Rubicon Organics Reports Second Quarter 2023 Financial Results
- Record net revenue of $11.3 million (28% increase) and $20.1 million (44% increase) for Q2 2023.
- Achieved Adjusted EBITDA of $1.8 million and $1.9 million, a $1.5 million and $3.2 million increase compared to prior periods.
- Operating cashflow of $2.4 million and $2.6 million.
- Cash balance increased by 22% to $9.3 million.
- Simply BareTM Organic and 1964 Supply CoTM identified as top 3 brands recommended by Canadian budtenders.
- WildflowerTM strengthens dominance in Canadian topical market with 22.5% market share, a 38% increase.
- Launch of 1964 Supply CoTM live rosin gummies.
- National market shares of flower and pre-rolls at 2.0% and 2.1%.
- None.
- Record net revenue of $11.3 million (28% increase) and
$20.1 million (44% increase) for the three and six months ended June 30, 2023
- Achieved Adjusted EBITDA1 of $1.8 million and
$1.9 million for the three and six months ended June 30, 2023, an increase of$1.5 million and$3.2 million compared to the prior periods
- Achieved operating cashflow of $2.4 million and
$2.6 million for the three and six months ended June 30, 2023
22% increase in cash balance from March 31, 2023 to$9.3 million - Simply BareTM Organic and 1964 Supply CoTM identified as 2 of top 3 brands recommended by Canadian budtenders2
- WildflowerTM strengthens dominance in Canadian topical market with market share of
22.5% 3, increase of38% compared to the prior period - Launch of 1964 Supply CoTM live rosin gummies in Ontario, BC and Alberta
2.0% 4 and2.1% 5 national market share of flower and pre-rolls for the three and six months ended June 30, 20235.4% 6 and5.3% 7 national market share of premium flower and pre-rolls for the three and six months ended June 30, 2023
VANCOUVER, British Columbia, Aug. 16, 2023 (GLOBE NEWSWIRE) -- Rubicon Organics Inc. (TSXV: ROMJ) (OTCQX: ROMJF) (“Rubicon Organics”, “Rubicon”, or the “Company”), a licensed producer focused on cultivating and selling organic certified, premium cannabis, today reported its financial results for the second quarter ended June 30, 2023 (“Q2 2023”). All amounts are expressed in Canadian dollars.
“I'm pleased to share that Rubicon Organics has achieved another record quarter of net revenue, a
“I am proud of the independent validation of our brands, Simply BareTM Organic and 1964 Supply CoTM, received from a Brightfield Group survey2 of Canadian budtenders which ranks our two flagship flower brands among budtenders’ top three most recommended brands. This reflects our commitment to operational excellence and customer satisfaction,” said Melanie Ramsey, Chief Commercial Officer.
Q2 2023 Financial Highlights:
- Record net revenue of
$11.3 million (28% increase) and$20.1 million (44% increase) for the three and six months ended June 30, 2023. Compared to the three months ended March 31, 2023, net revenues saw growth of28% quarter over quarter.
- Gross profit before fair value adjustments up
$1.8 million (62% increase) and$4.0 million (113% increase) for the three and six months ended June 30, 2023.
- Achieved fifth consecutive quarter of Adjusted EBITDA1 profitability with
$1.8 million and$1.9 million for the three and six months ended June 30, 2023, an increase of$1.5 million and$3.2 million compared to the comparative periods in 2022.
22% growth in cash balance from$7.6 million March 31, 2023 to$9.3 million .
- Achieved fourth consecutive quarter of operating cashflow positive of
$2.4 million and$2.6 million for the three and six months ended June 30, 2023, an increase of$3.0 million and$4.8 million compared to the prior periods in 2022.
- The Company had working capital of
$19.7 million as at June 30, 2023 of which$9.3 million of cash on hand and$4.7 million in accounts receivable.
Q2 2023 Results of Operations:
| Three months ended | Six months ended | |||||||
| June 30, 2023 $ | June 30, 2022 $ | June 30, 2023 $ | June 30, 2022 $ | |||||
| Net revenue | 11,281,793 | 8,834,795 | 20,081,733 | 13,983,009 | ||||
| Production costs | 2,592,334 | 2,701,354 | 5,270,938 | 5,074,174 | ||||
| Inventory expensed to cost of sales | 3,916,114 | 2,977,216 | 6,851,008 | 4,897,546 | ||||
| Inventory written off or provided for | 173,179 | 312,547 | 330,603 | 423,287 | ||||
| Gross profit before fair value adjustments | 4,600,166 | 2,843,678 | 7,629,184 | 3,588,002 | ||||
| Fair value adjustments to cannabis plants, inventory sold, and other charges | (606,406 | ) | 340,323 | (466,943 | ) | 2,086,421 | ||
| Gross profit | 3,993,760 | 3,184,001 | 7,162,241 | 5,674,423 | ||||
| Loss from operations | (160,396 | ) | (943,962 | ) | (464,893 | ) | (2,073,171 | ) |
| Adjusted EBITDA1 | 1,767,921 | 261,206 | 1,936,586 | (1,255,228 | ) | |||
As At: | June 30, 2023 $ | June 30, 2022 $ |
| Cash and cash equivalents | 9,273,452 | 6,819,044 |
| Working capital | 19,744,919 | 19,434,073 |
Q2 2023 and Subsequent Sales & Operational Highlights:
- Through the first half of 2023, Rubicon Organics has been establishing high-quality partnerships for contract grow and co-manufacturing in order to complement our own premium production and to satisfy the increasing demand for our brands.
- The Company launched its first entry into the edibles category, through a co-manufacturing relationship, with 1964 Supply Co™ live rosin edibles in Ontario, BC and Alberta. These edibles were the first single-strain live rosin edibles in Canada and are vegan and gluten-free. Following up on the success of the initial two flavour launch in the second quarter, 1964 Supply Co™ has rolled out three additional flavours.
- We expect our high-quality partners to complement our own premium production in order to grow our brands in the Canadian marketplace and expect to see ramping up of supply from these partnerships beginning in Q4 2023.
- With the continuing growth of the infused pre-roll category, 1964 Supply Co™ launched the 1 x 1 gram Comatose rosin roll that features a mix of flavourful Comatose flower and potent Comatose hash rosin. Comatose was the 1964 Supply CoTM “hero strain” and was voted indica of the year by Kind Magazine in December 2022.
- Wildflower™ is leveraging its leading market share by launching new products to address consumer needs in the wellness space. The new products launched consist of Wildflower™ Extra Strength Relief Stick and Wildflower™ 1:1 CBD:THC Relief Stick.
- In the second quarter of 2023, Brightfield released its own survey of Canadian Budtenders and in those results, Simply BareTM Organic and 1964 Supply CoTM were identified as two of the top three most recommended brands by Canadian budtenders2.
- The Company has
2.0% 4 and2.1% 5 national market share of flower and pre-rolls for the three and six months ended June 30, 2023. - The Company has
5.4% 6 and5.3% 7 national market share of premium flower and pre-rolls for the three and six months ended June 30, 2023. - The Company’s topical brand, Wildflower™, continues to be the number one8 topical brand in Canada with a market share of
22.5% 8 and19.9% 9 for the three and six months ended June 30, 2023, increasing from16.3% 108(28% increase) and14.7% 11 (35% increase) from the comparative periods in the prior year.
Company Outlook
Rubicon Organics has set out four key priorities for 2023:
1. Optimize Yield and Cultivation at our Delta Facility
Our priority is delivering super-premium quality cannabis flower products in the Canadian market. Producing at scale in a greenhouse environment is subject to seasonal impacts and commercializing new strains to meet the demand in market and our brand standards can present challenges. We remain focused on ongoing refinement and optimization in our cultivation systems. In 2022 the Company achieved several crops exceeding our nameplate 11,000 kg capacity, and we expect 2023 to be a year of steady and consistent quality production. Additional tables will be installed in our facility to improve air circulation, and increase capacity up to
2. Maximize Canadian Premium Opportunity
Rubicon is focused on maximizing the gross margin we earn from each gram produced from our Delta Facility. Delivering both the right genetics and product formats to the customer at the right price to value ratio and maintaining good relationships with the provincial distributors and retail stores are critical to our success. In 2023 we are working to grow our Simply BareTM Organic brand and to premiumize opportunistically elements of our 1964 Supply CoTM. These efforts would contribute positively to our gross profit.
As we have forecast demand beyond our available supply from our Delta Facility we have begun projects that we expect to incrementally grow our net revenue and gross profit. We intend to launch products that do not require our Delta Facility’s capacity with high-quality partners that complement our own premium production that we anticipate will add incremental gross profit to our results in a cost effective and efficient manner. We are actively looking to build our revenue with the launch of new products under our existing brands which can be contracted to other licensed producers thus not utilizing our existing capacity, but will be to Rubicon’s quality standards. We expect to see the ramping up of supply from these partnerships to leverage the strong demand of our brands beginning in Q4 2023. We intend to deliver this incremental gross profit without significant incremental overhead cost to our business, thus driving additional overall profitability.
3. Drive Efficiency in Processes and Systems
As steady state has been established at our Delta Facility, we now are seeking to create efficiency in our systems away from manual processes or those where there is reliance on key individuals to increase the resilience and repeatability of our systems and reduce cost.
As part of this process, Rubicon is evaluating new information systems and expects to begin implementing new systems beginning in the second half of 2023. This project will increase costs in the short-term, but we believe will improve efficiency of the existing business and ready Rubicon for further growth.
4. Build a Proud, Engaged Team Delivering Outstanding Results
With turmoil in the cannabis sector in the last number of years, coupled with the stresses relating to work in the pandemic and tightness of the labour market, we have seen considerable turnover in the business. We believe that in order to deliver a premium product to market, our team members being engaged and proud is important to put our best foot forward with our consumers and customers. Furthermore, the cost and resources used when there is labour turnover can be considerable. As part of achieving an engaged and proud team, we have set clear goals and objectives linked to reward to recognize the hard work and accomplishments of team members. We also have begun reviewing our Company values listening to our people as part of the process and Rubicon’s evolution now that we are in a steadier state.
Outlook
Rubicon believes that our cannabis quality, brand positionings and product offerings will drive continued growth in net revenue, resulting in an increase in gross profit and Adjusted EBITDA1 for the full year 2023. With a stable cost base, this anticipated growth in net revenue and gross profit would improve our operating leverage. Additionally, we expect to achieve positive free cashflow for the full year.
In 2023 the Canadian cannabis landscape has seen two notable trends. Firstly, price compression has affected all flower categories, including premium. We believe that the price compression is largely driven by the financial strain faced by many competitors and there will be a rebalancing over the coming year as companies leave the sector and there is more of a supply/demand equilibrium established. Secondly, products claiming extremely high THC have surged drawing consumer interest, but there have been widespread doubts about the accuracy of these high THC results. We anticipate that regulators will look more closely at this area over the coming year. As consumers are more educated to the whole flower experience, with Rubicon’s quality flower and consistency of cultivation, we believe we are well positioned to win in the premium category over the coming years.
As a business we are now looking to increase the volume of product that we have available for sale to fill the demand we have for our quality products. The business is evaluating several options to increase our capacity. We believe that despite any market volatility, price compression, inflationary pressures, regulatory change, our product quality and brand portfolio has positioned Rubicon to win in the premium cannabis market.
Conference Call
The Company will be hosting a conference call to discuss Q2 2023 results on Thursday, August 17, 2023. Conference call details are as follows:
| Time: | 7:00 AM PT / 10:00 AM ET |
| Conference ID: | 05807716 |
| Local dial-in: | +1 (416) 764 8646 |
| Toll Free N. America: | +1 (888) 396 8049 |
| Webcast: | https://viavid.webcasts.com/starthere.jsp?ei=1627973&tp_key=0851d57783 |
ABOUT RUBICON ORGANICS INC.
Rubicon Organics Inc. is the global brand leader in premium organic cannabis products. The Company is vertically integrated through its wholly owned subsidiary Rubicon Holdings Corp, a licensed producer. Rubicon Organics is focused on achieving industry leading profitability through its premium cannabis flower, product innovation and brand portfolio management, including three flagship brands: its super-premium brand Simply Bare™ Organic, its premium brand 1964 Supply Co™, and its cannabis wellness brand Wildflower™ in addition to the Company’s mainstream brand Homestead Cannabis Supply™ and its premium concentrate brand Lab Theory™.
The Company ensures the quality of its supply chain by cultivating, processing, branding and selling organic certified, sustainably produced, super-premium cannabis products from its state-of-the-art glass roofed facility located in Delta, BC, Canada.
CONTACT INFORMATION
Margaret Brodie
Interim CEO & CFO
Phone: +1 (437) 929-1964
Email: ir@rubiconorganics.com
The TSX Venture Exchange or its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) does not accept responsibility for the adequacy or accuracy of this press release.
Non-GAAP Financial Measures
This press release contains certain financial performance measures that are not recognized or defined under IFRS (“Non-GAAP Measures”) including, but not limited to, “Adjusted EBITDA”. As a result, this data may not be comparable to data presented by other companies.
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 as well as its liquidity. Accordingly, they should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. For more information, please refer to the “Selected Financial Information” section in the MD&A for the three and six months ended June 30, 2023, which is available on SEDAR at www.sedar.com.
Below is the Company’s quantitative reconciliation of Adjusted EBITDA calculated as earnings (losses) from operations before interest, tax, depreciation and amortization, share-based compensation expense, and fair value changes. The following table presents a reconciliation of Adjusted EBITDA to the most comparable IFRS financial measure for the three and six months ended June 30, 2023 and June 30, 2022.
| Three months ended | Six months ended | |||||||
| June 30, 2023 | June 30, 2022 | June 30, 2023 | June 30, 2022 | |||||
| $ | $ | $ | $ | |||||
| Loss from operations | (160,396 | ) | (943,962 | ) | (464,893 | ) | (2,073,171 | ) |
| IFRS fair value accounting related to cannabis plants and inventory | 606,406 | (340,323 | ) | 466,943 | (2,086,421 | ) | ||
| 446,010 | (1,284,285 | ) | 2,050 | (4,159,592 | ) | |||
| Depreciation and amortization | 775,227 | 757,463 | 1,520,010 | 1,449,890 | ||||
| Share-based compensation expense | 546,684 | 788,028 | 414,526 | 1,454,474 | ||||
| Adjusted EBITDA1 | 1,767,921 | 261,206 | 1,936,586 | (1,255,228 | ) | |||
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' goal of achieving industry leading profitability 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 EBITDA1 profitability and cashflow 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 those factors identified under the heading "Risk Factors" in Rubicon Organic’s annual information form dated March 31, 2023 filed with Canadian provincial securities regulatory authorities.
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.
We have made numerous assumptions about the forward-looking statements and information contained herein, including among other things, assumptions about: optimizing yield, achieving revenue growth, increasing gross profit, operating cashflow and Adjusted EBITDA1 profitability. Even though the management of Rubicon Organics believes that the assumptions made, and the expectations represented by such statements or information are reasonable, there can be no assurance that the forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in forward-looking statements. Investors are cautioned against undue reliance on forward-looking statements or information. Forward-looking statements and information are designed to help readers understand management's current views of our near and longer term prospects and may not be appropriate for other purposes. Rubicon Organics assumes no obligation to update any forward-looking statement, even if new information becomes available as a result of future events, changes in assumptions, new information or for any other reason except as required by law.
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. Refer to ‘Non-GAAP Financial Measures’ for details on the Adjusted EBITDA calculation.
2 Brightfield Group Canada Budtender Study 2023
3 Hifyre data for topical products covering three months ending June 30, 2023
4 Hifyre data for flower & pre-rolled products covering three months ending June 30, 2023
5 Hifyre data for flower & pre-rolled products covering six months ending June 30, 2023
6 Hifyre data for premium flower & pre-rolled products covering three months ending June 30, 2023
7 Hifyre data for premium flower & pre-rolled products covering six months ending June 30, 2023
8 Hifyre data for topical products covering three months ending June 30, 2023
9 Hifyre data for topical products covering six months ending June 30, 2023
10 Hifyre data for topical products covering three months ending June 30, 2022
11 Hifyre data for topical products covering six months ending June 30, 2022
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