Earnings call transcript: Rubicon Organics Q2 2025 sees record revenue growth

Rubicon Organics Inc. reported its highest-ever quarterly revenue of $15 million for Q2 2025, marking a 24% year-over-year increase. This surpassed the forecasted revenue of $12.6 million by 18.89%. Despite a modest earnings per share (EPS) of $0.01, the company continues to show strong financial health with a fifth consecutive quarter of positive adjusted EBITDA. According to InvestingPro analysis, the company’s stock appears slightly undervalued based on its Fair Value calculations. The stock price reacted positively, increasing by 11.11% in pre-market trading, reflecting investor confidence in the company’s growth trajectory and strong financial health score of 3.09 (rated as GREAT).

Key Takeaways

• Rubicon Organics posted a record quarterly revenue of $15 million.
• The company achieved a 24% year-over-year revenue growth.
• Adjusted EBITDA remained positive for the fifth consecutive quarter.
• Stock price surged by 11.11% post-earnings announcement.
• The company maintained its 2025 targets, signaling steady growth expectations.

Company Performance

Rubicon Organics demonstrated robust performance in Q2 2025, with significant revenue growth attributed to its strategic expansion and product innovation. The company has strengthened its position in the premium cannabis market, particularly in pre-rolls and vapes, which are experiencing rapid growth. Its strategic acquisition of the Hope facility is expected to increase production capacity, further supporting its expansion plans.

Financial Highlights

• Revenue: $15 million, up 24% year-over-year and 21% sequentially.
• Gross profit: $5.9 million, a record high for the company.
• Adjusted EBITDA: $1.4 million, maintaining a positive trend.
• Gross margin: Improved to 34% from 30% a year ago.
• Cash from operating activities: $800,000, with $7.3 million in cash reserves at quarter-end.

Earnings vs. Forecast

Rubicon Organics exceeded revenue expectations with an actual revenue of $15 million against a forecast of $12.6 million, resulting in an 18.89% surprise. While the EPS was modest at $0.01, the revenue beat underscores the company’s strong market position and operational efficiency.

Market Reaction

Following the earnings announcement, Rubicon Organics’ stock price increased by 11.11%, reflecting positive investor sentiment. The stock’s movement positions it closer to its 52-week high of $0.70, indicating a recovery from previous lows. With a beta of -0.13, InvestingPro data shows the stock tends to move independently of market trends. This surge aligns with broader market optimism towards the cannabis industry, particularly in the premium segment. The company’s strong financial metrics include a healthy current ratio of 2.92 and moderate debt levels, with a debt-to-equity ratio of 0.22.

Outlook & Guidance

Rubicon Organics maintained its 2025 targets, projecting continued revenue and adjusted EBITDA growth. The company plans to leverage its recent acquisition and product innovations to expand its market share. InvestingPro analysis reveals a strong revenue growth of 34.19% over the last twelve months, with analysts maintaining a consensus "Strong Buy" recommendation. Additionally, the anticipated international shipments in Q3 and increased production capacity are expected to drive future growth. Unlock the complete financial story with InvestingPro’s comprehensive research report, featuring expert analysis and advanced valuation metrics.

Executive Commentary

CEO Margaret Brody highlighted the company’s leadership in the premium cannabis segment, stating, "Cannabis is in a global supply shortage and Rubicon Organics is Canada’s premium leader." She also emphasized the company’s forward-looking investments, noting, "We are investing today to accelerate future growth."

Risks and Challenges

• Regulatory hurdles in obtaining the Health Canada license for the Hope facility.
• Potential delays in international market expansion.
• Market volatility in the cannabis sector.
• Supply chain disruptions affecting production and distribution.
• Competitive pressures in the rapidly growing vape and pre-roll segments.

Q&A

During the earnings call, analysts inquired about the company’s international market strategy and the impact of the Hope facility acquisition. Executives discussed the potential for increased production capacity and the strategic importance of expanding into new markets. They also addressed concerns about wholesale pricing dynamics and the company’s focus on genetic innovation.

Full transcript - Rubicon Organics Inc (ROMJ) Q2 2025:

Conference Operator: Good morning, ladies and gentlemen, and welcome to Rubicon Organic’s Second Quarter Earnings Call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. I would now like to turn the conference call over to Margaret Brody. Please go ahead.

Margaret Brody, CEO/Executive, Rubicon Organics: Today, I’ll share an update on Rubicon Organic’s Q2 twenty twenty five performance, our growth opportunities and outlook. Glenn Ibbot will be walking you through our financial results. In Q2, we appointed Glenn Ibbott as Interim CFO, completed a $4,500,000 private placement, finalized the acquisition of our Hope facility, launched our new all in one vape product to market, all while positioning the company for long term success. We also delivered record results in the quarter. Net revenue of $15,000,000 our highest ever single quarter, gross profit of $5,900,000 another record high and delivered adjusted EBITDA of $1,400,000 building on the $800,000 from Q1 twenty twenty five for year to date $2,100,000 Rubicon’s growth continues to outpace total market.

One of the key drivers behind our year over year growth was the exceptional performance of our nineteen sixty four five ten thread revenue baseline. Launched in Q2 ’twenty four with just two SKUs, we expanded to five by year end. And by the close of Q2 twenty twenty five, we have seven SKUs in market, further strengthening our portfolio. These vape carts are extremely well received, quickly capturing over 15% of the segment and continuing to gain momentum. Beyond resin dates, we saw strong growth in 1964 pre rolls, dried flower and concentrates, along with gains in Simply Bare pre rolls.

We also drove innovation in edibles and capsules. Hifyre is reporting now that pre rolls both infused and flower only were the fastest growing segment in the 2025 and now account for 35% of total market sales. Rubicon also holds the number one position in premium edibles, and we have strong offerings under our brands of Simply Bare, nineteen sixty four and Wildflower. In topicals, we continue to lead the category with the market’s top selling SKU despite our premium pricing, While we’ve experienced some share erosion with the entry of competitors offering more SKUs at lower price points, our revenue in this segment continues to hold its own. This speaks to the strength of our product quality and the brand equity we’ve built over time.

In growing our offerings to customers, we are regularly launching new products that build on the strength of our House of Premium brand and leverage our genetics banks. In Q2, a few standouts for you. We launched BC Organic Sunset Runs by Simply Bare, again honored to share another legacy genetic from Gastown Genetics. This was launched under Simply Bare. It’s earning outstanding reviews and is a key part of our drop strategy, bringing fresh, distinctive flavors to our consumers.

We launched our first all in one resin vape under our award winning and best selling Comatose strain, which provide a new and discreet format to consumers to enjoy on the go. We are seeing rapid gains in distribution, and we’ll have a more fulsome update view on the performance of All in One in the third quarter. Now Glenn on financials.

Glenn Ibbott, Interim CFO, Rubicon Organics: Thank you, Margaret. Good morning, everyone. Today, we reported Q2 twenty twenty five net revenue of $15,000,000 which was our highest ever for a single quarter, up 24% versus 2024 and up 21% sequentially. Our 1964 brand saw growth led by the pre roll segment, following format enhancements in 2024. Additional momentum came from our five ten live resin base launched late in Q2 twenty twenty four, which benefited from a full three six months in the market this year.

The brand clearly resonates with consumers as it also saw continued strength in flower, edibles and concentrates. Simply Bare Organic also delivered growth in both the three and six month periods, driven primarily by strong performance in the pre roll segment. This was supported by the momentum of our superb genetics, such as DT Organic Fruit Loops, and strengthened by recent innovations in the capitals and edibles. Wildflower maintained a strong presence in the topical category with its sixty gram topical stick ranking as Canada’s best selling SKU in the segment according to Hifyre. And with the number two market share in topicals, Wildfire remains a trusted leader in the wellness space.

Gross profit before fair value adjustments was $5,100,000 up 40% from Q2 of last year, with gross margin improving to 34% compared to 30% a year ago. This reflects strong revenue growth, the benefits of scale and ongoing operational efficiencies at our Delta facility. Within SG and A, Q2 twenty twenty five costs increased by just under $1,000,000 as we invested in targeted marketing to support brand growth and invested in people and infrastructure to position the business for future expansion. Bringing it all together, adjusted EBITDA for Q2 twenty twenty five was $1,400,000 up from $900,000 last year. This marks our fifth consecutive quarter of positive adjusted EBITDA, highlighting the strength of our underlying business, even as we continue to invest in long term growth.

Turning to cash flow and financial health. We generated $800,000 in cash from operating activities in the quarter, driven by our net profit. This compares to an operating cash outflow of $300,000 in 2024. We closed the quarter with $7,300,000 in cash and a solid working capital position of $18,700,000 Our liquidity remains strong, supported by disciplined cost control and a prudent capital structure. As you recall, in November 2024, we secured $10,000,000 in credit facilities at an interest rate of 6.75%.

During Q2 twenty twenty five, we raised gross proceeds of $4,500,000 in an equity financing to support the start up and scale up of the whole facility. We may consider additional financing should we choose to accelerate key projects, but we consider Rubicon’s current balance sheet to be very healthy. To summarize my review of our Q2 and first half twenty twenty five financial performance, solid revenue growth across all of our key segments and products, combined with operational efficiencies and continued cost discipline led to positive operating cash flow, the fifth consecutive quarter of positive adjusted EBITDA and overall robust financial health. I’ll now turn the call back to Margaret.

Margaret Brody, CEO/Executive, Rubicon Organics: Thanks, Glenn. We are underway with a strategic expansion, having purchased our new facility in Hope, BC that closed in June. This acquisition is timely now given the evident global cannabis supply shortage and certainly one of quality. The new site provides the opportunity for us to satisfy more demand as it brings an incremental 4,500 kilos of production capacity into our business for about $4,500,000 purchase price plus an expected $2,000,000 in incremental CapEx. For those unaware, the site was the first licensed cannabis facility in BC and is located one point five hours from our existing operation in Delta, which should allow us to get it up and running quickly.

Once licensed, we expect it will take twelve to eighteen months to get the appropriate consistent quality and begin to optimize yield. We are now awaiting Health Canada licensing, which we expect this year with incremental OpEx of 1,000,000 to $2,000,000 incurred in 2025, pending license timing and revenues in the 2026. This expansion will help capture unmet demand for our capacity constrained brands in Canada, and we expect could open up international channels in 2026. Rubicon is planning to grow our business. We have consistently grown our revenues faster than total market growth, and we expect that to continue.

Through the Hope acquisition, we expect to increase our supply capacity by over 40%. This combined with long term supply agreements will help us to meet growing demand. We are growing our vape market offerings as we now have nine SKUs in market when there were only two launched last summer. We started out with traditional cartridge format and have just launched our all in one, which is now in Canada’s fastest growing market category. Our initial all in one vape launch this year is 1SKU, and we expect to have a total of four in market by the end of this year.

As mentioned, Rubicon has received its GACP certification and sent its first shipment internationally. Our plan is with international is to test and learn in 2025 before we undertake a similar crawl, walk, win strategy that we previously executed in flower, then topical, then edibles, then vapes. We see a strong future for our business. And in 2025, it is a transformational year. Our company outlook for 2025 remains consistent.

Firstly, we are focused on securing additional premium quality supply in two ways. Firstly, getting this new facility up and running and secondly, through contract arrangements where we expect an incremental 2,000 kilos of biomass. Secondly, we are focused on the domestic market and building trust with our customers in Canada. We see now is the time that brands are built and many of our competitors are or have turned away from the Canadian market. And that coupled with rising barrier to entry onto Canadian shelves with provincial SKU rationalization and supplier scoring means it will become increasingly challenging for new brands and products to secure shelf space.

At the same time, Canadian consumers are becoming more brand loyal, prioritizing trust and value in their purchasing decisions. We believe our award winning brands and diverse product portfolio will continue to resonate with them. Third, we remain deeply committed to introducing new and innovative genetics to the Canadian market, continuing to elevate the consumer experience. Our goal is to lead the industry in genetic innovation and deliver fresh, exciting news to customers. And lastly, in 2025, we plan to test and learn in the international market in advance of having incremental production from both, some of which we expect could be available for international channels.

In financial terms, our 2025 targets remain unchanged. We are forecasting growth in net revenue, adjusted EBITDA from our core business on a like for like basis. And as I mentioned, our 25 annual adjusted EBITDA will be impacted by initial pre revenue operational costs of 1,000,000 to $2,000,000 associated with the start up of Hope, with revenues from Hope not likely to appear until 2026. We’re bullish on Canadian cannabis as global demand now exceeds quality supply. With strategic moves into edibles and vapes, debt refinancing and the new site acquisition, Rubicon is well positioned for long term growth and value creation.

We would now like to open up the line for analyst questions. Operator, please open the line.

Conference Operator: Thank you, ladies and gentlemen. We will now begin the question and answer session. And your first question is from Neil Bilner from Haywood Securities. Congrats

Neil Bilner, Analyst, Haywood Securities: on the good quarter here. Maybe I want to start with the revenue line, solid growth year over year as well as quarter over quarter. You talked about procuring 2,000 kilograms biomass, I guess, to help support that. Can you talk a little bit about what sort of more opportunities you have given the fact your current facility is pretty much at capacity? Remind us how much you procured last year to sort of understand how much of growth that 2,000 is this year?

Danny, Executive, Rubicon Organics: Hi, Neil. Good morning. Good question. Look. You’ll if if you look back on the last three years with a single asset, we’ve been able to grow the business, you know, certainly well over double digits every year, and that’s through innovation and looking at new product lines.

Some of the biomass that we are bringing in is going into our, baseline. So, we believe that we’ve got a significant amount of growth yet, in particular with the all in one. I can’t quantify it as much today, in terms of what that’s gonna look like because we are seeing a shift in market right now between the five ten over to all in one. But we are seeing the distribution and and early stages of the all in one formats marry, mimicking what we did last year with five ten. So I would say we’re bullish.

The margins on both of those are very strong and at the higher end of our range, so stronger than the average margin you’re seeing here, which is great. And that’s where part of where you’re seeing the growth in our margin, and we’re focusing on high margin products. There is there is other ways we can start to look to fill to to to drive the revenue forward. And one thing is this year, we’ve got a trial of our genetics in outdoor grow, which then that product could go into our vape products as well. So we’re looking at lots of different opportunities to grow our business.

Neil Bilner, Analyst, Haywood Securities: That’s great. Thank you. It’s almost like you read my mind because my next question was on the margins. You basically sort of already answered it with

Glenn Ibbott, Interim CFO, Rubicon Organics: because, know, I thought ask

Margaret Brody, CEO/Executive, Rubicon Organics: your question on margin because I think Glenn’s prepared to answer that one.

Neil Bilner, Analyst, Haywood Securities: Yes. Well, just obviously, there’s a nice growth in gross margins both year over year and quarter over quarter, and was just looking to see sort of what sort of drove that growth. And obviously, it sounds like it’s those the vape line that’s helping contribute to that. Is there is there much more room for that to grow?

Danny, Executive, Rubicon Organics: Danny, do want to take that one? Yeah. Yeah. For sure. Yeah.

Glenn Ibbott, Interim CFO, Rubicon Organics: Yeah. For sure. I mean, Rubicon stays in its lane and plays in the premium segment of the market, as you know. So the margins are pretty healthy to begin with for the Canadian rec market. And Margaret pointed out the growth in the vapes, which have strong relative margins.

I also point out that we’re getting more volume through, you know, a fixed manufacturing base. So I would say it’s a little bit of scale, you know, the efficiencies that come with scale. So some fixed costs and cultivation focusing on yields there and just pushing more through the facility in terms of bringing biomass in and and manufacturing. So, you know, that to me is exciting as you know. And as you can get more out of an asset, just to close to the bottom line.

And I think that’s what we’re seeing here with, you know, margin and and continuing profit improvements.

Neil Bilner, Analyst, Haywood Securities: Yeah. Yeah. That’s great. Last one for me is with respect to Hope. How much of the CapEx can you you know, how much of the work can you do in advance of getting the the Health Canada license?

Like, I know you just plan to invest one to two million dollars into that. I I can’t recall what the rules are. Like, can can you still get all the work done, in advance of the license, or do you have to get the license before you can really do much of the, the the investment into the asset?

Danny, Executive, Rubicon Organics: Good question. We do have a bit of a chicken and egg scenario happening in that we have submitted and are waiting with Health Canada. There are some things that are more we expect when we get the license, it will only take us a few weeks to be able to move in terms of planting. I think that’s the better answer because some of the timing, some work has been done, some work is still yet to do, but we’re very confident that that won’t slow us down in the way that we’ve managed the business. So we’re not look we’re not thinking that it would be we obtained the license and we have to wait two months.

It may be a couple of weeks that we need to to finalize a few things, but it’s not a significant delay. And our expectations of on the license will be in at some point between between now and the end of the year. Many of you are aware that within Health Canada, there has been a slowdown, and I know Tilray had no results, etcetera. We’re we’re we do not believe there’s any impediment to us getting the license. It’s a matter of, in my view, when and why.

Neil Bilner, Analyst, Haywood Securities: That’s great. Congrats again on the quarter.

Danny, Executive, Rubicon Organics: Thank you.

Conference Operator: Thank you. Your next question is from Pablo Zuanis from Zuanis and Associates. Your line is now open.

Pablo Zuanis, Analyst, Zuanis and Associates: Thank you, and good morning, everyone. Look, just a follow-up to last question. In terms of the whole facility, can you talk about whether what you have found there, it’s better than expected or in line with your expectations? Also, I’m sure, you know, I know you’ve talked about 40% capacity expansion, but over time, with yields and efficiencies, it be a bigger delta in terms of throughput. Just if you can just give more color in terms of the state of the facility and relative to your expectations.

And then the only thing I would add on the same topic in terms of the timing question, if you were to get the license, as you said, within that range that you gave, Margaret, you were to get it literally on December 30, when could you be generating revenue from that facility? Great

Danny, Executive, Rubicon Organics: questions. Firstly, on the state of the facility, we’re very happy with it. You know, I I don’t think there’s anything to report materially. We were I I think we’ve done a did a good job on due diligence. There’s always one or two things, but, you know, Fox to MediPharm and the individual who was was maintaining it out there.

Two, in terms of throughput, you know, Rubicon likes to underpromise and never deliver. Well so I don’t wanna say we wanna blow past the 4,500 kilos. Obviously, we’re going to we are we are focused on optimizing every single asset that we have. So I would say that is a target of ours, but we also manage the facility downtime and not to have any issues with the facility. So sometimes that that has any type.

But, yeah, I I think that’s a that’s a fair question. You know, can you beat it? Many in our business, given that the the previous owners said it was sixty nine hundred kilos, would say that we can. We’re growing we expect to grow beautiful premium weed there, so we wanna make sure that we’re setting realistic expectations. But, obviously, I have ambitions to go higher.

And so, in terms of the license on December 31, I believe that that would not change our a our first half revenue expectation. Although, we certainly would dampen our the the amount in the first half that we do.

Pablo Zuanis, Analyst, Zuanis and Associates: Okay. Understood. That’s good color. And then I don’t know if this is for Glenn, but Glenn, you made, I think, a reference that after the equity raise, you feel that you’re in good shape, but that you would consider future equity raises to fund future expansion. I don’t know if it’s for Margaret.

But just trying to understand, I guess, assuming that you have other expansion opportunities, what’s your debt leverage tolerance, right, so we can model equity raises when you get to a certain point? Yes.

Glenn Ibbott, Interim CFO, Rubicon Organics: Pablo, it’s a good question. I think we’re just pointing out though, you know, in the cannabis industry, you know, there’s always opportunities. And if there’s a compelling, you know, return, if there’s there’s a business case that makes sense, we’ve got room to take on, you know, a bit more debt. I think we’d be comfortable with, you know, 3 or $4,000,000 more debt. We could service that quite easily.

We do have warrants out there, you know, and I think, you know, our expectation is that we will, you know, as we progress the company and and grow the top and bottom line. So at some point, those will be in the money, and and there’ll be support coming in there. So, you know, there there’s opportunities to step on the gas on some current projects and accelerate them, you know, cost efficiency projects. And, you know, certainly, you know, with our eyes on continuing to, you know, grow our business in Canada and, you know, the test and learn strategy internationally, They can only believe over the next year year or two, there’ll be more opportunities to grow. So just flagging that we’ve got more capacity there, but there’s nothing imminent in our plans that we want to note for you.

Pablo Zuanis, Analyst, Zuanis and Associates: Okay. Thank you. And one last one for me, Margaret. It’s a two part question, but you talked about overseas demand, out streaming quality supply, and I’m sure you would know that based on the inbound calls that you are getting. But maybe if you can give more color on that.

And, you know, are you missing out on opportunities right now because a third party biomass that you’re buying is for vape and it’s not for premium flower, obviously. Right? So but just if you can give more color about that. Because some people are talking about oversupply, but it seems to be on the low end of the market, not on premium. And then the second part of the question, and I’m sorry to add this, it’s related but separate.

When I look at the HiFiR data for Canada in premium flower, I see a lot of movements in terms of brands, right? Some brands gaining, some brands losing, maybe just the regular quarter to quarter changes based on promotions. But I’m surprised that there seems to be lack of stickiness there apparently based on the movements among brands in premium with 28 gs growing, for example. If you can just give more color in terms of your big picture view about where we are in that in premium flower in Canada. Thank you.

Danny, Executive, Rubicon Organics: Absolutely. Thank you. For the first question on international in terms of color, look, we still have probably not been down to that. I would say that, you know, at the at the mid level, so mainstream and below, there’s there is capacity turning on. We saw those funds announcement opening up their their next piece.

We know Kronos is is growing, and there is or or or or increasing supply. There are stories like that out there. There are also outdoor flows around the world turning on. What we are not seeing is the turn on of legal premium flower capacity, and that is a very limited and small category with Canada believing that we are international. What we have seen and why we took the strategy that we did was we’ve seen lumpiness in public company reporting on international markets, I e, you know, export permits slowing down, speeding up.

We’ve heard many stories of nonpayment. We’ve had heard stories of people sending product across and then it not meeting specs or then not getting paid. So, you know, when when you start into that, that creates instability in your business and in your forecasting. I do expect that Rubicon will play internationally more significantly in future, but we still have a lot to do in Canada, and we need to get the the new facility up and up and running. Oversupply, I I just don’t think that that’s I think that’s a bit of a false narrative.

More that people buy supply in advance because there was a nervousness of not having it, and and it and it’s really lumpy. So they have a big bulk, and then it goes away, and the big bulk goes away. What international buyers, in particular, for the medical patients looking for is consistent supply. And and that’s really where we always wanna be consistent for our customers. We’re in the business of brand building.

And at this stage, we don’t believe we have the amount of supply to be able to deliver that consistently. And that actually leads very well onto your next question with respect to the Hifyre data and premium. We see the Hifyre data, because anything premium is 20% over the average selling price in that period. We actually look at several brands with our competitors, and those brands we do find are more sticky. We based on where we are with how quickly genetics are selling in smaller formats, which are more profitable, We fill 28 gram fast.

Part of part of looking at hope and getting additional biomass and some of the work we’re doing is how we can fill that because, obviously, we want more of the consumer’s dollar. We also wanna satisfy our customers’ needs for larger format. We think that brands are beginning to get secure and since the the shelf is is beginning to get established in Canada with consistency. So for us, I think that it’s there are some subtleties within price points that are significant to the consumer. If you’re charging if the average in Canada for three and a half gram jar, it isn’t not the right number.

So let’s say, hypothetically, it was $25 at anything over, you know, $30 is gonna be in that. Well, that ranges then from 30 up to 50, which would include some Sudera and nineteen sixty four as well as a series of other brands that to us don’t actually aren’t actually clean. So data can be funny. We wanna look at our categories and how we’re winning to probably try to price the brand stand, and we feel that that’s getting sticky.

Pablo Zuanis, Analyst, Zuanis and Associates: K. No. That’s good good color. Thank you.

Danny, Executive, Rubicon Organics: Yeah.

Conference Operator: Thank you. And your next question is from Andrew Sample from Vantem Financial.

Andrew Sample, Analyst, Vantem Financial: Congrats on the second quarter results. I’ll start off with just kind of going back to the growth drivers in the quarter. Vape has been highlighted in the prepared remarks and throughout this call. I’m just wondering how some of your other product formats did within the quarter. Were they contributing to growth?

Did you continue to see strong momentum in some of your other products such as flowers, pre rolls and edibles? If you could comment on that, that would be helpful.

Danny, Executive, Rubicon Organics: Thanks. Pre being probably the story of the first half outside of date for us, you know, holding in other places, but we’ve seen pre rolls surpass flower for the first time and into being the largest category. I think a big part of that is the trust in terms of what consumers are getting, convenience, etcetera. We as you may or may not be aware, targeted pre roll automation project is actually now completed. We’ll see that in the second half.

And we really see pre rolls as being a strong category going forward. We saw that in our growth. Very pleased with it. And we also shifted the format of our pre rolls in 1964 that were a point seven times three to a point point five times five. And and we were we were trying to differentiate a bit, market didn’t quite work.

That was a ’24 initiative, and we’ve really seen momentum. So I I would say pre rolls have a story of 2025, and I think all in one is gonna be you know, I think those are all in one and pre rolls are gonna be the a big part of the future. The importance of the of flower and having quality flower from a a brand perspective cannot be understated, and that’s different from growth. It’s actually about demonstrating to the market and the consumer the consistency and quality of what you can do.

Andrew Sample, Analyst, Vantem Financial: That’s great. And maybe just a quick follow on to that. Did we see any contribution from the pre roll automation in the second quarter, or was that all so is that Yes.

Glenn Ibbott, Interim CFO, Rubicon Organics: Okay. Great.

Margaret Brody, CEO/Executive, Rubicon Organics: Yeah. Yeah. Just a reminder, it it

Danny, Executive, Rubicon Organics: got really commissioned in June. So

Margaret Brody, CEO/Executive, Rubicon Organics: I would have to go in and and and do some data data mining. And sometimes you see what you want to see when

Josh Selker, Analyst, CB1 Capital: you’re looking at a very

Danny, Executive, Rubicon Organics: short period of time, but we’re very pleased with how the project has gone. I want to really give credit to our team on it.

Andrew Sample, Analyst, Vantem Financial: Great. And then maybe just on the inventory this quarter, a little bit higher. It’s been higher than Q1. Q1 was a fair bit higher to close out the year. My understanding is you’ve been typically selling most of, if not all, of what you can produce.

Obviously, that’s that’s tracking. Revenue is higher, but just wanted to check and see if there’s any kind of strategy or or reason that the inventory has continued to move higher other than just the the sales momentum.

Margaret Brody, CEO/Executive, Rubicon Organics: I that one’s over to Glenn.

Glenn Ibbott, Interim CFO, Rubicon Organics: Yeah. Most of what you’re seeing there is a buildup in anticipation of launching, you know, all at once and the higher run rates for the five tens. So we see in our you’re right. Of course, there’s not much in in the finished good that goes out the door pretty quickly. But, you know, we have to see, you know, big parts and oil and and that sort of thing built up in anticipation of the launches.

So that’s the main driver in there. There’s bits and pieces of other stuff, but that’s really where the growth is. So I’d expect us to continue to, you know, look for ways to to manage that down. You know, it’s certainly you know, when you look at our cash flows in the first half, you know, you see the investment in inventory and and has consumed a couple of million dollars of cash in first in the first half. So, you know, we will try to manage that down a bit.

But we do have higher higher volume run rates and more more product categories that are, you know, requiring us to carry a bit more in inventory.

Andrew Sample, Analyst, Vantem Financial: Great. That’s that’s useful color. And maybe final one for me, if I may. Just returning back to the topic of international sales. Obviously, Rubicon’s communicated a test and learn strategy on international.

I note that you had your first international shipment in Q1. Did you have any follow on shipments in the second quarter on the international market side? And what’s the thoughts about the likelihood of seeing additional international in the second half of the year? Just trying to get a sense of maybe whether that first experience went well, whether you see an opportunity this year or maybe you need to wait for the whole facility to be online first. If could comment on that, that would be helpful.

Margaret Brody, CEO/Executive, Rubicon Organics: Yes. Great question. Not in

Danny, Executive, Rubicon Organics: the second quarter. In the third quarter, yes. Again, we’re doing small lots. So what we wanna what what I’d like to do is have dealt with potential partners in several different countries by the end of the year, have moved we we did expect the shipment would a shipment in the third quarter would go up in the second quarter, but the export cannabis permit delay was real. So I think it was early July that we ended up getting it, and, you know, it’s five months before, something like that.

I do understand once you get into a regular routine, it it it gets quicker. My goal is to have gone to several countries by the end of the year because then we can see product reaction. We can understand the channels. We can look at South Canada and get the permits out, all those types of things. We are we do need hope to come online, but there’s there’s still more to assess, and there is a lot of opportunity.

I’m very, very pleased with our choice, though, to take focus on the Canadian market for that shelf space, given the size of business we are. I believe that that’s standing us in very good stead and has almost increased the because of the brand and reputation, it’s actually, I believe, increased That’s

Andrew Sample, Analyst, Vantem Financial: great. Thanks for taking my questions, and I’ll get back into queue.

Danny, Executive, Rubicon Organics: Thanks, Andrew.

Conference Operator: Thank you. And your next question is from Josh Selker from CB1 Capital.

Josh Selker, Analyst, CB1 Capital: I know that Hope and Delta are different facilities. One is a hybrid greenhouse, one is an indoor facility. I know Delta is living soil, and I believe Hope was built for hydro. I’m just wondering if you developed any specific or bifurcated strategy for hope given that it’s different than Delta?

Danny, Executive, Rubicon Organics: Great question. We are certainly looking at how we can maximize hope. We’re also looking at strains that weren’t successful in Delta in terms of a greenhouse environment, pushing them to hope that we believe will be more successful in an indoor hybrid environment. To be clear, those would be 1964. It would not be the organic facility is at Delta, so it’s in Clearwater.

I think some of the constraints and Indica leaning are likely to be more successful, but it could be the opposite. We’ll we’ll see as we go. We will be you know us, we trial as we go. We like to get as much data and information as we go along, but feeling very bullish on hope, and excited for what’s next. And we have to change the name because he’s we talking about hope all the time is just terrible.

Glenn’s gonna kick me.

Josh Selker, Analyst, CB1 Capital: Looking forward to the new name. My next question, just interested in how legacy strains are performing. Wondering if flower success is a derivative of popular legacy offerings or more new SKUs.

Danny, Executive, Rubicon Organics: That’s a very good question. You know, our two original or Blue Dream is our original strain, still extremely popular, one of our top selling SKUs. Comatose as well won flower of the year back in 2022. It’s held position and is our still our number one strain. That’s over three years.

That’s fairly unheard of, and I think what we’re gonna see going forward in the Canadian market is these hero strains that consumers come back to time and time again. That in particular, it’s important for consumers, but what we see is the excitement around new news and leading with genetics, brings interest and curiosity into our brand, in particular, what Simply Bare does. We plan to be Canada’s global leader in genetics. We have been focusing on that. You’ve heard us talk about it in the past.

We believe the genetic story is not yet being fully told in the market and the opportunity around that. One one thing that I think if you look at opportunities in three years, we build a fantastic we did a great genetics library. We built a fantastic genetics library. That’s something that I believe will be able to be monetized in future as well. Now we’re not at that stage yet, but there’s significant amount of opportunity, and we’re extremely excited about what’s coming in the next two years of our our pipeline.

I mean, we thought we we’re we’re that far along from a commercialization perspective. Very excited.

Josh Selker, Analyst, CB1 Capital: I appreciate that. Then to maybe sneak in a third question, seeing some uptick in wholesale pricing and wholesale pricing commentary on a larger basis. I’m just wondering, as a purchaser, what are you seeing in wholesale pricing on a year over year basis versus 24? I know a lot of your growth is from incremental capacity, which is purchased, but your margin keeps improving. So I’m just wondering, what are you seeing in that wholesale pricing line?

Danny, Executive, Rubicon Organics: Two things. One is we we have long term supply agreements and work with partners that understand the importance of consistent dealing with consistent and strong partners that pay their bills. That has not been true of in Canadian cannabis, and I think now that’s occurring over on the worldwide stage. WDNU needs to be a 100% of their capacity, but being the a strong leg of stool is important for companies around Canada. In terms of, you know, Hope will certainly the the new facility will certainly assist us with that.

We only saw wholesale pricing search about this time last year. We are now seeing additional capacity come online. Will that balance it potentially? I don’t believe that prices are gonna go up significantly from where they are now. Would be my personal prediction.

I don’t know if others have a different view given, what’s happening in the market. And, I so I think we’re we’re in a good spot.

Josh Selker, Analyst, CB1 Capital: Super. Thank you for taking my questions. Congrats on the quarter.

Danny, Executive, Rubicon Organics: Thanks, Josh.

Conference Operator: Thank you. There are no further questions at this time. I will now hand the call back over to Margaret Brody for the closing remarks.

Margaret Brody, CEO/Executive, Rubicon Organics: Thank you for joining us today. 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 world class genetics. We are investing today to accelerate future growth, leveraging our strong position, proven know how and balance sheet to build enduring brands designed to stay on shelves for the next thirty years. I always end a conference call with a personal recommendation. And today, I’d like to turn the attention to Wildflower and our Extra Strength Relief Stick, which I’m finding extremely helpful with my low cartilage knee pain.

Thanks, everyone.

Conference Operator: Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect your lines.

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