Rubicon Organics Inc. (TSXV: COV; OTCQX: CVALF) Q2 2025 Earnings Call | 05/28/2025

Rubicon Organics Inc. Q1 2025: Strong Revenue Growth, Positive Adjusted EBITDA, and Strategic Expansion

Rubicon Organics Inc. reported a robust start to 2025 with significant financial improvements and strategic moves aimed at expanding its premium cannabis production and market reach. CEO and President Margaret Rohde, alongside new CFO Glenn Ibbitt, detailed the company's Q1 performance and future growth opportunities.

Q1 2025 Financial and Operational Highlights:

• Net Revenue: Increased by 39% year-over-year (or $3.5 million) to $12.4 million.
• Adjusted EBITDA: Turned positive at $700,000, a $1.1 million improvement compared to a loss in Q1 2024. This marks the fourth consecutive quarter and eighth of the last nine quarters with positive adjusted EBITDA.
• Gross Profit: Before fair value adjustments, reached $3.8 million, a 72% improvement year-over-year, with a gross margin improving to 31% (up from 25% in Q1 2024).
• Liquidity: Ended the quarter with $7.8 million in cash and a strong working capital position of $20.6 million.
• Strategic Financing: Successfully closed a non-brokered life offering, upsized by 50% to $4.5 million due to strong demand.
• International Certification: Received GACP certification for its Delta facility, enabling the inaugural international shipment to Poland in mid-March.
• Production Capacity Expansion: Entered an agreement to acquire a new facility in Hope, B.C., set to expand annual premium cannabis flower production capacity by over 40% to 15,500 kilos for a purchase price of $4.5 million and under $2 million in CapEx. This strategic acquisition positions Rubicon to meet growing demand and capture unmet needs.

Product and Brand Performance:

Rubicon Organics' revenue growth was fueled by strong performance across Canada's four largest provinces, driven by product innovation and strong brand equity.

• Resin Vapes: Launched in Q2 2024, this line rapidly expanded its SKU count and captured nearly 15% of its market segment, showing strong momentum.
• 1964 Portfolio: Delivered strong growth in both vape and flower categories (up 44% year-over-year), with successful new product introductions like new flower genetics and 0.5-gram pre-roll packs.
• Simply Bare and Wildflower: Continued to strengthen the overall portfolio, with Simply Bare launching new unique flavors like BC Organic Pink Drip. Wildflower maintained strong performance in the wellness category despite premium pricing.
• Edibles: Presence in premium edibles expanded under Simply Bare, 1964, and Wildflower, with the recent introduction of Homestead Resin Gummies designed to attract mainstream consumers to the premium portfolio.
• Topicals: Maintained market leadership in the topical category, growing revenue despite increased competition at lower price points.

Outlook and Strategic Priorities for 2025:

Rubicon Organics is bullish on the future of Canadian cannabis, anticipating continued growth driven by a shifting market dynamic where demand is now outpacing quality supply.

• Supply Expansion: Focused on securing additional premium quality supply through the Hope facility acquisition and incremental contract arrangements for 2,000 kilos of biomass (on top of last year's volumes).
• Domestic Market Focus: Prioritizing the Canadian market and building customer trust, leveraging its award-winning brands and diverse product portfolio as competitors withdraw and market entry barriers rise.
• Innovation: Committed to introducing new and innovative genetics to the Canadian market to enhance consumer experiences.
• International Market Exploration: Plans to "test and learn" in international medical markets in 2025, with meaningful revenue contribution from international channels expected in 2026 once the Hope facility provides incremental production.
• Financial Targets: Forecasting growth in both net revenue and adjusted EBITDA from its core business on a like-for-like basis for 2025. However, initial pre-revenue operational costs of over $3 million associated with the Hope facility startup will impact annual adjusted EBITDA, as Hope's revenues are not expected until 2026.