Rubicon Organics Reports Third Quarter 2023 Financial Results

• Net revenue of $10.0 million and $30.1 million for the three and nine months ended September 30, 2023
• Adjusted EBITDA¹ of $1.1 million and $3.1 million for the three and nine months ended September 30, 2023
• Achieved operating cash flow of $1.4 million and $4.0 million for the three and nine months ended September 30, 2023
• 5.6%² national market share of premium flower and pre-rolls for the three months ended September 30, 2023
• 5.1%³ national market share of premium edibles for the three months ended September 30, 2023 following initial launch in Q2 2023
• Wildflower™ is the number one^{4, 5} topical brand in Canada with market share of 26.0%⁴ and 22.0%⁵ for the three and nine months ended September 30, 2023

VANCOUVER, British Columbia, Nov. 14, 2023 (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 third quarter ended September 30, 2023 (“Q3 2023”). All amounts are expressed in Canadian dollars.

“I am proud to announce Rubicon has achieved our sixth consecutive quarter of positive Adjusted EBITDA and fifth consecutive quarter of positive operating cashflow. Despite the challenges encountered in the demanding Canadian cannabis sector with competitive price compression alongside broader negative macroeconomic pressures faced by Canadian shoppers, we persist in fortifying the Company's standing as a leading force in the premium cannabis market, and are looking forward to executing our strategy to leverage the strength of our leading premium brands.” said Margaret Brodie, Interim CEO and CFO.

Melanie Ramsey, CCO, said “I'm delighted to see the validation of our successful edibles launch, attaining the third-highest market share in premium edibles within five months of being in market. This milestone significantly contributes to our long-term strategy, offering growth opportunities and leveraging our robust brand reputation built on consistent premium quality. There is more to come in this space as the team strives toward executing on continuous innovation.”

Q3 2023 Financial Highlights:

• Net revenue of $10.0 million (5% decrease from Q3 2022) and $30.1 million (23% increase from Q3 2022) for the three and nine months ended September 30, 2023.
  
• Gross profit before fair value adjustments of $3.2 million (21% decrease from Q3 2022) and $10.9 million (41% increase from Q3 2022) for the three and nine months ended September 30, 2023.
• Achieved sixth consecutive quarter of Adjusted EBITDA¹ profitability with $1.1 million and $3.1 million for the three and nine months ended September 30, 2023, a decrease of $0.8 million and increase of $2.4 million compared to the comparative periods in 2022.
  
• Growth in cash balance by $2.6 million from September 30, 2022 from $6.8 million to $9.4 million.
• Achieved fifth consecutive quarter of operating cashflow positive of $1.4 million and $4.0 million for the three and nine months ended September 30, 2023.
• The Company had working capital of $18.7 million as at September 30, 2023 of which $9.4 million of cash on hand and $3.6 million in accounts receivable.
• Simply Bare^TM Organic and 1964 Supply Co^TM identified as 2 of top 3 brands recommended by Canadian budtenders⁶.
• 1964 Supply Co^TM voted #1 brand sampled at KIND Summer Fair.
• 2.0%⁷ national market share of flower and pre-rolls for the three months ended September 30, 2023.
• 5.6%² national market share of premium flower and pre-rolls for the three months ended September 30, 2023.
• 5.1%³ national market share of premium edibles for the three months ended September 30, 2023 following initial launch in Q2 2023.

Q3 2023 and Subsequent Sales & Operational Highlights:

• Rubicon Organics has been establishing high-quality partnerships for contract grow and co-manufacturing 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^TM 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^TM has rolled out three additional flavours.
  
• The Company’s brand, Simply Bare ^TM Organic brand launched infused pre-rolls under the Simply Bare ^TM Organic brand, “Layer J” in BC and Ontario in October 2023. It contains two layers, one with flower and hash of one cultivar, and the other with flower and hash rosin of another cultivar. The two cultivars are BC Organic Cleopatra and BC Organic White Rainbow.
  
• In October 2023, Simply Bare ^TM Organic launched a new 2-gram hash, “New School Hash” available in BC, Ontario, Alberta and Quebec.
  
• 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 Co ^TM “hero strain” and was voted indica of the year by Kind Magazine in December 2022.
  
• In September 2023, the Company’s brand 1964 Supply Co™ launched an infused pre-roll, the Super Lemon Haze “Heavy Hitter” rosin roll which is a 1 x 1 gram infused pre-rolls featuring Super Lemon Haze flower, and potent Super Lemon Haze hash rosin.
  
• 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.
  
• Wildflower™ launched its first edibles in BC in October 2023. These edible products consist of four flavours and contain the minor cannabinoids CBN, CBG and CBD as well as full spectrum THC live rosin, and are vegan and gluten-free. In November 2023, all four flavours also became available in Alberta.
  
• 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 Co^TM were identified as two of the top three most recommended brands by Canadian budtenders⁶.
  
• 1964 Supply Co^TM was voted as the #1 brand sampled at the KIND Summer Fair by budtenders. Of the budtenders surveyed, 96% are more likely to recommend a brand they sampled at the KIND Summer Fair.
  
• The Company has 2.0%^{7, 8} national market share of flower and pre-rolls for the three and nine months ended September 30, 2023.
  
• The Company has 5.6%² and 5.4%⁹ national market share of premium flower and pre-rolls for the three and nine months ended September 30, 2023.
  
• The Company’s topical brand, Wildflower™, continues to be the number one^{4, 5} topical brand in Canada with a market share of 26.0%⁴ and 22.0%⁵ for the three and nine months ended September 30, 2023, increasing from 19.9%¹⁰ (31% increase) and 16.7%¹¹ (32% increase) from the comparative periods in the prior year.
  

Company Outlook

Rubicon Organics has set out four key priorities for 2023:

      1.   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 2023 has been a year of steady and consistent quality production so far.
In late October 2023, the installation of additional tables has been completed in our facility and we anticipate continued improvements in air circulation and an increase in capacity up to 10% from crops harvested in late 2023 and beyond.

      2.   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. We are working to grow our Simply Bare^TM Organic brand and to premiumize opportunistically elements of our 1964 Supply Co^TM, to make a positive contribution to our gross profit.

As we have forecast demand beyond our available supply from our Delta Facility, we have entered partnerships to incrementally grow our net revenue and gross profit that do not require our Delta Facility’s capacity. In early 2023, the Company entered into an agreement with a third-party manufacturer of high-quality edibles and has expanded the portfolio with new flavours after the successful launch. Within 5 months of launch, our 1964 Supply Co^TM edibles are the third best-selling premium edible brand with 5.1%³ of market share; we believe this strong market share capture was driven by the leading reputation of our premium brands. By working with high-quality partners that complement our own premium production, we have seen early success in adding incremental gross profit to our results in a cost effective and efficient manner.

We will continue to look for opportunities 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 have established our first high-quality partnership for contract grow that will help fulfill demand under the 1964 Supply Co^TM brand. We intend to deliver this incremental gross profit without significant incremental overhead cost to our business, thus driving additional overall profitability.

      3.   Drive Efficiency in Processes and Systems

As steady state has been established at our Delta Facility, we are now 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 has been evaluating new information systems and has begun implementing a new system in the second half of 2023, with the intention to go live in the beginning of 2024 with Phase 1, and later in 2024 with Phase 2. This project will increase short-term costs but we believe will improve efficiency of the existing business and ready Rubicon for further growth.

      4.   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 have also reviewed our Company values listening to our people as part of the process and Rubicon’s evolution, now that we are in a steadier state. These revised values will be introduced to Company at the end of November 2023.

Outlook

Rubicon believes that our cannabis quality, brand positionings and product offerings will drive continued growth in net revenue, resulting in an increase in gross profit and Adjusted EBITDA¹ for the full year 2023. With a stable cost base, this anticipated growth in net revenue and gross profit would improve our operating leverage. Additionally, we expect to achieve positive cashflow for the full year.

In 2023 the Canadian cannabis landscape has seen two notable trends. Firstly, price compression has affected all flower categories, including premium. We believe that the price compression is largely driven by the financial strain faced by many competitors and there will be a rebalancing over the coming year as companies leave the sector and there is more of a supply/demand equilibrium established. Secondly, products claiming extremely high THC have surged drawing consumer interest, but there have been widespread doubts about the accuracy of these high THC results. We anticipate that regulators will look more closely at this area over the coming year. At premium price points, consumer demands are more heavily weighted on overall experience, predominantly smell / flavour / flower quality vs. THC levels alone, and with Rubicon’s quality flower and consistency of cultivation, we believe we are well positioned to win in the premium category over the coming years.

As a business we are now looking to increase the volume of products that we have available for sale to fill the demand we have for our quality products. The business is evaluating several options to increase our capacity. We believe that despite any market volatility, price compression, inflationary pressures, regulatory change, our product quality and brand portfolio has positioned Rubicon to win in the premium cannabis market.

Conference Call

The Company will be hosting a conference call to discuss Q3 2023 results on Wednesday, November 15, 2023. Conference call details are as follows:

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™ and its premium concentrate brand Lab Theory™.

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
Interim CEO & CFO
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 three and nine months ended September 30, 2023, which is available on SEDAR+ at www.sedarplus.ca.

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 a reconciliation of Adjusted EBITDA to the most comparable IFRS financial measure for the three and nine months ended September 30, 2023 and September 30, 2022.

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 EBITDA¹ 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 31, 2023 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 EBITDA¹ 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.

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 Non-GAAP Financial Measures for details on the Adjusted EBITDA calculation.
² Hifyre data for premium flower & pre-rolled products covering three months ending September 30, 2023
³ Hifyre data for premium edible products covering three months ended September 30, 2023
⁴ Hifyre data for topical products covering three months ending September 30, 2023
⁵ Hifyre data for topical products covering nine months ending September 30, 2023
⁶ Brightfield Group Canada Budtender Study 2023
⁷ Hifyre data for flower & pre-rolled products covering three months ending September 30, 2023
⁸ Hifyre data for flower & pre-rolled products covering nine months ending September 30, 2023
⁹ Hifyre data for premium flower & pre-roll products covering nine months ending September 30, 2023
¹⁰ Hifyre data for topical products covering three months ending September 30, 2022
¹¹ Hifyre data for topical products covering nine months ending September 30, 2022