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(Globe Newswire) Vancouver — Rubicon Organics Inc., 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. 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.
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.”
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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 EBITDA1 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 categories7
- 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.
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.
WildflowerTM’s leadership in cannabis wellness
WildflowerTM‘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.
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