Rubicon Organics Inc. (ROMJ) Earnings Call Transcript & Summary

So moved.

Is there any discussion on the motion? All those in favor, please raise your hand. Opposed, if any? Carried. Next item of business is to consider, and if thought appropriate, passing our new resolution to approve an amendment to the Omnibus equity incentive plan of the company. As more particularly described in the information circa of the company dated June 27, 2025. I would ask for a motion with respect to the approval of the amendment to the Omnibus equity incentive plan as more particularly described in the information circular.

So moved.

Is there any discussion on the motion? All those in favor, please signify by raising their hand. Opposed, if any? Carried. Prior to this scrutineers report, I need to step back for just a moment. I think when I asked for the -- in connection with the election of Doris Bitz, the question I asked was were there any opposed? I think the question should have been where there any withheld. And so all those in favor, if I could step back to that 1 again, please. For the motion for the election of the directors, and that was -- all those in favor of -- the appointment of Doris Bitz, please raise your hand. Withheld, if any? Please raise your hand. No, withhelds. Thank you very much. I didn't want to pass that without having correctly reported. The scrutineers' report I have here. And with your permission, I'll read there were a total of 0 shareholders personally present. There are 3 shareholders personally present, but by the proxies, there were 39 shareholders present. Securities represented by registered shareholders that were none, securities represented by management proxies 31,130,021. Total securities represented at the meeting, 31,130,021 or 46.34% of our total outstanding voting securities of 67,175,771. I adopt the scrutineer's report and declare accordingly that the quorum was present and ask now, if there is any other business to come before the meeting. If not, all the business for this annual general and special meeting was called has now been completed. Before concluding the meeting, I would like to thank Janis Risbin for her hard work for the company over the past 5 years as our Chief Financial Officer. Today is her last official day with the company, and we do appreciate that effort over all this time and we wish you very well. In your next endevours. And I think -- and before the -- again, the motion to conclude to announce that following this meeting, there is a consent resolution signed or being prepared for those directors to nominate Doris Bitz as our new chairperson and she will commence that job immediately following the conclusion of the meeting. Thank you, Doris. And I've moved that this meeting -- well, I ask for a motion to conclude the formal priorities.

I move that this meeting be concluded.

Thank you. All those in favor, please signify by raising your hands. I declare this Annual General and Special Meeting of the company concluded. Thank you for your attendance and your continued support. I would like to turn this over now to Margaret Brodie. You have that?

Good morning, everyone. And I believe you should now be able to see the presentation online. I am -- you can't see me, if you're listening in ether, but we are present here in the room. So please bear with us, if I'm just hearing something and you miss it. I'm Margaret Brodie. I'm the CEO of Rubicon Organic very proudly. Today, I'll share what Rubicon Organics has achieved over the past year, what's ahead. And with our newly acquired facility in Hope, BC and why Canadian cannabis deserves a renewed attention. With a global shortage of legal cannabis and new markets opening up, premium producers are in short supply. Rubicon is proud to be Canada's leading health of premium brands, a title we've held consistently in what we believe is the most competitive and advanced cannabis market in the world. Consistency defines Rubicon not just in elevating consumer experiences and delivering on our brand promises, but also in executing against our commitments. For new investors, we offer a compelling value, low market cap, premium positioning, strong balance sheet and near-term growth, especially with our expanded supply from Hope, BC. For long-term shareholders, we recognize the frustration of the sector's lack of interest in recent years, but with Rubicon's continued profitability, Canadian companies showing strength and global medical markets gaining traction, I believe our valuation is poised to shift. I'm going to share with you here our disclaimer, and I'd encourage you all to read it in your time. And before we begin, I want to share a short video with some brand background, new launches and glimpses into our products. Those of you on the line may not -- we'll start in just a second, but you may not be able to hear the music, and I do hope you can. [Presentation]

Our vision is to be the most trusted premium global leader in cannabis. We bring our vision to life, grounded in emissions to elevate experiences through trusted cannabis brands with industry-leading quality and world-class genetics, dedicated to quality and innovation, ensuring that every interaction with Rubicon reflects our commitment to excellence. We are building brands to be on shelf for the next 30 years. Rubicon is Canada's leading premium producer holding around 6% of the national premium market share. We're headquartered here in Vancouver, B.C., publicly listed on the TSXV and the OTCQX and proud to operate as 1 of the few living soil cultivators in the country, a cornerstone of our super premium strategy. We hold unique IP and are now the world's largest scale certified organic cannabis company, backed by a robust genetic library. Our operations span 2 premium facilities and organic certified greenhouse in Delta, BC and an indoor flower site in Hope, BC. Now in our third year of profitability, our proven brand platform has launched category-defining products. In '23, we were the first to the Canadian legal market with live rosin edible. In '24, our national vape rollout achieved 55% national distribution -- excuse me, distribution in 6 months, winning both vape of the year and best new product of the year. We've been recognized across the industry. A near sweep of the 2024 kind award winning across vapes, flower, hash, topical and edibles. And we were just recently in May named Standard Producer of the Year by the Grow Up Award. From cultivation to product innovation, quality is our competitive edge. We don't aim to be everything to everyone. We're focused on winning in premium. In recent years, with broader cannabis markets remaining quiet and down Rubicon stays focused and disciplined laying foundations for what we see as the next wave of industry opportunity. With the acquisition of our new facility, we're investing in scale, quality and future capacity to cement our position as the most trusted premium cannabis leader. So who are we? A few faces in the room here today. Our team has a deep cannabis experience coupled with a long history of competitive CPG industries with an institutionally investable Board. You will also see we just recently appointed an interim CFO, Glen Ibbott; Glen is best known in the industry for his tenure as CFO of Aurora Cannabis from 2017 to 2024, where he played a pivotal role in the company's rapid growth international expansion and delivery of recurring EBITDA and cash flow. His expertise comes at an important time for Rubicon as we scale new capacity and begin exploring new markets. I'd also like to mention the same is true of Doris Bitz and the experience that Chief had in scaling businesses. As Len mentioned, after today's meeting and our announcement, Doris will be taking the mantle of Chair. We're very proud to have her here today and welcome her to that new role. Next is information on our most recently published numbers from Q1, '25 and you can see the numbers and announcements we have been busy. We delivered net revenue of $12.4 million, a 39% or $3.5 million increase year-over-year. Typically, Q1 is seasonally lower for us. We reported positive adjusted EBITDA of $700,000, marking a $1.1 million improvement compared to the same period in '24. We received our GACP certification for our Delta facility to allow us to execute on our inaugural shipment to Poland, international shipment in mid-March and we entered into an agreement to acquire the new facility in Hope, BC, expanding our annual correction capacity by about 40%. I can't yet report our Q2 numbers, but I can report that we successfully closed a non-brokered financing, which we upsized by 50% to $4.5 million due to strong demand despite the significant volatility in capital markets at the time. We appointed a new CFO was mentioned. And we just at the end of June, launched our all-in-one vape products in the market. Here is a snapshot of our financial picture at March 31. As I said, we delivered a year-over-year increase in net revenue and improved gross profit and adjusted EBITDA. But in looking back to 2024, we delivered $50 million in net revenue and $5 million in adjusted EBITDA, taking into account onetime ERP costs of around $1 million. Our working capital position continues to be strong. And at March 31, we had approximately $20 million in working capital following the successful refinancing of our debt in Q4 of 2024. Our financing was closed in Q2, so we've not included in these working capital numbers. And I should mention on the debt, very proud to say that we did close debt at 6.75%, which really is industry-leading in the cannabis sector. Very proud of that. We delivered our strong results through our 3 flagship brands. Simply Bare Organic, our super premium brand for the discerning consumer. 1964 our premium offering for consumers transitioning from the legacy market, Wildflower our wellness-focused brand, leading in topical, and I'll speak shortly to Homestead. In a market where packaging opacity over eroded consumer trust, our consistent best-in-class quality has got confidence in our brand. Our brand platform is built on premium flower recognized by Flower of the Year wins in both 2022 and 2024. This reputation has become a launch pad for growth and a few highlights I'll share with you. We're winning with budtenders. For 2 years running, Simply Bare Organic and 1964, have ranked in the top 5 most recommended brand in independent surveys. We claimed the #1 premium edible position nationally with 27% market share, becoming the fifth largest edible supplier within -- from within a year of launch. Our Vape launch in mid-2024 was the fastest in the company's history. And as I mentioned, had 55% distribution in the key markets and within 6 months of launch. In Q4, which was basically 4 months after launch, we had 13% market share and #2 position in resin vapes in Canada. We won Vape of the Year and Best New Product of the Year with that launch. Quality input drives quality output. Our base success was rooted in the launching of our 2 best blood strains from the 1964 Flower portfolio, demonstrating again between consistent, the link between consistent premium quality flower. And Wildflower continues to lead, our top SKU holds the #1 position in the Canadian topical market with premium pricing and a lean SKU lineup relative to our competitors, apologize, if I move the slide forward. Wildflower also improves the quality wins. Homestead competes within a brand ecosystem in our ecosystem by monetizing aged or offset product that doesn't quite meet the standard, but it's still very good products and it supports our quality-first strategy and turning into our brands of Simply Bare and 1964. As true CPG brands emerge, our loved -- consumer loved budtender recommended portfolio, power successful launches and sustainable growth. You can see here the growth that we've been able to gain in Canada, since the same period last year. Our brands are experiencing double-digit growth in BC, Ontario and Alberta. We have some work yet to do in Quebec. This is all without using our balance sheet to drive growth but through contract arrangements. Rubicon has demonstrated a proven ability to capture market share in both new and existing segments. The base and edible categories are highly competitive, yet our execution of new product releases underscore the strength and quality of our brands. This ability to swiftly bring products to market while maintaining exceptional quality has been a key driver in capturing market share and reinforcing our leadership in premium cannabis. When we deliver on our brand promise, -- it fuels a powerful cycle of repurchase. And firstly, it begins with trial, then repurchase and then recommendation, reinforcing our position as a trusted cannabis brand leader. Canada's legal market is still in its early stages. While we've seen impressive growth, we're still only scratching the surface. New consumers are entering the legal market regularly. It's estimated somewhere between 20% and 40% of cannabis buyers are still purchasing in the legacy market, many in both markets. As new generation of consumers enter, we do expect them to purchase legal cannabis as their norm. We're seeing demand grow internationally. As these new markets come online, there is a significant supply shortage, in particular, for quality, and it will take some time for countries to give the supply online. We're not seeing that influx of capital that we saw in the early days of Canada. So there's not net new quality facilities being built largely around the world. And we see that means that asset value will increase in the coming year. Canada, we believe also will be the home of quality into the international markets, certainly for the time being. In the total market environment, Rubicon's leading position in Canada, plus our recent facility acquisition means we are well positioned to capitalize on this demand in the premium segment. In addition, Cannabis is accretive to Canada's GDP, a fun fact, that I enjoy and is not impacted by the same trade and tariff wars that other industries are. Export consumers are not reliant on the U.S. we cannot export to the U.S. and [ unbenotes ] to many Canadians, we add more to Canada's GDP than the dairy sector. Rubicon planning to grow our business. In the last 3 years, our revenues have outpaced industry growth, and we expect that to continue. Through the Hope acquisition, we expect to increase our supply capacity by over 40% this, combined with our long-term third-party supply agreement will help us to meet growing demand. Our edibles portfolio continues to grow rapidly with 185% year-over-year growth, since launching our live rosin edibles. With respect to the date category, we're increasing our offering as we now have 9 SKUs in market when there were only 2 launched last summer. We started out with the traditional cartridge format and have just launched the all-in-one, which is now Canada's fastest-growing market category. We expect to continue to see strong growth in base, where it's only -- it's grown from 16% of market to closer to 18%. But in more advanced markets in the U.S., it's closer to 25%, 30%. In addition, we've got our leading genetic strategy. We are here to lead trends and not follow. We have released several high-performing flower strains and they are in market. You saw some of them in the beginning -- in the video at the beginning, we have a lot more to come, and we're very excited about that. As we mentioned, Rubicon has also received its GACP certification at Delta facility and sent its first shipment internationally. Our plan with international is test and learn in 2025. We need to get the Hope facility online to have more supply before we undertake what we expect will be a similar crawl, walk, run strategy that was previously executed in both flower than topical than edible and then vapes. For those unfamiliar with the product here, I've put the all in one. And there's an image of the new comatose base that is out in market. As we said, we've launched with just 1 day, we expect to have 4 in market at the end of the year. So this is very exciting, an image of our new facility in Hope, DC. You may have followed our story. As I said, we have built our revenue through co-manufacturing and this is our first move into an additional facility for Rubicon to control our supply. This is our big project in 2025, and the acquisition just closed in June, we are now awaiting licensing from Health Canada. But this acquisition is extremely timely given the now evident global supply shortage, in particular, in premium cannabis. The Delta facility is already producing some of Canada's best premium candidates and we're the only scaled premium organic operator in the country. Hope provides us the opportunity to satisfy more demand, and it brings incremental 4,500 kilos of production capacity into our business for just $4.5 million plus around we expect to spend about $2 million in incremental CapEx. Given that the low-end estimate would be that it would cost $12 million to build that today, excluding the cannabis equipment included, this is an incredibly strategic purchase for us. We will fully own the facility all its real estate, which allows us to have a stronger balance sheet and further optionality. The Hope site was first licensed and it was the first licensed facility in BC, which I think is kind of fitting the Rubicon on it now. It's located only 1.5 hours from our existing operation in Delta. This proximity allows us to leverage our experienced professionals get the team up and running quickly, once licensed, we expect it's going to take 12 to 18 months to really optimize it, but we do expect to have revenue in 2026 from this facility. This expansion helps us to meet unmet demand we are capacity constrained in Canada, and this could open up international channels into onstream platform. So for the past, present and future, Canadian cannabis market is experiencing the long-awaited shakeout accelerated by noncompetitive operators choosing to move their businesses internationally to wholesale sales, really moving away from brand. Initially, the Canadian market had inconsistency, low-quality products and overly broad distribution approach, many consumers did return to legacy markets. However, the landscape is changing, and there are 3 large themes emerging. Firstly, there's been a significant improvement in product quality, but there's still a large gap between value and premium segments and a large amount of inconsistency experienced by the consumer from many brands. Secondly, provinces are streamlining SKU count and based on operator reliability and rate of sale, making it harder to get product on shelf and stay on shelf. Most recently, Ontario Cannabis store announced further SKU reductions from 5,200 to 4,500 by the end of the year. If you are not a brand on shelf today, it will be more and more challenging for you to get on. Lastly, consumers are growing more consistent in their choices as brand promises start to emerge, offering them trust of value for money. Looking to the future. We see increased barriers to entry is getting more difficult to get on shelf and we see our brand strategically positioned to thrive in this environment. Our brand strength, consumer affinity and high supplier ratings insurers will remain competitive and relevant. This is the time, as I said, when brands are being built that are going to be on shelf for the next 30 years. So the cannabis industry has followed the classic hype curve, initial high, a challenging lull and are now an emergence of clear winners as the market matures. The past 3 years have been marked by intense competition and relentless pricing pressure. But we believe domestic pricing has now stabilized and in fact, gone up in many cases. We can see that as evidenced through the wholesale market. Market dynamics are shifting with demand outpacing supply, setting the stage for a steeper more sustained resurgence both domestically and internationally. Now we do expect that's going to be lumpy, in particular from the international market. Wholesale prices have risen from their lows, and we continue to receive strong demand for our products in both markets. We expect the next 18 to 24 months to be a period of continued growth for us, in particular, after we get the Hope facility up and running and commercialized. The market is changing. Many smaller craft and premium companies are struggling to maintain a consistent national self space or have pivoted right out of the Canadian market and removed their brands into the international market. That leaves an ability for us to be on shelf. As SKU rationalization continues, only brands with strong consistent supply chains will stay on shelf. So we are uniquely positioned in Canada. Owning our own premium supply, holding premium brands and with the national route to market. You can see here in our market information, we are tightly held with around 43% insider ownership. We have 67 million shares outstanding and the trading, since our offering in April has stayed around $0.44 where we did that offering. So I believe we were a steal of a deal. It's also my view that we are strategically in the cannabis industry strategically positioned as brands emerge to achieve higher valuation model, more typically seen in analogous industries like CPG. You can also gain external perspective on Rubicon Organics from Neal Gilmer at Haywood Securities and Pablo Zuanic, Zuanic and Associates. We can share those contacts, their contact details for those interested. So we are driving growth as Canada's leading house of premium brands. We have built a platform for what is next. We are well positioned for that growth. We have demonstrated it consistently in the last few years, even without incremental facility. Now we have that facility. We have delivered 3 years of EBITDA profitability with strong sales growth and operating cost discipline. Our balance sheet is on order, and we have refinanced for long-term debt at a competitive rate of around 6.75%. We have leading trusted premium brands. We have invested in R&D, and we have world-class genetics, and we have a solid and experienced team. Cannabis is in a global supply shortage and Rubicon Organics is Canada's premium leader, who is elevating experiences and building trusted cannabis brands with industry-leading quality and genetics. We're investing today to accelerate future growth leveraging our strong position, proven know-how and balance sheet to build enduring brands designed to be on shelf for Canadian for many ways to come. So now I would like to open up the line to questions in the room. Unfortunately, I don't believe we can take them from the phone. But does anybody have any questions? I answered them all in the presentation. I know it's July 31, and people probably want to get out with their cottages and cabins. But -- if you're on the line and you have any questions, I would encourage you to follow up with me directly reach out to ir@ruboconorganics.com. This presentation will be available on our website, and please look out for our results that are coming on August 18, we will be having our press conference. It's not yet formally announced, but I do believe that is the date. We're very interested to see how this Canadian market emerges. And we believe we are in the winner's pool, have a unique offering out there. So feel free to reach out. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.