ROMJF - Earnings call transcript Q2 2021

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Operator

Good morning, everyone. Welcome to Rubicon Organics Second Quarter 2021 Financial Results Conference Call.

As a reminder, this conference call is being recorded on August 20, 2021. At this time, all participants 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 I turn Investor Marc Relations. Charbin, call over to ahead, go Marc. Please

Marc Charbin

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

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

Jesse McConnell

be the leader organic and products. premium Marc, global morning, cannabis you, Rubicon good to Organics, At in Thank is everyone. our mission

this by through the to focusing quality. first value fundamentals of and on consumer best the and price are We accomplishing delivering proposition the ratio right the

differentiating are we our through and effects Secondly, organic flavors methods. products, certified

out the environmental portfolio And lastly, building robust our segment. to Rubicon segments. true our to Organics approach by brand staying This as market in pricing the of to evidenced report. pledge in the better win industry-first by best by premium a gives Third, cannabis sustainability, good, and ESG right each

our our Our It that our we Columbia, mentioned X brand quality markets, relentless been the a home is while launches portfolios. these all SKU a markets our X. over update market focus our ranked cannabis in province industry cannabis customers. in year, have second any little attribute this grow quarter had brand is in many our Organic very that are their Simply In expect a premium reduce able demonstrates markets noteworthy consistently high-quality our remain to MD&A, has larger will British I in upcoming market our deliver and while order with line, increasing our we've to quarters. to grow coming most and recent quality our strategy of we significantly product to working. and in our Bare critical. a have to the on only and innovating quarter for of product market been competitors we good in brands Bare in business, process and In We over factors share Simply we that continuous increased our the Like our improvement for in share business is share consumers. have that leader top thresholds Organic discerning consistent

flower Specifically, X completed have our we a THC phase of few high-potency have streams. high these commercialized development select program of and

was them of new in The first month coming July, made and these this in of with in mid-September. to offerings Quebec the later market available majority

Slide to X. Turning

that this notion premium the methods. little premium aromas effects premium in win cannabis and consumers those premised today, can we a on to to of pay strategy Like experiences of the organic the flavors, consumers the best super characteristics. cannabis Our through that and and is believe best willing many cultivation enjoy segment to are achieved care more be their about

Turning to Slide X.

fantastic Ontario, You we cultivation in savvy premium in that our of X.X derived product create footprint. Cannabis share in environmental a flower is products cannabis have that market know, especially and chemicals that richer the reviews. consumers, methods appeals significant Organic and profile This no the There And and market such they our just put dominate there To as unwanted flavors. consume feature. to organic not is live cannabis in organic of with June lower each are terpene elevate our most that Canada products the rosin benefits to can were a cannabis products, consumers knowing also ground as locally launched important are the mindful their recently as out inputs ocean. in PAX see organic from are and pods, #X or prefer BC, pre-rolls and which continue Quebec cultivation the Alberta. in to you

handful X of As organic to the Canada, organic of certified will to that of market. to our cannabis premium cannabis only a cultivation a pivotal driver expect we in producers continue be win segment strategy the

our quarter highlights. to Turning X

We and distribution will revenue both X. and that accelerate significant innovation X growth in headway in have in our made quarter quarter

more SKUs the quarter. to earnest provincially are the a total Most innovation territories begun additional X XX with provinces listed SKUs with distributed commercialize of in products and now different we've our brands. available product an in recently XX across added importantly, Brunswick and widely during pipeline We Yukon added X New with for

As and that provinces a Ontario. recently the doubling including communicated. consistently new aligned can of our strategy This our than X, see premium portfolio have XXXX more best you provinces, been the Supply Co, on and listed represents cannabis current major and Alberta, Homestead, our better, is we BC Slide [mining] product have with brand, mainstream with X good, brand of X

expect see offerings at begin in end listings the these of as a September mid-September. the provincial these significant from majority We of growth and to shipping into X new we to acceleration in revenue quarter new distributors

we market of still pricing maximizing while segments, growth sales volume forecast the aggregate top of profit. higher is each line significantly premium in and strong our mainstream As the gross

of in encouraged they we reach Our by X hours first markets of sold later BC, larger as brands these even quarter within are XXXX shipments out very in Homestead so potential the and X.

to sales of domestic in are new new channel. the open of stages Speaking markets, finalization late contract a up we

our travel about spoken top in our with front, our announcing in international routes all receive with to details which revenue contributes with easing, our the as structure, growth soon. direct we bottom We've the that, primarily of expecting audit very we incremental acceleration are to audit releasing parallel trajectory are go other and And line to anticipate consistent to fourth market, partners. COVID we'll German restrictions that close production international GMP we we communication And confidence EU on-site any the which quarter. us, cost sales with in are On this be costs, making our our we to toward profitability. now quarter all X, growth it's about expense address its been for in our turn line. Because cost the base. I've

Social largely in in In Inaugural recognized cost the but that in Governance $X.X by the the be went incremental restructuring of These X, X June, which our basis second and quarter. in on quarter Report. recall million. You'll will closures, the quarter annualized published quarter, restructuring through a approximately we savings COVID our was Environmental, expensed reduced to second and an store the cost we base response

this We we're standards and in our are the cannabis highest world ESG to formalize the company that the proud provide commitment with publication of to the this first report.

engrained us know governance For that sustainability are those you you stewardship, of know our well, environmental and in DNA. who

of business. our reinforcing BC high-efficiency and facility built term, upgrade near carbon use we we recycling. expect that glow was agricultural inputs local $X annualized employ divert soil We further a Our Hydro We recyclable lights. through living with of and comp provides packaging. to the with LED is sustainable that year, posting footprint our a good through ways the business million In savings reduce reception

for We improvement. identifiable have mandate even ESG now further taken our by targets providing

diversion framework target set a have and XX% XXX% improve water a we measure for and developed by baseline which and waste circular packaging to future years. create consumption we XXXX, have for in can We a in

Our goals. also commercial in ties ESG report strongly our to

our factors and our feel ESG strategy, executing our we we the We're differentiating the pricing premium product market. cannabis on premium enhancing earth justification each growing that here]. With for category in mission added are on [forward of in cannabis organic and cutting-edge the best and providing

determined their the process, are care to With this in evaluating call customers Margaret. where from, and products as I over investment the environmental now coming factors we investors the as stay about ahead of and will pass respect. decision to part are curve that, Just social of increasingly, are

Margaret Brodie

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

the and June or Brunswick late the the access market The Ontario, partially course expanded Quebec, were BC, the distribution net profit Two with New this for Canadian to our Saskatchewan, to it July, of to We to XX early in the attributable the Yukon. X prior provinces increase inventory last majority SKUs up were of SKUs improved from we'll in slightly of across year, been began as listing growth to confirmed revenue QX Manitoba, reported $XXX,XXX compared and QX, retail and hitting $XXX,XXX compared Alberta, stores reaching is over Canada in be excuse trajectory, the revenue ramping in As these QX reopen, sales benefited we prior -- particularly would factors Gross have gross our Sequentially, in a write-down. quarter. as write-down. caused profit me. not weeks Ontario. to inventory across

threshold Jesse to the Bare Organic have quality increased First, are we for market. the ensure the in we Simply as cannabis determined earlier, as mentioned best Canadian

$XXX,XXX our which sale, materialize excess given anticipating inventory market store now we Secondly, This as sales, we up we did and second down the had realizable by our months the reopenings impacting we access have retail not our before of the about of is ramped to available value the wave it Homestead net stores quarter. X inventory, for commence cannabis written in of cultivation that for meant that COVID-XX third ready QX brand.

and $X.X our the brands an that brands million from with of million net two sales to million is market now ended we our was increase which over We of products balance XX loss QX Subsequent we We the in $XX approximately adjusted new at key the bringing the hoping, quarter sheet investment cash significant issue, continue see as going that QX This in with ready proceeds have support Fortunately, objectives improvement more EBITDA we create. August debenture and in we EBITDA for million that revenue XXXX from our carry. We capital. were across remain forward end market. growth our biomass comparable reopening received in unfortunately our $X XXXX. to in with available as offset the million and adjusted by to this cash our $XX not July, of quite working added are stores as continued to confident in XXXX. treasury. we we quarter the XXXX the with debt markets, brands XX, to Homestead reported And June and in to $XX.X in will early only

financial objectives. Turning to our

see goods to that take into capacity of costs Rubicon continued to full operating Homestead our material being impact we expect LPs. expect from HX certainly in that reopenings rather currently production expand realize volumes full other at associated costs Jesse super earlier. saw maintaining leverage. positive the of with QX, cash sold to flow its sales P&L; utilization, unlike for from late And This on Organics we closer The a are operating and in opportunity profitability and the that cost and expensed we of comment XXXX. premium significant contributions Organic production as and directly being in store expense goal QX product, the We as particularly through in monthly means incurred that achieve EBITDA made our new we to of the market in Ontario revenues the to provinces, expenses capitalized Bare and most continued I'll sale leadership than XXXX Simply are market. this has

the start months, of base, to premium, products focused position Organics are of deliver international And high-quality is the ready the for in us mirror, opportunities we in market. now like to the rearview to key and excellent with low markets. to super the share continue Canadian open ahead premium listed X with consistent premium with strong we in line. realized see revenue significant. Operator, gain to and our balance we open that costs opportunity coupled means in be would to As now growth, closures of profitability to near-term is and believe generation categories mainstream COVID-XX Rubicon expected We the store production a deliver in the revenue our This questions. next cannabis an sheet cost please and line

Operator

[Operator Instructions].

first Your comes Securities Haywood from from question Gilmer Neal

Neal Gilmer

next said just you're to want bit the markets. the some I of a Maybe see the and course And over think have the more a the it color talked you on months? new initial SKUs of feedback nature of into little Ontario. we'll to was the MD&A, some on Do new the of you to in dig you I sort that noticed, little live SKUs of deeper any rosin try bringing how going few about I bit market in the

Jesse McConnell

previously we've in as Well, Neal. doubled over question, mentioned, Great count our SKU province.

And anticipate having already that we're the will that's We've Kush. around there associated XXX%. The that we about of the strains, gross best results that. so are most which we incrementally, launched to the margin that that new Simply with few where be pretty SKUs excited And Bare Simply seen preliminary our been Quebec has Pink in Bare date. we feedback have launched product significant

drops products out excited That's had We've so far. the rosin. a of live only of X really sold in that, limited are which The time about we're other X matter been offer hours. of both

associated provinces ramp that. more a of lot closely work orders So up a for It's something category new that's purchase to we're the with that with the looking to distributors.

with now terpene have grow core today another the PAX of that pods. lastly, I'm And But marketplace distillate-based anticipating demand in of significantly. really our often seeing a competitors quite to becoming we're PAX category and that pod. the So Most artificial familiar they're about the then product, excited more SKU pretty it. is we're that

As we’re the And are quite spectrum premium you the PAX in focused market full side, know, pods today. we're on pods on the PAX focused nicest our flavors.

Neal Gilmer

the that quality basis, Maybe great. have to their of you I'll at we'll expense, regular With margin. for your That's parts look color. similar versus a when sort amount standards? comments that Bare, sales, for last on standards Simply fairly respect a bit your just take follows that with write-off X your for Appreciate understanding of the to the And Margaret, that me there, production and the revenue but on sort necessarily call the exact moving would that of fact small and something given inventory sort inventory high new ending in and see little the inventory maybe we is focus quality just on as of not follow-up a this just And at -- write-off. cost same more profile the you a your the some levels, see gross quarters. on it,

So much understand in and that's sort as up wouldn't an sold that change in revenue I second those X correctly the half of improvement cost the margins? gross we of ticks drives see it in line of year, profit that what

Margaret Brodie

Correct.

X got and you've answer. questions So there, I'll

which write-down, change first, going the inventory. is The write-off. around I'm And a not to your nomenclature a to

Neal Gilmer

Fair enough.

Margaret Brodie

product sell it the well fair capitalized proportionate product because the assets write-down But helps wanted we does, XX it's that appropriate cash under that we the product fact, the we in improvement it We feel we're above brand, value. that will that that to it's our very that to other that Homestead cash to cost -- quarter. in it's turn the different that me because take said market. the believe can as sitting out happy quarter. us to as Frankly, able it companies. the into margin product. hopefully, clear will We the didn't is but IAS we as be we and had in this, above auditor on route that in about a industry biological on But cash the we cost -- that We do gross sitting quite with next going through costs saying see have cash we to inventory. have. our clears sell next to because they as And kill And was actually, weren't than for we

on cost. very in what confident we're we're doing So

to to going that going part leading of production second you're are us cost see of question, down are sort the the to And for down. the going go and

down. seen trend it coming a of You've then rising and

expect in, seasonal And right We for we're that's for about any that other next forward that relatively will see be done once revenue than speaking, costs, additional more XXXX. driving X expensive et a year in years But with some that bullish BC flat months, impact be winter really beast. to bottom cetera. $XXX,XXX the a large We've but in been pushing with is be the on incremental you'll Hydro us. line. dealing broadly The savings seasonally, will heating Otherwise, should that quarter impacts. to get growth directly it

Operator

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

Rahul Sarugaser

from you year, revenue Could also So referred population second brands, September. do those based I the as in Western the an the confidence continue second PR new expect how your the the ramping But inflection guess that? half large a to of to order you also in sort in additional Eastern half little of looking at overperform year? referred expected provinces but continue more color the on bolus given as drive SKUs you you this morning, to Ontario points give on to to primarily specifically that there the in bit us the provinces, in of you order through well

Jesse McConnell

Rahul. Great question,

mentioned, -- I listings Recall, of is I'll which inventory our pipe have I'll into our the X, first around think fill. quarter pipe in fill, that that the been timing none Ontario almost the market largely new of question, I in X, start most around -- shipped. as own listings divide with and

won’t So incremental. to going of really see impact be in we earnings. really hadn’t you significantly seen pretty -- any these It’s that

slot new of We bulk and that in far quarter for you with until about land able even won’t of ramp but to the And September. away a XX% those some are being don’t those revenue by see listings to today happen of those starting some marketplace those, book X. of be

that market of have when we double with latter it and currently in September half the be in will over early products is inflection we point that see market. October, of really So number I that different for the store And parallel have with LPs new in openings. pipe inventory see Ontario, based to that fill times think and is in on timing expect mentioned they different

to walk-by really going late market view event to Our it here of question, wasn't BC premium We've then your the we early that an maintaining been COVID that that Ontario. that position see happen inventory that of versus tremendously don't successful the happened been throughout. July, traffic. driving August, until and September, pipe closures the in leadership And be market, and has the for BC to given second office return pace fill in sort our turning in

home is in work it we've able been here. our months so with market, we course, to Of about closely here markets. than stores we're X longer more And the for major in have market

know see BC about some will consumers what growth only out with So when in we're and really that our expecting and larger we're strong going market those familiar and effects. flavors turn Eastern it's markets, education us that already we're process that and to open. Simply the XXXX are a tremendous that here love getting becoming more provinces are doors through Bare you share more reflect now quality the to those Eastern in that consumers People footprint, products,

Rahul Sarugaser

Perfect. helpful, That's really Jesse.

sort guided of of question turning you, a profitable looking Margaret. of guess on for follow-on I kind in at to the had a year. So middle sheet the question kind folks equally you of this it's Previously, and balance

up. COVID impact as outsized have positive an retail and opens shutdowns the course, opposite had impact hopefully your on revenue. But retail Of of should course,

thinking potentially turns even we And/or time number a now, million as -- flow EBITDA Margaret, sort which million you Rubicon where or as XX Now company? working of I I that guess, cash an well capital, line in positive be given cash point -- have you the revised the that estimate? on into about $XX.X have $XX should at the revenue you believe in do hand said positive

Margaret Brodie

Jesse. I'll take Rahul. that one, Thanks,

of our We the SKUs the is new are landing timing turn. in -- Ontario

mid-September, The said, Bare. going XXXX in that product coupled first the significant Simply SKUs is as in new with that, market into Jesse all are

over for we're sitting we very We're few the -- course strong of balance the are We're next months. feeling expect on sheet, So in we positive pleased track that. with off a EBITDA us. only the Simply on. And going to with some the that you're see Bare, see from which to not back strong you're that, revenue going of bullish of growth we're and trajectory that

the for and to amounts driving also bit do we that out quite continue and our premium forward. XXXX a there's clearing think Bare significant done there's Homestead of us room to with in sitting of vault Simply grow. category volume keeping But So where that's

we're positivity. that So EBITDA you're that, say, to of the very I and next, the us see from in going over would course X confident months, i.e.,

Operator

Your Chu of next the Capital. John from question from comes line Desjardins

John Chu

these first brands SKUs the into all with and all new question costs just on So associated is provinces new these and launching new my that. markets,

while to QX? the that costs we So expect remain into during launch? QX, they off to are see early those for come expected some are of can to Or elevated parts of a

Margaret Brodie

one, I expecting Jesse. consistent. be relatively that can them to take We're

We are -- built. is our team

have people any fantastic We sales the It's with more if innovation not side. a growth And costs point in incremental this marketing we associated need and at directly team. to marketing drive would be on that.

John Chu

about talking weeks the the is just believe maybe growth. said then And you of June, quarter-over-quarter which I the for last really Okay. driver X

we're pent-up like for of weeks to So how the us of is that kind open? momentum of restocking and now a tying Or year? is see the to to in of level demand and expect to that the second that in seeing bit I that good the stores read-through of half rest it terms more a then that some as a mean, off wholesalers, starts something with X revenue then provincial more of a growing more of through consistent on

Margaret Brodie

-- think I sorry.

Sorry, Jesse. go ahead,

Jesse McConnell

patterns. buying last X not June weeks -- significant were It was way a fill return pipe to in of The event. more a the normalized

consistent. to-date. is In stores we we last what yet X normalized a over distributors. seen the a this the large the coming see from and to view, weeks more happen to our movement So pattern event have the fill sort We've is of buying pipe

SKUs going the what June that look look see can I And basis. do, like SKUs look based can -- have few patterns thing, versus think chunky you orders. Only on the of are purchase So we expect that you, that to perspective, result some John, I'll dates to in the And our a buying included last that. a of doubling you distributors' of it's is go-forward just Rubicon in remind -- marketplace. inclusive are more can going when not the from shipping to on we many revenue of is expect

So little that chunky that, to you're see a on accelerated but quarter us growth was coming X. of bit going out from definitely

John Chu

question. you And my for Ontario. talk Okay. then last Can about just the listing window

I there's window. about think closing? all closed to you broader of talk the that landscape? dynamics how long that or too long fairly some just that in maybe the the of not window going submissions you listings impacts prior until in, a then and And to competitive be ago, then break Can got your next whether not

Jesse McConnell

we substantially call, change another best of Yes. for updates. until April August have another bit will a little listings which great call update our to they my in here caveat mind OCS August the my answers will efficiencies organization. call to call reference operational first all was to looking they not not bimonthly own afternoon. next call call understanding their call question. were being in The was I will but got a and per the be at quarterly the April, recent those this product product, our we our haven't yet. tendency with call, That's contact how I current as the doing call we the so And a product. expect go-forward got a product not in, think basis, we which understanding encourages to until would That to the that I'm they at last for away. have be move the then hoping that to X because their quarters OCS week, a this made then product on create OCS today, a In per -- hear Initially, are be core earliest. state-of-the-art with speaking June And in

Margaret Brodie

would I And add.

for Just some listings are reminder, product in of getting those with and store. call large a very product. actually the it Ontario where that of in window the April, building then to market take opening will with a in land to stores, product consumers share new It's critical absolutely time your understanding time

John Chu

And question. sorry, last

launching the of June, that about new these month Some or that's products the submission next in from you period? talked X,

Jesse McConnell

Okay. Yes.

the time to the product goes X approximately see in, that. products expect and after then line, can is orders John, So submission typically purchase months market you for in

in X So referencing we are orders most product going after the August going of product bulk into of what the those listings accepted. then call from now, some June and right in, September, months the were

John Chu

then August November-ish? this from the to for listings, afternoon, product hear about hear listing guess, you're hoping So new that I can we

Jesse McConnell

October, November.

So that, it approximately in in, if comes it's August, X the purchase order. months after that you'll see

they're October, it of approximately make depending would would November. after sometimes in typically for months market approved to the OCS listing. does certain trying But accelerate inventories. most depending on products their listings those need rationalize product consumers and -- see their on it X the those see delays you'd land largely they're in how those So sometimes exceptions, But

John Chu

Was number? digit, many how single the make just for ballpark that call? did digit, you submissions August And double

Jesse McConnell

there. submissions XX Approximately

large are margin Some gross pools.

are smaller, X Some there's or replacements. and also X

So I with up date process and rate is the a category, margin with ongoing your we of the is the portfolios consumer what of sale, value to have of product see the of XX. keeping for. part would and to is higher it replace SKU feel aligned decline say optimization incremental in which rates where or change proposition going is we SKUs, approximately looking we're sale Others us, that to for about a looking

Operator

further no this over back presenters. are questions. At to there it Instructions]. will the time, [Operator I turn

Jesse McConnell

in Well, today. everyone, quarter X our place. quarter joining We're bullish you. you, thank X, the very The is outlook. Thank team on for call

are innovations listed. Our

come has up quality Our significantly.

the So profitability toward looking for to you we here turn later half. this making Thank forward much in call. are the very joining

Operator

conference. concludes today’s This

You may now disconnect.

Rubicon Organics (ROMJF) 20 Aug 212021 Q2 Earnings call transcript