	)
Adjusted EBITDA1	(3,416,332	)	(2,510,839	)	(6,791,699	)	(5,547,096	)
Cash2	4,009,930		12,577,730		4,009,930		12,577,730
Working capital	25,994,223		5,467,987		25,994,223		5,467,987

1. Adjusted EBITDA is a non-GAAP measure that is calculated as earnings (losses) from operations before interest, tax, depreciation and amortization, share-based compensation expense, and fair value changes. See Selected Financial Information in the Q2 2021 Management’s Discussion & Analysis for details on the Adjusted EBITDA calculation.
2. As at June 30, 2021, $9,907,200 (US$8 million) was receivable in relation to the issuance of the Debenture. The Company received the full amount in July 2021.

During the three months ended June 30, 2021, Rubicon Organics earned $4.6 million of net revenue, an increase of $3.6 million from the three months ended June 30, 2020, which is attributable to an increased product offering that now includes 44 SKUs across five brands, and expanded distribution across Canadian provinces. The Company reported a $0.5 million sequential increase in net revenue, from $4.1 million in three months ended March 31, 2021. The increase was driven by sales growth in the last two weeks of the second quarter 2021 as stores began to partially re-open in Ontario.

The Company reported an Adjusted EBITDA loss of $3.4 million for the three months ended June 30, 2021, as compared to a loss of $3.4 million for the three months ended March 31, 2021 and $2.5 million during the three months ended June 30, 2020. The variance versus the three months ended June 30, 2020 is due to the increase in net revenue offset by investments into consulting, salaries and wages, in addition to other operating expenses, as the Company invested in the development and distribution of new brands and products. Adjusted EBITDA was flat for the three months ended June 30, 2021 as compared to the three months ended March 31, 2021 and reflects the increased net revenue described above, offset by an investment in sales and marketing for the launch of new brands and moderated operating expense growth resulting from the restructuring implemented in the second quarter of 2021.

The Company reported a net loss of $5.1 million in the three months ended June 30, 2021, as compared to a net loss of $4.0 million for the three months ended March 31, 2021, and $1.8 million for the three months ended June 30, 2020. The variance to net loss as compared to the three months ended March 31, 2021 and June 30, 2020 reflects the factors impacting adjusted EBITDA described above as well as other non-cash adjustments.

Outlook

During the second quarter of 2021, the Company maintained significant market share in the premium and organic product categories with its Simply Bare™ Organic brand¹. The brand continues to be the #1 organic dried flower product of choice in all provinces¹. The Company also maintained a top six position in premium in each of Ontario, Alberta and Quebec and remained the #1 premium brand in British Columbia¹.

Consistent with industry trends and guidance, the shutting of stores in the first and second quarter of 2021 had a significant impact on sales to provincial distributors relative to forecasts, particularly in Ontario and Alberta. This trend began to reverse in the last two weeks of the second quarter as stores in Ontario partially re-opened. Exiting the second quarter and for the third quarter to date, we have seen accelerating retail sales velocity, indicating a strong consumer demand in the premium segment for our Simply Bare™ Organic brand. Rubicon believes that the combination of its 132% increase in SKU count, new brands in key Canadian markets and an Ontario restocking event in September of 2021 will increase our revenue trajectory throughout the second half of 2021.

COVID-19 related store closures impacted Rubicon Organics’ ability to achieve its previously disclosed Adjusted EBITDA and operating cash flow targets during the six months ended June 30, 2021. As a proactive measure, Rubicon Organics undertook a company-wide restructuring during the period and has achieved annualized savings of $2.6 million. The Company’s current expectation for the achievement of key milestones remains in the second half of 2021, subject to the timing of shipments of new SKUs to large provincial buyers. With our recent expansion in available SKUs and increased sales velocity, we remain confident in the appeal of our brands and our strategy to win in the premium market.

Conference Call

The Company will be hosting a conference call to discuss the second quarter 2021 results on August 20, 2021. Conference call details are as follows:

Time:	7:00AM PDT/10:00AM EDT
Conference ID:	9335557
Local dial-in:	(833) 900-2238
International dial-in:	(647) 689-5136
Webcast:	https://onlinexperiences.com/Launch/QReg/ShowUUID=B8C2E4D1-65CE-4FC0-AB61-983F106419EC

ABOUT RUBICON ORGANICS INC.

Rubicon Organics Inc. is becoming the global brand leader in organic cannabis products. Through its wholly owned subsidiary Rubicon Holdings Corp, a licensed producer, the Company cultivates, processes and sells organic certified, sustainably produced, super-premium cannabis products from its state-of-the-art hybrid greenhouse located in Delta, BC, Canada. Rubicon Organics is focused on achieving industry leading profitability through a focus on innovation and the development of brands and cannabis 2.0 products, including its flagship super-premium brand Simply Bare™ Organic, its super-premium concentrate brand LAB THEORY™, its premium flower and hash brand 1964 Supply Co™ and mainstream brand Homestead Cannabis Supply™.

CONTACT INFORMATION

Margaret Brodie
Chief Financial Officer
Phone: +1 (437) 929-1964
Email: ir@rubiconorganics.com

Cautionary Statement Regarding Forward Looking Information

This press release contains forward-looking information within the meaning of applicable securities laws. All statements that are not historical facts, including without limitation, statements regarding future estimates, plans, programs, forecasts, projections, objectives, assumptions, expectations or beliefs of future performance, statements regarding Rubicon Organics' proposed brand launches and path to market are "forward-looking statements". Forward-looking information can be identified by the use of words such as “will” or variations of such word or statements that certain actions, events or results "will" be taken, occur or be achieved. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, events or developments to be materially different from any future results, events or developments expressed or implied by such forward looking statements. The forward-looking information in this press release is based upon certain assumptions that management considers reasonable in the circumstances, including the impact on revenue of new products and brands entering the market, and the timing of achieve adjusted EBITDA profitability and cash flow positive. Risks and uncertainties associated with the forward looking information in this press release include, among others, dependence on obtaining and maintaining regulatory approvals, including acquiring and renewing federal, provincial, local or other licenses and any inability to obtain all necessary governmental approvals licenses and permits for construction at its facilities in a timely manner; regulatory or political change such as changes in applicable laws and regulations, including bureaucratic delays or inefficiencies or any other reasons; any other factors or developments which may hinder market growth; Rubicon Organics' limited operating history and lack of historical profits; reliance on management; and the effect of capital market conditions and other factors on capital availability; competition, including from more established or better financed competitors; and the need to secure and maintain corporate alliances and partnerships, including with customers and suppliers; and the effects of the COVID-19 pandemic. These factors should be considered carefully and readers are cautioned not to place undue reliance on such forward-looking statements. Although Rubicon Organics has attempted to identify important risk factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other risk factors that cause actions, events or results to differ from those anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in forward-looking statements. Rubicon Organics assumes no obligation to update any forward-looking statement, even if new information becomes available as a result of future events, new information or for any other reason except as required by law.

Non-GAAP Financial Measures

This press release contains certain financial performance measures that are not recognized or defined under IRFS (“Non-GAAP Measures”) including, but not limited to, “Adjusted EBITDA”. As a result, this data may not be comparable to data presented by other cannabis companies. For an explanation and reconciliation of these measures to related comparable financial information presented in the financial statements prepared in accordance with IFRS for the three and six months ended June 30, 2021, please refer to the “Selected Financial Information” section in the MD&A for the three and six months ended June 30, 2021. The Company believes that these Non-GAAP Measures are useful indicators of operating performance and are specifically used by management to assess the financial and operational performance of the Company.

¹ Based on information from industry data sources including the Ontario Cannabis Stores and Buddi data during the period from January 1, 2021, to June 30, 2021, where premium is defined as any product with a retail price per gram above the average retail price plus 20% in the market of interest, during the period of observation.

FAQ

What were Rubicon Organics' Q2 2021 financial results for ROMJF?

In Q2 2021, Rubicon Organics earned $4.6 million in net revenue, a $3.6 million increase from the previous year.

How did Rubicon Organics' revenue perform compared to Q1 2021?

Rubicon Organics reported a $0.5 million sequential revenue increase from $4.1 million in Q1 2021.

What is Rubicon Organics' net loss for Q2 2021?

Rubicon Organics reported a net loss of $5.1 million for Q2 2021.

What restructuring efforts has Rubicon Organics implemented?

The company completed a restructuring that has achieved annualized savings of $2.6 million.

What is the outlook for Rubicon Organics following Q2 2021?

Rubicon expects increasing revenues in the second half of 2021 due to new product launches and consumer demand.