ROMJF - Earnings call transcript Q1 2021

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Operator

Good morning everyone. Welcome to the Rubicon Organics’ First Quarter 2021 Financial Results Conference Call.

As a reminder this conference call is being recorded May 18, 2021. At this time all participant lines are in a listen-only mode.

Following the presentation we will conduct a question-and-answer session. at questions. for provided queue analysts be for up will that research time to Instructions now the will Relations. I turn [ph], Mark Investor Herbin call over to go Please Mark. ahead

Unidentified Company Representative

us and you, as results financial on as website MD&A this release, Organics you Thank are morning press released Organics at everyone the The statements, Good for quarter Rubicon operator. were joining rubiconorganic.com. well financial today. morning. XXXX available Rubicon first SEDAR thank and on

our today of which refer am Officer you McConnell, Financial to caution pass will Chief Before forward-looking contains Chief Officer. Brodie, we begin regarding now X Rubicon’s the I will joined Slide on by Executive presentation statements. over I call Jesse. I Margaret the and call Jesse to

Jesse McConnell

and one you our call, only thank It has bringing attending for update XXXX all. share six market call. for Mark weeks our quarter been everyone you the Thank since last conference you fresh

on premium remains see major Bare provinces. Slide Simply is can cannabis across organic and you the brand As market X, selling top the dominating

over a six the premium both and of And Columbia. Alberta, Quebec. brand of in results Ontario, excellence home in are British These are top organic product province premium we our and top are results brand function We pipeline. year especially innovation little our market on executing ago. and competitors proud considering of have a years a I'm was now a Bare launched these few our for in been where Simply

have best increased strategy not one the premium on I super number several through best super We'll in dozen in better strategy, the our currently a be the premium. tests launching the XXXX of better, We inception the that last premium said we about genetics past Well both innovation with market. starting supply with and product but premium offerings trials. more will Since pricing best only follow will year pleased and genetics code putting additional best. and genetic brand the genetic our a In segment. soon within grow report select best library spent good, to by revenue and or these share is our we brand bring through namely available to portfolio focusing segment. sticking mainstream and marketplaces of our ready we've after am we extensive to Quebec market to is are we've few and which of provincial spoken to those after a

strains Canada The first of terpene these around Day. THC high will available high and become

seasonal core with second on stand highly to inflecting product demonstrate Premium hybrid addition and by grow the right built facility Bare specifically basis strains expanding that greenhouse strain line we offer top as portfolio, and is for a our We proven and also we In the to cultivation we organic cost. significance competitive time strategy at our advantage a expect cost of anticipate the our quick have build the decision limited where margins low drive has profitability half the by be the to build marketplace, methodology premium to better that this cannabis we sized to Simply we being in Canadian of segment the the we year. structure connoisseurs. offering right will after sought

of transactions easily replicated recent all you've cultivation sheet. with balance on be As and even premium in cannabis cash premium cannot seen dollars branch in the the sector billion

financial this We X, two balance our restructuring. Slide our The Organics position X our that milestones. much you debt. our repay in undertook can in improved restructuring recent are month. sheet. particular We're Of Slide On of substantially see discussed to note that. recent of proceeds to that outstanding and paying these of debt this Rubicon call. a led our principally There and our bought we Turning have last disclosed is done deal to we just all MD&A factors many

last implemented in operational outlined we call have had been First, sooner that expected. than efficiencies the our we had

resulted We the and took efficiencies into We plants our improvements This in requiring of undertake overall us continue the work. expansion in slowdown processing. [indiscernible] quality less to translates our the of advantage the procedures additional market to less to and therefore harvesting increase in are certain processing cultivation packaging. both COVID in also of make due to spend domestic closures processes discovery significant which having in and time

call meant December. significantly of are that've in Ontario top wave traffic and and quarter have diminished, restructure them in the retail store COVID in until the decision end the people. provincial peers probably position. took expressed to are part most closures store particular This ongoing by significantly still you strong company business Unfortunately, is our is one since place cost to had The we with financial to June. closed news and short-term hit ways resulting challenges, there's and Secondly to been been base as we response place this but In grow a much. Ontario The XXXX, wide walk already reduce these this in the in internally in remain second in great of keep the we forecasting some many on and our earnings a line. reported challenge of not to to closures

out a are are at in It our of process. all-time save million darkest level company ongoing we continuous are cost about dawn year before as nationwide, X.X expect expected the initiatives Our lows. part is always challenges store short-term. and additional COVID realize improvement to view and these to the inventories Vaccines efficiencies rolling cash we as

example confident to our whom one spend outside provide we place the our wanting this accommodate simply built and many socializing able -- that demand to operational we time are has advantage as re-openings. in open three. for year, licensed surge yet robust sizeable current obvious to innovation the their on their or first ensure Ontario We to retail stores in have plans store have bubble, are of since restocking more sales the place why pipeline XXX prepare to anticipated already the we January quarter redesigned process anticipate full to of team of we spend occurring We a demand remains back in simply the beyond doors people surge orders. almost wanting the as of To

looking to of X, to XXXX. Turning the Slide remainder we're forward

We have product are There few launches a XXXX. a in quarter pretty exciting two, pipeline. upcoming big

Simply first launching Bare be Live in under First, brand. we'll Organic Ontario our product Rosin our

and We an incredible much is methodology larger this to are process genetics will that believe currently well tremendously suited product. we creating organic a about than it product excited is and our be category particularly

the anticipate through or category PAX Pods ERA also weight entering We [ph].

to be right of profitability. province our of products. already significant. strategic new We this brand industry size in strategy as the pod our to in be be the of launching We've launched market end only by for pricing launch with expect will the June in weight restrain PAX once leading ERA is into organic for capture Quebec great XXXX our segmentation line our anticipate we with margin XXXX the to Building by province better prize good, mentioned previously best the XXXX provincial And goal strategy, also volume better, strategy with and ensuring marketplaces. pricing realizing critical while we'll we success

practices. leadership In it as addition sustainability its pipeline, Organics governance relates our innovation and to to Rubicon advancing industry environmental, is

to one our days mission core our the In sustainability and you values proof and again our you in for are joining exactly ESG are oriented of and to class standards. commitment Margaret. will call, We of four where intend Thank call values. now improve to we over is we best we as today company, outline I will see coming and the how today's principles pass

Margaret R. Brodie

Organics and X.X million. million net revenue XXXX, increase This In everyone. Jesse first to of first morning you, quarter XXXX. is a good of of relative Thank the the quarter reported Rubicon X.X

XXXX, off Although relative effect in in we by QX the in write we to provincial given preparing on sequential it revenue on into We to in-store limitations patterns due were indicated came In for COVID-XX do revenue, million visibility shopping the by we that the necessary limited closures, good the and off ship QX buying not And net was But would $XXX,XXX QX was impact off. to inventory. experienced. sequential been product with this shopping, packaging it impact the market adjusted We driving we Unfortunately, more QX we fair the and Removing reported December quarter, Considering XXXX. we we finished orders a quite over we gross value were than had until placed XXXX. reported approximately profit. pretty this in-store higher decline for relating that the than we on that positive goods in experienced finished of product finished the and growth XX this distributors for a distributor change in wrote given write experienced provinces of making thought product Rubicon a remained have decline package retailers to we less we are spec. with planned entirely for write-off, profit sales XX in loss towards in EBITDA changes. had requirements, provincial pleased days of levels built X.X product of was of gross are days. an XXXX. excluding packaged the than progress line

conditions, is profitability As market undergone adapt open to that million. feel we a Jesse adjusted capital restructuring approximately the favorable cash market X cash and by and market earlier, eminently million lean to over We position in the ended in and routes with XX to EBITDA have more we quarter with achievable have a working We mentioned conditions. measured million XX operation. are over of is today

are hard all to with can going sheet really our to we balance While from pretty we operation. still the we extract comfortable efficiencies are our press

strong debt are range this that keep the mortgage before growth quarter this value the free, of At our our $XX facility provides. place for currently the XXXX. the be of end options at We expect looking cash are we trajectory, second flexibility cash and in our in lower position in of delta we million to point although cost to

objective, positive maintaining XXXX our we HX in of our are cash to out pushing objective financial profitability our to EBITDA goal XXXX. flow Turning operating QX of monthly and

still expect on have difficult are but are terms forecasting profitability Ontario if position revenue. current races, we our off of the lockdowns are impact start openings deliver We to in an a to short-term. in we the further in in pretty will it ability extended we seeing retail If

bullish Rubicon’s very are ability on profitability. to drive We

customers restocking once green Ontario Jesse to a allow make there first of and light to the waiting their retailers there order. mentioned, potentially get As event stores is back hundreds in stores large are

drive will innovation have implemented to positions that premium concentrates The exceptionally as delivered we very costs to the the the premium market category. and incremental to production line. deep that category to pipeline baked, bottom across restructuring well and directly across that a have have ensure We additional efficiencies well and fall flowers, in sales market share date, strong very share our down, operational positioning we company the capture

very to lockdown Organics’ looking coming true We out are forward Rubicon and of potential. showing

open we would questions. like to now So open Operator, the line. the to line please

Operator

Thank you. Instructions]. [Operator

Chu line from question the comes of first Your John from Desjardins.

is now line Your open.

John Chu

seeing of so those not even destocking starting you up when in mid-March whether buying Hi a orders you emerge? purchase we've that the and maybe that seeing there, call think about just your starting bit said the they of last I'm reversal just shutdown, I time been of a patterns whether or curious had wholesaler or with pick talk currently, you to seeing were not and can some you're to

Jesse McConnell

John. Hi, to great hear and question. from Good you a

huge that and those that open, January-February We that a flown at purchase Ontario POs were in was we closures, there orders return in and have the an to we purposes few then levels. for looking surge building in have internal brief with COVID a the weeks interesting that was graph how saw

they to board, out addition meaning popular a going the stock you're up of occurred us this earlier, out aware probably that that in has others across of in Ontario skew also for the social delivery items So and the slots, number items. that spread indicated purposes, rationalization of distancing ended have actually

not forecast reopen, patterns be buying we yet. stores be to which have the anticipate So we few the provincial to current June Xnd, until according weeks could do internally that. early not they a And as returned wholesale seeing to that really as after government. that normalized Again,

John Chu

type June, your the you PAX of some timeline, new a Okay, and just of of the some of Falons a had timing into [ph] X.X on about you the to and XXXX but maybe talk products, that details and more and it's might Live just we Rosin any and previously then then now for of an a the QX you products, with which roll some well? new us maybe us provinces then order timing of bit maybe see gave out as launch launch, can specifically the products give you're stuff launching of first -- looking bit when you other that additional had

Jesse McConnell

one certified different strong little that. therefore Live product Well Rosin, that consumer organic, the very adapts that's minor resin, being category live correction, which and to just anticipate and it's is as a a solventless a is something actually which we

I So way the that the is and timing a is little provinces. in strategy new give can't different the a province you see out by quarter or dates province move each therefore outline basis one easiest There's each calls fall differently the to specific to slightly just respond consumer. to brand rolling broadly we available slightly and you'll to on on early are inside and province the those our provinces. of province of across right time in different in the on which various that each product three would but different that XXXX then the therefore become now, late will quarter I two timings will

the is month, launch next PAX in PAX, I believe for As June. that

other different eight the first and see that various see Yes, products that’s innovations, same additional of some And to that is probably trials, that we is We there Ontario on some and that see the increment, weeks first Live that the provinces into. genetic first, Ontario after product. quarter. anticipate various in gone the the launched maybe way coming apologies. in market I I their Rosin of to in the in province, have You'll list said but different the we we genetics expect worked first, that and I roll pretty the consumer. the mean, the saw of that dozens hit the Alberta -- in then has begin out and more -- within will profiles it's at being to ensure the the to than across XXX are understand that. Alberta then six course, terpene of right five begin Again, have slightly be four new terms to the on the grow here going high cost market. you're of weeks, in best very genetics to yield every to genetics innovation see side that And then how a in our base they quality we different pipeline to and to to going THC then after in buying weeks, first robust coming And -- see next there's each different patterns province. call, attractive

So to be buying advantage. we've going those And specific we that's range of that strategy treat adapted part to to province our think strategic our each pricing patterns.

John Chu

maybe then question a and Okay, just me. last from

give to sounds from kind EBITDA do perspective, of that. it what the it we to you've just like timeline, On a positive been see a addressing need maybe there of because cost sense topline get

top give which headwinds. the to bit be number control your us a can given of sense industry us type hindrance out of what So that of been But it line has topline it that need seems see the you for positive you one to EBITDA? the a like seems

Jesse McConnell

Yeah, the real short-term. headwinds for do excited, whole industry. I as certainly quarter COVID on been mean, bullish And view the three. very it we We're have very certainly

for million revenue to place. inability are doors of current break visit with of orders hundreds of haven't inflection just right kind they frustrations, are product structure imagine they it. got point question, doors in the excited and industry that be reasons, your our hundreds the under wide, and EBITDA stores to opened but waiting in about can stores. our just over cost two all But for specifically the and the would though our just us their for quarter You There But address X lockdown you've open when positivity. to into shouldn't stores

John Chu

that's okay, Okay, I'll Thanks. the queue. get back very helpful. in

Jesse McConnell

John. Thanks,

Operator

Gilmer from the of from line Securities. question comes next Neal Your Haywood

open. Your is now line

Neal Gilmer

any Yeah, undergone, in to actually reflected realized that your post QX Margaret. onwards? QX in done of the those respect savings, million you, that is and maybe that restructuring with QX we'll with the you've good or comments something morning, you've to with starting savings start X.X and annualized was in Jesse that Margaret, see

Margaret R. Brodie

Frankly, looking people, year, It as that obviously onwards. of reflected us which QX repurchasing we -- decision at are will the were move the a namely to dehumidifiers, is like in expect more and items through We cost all before. efficiencies and be renting for do whether we difficult growth. come that there

the If all [indiscernible]. is and XXst you some debt our cash March at look down since our biggest buying our paying in use of cash, last

we're other our upgrade, waiting so on than cash BC which We're really will operations, a So also Hydro -- just well. as costs update driving forward. normal reduce

I they're up. are which But there in excited those think we're at that's all fourth is lot increments it but quarter, improvements the like earliest. quite -- a the add and about, incremental,

Neal Gilmer

Okay, comments it's here trying you. Ontario, going And provinces I down. but to with a just to thank lockdown gauge tough still obviously your respect understand myself. in get for on whatever, then on know what's sitting the I

quo June? the look much a marketplace of versus it's So think Not flat of is -- expecting the quarter-over-quarter in way you of of to because in QX closed the is lockdowns too upside now? end sort basically of right the the take through downside it's to you're not on sort much would to we that status sort at that say, or QX, because pretty it's assuming safe are a basis, the dynamics much it right

Margaret R. Brodie

excuse are some got coming reduce That me, have that curfew Ontario with point We're June but product market, Quebec, one be considerable how very sizes seen event across very orders -- -- you with to these the LPs new orders placed be there, all of huge on closed. the will stores want would to categories. think demand. interesting we've mid-August. it's it when of to Neal. because Ontario the whether that, size we're various about initial said, going up, to going at that size being for I occurs, expect until to And agree see we'll pretty be in the board in out, stores restocking in that positive lumpy We've different of everybody's July, reduced province being hours companies, Ontario their hit the I will us think COVID. a large hand some and on sit the launches or and probably it open the with if we needed There's

You don't want entire one your sitting with skew. to store be

very then logistical So be the large exercise OCS. it a for will

the So bit the even or advantage nimble start we're I the until ability deliver it. big a see can orders, do hard come What on when reactive guys chain I think and actually that large of fill able that smaller opportunistic can't to flex businesses, and are in take we've expectations those my to we September. organization, out you won't to got gaps. supply the tell And to be working the is be be very to to and August with

Neal Gilmer

Okay, it. Appreciate line. pass thanks. will the I

Jesse McConnell

Neal. Thanks

Operator

next Your of the Raymond Sarugaser question from line Rahul James. from comes

now line Your is open.

Rahul Sarugaser

questions. thanks taking so and much Jesse Morning our Margaret, for

the bunch answered the already a by my previous previous question. So people through of been questions

be of and turn Intel So EBITDA still that continued there's into able QX looking of restructuring taking you of positive account to mentioned. QX and costs QX, terms a QX that then, in you opening maybe the come bit and opacity your course, just some recognizing up that little should beyond confidence

we be durability should that you some do EBITDA the then come of sort about and onwards? and how into QX EBITDA hopefully, of of QX positive primary thinking and drivers of the that So how assess

Jesse McConnell

of openings our six us Rahul. Well, is course, and getting It's just closures responsible it's in also restructuring for Ontario, depressed of Great having but months to question, better. twofold. firstly, the response a simply a

to dramatically dramatically our it's people just handle and our yields. have increased, Our increased quality has increased, has meant need dramatically cultivation processes we increased, less processing

you look were So has to came look we out in for and back all in around open as the event a organization, sense, couple in place frankly, industry to Ontario is that the and have those closures need quarters result at we about that and the great. kind conversations its restocking for of December. the of never a going When consumer, create up of that the think cleaned accessibility marketplace, pass which

in is We're a of will of happen aggregate. quarter restocking surge will simply not stores nearly in there on. I in Ontario one-time event and drive in demand talking the up XX% increase nice while also three, that curve province leveling about So the a it's bump a It's alone. demand

So whole we that really see leveling off. thing

but going the The this skew skews find lot to rationalization, through the landscape skew shifting see strong come from you the to I'm less into down know, quarters counts in didn't get LP's XXX magnitudes the down XXXX as to this. also themselves bit position that and going get competitive. a two I'll little We wrong, around a last neighborhood brought financial being of a numbers right, odd somewhere skews. are

reduction magnitude. really significant in So

So arguably options targeted. the shelf so better share on got consumers, better, for more more we've

for are business more core the So innovation this our facility, premium the we in consumer, able in accessibility of that just the of around get out to forward in coming launching at year, over to specifically year distribution a now, category, into look domination the many which we've Atlantic the frankly, the right last flour. continuing points they're high the is more the as we building going of we've got been right pipeline access got sized we've process end that built our going quarters. prove to we've we're we And grade the that be

industry upcoming quarters, those I succeed see quarters. lot of up kind LPs sidelines in there. that focused is And think leveling into you'll LPs there's that. in struggled here going have to in who a And with of remained think who the So are couple of pushed really last a I a whole process the

Rahul Sarugaser

some great color. That’s Jesse. thanks Perfect,

quarter-over-quarter, as at other terms bottom that will follow margin the so modest of looking and course, on would drive seen bottom And and quarters that how continuing -- the couple longer-term? a next mean, about we thinking trajectory, line improvements some medium -- should be factor that margin the line and of be, then margin margins improvement on I over in of just we've that of

Jesse McConnell

the our you're in our going look Bare think see Simply some portfolio of But was you cost we margin I out of accretion. that see and to -- a overheads and increase, when quality some of people. -- you our a on restructuring see Well, that drives then yields of at that should came and lot because unit economic that again, it basis, improving are

the certain In of and new example look the size economics access we're we provinces, the be margin going gross you $X around by the pool step in. we pool, to get margin in overall when five terms margin of away twice to weeks that a from size pool, gross price that's give that if pricing drive $X simple in to Rahul, down aggregate one implementing to currently coming of a we from unit current in to that the the almost strategy at we're offerings our

got offer that. segment So domain. now in But to new below this and that we'll the margin higher can we innovation, have genetic that offerings still begin we've that just

margin unit gross one of we aggregate while the So currently we're economics the that growing maintaining and the plan. the size pool

Rahul Sarugaser

queue. back get in Perfect, much questions. my thanks so taking I'll for

Jesse McConnell

Thanks it. Rahul, appreciate

Operator

time. conference further the this Jesse turn no McConnell. at like back showing to to I now questions would I'm

Jesse McConnell

challenge bunch out we've We've quick quarters about very our couple a on just last to of the the to upcoming go with ready these things two weeks. closures. Well, the We've nationwide bullish year, the think, been talking you. organization. whole a COVID this very, for that last comments of up, and the in of launch got I industry been future in close It's province-wide to innovation business. ready Thank we're for a leaned here,

excited So more the Everybody's normal bit of forward that getting we're a a looking something back tremendously life. resembles to to normality, about future.

for strategy, conference with stick our I'll in Thanks back. to and to going your drive day just call. grow anticipate and we're of the you continue our And quarter everybody profitability here, So, give rest three. revenue here joining

Operator

have day. participating This concludes you for today's call. a wonderful and conference Thank

You may now disconnect.

Rubicon Organics (ROMJF) 18 May 212021 Q1 Earnings call transcript