Rubicon Organics Reports Q1 2024 Financial Results
· *Achieved net revenue of $8.9 million for the three months ended March 31, 2024*
· *Adjusted EBITDA*^*1** loss of $0.4 million for the three months ended March 31, 2024*
· *Negative operating cash flow of $0.9 million for the three months ended March 31, 2024*
· *Number one premium licenced producer across all categories*^*2*
· *2.0%*^*3** national market share of flower and pre-rolls **for the three months ended March 31, 2024*
· *7.1%*^*4** national market share of premium flower and pre-rolls **for the three months ended March 31, 2024*
· *Wildflower*^*TM** is the number one topical brand in Canada with market share of 30.6%*^*5** for the three months ended March 31, 2024*
· *22.8%*^*6** national market share of premium edibles **for the three months ended March 31, 2024*
· *Launch of full spectrum extract vapes in Alberta, BC, and Ontario in May 2024*
VANCOUVER, British Columbia , May 15, 2024 (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 three months ended March 31, 2024 (“Q1 2024”). All amounts are expressed in Canadian dollars.“Rubicon Organics holds the #1 premium position in Canada and is poised for growth with the launch of our full spectrum extract vapes line tapping into the highest growth segment in Canada. With a focus on quality, we are confident that our vape launch will not only drive revenue growth but also solidify our position as a leader in the Canadian cannabis market.
“We anticipated a challenging Q1 due to typical seasonality and the overhang of weak consumer sentiment from 2023. I expect to recover from this temporary dip from our streak of positive Adjusted EBITDA in Q2. In Q1, a changing product mix reduced our gross margin, but this spring we've shifted focus to higher-margin products, expecting improved results in Q2 and beyond. Our Q1 working capital investment for product launches is expected to come to fruition delivering further net revenue growth starting in Q2. Additionally, our first-half results are influenced by the ongoing one-time ERP implementation”, said Margaret Brodie, CEO.
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^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. Included in Adjusted EBITDA in the three months ended March 31, 2024 is $0.3 million of one-time costs incurred for the ERP implementation project. See Non-GAAP Financial Measures for details on the Adjusted EBITDA calculation.
^2Hifyre data for premium products covering flower, pre-rolled products, concentrates, edibles, topicals, and vapes for the three months ended March 31, 2024
^3Hifyre data for flower & pre-rolled products covering three months ended March 31, 2024
^4Hifyre data for premium flower & pre-rolled products covering three months ended March 31, 2024
^5Hifyre data for topical products covering three months ended March 31, 2024
^6 Hifyre data for premium edible products covering three months ended March 31, 2024
Janis Risbin, CFO, said “Despite the market challenges, we've managed to maintain revenue levels in line with Q1 2023, a testament to our resilience and adaptability. With the expected re-financing of our debt later this year, we remain focused on strengthening our already solid foundation and continuing to invest opportunistically for growth in 2024 and beyond.”
*Q1 2024 and Subsequent Highlights:
*For the three months ended March 31, 2024
· Net revenue of $8.9 million (1% increase from Q1 2023)
· Gross profit before fair value adjustments of $2.2 million (28% decrease from Q1 2023)
· Adjusted EBITDA^1 loss of $0.4 million compared to profit of $1.7 million in Q1 2023
· Cash used by operating activities was $0.9 million compared to cash provided by operating activities of $0.2 million in Q1 2023
· Number one premium licenced producer across all categories^7
· 2.0%^8 national market share of flower and pre-rolls
· 7.1%^3 national market share of premium flower and pre-rolls
· 30.6%^4 national market share of topical products
· 6.7%^9 national market share of premium concentrates
· 22.8%^10 national market share of premium edibles
· Launch of 1964 Supply Co.^TM full spectrum extract (“FSE”) vapes, initially available for Blue Dream and Comatose, with purchase orders received from Alberta, BC and Ontario. --------------------
^7Hifyre data for premium products covering flower, pre-rolled products, concentrates, edibles, topicals, and vapes for the three months ended March 31, 2024
^8Hifyre data for flower & pre-rolled products covering twelve months ending March 31, 2024
^9Hifyre data for premium concentrates products covering twelve months ending March 31, 2024
^10Hifyre data for premium edible products covering twelve months ending March 31, 2024
*2024 Results of Operations:*
*Three months ended* *March 31, 2024*
*$**
* March 31, 2023
$
Net revenue *8,890,417* 8,799,940
Production costs *2,692,692* 2,678,604
Inventory expensed to cost of sales *3,737,334* 2,934,894
Inventory written off or provided for *266,039* 157,424
*Gross profit before fair value adjustments* *2,194,352* 3,029,018
Fair value adjustments to cannabis plants, inventory sold, and other charges *164,252* 139,463
*Gross profit* *2,358,604* 3,168,481
As At: March 31,
2024
$ December 31,
2023
$
Cash and cash equivalents *8,121,134* 9,784,190
Working capital † *9,554,365* 10,132,089
^† Working capital as at March 31, 2024 includes $10.7 million current portion of loans and borrowings. The Company is currently in discussions with the debenture holder and other lenders to extend the term of the existing agreement or to enter into a new loan agreement in the second half of 2024.
*2024 Outlook*
*Brand and Product Development*
Our strategy is founded on a strong premium branded portfolio, highly regarded by both budtenders and consumers alike. Guided by consumer research, we continually innovate our products to anticipate market trends. Our commitment to quality and excellence is evident throughout all areas of our business, seeking to deliver products and services that consistently meet the highest quality standards.
*Launch into Vape Category*
Rubicon is launching into the vape category with our 1964 Supply CoTM brand. The introduction of vapes strategically aligns with our market expansion strategy and offers substantial growth prospects. The vape market has demonstrated robust growth over recent years and trends in Canada and the US demonstrate indicating the vape category's increasing prominence, rivaling or surpassing traditional flower products.
Our launch into the vape category takes advantage of additional biomass available from our contract grow strategy launched in 2023 of our own genetics grown outside of the Delta Facility. We have received initial purchase orders for our Comatose and Blue Dream Full Spectrum Extract (“FSE”) resin vapes in Ontario, BC, and Alberta which are all expected to be delivered in May 2024 to the provincial distributors and available for purchase in retail stores shortly thereafter.
In line with our approach to the live rosin edibles we launched under the brand in 2023, we are focused on delivering products that maintain a competitive edge through superior quality, right price to value ratio leveraging our established and reputable brands. We are confident that by capitalizing on this opportunity, over time we can achieve comparable financial success with our vape offerings as we have with our flower business.
*Wildflower*^*TM**’s Leadership in Cannabis Wellness*
Wildflower^TM's prominence in the cannabis wellness sector is characterized by its notable dominance in topical products and the Company has recently expanded the brand to other categories, including edibles, oils, and capsules designed to address specific wellness needs such as sleep, pain relief, and anxiety reduction. While we expect more competition to enter the topical and wellness category, we are expanding the brand into other categories and anticipate steady growth and momentum behind the daily wellness consumer.
*Launch of New Genetics*
Rubicon plans to continue to launch new and novel genetics into its Simply BareTM Organic and 1964 Supply CoTM to continue leadership in the premium cannabis market. Launches in 2024 include BC Organic Zookies, BC Organic Power Mintz, and BC Organic Fruit Loopz under the Simply Bare TM Organic brand, and Blue Dream under the 1964 Supply CoTM brand.
*Growth from Solid Business Fundamentals*
Consistent quality and systematic delivery to our customers, including the provincial distributors and retailers, and consumers to meet their needs is imperative to be successful in the Canadian cannabis industry. In 2024 we are investing in an Enterprise Resource Planning (“ERP”) system which is necessary for our business to deliver more growth in future and allow less reliance on key people within our internal systems. Anticipated project costs for 2024 are estimated to reach $1 million, with $0.3 million incurred in the first three months of 2024. While a resource intensive process, this ERP implementation readies our business for growth in future.
*Financial*
We believe that our commitment to cannabis quality, strategic brand positioning, diverse product portfolio, and committed team will position us as one of the premier cannabis companies in Canada. We anticipate year over year growth in net revenue, supported by modest increases in our cost base, excluding the impact of the ERP implementation occurring mostly in the first half, thereby enhancing our operating leverage. While we expect growth in 2024, we also anticipate that much of the growth will come from our branded products that are produced using external capacity and thereby deliver lower gross margin than our current mix. Furthermore, we expect continued fierce competition in the distressed Canadian cannabis industry with price compression across all categories. Notwithstanding these pressures, we expect to deliver continued operating positive cash flow in the year ahead and plan to refinance our debt to a longer-term mortgage facility in the second half of 2024.
*Conference Call*
The Company will be hosting a conference call to discuss Q1 2024 results on Thursday, May 16, 2024. Conference call details are as follows:
Time: 7:00 AM PT / 10:00 AM ET
Conference ID: 30069
Local dial-in: +1 (289) 514 5100
Toll Free N. America: +1 (800) 717 1738
Webcast: https://onlinexperiences.com/Launch/QReg/ShowUUID=A8F14C29-EF4E-4A50-B4E1-292C04F7E127
*
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™.
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
CEO
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 year ended December 31, 2023, which is available on SEDAR+ at www.sedarplus.ca.
Adjusted EBITDA
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 the Company’s reconciliation of Adjusted EBITDA to the most comparable IFRS financial measure for the three months ended March 31, 2024, March 31, 2023, and December 31, 2023.
*Three months ended* *March 31,*
*2024* March 31,
2023 December 31,
2023 *$* $ $
Profit (loss) from operations *(1,738,486* *)* (304,497 ) 889,166
IFRS fair value accounting related to cannabis plants and inventory *(164,252* *)* (139,463 ) (829,800 )
Depreciation and amortization *776,680* 744,783 793,006
Share-based compensation expense *702,846* (132,158 ) 440,491
Adjusted EBITDA ‡ *(423,212* *)* 168,665 1,292,863
^‡ ^Included in Adjusted EBITDA in the three months ended March 31, 2024 is $0.3 million of one-time costs incurred for the ERP implementation project.
*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 EBITDA^1 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 27, 204 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 EBITDA^1 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.