Rubicon Organics Inc.

Good morning, everyone. Welcome to Rubicon Organic's third quarter 2021 financial results conference call. As a reminder, this conference call is being recorded on November 17th, 2021. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for research analysts to queue up for questions. I will now turn the call over to Mark Chabay, Investor Relations. Please go ahead, Mark.

Thank you, Operator. Good morning, everyone, and thank you for joining us today. Rubicon Organics' third quarter 2021 financial results were released this morning. The press release, financial statements, and MD&A are available on CDAR, as well as on the company's website, rubiconorganics.com. Before we begin, I'll refer you to slide two of our presentation, which contains Rubicon Organic's caution regarding forward-looking statements. I am joined on the call today by Jesse McConnell, Chief Executive Officer, and Margaret Brody, Chief Financial Officer. I'll now pass the call over to Jesse.

Thank you, Mark, and good morning, everyone. We have been steadfast in our mission to grow the best cannabis on Earth and for the Earth, and we are beginning to reap the benefits of that focus. Quarter three was a breakthrough quarter for Rubicon Organics, as we achieved record revenues and gross profit, made significant market share gains, and established Simply Bare Organic as the number one premium brand in Canada in flour and pre-rolls. As the cannabis industry matures beyond mere production and distribution, we are beginning to see the emergence of durable consumer brands and the loyalty associated with them. Consumers and bud tenders alike are singing the praises of Simply Bare Organics, and that chorus is growing louder. Consumers are looking for brands that resonate with them, and on slide three, we can see the result of their search. Simply Bare Organics has emerged as the number one premium brand in Canada for flower and pre-roll, with a whopping 8.3% of the national premium market. We've made strong gains in the three largest markets, securing the number one position in Quebec, and maintaining our pole position in our home province of beautiful British Columbia. Together, the flower and pre-roll market make up over 70% of the total market, and it continues to grow. But it is the performance of the pre-roll segment that has been the most impressive, with year-to-date growth in 2021 compared to 2020 an astounding 77%. Pre-rolls are particularly appealing to the new legal market entrant who's often less price sensitive and prefers pre-rolls for the convenience. In the premium pre-roll segment, Simply Bare Organic has an impressive 18.5% market share nationwide. And even more impressive, in our home province of British Columbia, home to some of the most discerning cannabis consumers in the world, we command over a quarter of the premium pre-roll market with a 26% share. The recognition of Simply Bare Organic as Canada's number one premium cannabis brand reveals its latent potential when you consider that cannabis markets are only now beginning to open up globally. There's been a lot of buzz in the premium market in Canada as of late. We've seen some M&A. We've seen some large LPs indicate they are planning to increase share in the space. We've also seen some smaller craft LPs come to market with decent product. Establishing brand recognition in the premium space takes a lot more than good intentions. You need a facility that is designed to produce high quality product profitably with a great genetic library. You need a strong marketing team to design and align the brand architecture and strategy with consumer insights. You need a supply chain team that can ensure the product is packaged properly at scale. and is consistently available on the store shelf. You need a strong sales team to gain points of distribution, in-store brand placement that maximizes the shopper's journey, the communication of the brand's value proposition to the relevant stakeholders, such as buyers and bud tenders. And ideally, you have a portfolio of brands so that the buyers are able to leverage their relationship with you to fulfill some of their needs outside of the premium segment. All of this takes significant working capital and time. This is why we are so bullish on Rubicon's positioning. We have the right size facility to generate significant operating leverage. We have the perfect suite of brands to optimize margins across all of our cultivation. We understand the various consumer segments, and our consumers in particular. We are expanding our brand umbrella to include our recently launched 2.0 product innovation in hash and live rosin, both of which I had mentioned have garnished rave reviews. We have now been in market long enough that consumers are getting to know and love our brands and our company. The rest of the world is looking at the Canadian market as a testing ground for their own regulated cannabis markets. As the cannabis industry evolves into a global marketplace, there is a tremendous opportunity for Rubicon to build brand recognition and to create meaningful differentiation through our focus on organic production and sustainably marketed products. A recent four-year NYU Stern study of consumer purchase behavior reveals that sustainably marketed products delivered 7.1 times faster growth than products not marketed as sustainable and enjoyed a significant 39.5% price premium. This was particularly true for upper-income, college-educated urban millennials who represent a large target segment for Rubicon Organics. In a global marketplace, There's every reason to believe that these macro consumer trends will apply equally to the cannabis industry. On slide four, you can see that in the organic flower and pre-roll market in Canada, Rubicon has the dominant brand portfolio in every province for which we have reliable data. Organic isn't just a stamp we place on our product. It's more than the story of sustainability that underpins it. Organic production creates real physical attributes that translate into a premium value proposition. Savvy consumers report an enhanced and longer-lasting experience, better flavors and aromas from the elevated terpene profiles, and smoother vaporization. It is the coming together of these characteristics, along with emerging consumer values, that create leadership in the premium sector. We continue to explore how to best position our brands in the international markets, and as we previously indicated, we built EU GMP capability into our facility. We are currently awaiting inspection from the German auditors and we anticipate receiving our certification in the second quarter 2022. In addition to Germany, we're exploring other international markets in the EU and elsewhere and expect to make an announcement to that effect in the first quarter of 2022. Rubicon had an outstanding quarter, registering record net revenue growth of 54% sequentially over quarter two 2021 and over double the net revenue from this time last year coupled with this was an increase in gross profit of nearly 2.2 million from the previous quarter which demonstrates how significantly we benefit from operating leverage as we drive the top line a big part of these results is what we've worked so hard to achieve this past year which is the national rollout of our good, better, best brand portfolio strategy. This enables us to optimize margins across all the products we produce. In the upcoming quarters, you'll see the implementation of the next phase of our strategy, where we will focus on increasing our flour production and the percentage of the product and brand mix that is sold through our premium brands. In early quarter three, We had 1964 Supply Co., our premium brand, and Homestead, our mainstream brand, accepted for listing at a number of large provinces. And we rolled those out over the course of the quarter. In Ontario, by far the largest cannabis buying market in Canada, 1964 hit the shelves in September and Homestead in October. Subsequent to Q3, with our entire portfolio of brands in market and with coast-to-coast distribution, we became a top 10 LP with a national market share of 2.2% for the three months ended October 31st. And we've achieved this by producing at a single facility with our own sales and marketing team and without any wholesale sales. On slide five, we can see some of the brand assets that we send to the provinces. Going forward, we are focused on increasing our yield with a plan to deliver an 11,000 kilo run rate by fourth quarter 2022. You can also expect to see a number of line extensions under our existing brand portfolio as we introduce exciting new high THC and high terpene strains like our recently launched Island Pink Kush Insiders Cut with a range of 24 to 26% THC and nearly 5% terpenes. All of which will be strategically positioned relative to our brand value propositions and to the buying preferences of different regions. And of course, we will never stop innovating. We continue to push the boundaries of quality, flavor, and format, and are aptly named DreamWorks Theater, from which we have already dropped small batches into the market of some of the best, if not the best, live rosin available. In early 2022, we anticipate bringing new products to market, like infused pre-rolls and live rosin vapor cartridges. Our strategy, staying focused on the premium segment, with a vision to build a portfolio of global premium cannabis brands is paying off with record revenues, gross profit, and consumer recognition. With that, I will pass the call over to Margaret.