Rubicon Organics Reports Fourth Quarter 2020 Financial Results and Operational Milestones
Rubicon Organics Inc. ("Rubicon Organics" or the "Company") (TSXV:ROMJ | OTCQX:ROMJF), a licensed producer focused on cultivating and selling organic certified and premium cannabis, today reported its financial results for the fourth quarter and year ended December 31, 2020 ("Q4 2020"). All amounts are expressed in Canadian dollars.
"Our focused strategy of producing the highest quality premium organic cannabis is gaining more traction as we launch new products, add brands and expand distribution. We are very pleased with the $9.4 million in net revenue we delivered in 2020, our first year of operation, and we believe that our expanded distribution and deep innovation pipeline will continue to drive revenue growth and improved profitability in 2021. We are in an excellent financial position to drive organic growth and will continue to consider strategic options towards driving shareholder value and achieving our long-term goal of being global brand leaders in organic cannabis," said Jesse McConnell, Chief Executive Officer.
Q4 2020 Highlights:
Highlights Subsequent to Q4 2020:
-- Repaid the $5.0 million first mortgage loan in full.
Q4 2020 Select Financial and Operational Results:
Year ended Three months ended Three months ended December 31, 2020 December 31, 2020 September 30, 2020 $ $ $ Product sales 11,203,893 5,756,749 3,725,367 Net revenue 9,387,320 4,774,488 3,166,786 Other income 929,867 -- 491,405 Loss from continuing operations (14,349,541 ) (4,805,606 ) (4,279,330 ) Loss from discontinuing operations (633,631 ) (237,096 ) (37,918 ) Net loss for the period (14,983,172 ) (5,042,702 ) (4,317,248 ) Adjusted EBITDA (11,081,996 ) (2,958,525 ) (2,576,283 ) Cash 12,136,459 12,136,459 8,061,527 Working Capital 4,166,180 4,166,180 917,958
In Q4 2020, Rubicon Organics earned $4.8 million of net revenue, which is an increase of $1.6 million or 51% as compared to Q3 2020. This increase in net revenue is attributable to an increased product offering, including the launch of new brands, and expanded distribution channels across Canada.
The Company reported an Adjusted EBITDA loss of $3.0 million in Q4 2020, as compared to a loss of $2.6 million in Q3 2020. The sequential change in Adjusted EBITDA is attributable to the increase in net revenue in Q4 2020 offset most significantly by the write-off of inventory that did not meet our strict internal quality standards.
The Company reported a net loss of $5.0 million in Q4 2020, as compared to a net loss of $4.3 million in Q3 2020. The sequential change in profitability reflects fair value changes in the Company's cannabis assets and increases to operating expenses such stock-based compensation and general and administrative expenses.
Rubicon Organics is determined to achieve positive operating cash flow and profitability. In Q4 2020, the Company gained significant market share in the premium category, in particular in Ontario and BC., including the capture of the #1 premium brand in BC and the #2 premium brand in Ontario and Alberta. Through the winter of 2021 in Canada, the Company experienced a significant decrease in orders from the provincial distributors in Ontario and Alberta relative to forecast. This decrease from forecast was particularly noteworthy where store closures were in effect or stores were limited to "click and collect" shopping. In addition, there has been inventory de-stocking events at provincial distributors impacting total short-term market demand and lower first-time purchases of new product innovation by the distributors. These factors will impact Rubicon Organics' ability to achieve its previously disclosed Adjusted EBITDA and operating cash flow targets in Q1 2021. The Company's current expectation for the achievement of such milestones has been delayed to Q2 2021, subject to the impact of further provincial restrictions on retail store openings and distributor buying patterns. We remain confident in our product appeal and plan to win in the premium market given that with the recent significant SKU rationalization at various provincial distributors, Rubicon Organics retained all of its SKU listings with the provincial distributors and also added new SKUs such as 7g jars of Simply Bare(TM) Organic and Wildflower topicals.
Despite these external factors, the Company has maintained pricing for its premium products, remained rigorous in the control of cash costs, implemented efficiencies across its production process and tailored its innovation pipeline to product categories with high consumer demand and premium margin potential.
The Company expects to fully repay the mortgage facilities existing at December 31, 2020 as they come due between April 2021 and July 2021, and to refinance approximately half of the debt to a long-term mortgage financing facility, potentially with more favourable terms.
The Company will be hosting a conference call to discuss Q4 2020 results on April 6, 2021. Conference call details are as follows:
Date and time: 7:00 AM PT / 10:00 AM ET Conference ID: 3998408 Local dial-in: (833) 900-2238 International dial-in: (647) 689-5136 Webcast: https://onlinexperiences.com/Launch/QReg/ShowUUID=34E9422B-CF5D-4F68-A2FB-CB33F5571E13
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(TM) Organic and its super-premium concentrate brand LAB THEORY(TM).
Chief Financial Officer
Phone: +1 (437) 929-1964
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' proposed brand launches and path to market 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 launch of new brands and cannabis products, the timing of becoming Adjusted EBITDA and cash flow positive, and the Company's ability to refinance its debt. 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 year ended December 31, 2020, please refer to the "Selected Annual Information" section in the MD&A for the year ended December 31, 2020. 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.
Based on information from industry data sources including the Ontario Cannabis Stores and Buddi data during the period from October 1, 2020 to December 31, 2020.