TSXV: ROMJ OTCQX: ROMJF

Rubicon Organics Reports Record Third Quarter 2021 Financial Results and Operational Update

The Company had its highest ever revenue month in September 2021.

  • $7.1 million in net revenue, 54% increase over Q2 2021
  • 3% national market share of premium flower and pre-rolls
  • #1 Premium flower and pre-roll brand in Canada with Simply BareTM Organic

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 third quarter ended September 30, 2021 (“Q3 2021”). All amounts are expressed in Canadian dollars.

“Our record net revenue this quarter is a strong validation of our strategy to create an innovative portfolio of branded products, rooted in the production of high-quality organic cannabis. We can now also demonstrate that our lean manufacturing processes and financial discipline are able to generate significant contribution margin. With our brand portfolio, we have developed channels to utilize all of our production and we remain steadfast in our goal of driving industry leading profitability,” said Jesse McConnell, Chief Executive Officer.

 

Q3 2021 Operational Update

Simply BareTM Organic currently ranks as the #1 premium brand and #1 organic brand by sales of flower and pre-roll products across Canada for the year-to-date period ending September 30, 2021[1] and represents 8.3% market share of the premium flower and pre-roll category for the 12 months ended October 31, 2021[2].

For Q3 2021, the Company achieved its highest total market share since inception in the flower and pre-roll category, increasing to 1.9%[3] across Canada, up from 1.7%[4] in Q2 2021. This is attributable to steadily rising sales of Simply BareTM Organic, the launch of 1964 Supply CoTM in Ontario, British Columbia and Alberta and the launch of Homestead Cannabis SupplyTM in British Columbia and Alberta. Subsequent to Q3 2021, for the three months ended October 31st, the Company increased its market share to 2.2%[5].

Highlights[6] by major province in the premium and organic categories include:

  • 19% share of the Canadian premium pre-roll market
  • BC: #1 brand in both the organic and premium flower and pre-roll categories; 26% share of the premium pre-roll market
  • Quebec: #1 brand in premium flower and pre-roll, #2 brand in premium hash, and #1 organic brand in flower and pre-roll
  • Ontario: #4 premium brand in flower and pre-roll and #1 in organic flower and pre-roll
  • Alberta: #6 premium brand in flower and pre-roll, and #2 brand in all premium pre-roll products

Q3 2021 Highlights:

  • Earned $7.1 million of net revenue, an increase of 54%, or $2.5 million, as compared to Q2 2021 and an increase of 124% as compared to Q3 2020
  • Reported gross profit before fair value adjustment of $1.8 million, or a gross margin of 25%
  • Received US$8.0 million from the issuance of the secured debenture
  • Expanded SKU listing of Simply BareTM Organic products across major markets
  • Launched 1964 Supply CoTM and Homestead Cannabis SupplyTM with new provincial listings obtained in BC, Alberta, Manitoba, Ontario, and Saskatchewan
  • 1964 Supply CoTM available in Ontario stores for the first time in September
  • 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
  • Reduced foreign exchange (“FX”) risk associated with US$8.0 million secured debenture by placing FX swaps to fix the deliverable Canadian dollars on future principal and interest payments

Highlights Subsequent to Q3 2021:

  • Signed a Cannabis Products Supplier Agreement with Medical Cannabis by Shoppers Drug Mart Inc.
  • Homestead Cannabis SupplyTM landing in Ontario retail stores for the first time

Q3 2021 Select Financial and Operational Results

 

Three months ended Nine months ended
September 30, 2021

$

September 30, 2020

$

September 30, 2021

$

September 30, 2020

$

Net revenue  7,090,467  3,166,786  15,796,621  4,612,832
Other income  85,872  491,405  117,322  929,867
Loss from continuing operations  (3,846,535)  (4,279,330)  (12,930,310)  (9,543,935)
Loss from discontinuing operations  —    (37,918)  —    (396,535)
Net loss for the period  (3,846,535)  (4,317,248)  (12,930,310)  (9,940,470)
Adjusted EBITDA (644,093)  (2,627,746)  (7,435,793)  (8,174,844)
   
Cash and cash equivalents  11,972,077  8,061,527  11,972,077  8,061,527
Working capital  22,571,135  917,958 22,571,135  917,958

 

† 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 Q3 2021 Management’s Discussion & Analysis for details on the Adjusted EBITDA calculation.

In Q3 2021, Rubicon Organics earned $7.1 million of net revenue, an increase of 54%, or $2.5 million, relative to Q2 2021 and an increase of 124%, or $3.9 million, relative to Q3 2020. The increase in net revenue is attributable to an increased product offering under its flagship Simply BareTM Organic brand, the launch of 1964 Supply CoTM and Homestead Cannabis SupplyTM into large provinces during Q3 2021, and the gradual return of normalized retail operations in the province of Ontario.

The Company reported a quarter over quarter increase to Adjusted EBITDA of $2.8 million with a loss of $0.6 million in Q3 2021, as compared to a loss of $3.4 million for Q2 2021 and a loss of $2.6 million in Q3 2020. Rubicon improved its profitability by driving higher net revenue through the launch of its two new brands nationally. This increase to net revenue resulted in higher utilization rates allowing for increased operating leverage over the companies fixed cost base. Together these results drove a contribution of $1.8 million of gross profit before fair value changes. Furthermore, the Company began realizing the benefits on operating costs of the Company’s previously announced restructuring.

The Company reported a net loss of $3.8 million in Q3 2021, as compared to a net loss of $5.1 million in Q2 2021, and a net loss of $4.3 million in Q3 2020. The significant improvement in profitability reflects the factors impacting Adjusted EBITDA described above as well as other non-cash adjustments.

The Company had its highest ever revenue month in September 2021 and delivered Adjusted EBITDA profitability for the first time in that month.

 

Outlook

 

During Q3 2021, the Company maintained significant market share in the premium and organic product categories with its Simply BareTM Organic brand. The brand continues to be the #1 premium brand nationally in flower and pre-roll as well as the #1 organic flower brand of choice in all major provinces[7].

The Company experienced strong revenue growth in Q3 2021 with the successful launch of 1964 Supply CoTM and Homestead Cannabis SupplyTM into new large provincial markets. With these two additions to our brand portfolio, we can now offer organic cannabis to a more diversified group of consumers in high growth segments of the cannabis market. Our larger portfolio allows us to introduce new consumers to our organic franchise while ensuring we have route to market for all flower that is produced. The Company continues to assess product mix and is focused on increasing yield to meet consumer demand and optimizing margin within our product portfolio.

For Q3 2021, we have seen accelerating retail sales velocity and strong consumer demand in the premium segment for both Simply BareTM Organic brand and our newly launched 1964 Supply CoTM brand. Rubicon believes that the combination of new brands in key Canadian markets and increased product offerings enable us to capitalize on our momentum over 2022 along with a continued increase in quality and yield from our production. Furthermore, Rubicon Organics expects to deliver international exports for the first time in the first half of 2022. We expect 2022 to continue the growth trajectory we have seen to date, although we believe the fourth quarter of 2021 may be impacted by certain timing factors of our product availability and distribution of our product.

The Company achieved Adjusted EBITDA profitability for the first time in the month of September, although pending the timing issues referred to above the fourth quarter will likely remain negative, while operating cashflows are expected to be relatively cash neutral, the business is in the turn of profitability in the near-term.

The Company’s current expectation is Adjusted EBITDA profitability and to be operating cashflow positive in 2022. With our recent expansion in brand portfolio and our plan to maximize contribution margin from production, we remain confident with the appeal of our brands and strategy to continue winning in the premium market.

 

Conference Call

The Company will be hosting a conference call to discuss the Q3 2021 results on November 17, 2021. Conference call details are as follows:

 

Time: 7:00AM PDT/10:00AM EDT
Conference ID: 5872509
Local dial-in: (833) 900-2238
International dial-in: (647) 689-5136
Webcast: https://onlinexperiences.com/Launch/QReg/ShowUUID=EA997427-DA66-4BEF-947C-2600951007CF

 

Employee Equity Awards

Incentive Stock Option Grant

The Company has granted incentive stock options for a total of 90,000 common shares to employees of the Company pursuant to the Company’s Equity Incentive Plan and Deferred Share Unit Plan (together the “Equity Plans”). The stock options are exercisable at $2.60 per share for a period of five years and vest between one and three years from the date of grant.

Deferred Share Unit (“DSUs”) Grant

The Company has granted an aggregate of 75,000 DSUs in accordance with the Equity Plans to independent directors of the Company as compensation for their services. The DSUs vest immediately and may only be redeemed upon a holder ceasing to be a director of Rubicon Organics.

Restricted Share Units (“RSUs”) Grant

The Company has granted 200,000 RSUs in accordance with the Equity Plans to an executive of the Company as compensation for their services. The RSUs vest as follows: (i) 150,000 vesting between one and three years from the date of grant; and (ii) 50,000 vesting in tranches based on 12-month EBITDA targets.

 

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 a focus on differentiated product innovation and brand portfolio management, including its flagship super-premium umbrella brand Simply BareTM Organic, its premium flower and hash brand 1964 Supply CoTM, its premium concentrate brand LAB THEORYTM, and its mainstream brand Homestead Cannabis SupplyTM .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

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’ 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 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 nine months ended September 30, 2021, please refer to the “Selected Financial Information” section in the MD&A for the three and nine months ended September 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] Hifyre data for the period between January 1, 2021 and September 30, 2021.

[2] Hifyre data for the period between November 1, 2020 and October 31, 2021.

[3] Hifyre data for the period between July 1, 2021 and September 30, 2021.

[4] Hifyre data for the period between April 1, 2021 and June 30, 2021.

[5] Hifyre data for the period between August 1, 2021 and October 31, 2021.

[6] Hifyre data for the period between January 1, 2021 and September 30, 2021.

[7] Hifyre data for the period between January 1, 2021 and September 30, 2021.

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