Rubicon Organics Reports Second Quarter 2021 Financial Results and Operational Milestones

Published: August 23, 2021

Rubicon Organics Reports Second Quarter 2021 Financial Results and Operational Milestones

Rubicon Organics Inc., 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.

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™.