British Columbia-based producer Rubicon Organics Inc. (TSX-V: ROMJ) (OTCQX: ROMJF) appears to be making a good return from selling its products at market, but investors will be watching closely to see if the company can turn its spending into profit and shave down some of its inventory.
Late Thursday, Rubicon published earnings for its second quarter ended June 30, reporting net revenues increasing 12 per cent to $4.6 million, up from $4.1 million in the previous quarter.
The firm recorded a net loss of $5.1 million, increasing 27.5 per cent from $4 million in the last quarter. Adjusted earnings before interest, taxes, depreciation and amortization came in at $3.4 million, just slightly above its previous report.
Rubicon chalked up the losses to investments into consulting, salaries and wages, as well as other operating expenses related to the launch of new brands and products. The company’s Homestead Cannabis Supply bulk flower value line has hit stores in some provinces, and its 1964 Supply Co brand is also set to hit stores. Its Simply Bare Organic line remains a popular choice among enthusiasts.
Operating expenses increased quarterly by 24 per cent to $4.2 million, from $3.4 million. Share based compensation increased 258 per cent over the period to $615,000 from $172,000.
Rubicon’s cash position shifted significantly, falling 80 per cent to $4 million, from $20.2 million. The firm said it repaid $9 million in second mortgage loans. It also has accounts receivable totalling 12.6 million.
The company also added to its inventory pile, growing 9 per cent to $12 million, from $11 million.
The producer said it gained a research and development licence from Health Canada, and in June it became the first Canadian cannabis company to release an environmental, social and governance report.
Read more: First Canadian cannabis ESG report released by Rubicon Organics
Read more: Tilray moves to take large stake in US retailer MedMen
“Our share of the premium cannabis segment in Canada remains strong and we remain the go to organic brand among consumers,” CEO Jesse McConnell said in a statement. “With 44 SKUs across five brands, we can focus on meeting the rising demand from provincial distributors which is beginning to reflect both a return to normalized buying patterns and our new SKUs in high growth product categories.”
The executive emphasized his company’s ability to get new products listed as provincial buyers have slowed the addition of new SKUs.
“As 1964 Supply Co and Homestead Cannabis Supply in particular hit the market across new provinces in Q3 2021, we will be seeing the results of our extension in the premium and mainstream flower segments which represent large volume and incremental revenue pools for the Company.”
According to Google Finance, Rubicon missed its earnings-per-share target by 5.45 per cent, but beat analysts’ revenue expectations by 9.42 per cent.
Company stock remained flat Friday at around $2.24 on the TSX Venture Exchange.
nick@mugglehead.com
