Rubicon Organics Inc.

Good morning, everyone. Welcome to the conference call for Rubicon Organics Q4 Financial Results for the 3 and 12 months ended December 31, 2024. As a reminder, this conference call is being recorded on April 2, 2025. At this time, all participants are in the 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. Before we begin, I will refer you to slide two of our presentation, which contains Rubicon's caution regarding forward-looking statements and non-GAAP measures. Today's presenters will be Margaret Brody, CEO, and Janice Rispen, CFO. I will now turn the call over to Margaret Brody for the presentation.

Good morning, everyone. Today, I'll provide an update on Rubicon Organics. and our achievements in 2024 as Canada's leading house of premium cannabis brands. I will also provide some colour on our growth opportunities and what we are seeing as a resurgence in Canadian cannabis. As well, our CFO, Janice Risbon, will cover our financial highlights. 2024 was a record year for Rubicon Organics, achieving several milestones. We delivered another record high net revenue for both the three and 12-month periods ending December 31, 24, of 21 and 42% respectively on 2023. We reported positive adjusted EBITDA of $4 million, excluding $900,000 in one-off ERP implementation costs, without which we would have been at our record high profitability of $5 million. We achieved three consecutive quarters of profit from operations, We swept the 2024 Kind Magazine Awards with 11 prestigious accolades. We refinanced our credit facility at industry-leading rates, setting Rubicon up for the coming years. And finally, we executed on our commitment to deliver vape in market and the results and impact of which were hugely successful. Into 2025 now, thus far, we've received our GACP certification for our Delta facility, allowing us to execute our inaugural international shipment to Poland in mid-March. And we entered into an agreement to acquire a new facility in Hope, BC, expanding our annual production capacity for premium cannabis flower by over 40% to 15,500 kilos. A quick note for those of you who are more recently joining our story. Rubicon is the number one premium licensed producer, or LP, with a house of premium cannabis brands and over 6% market share of the Canadian premium market and multiple premium segment leading positions. Our brands are a proven launch brand for new products and revenue growth, as evidenced by, firstly, for the last two years, holding two of the top five most recommended brands by Budtender in Simply Bare Organic in 1964. Secondly, reaching number one in premium edibles position in the country with 30% market share within a year of launch. Thirdly, achieving over 13% national market share and 56% national distribution in our vapes In six months since launch, the fastest and widest product launch in our company history. From day one, we've been committed to delivering consistently high quality products that win over consumers and bud tenders alike. Our focus is on quality through every part of our business, from cultivation to product development, which we believe is absolutely essential to competing within the premium and super premium categories and has made us a leader in this industry. and our team has deep cannabis experience coupled with a long history in competitive CPG industries. We are focused where we can out-compete and win rather than trying to be everything to everyone. We are also one of the only living soil cultivators in Canada, which we view as a key competitive advantage in our super premium strategy. Today, we hold unique IP and are now positioned as the world's leading scaled certified organic cannabis company with an extensive genetics library. What can you see in our business? Proven growth. Our track record of success shows we know how to grow and scale our business with net revenue growth of 68% in 22, 14% in 23, and 21% in 24 each year off a higher base. Significant expansion. Our recent acquisition increases capacity by over 40% for our in-demand brands, offering us a low investment growth opportunity. Exceptional brands. We have built strong customer relationships with our focus on brands that deliver consistent and trusted high-quality experiences. And disciplined financial management. We have delivered three consecutive years of positive adjusted EBITDA by keeping our below-the-line operating costs in check and maintained a solid balance sheet supported by our recent long-term debt financing, which bears a very competitive interest rate of 6.75%. Leveraging the strengths. of our house of premium brands, we continued to expand with strategic product launches. For Simply Bare Organic, our super premium cannabis brand, targeting the cannabis connoisseur, we introduced ultra-flavorful quad-level strains like BC Organic Fruit Loops, shown here, and our BC Organic Fire OG, maintaining our strict quality standards for our best-in-class experience. Under 1964, the largest growth initiative was our vape launch. Our high-quality, award-winning products have generated significant net revenue, driven by a growing consumer preference for and willingness to pay a premium for full-spectrum extracts or FSE over distillate vapes. We expect this trend to continue. In addition to vape, In1964 continues to launch some of the best former legacy cultivars, with Stinky Pinky as one of 2024's standouts, and it was crowned as Flower of the Year. Our vape launch leveraged our brand strength, achieving over 55% national distribution by year end, despite only being in Alberta, BC, and Ontario. We won Vape of the Year and Best New Product of the 2024 Kind Awards and captured over 13% of the resin vape market in the fourth quarter. With vape currently only making up 16% to 17% of the Canadian cannabis market versus around 30% in the US, we anticipate continued strong growth especially with the prospect of Quebec coming online in late 2025. We've launched seven vape SKUs and expect it to continue to be a revenue growth driver in 2025. Our vape success is driven by best-in-class quality, bringing our most loved, best-selling strains to consumers in a new format. Premium vapes are only as good as the flower they're made from, quality in, quality out. In a market with limited product visibility, our brands strand out, for their consistent quality, earning consumers' trust. When we deliver on a brand promise, like we did with our vape products, it fuels a powerful cycle of trial, repurchase, and recommendation, reinforcing our position as a trusted cannabis brand leader. With our vapes now in market, we have a meaningful share across premium flower and pre-rolls, vapes, edibles, and topicals. In the quarter, we maintained our leading market premium position in Canada across all categories, holding 6.1% of the total premium market for the previous 12 months. And a few key highlights here. We hold 6% of the national premium flower and pre-rolls category. In the fourth quarter, we achieved 13% of the national resin vape category, incredible given the mid-year launch. We hold 27% of the premium edibles category, and in the fourth quarter, held the number five edibles position across all price categories. and our Wildflower brand continued to be the number one topical brand in the country with 27% of share, despite an increasing number of SKUs entering that category. As true CPG brands emerged in Canadian cannabis, our consumer-loved and bud tender-recommended brands drive successful launches. Our high-quality vape launch thrived on the strong recognition of 1964, a reputational platform gaining traction both in Canada and internationally. I'll now pass the call over to Janice to discuss our financial performance.

Thank you, Margaret, and good morning, everyone. We achieved a record high net revenue for a single quarter, totaling $14.2 million, and the highest consecutive 12 months net revenue of $48.7 million. The first half of 2024 was more challenging, with only modest year-over-year net revenue growth, as we continued to experience soft consumer sentiment and the impact of price compression in the market. Gross profit was affected by an adverse product mix driven by lower margin innovations, price compression, and a shift towards larger flower formats. In the second half, we refocused our efforts towards more profitable SKUs, increasing our gross profit margin by the fourth quarter. Our vape launch with the first shipments in Q2 2024 has been a significant contributor to our growth in 2024, most notably in the second half as we benefited from increased distribution and rate of sale as well as the increase of the range of available SKUs in market. The vape launch has been hugely successful and is now our highest distributed product format, with each SKU contributing meaningfully to the portfolio. And I'm excited to see continued growth from this format through 2025 as we approach one full year in market. However, the 1964 vape launch is not the only growth driver for Rubicon, with all brands having contributed to the overall top line results. Simply Bare has grown across all product categories, most notably driven by the pre-roll segment, benefiting from the successful introduction of new and unique genetic launches, as well as the 2024 introduction of capsules and edibles, both quickly becoming important contributors to the brand offering. For 1964 flour, the second half saw improved performance on the back of new genetic launches in the flour category and a format size adjustment on our pre-rolls business, finishing the year in growth. We also saw strong growth from 1964 edibles with a full year in market as we continued the expansion of the range. Wildflower continues to excel in the wellness category, performing strongly in the topical stick category, and expanding its portfolio into edibles and oils. Despite a low number of topical skews in our portfolio, we continue to maintain a strong 27% market share. We find that once customers experience the quality of our wildflower topicals, they keep coming back. Operating cash flows throughout 2024 continued to improve, with 2.3 million delivered in Q4 2024, bringing the year-to-date operating cash flow to 3.4 million. This marked our third year of positive operating cash flows. The operating cash outflow in Q1 of 0.9 million was driven by the slower start to the year from a sales and mix perspective, investment in our ERP project, and the investment in working capital as we prepared for the launch of 1964 Bates. Although it unfortunately broke our streak, it was the right thing to do for the business, and the results in the second half of the year demonstrate how these investments were necessary to position us for continued growth. 2024 was a successful year for Rubicon, delivering 20% growth in net revenue and 12% growth in adjusted EBITDA, when you exclude the $900,000 of non-recurring ERP investment that we made in 24. Even with the ERP costs, we've delivered another quarter of positive adjusted EBITDA, achieving this for 9 out of the 10 last quarters, and we've maintained positive operating cash flow for 8 out of the last 9 quarters. Our gross profit for the most recent quarter stands at $5.1 million, with a gross margin of 36%, showing great progress from the Q1 results of 25%. As we already mentioned, the beginning of 24 was impacted by market trends that began in the second half of 2023, such as price compression and a shift toward lower price larger formats. The improvement in growth margin since Q1 24 is a result of our efforts to attract consumers back to our more profitable products, gaining leverage on our largely fixed production costs, as well as post-launch cost savings on vapes. We will continue to evaluate margin accretive opportunities as we build out our forward strategy for the business. We earned $292,000 net profit from operations in the quarter, a third successive quarter. Our working capital position continues to support our plans, and we are back to just under $20 million in working capital, following the successful refinancing of our debt in Q4-24. We placed $10 million in credit facilities at an industry-leading interest rate of 6.75%, giving us a strong financial position to pursue further growth. At Rubicon, we pride ourselves on being fiscally responsible and keeping a tight control of costs. Our revenue has grown 13% and 21% in the last two years, respectively. Over that time, the market has gone through a lot of changes, and we have been agile to continue to deliver growth, but not at all cost. Our production costs, which relate to cultivation at our Delta facility, have shown a moderate increase over the last two years as we continue to optimize our growing techniques designed to achieve higher yields and improve consistency and quality. Inventory expense to cost of sales has increased from 34% to 43% in 2024 due to price pressure in the category, a trend towards larger format, lower margin flower skews, and an increase in the ratio of products sold with involvement of third-party manufacturers and third-party contract growers. We have kept control of our operating expenses while delivering the revenue growth as we remain fiscally responsible with 2024 operating expenses impacted by the 0.9 million investment in our ERP project. Finally, we have industry low rates of inventory write-off consistent at about 2% of net revenue for the last three years. I would now like to turn the meeting back to Margaret.