Rubicon Organics Inc., 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 28% increase year-on-year, delivering our fifth consecutive quarter of positive Adjusted EBITDA and fourth consecutive quarter of positive operating cashflow.” said Margaret Brodie, Interim Chief Executive Officer and Chief Financial Officer. “Our focus remains on further establishing a leading presence in the premium cannabis market and, through extensive due diligence to work with high-quality partners to complement our own premium production to achieve our long term-strategy. We expect to see the ramping up of supply from these partnerships to leverage the strong demand of our brands beginning in Q4 2023.”
“I am proud of the independent validation of our brands, Simply BareTM Organic and 1964 Supply Co TM, received from a Brightfield Group survey 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 of 28% 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 EBITDA 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 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 Bare TM Organic and 1964 Supply CoTM were identified as two of the top three most recommended brands by Canadian budtenders.
- The Company has 2.0% and 2.1% national market share of flower and pre-rolls for the three and six months ended June 30, 2023.
- The Company has 5.4% and 5.3% 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 one topical brand in Canada with a market share of 22.5% [note 8] and 19.9%[note 9] for the three and six months ended June 30, 2023, increasing from 16.3%[note 10](28% increase) and 14.7% [note 11] (35% increase) from the comparative periods in the prior year.
Company Outlook
Rubicon Organics has set out four key priorities for 2023:
- 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 10% in the second half of 2023 once installed, with standard maintenance scheduled during downtime.
- 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.
- 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.
- 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.
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: 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™.
