Anticipate 4Q21 Rebound: Summer Store Re-openings Driving
Strong Aug. Sales
We’ve noticed a material spike in Aug. sales for Rubicon Organics (ROMJ-TSXV, OP2), which—
particularly given ROMJ’s busy summer building out its brand portfolio and offerings—we believe could portend strong, sustained revenue into 4Q21, and, perhaps, +EBITDA too.
Our Take: Climbing the Ranks, Strong Forward Indicator COVID-19’s Canadian surge during 1H21 and its associated cannabis retail shutdowns indeed provided challenging conditions for all premium cannabis players, including ROMJ. Looking to 2H21, however, we’ve noticed a material uptick in ROMJ’s sales and market share, driven by store re-openings through the summer, and by the prevailing conditions being conducive to ROMJ launching its robust suite brands and products in earnest (see below). Sales of ROMJ’s products at the retail till, according to our channel data, indicate a +40% MoM sales increase between Jul. and Aug. (And Jun. to Jul. already showed a 9% MoM jump.) Judged on the basis of Aug.sales only, ROMJ would claim the #13 spot in national market share—a 3-position leap from its 3-
month weighted rank (see Exhibit 1)—edging out TerrAscend (TER-CSE, not covered) and landing just behind Sundial (SNDL-NASDAQ, not covered).
As we’d indicated in our 2Q21 earnings note, we believe improved market conditions combined
with ROMJ’s solid operational execution should lead to strong 2H21 earnings performance. In
particular, our calculations suggest that ROMJ’s current EBITDA breakeven point is associated
with quarterly revenue in the ~$6.5 mln range; with such strong indications of revenue this Aug.
onward, we believe ROMJ is well on track to produce +EBITDA results 4Q21 forward.
Robust Expansion in Products, Brands, Distribution
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This summer, we’ve seen ROMJ’s brand and product roll-out really take shape:
Sep. 2021: ROMJ launched 2 new SKUs from its 1964 Supply Co. brand (flower, concentrates)
and 2 SKUs from its flagship Simply Bare Organic brand (flower, pre-rolls) into the Ontario
market (first time 1964 has entered ON). These offerings add to the 44 SKUs launched across 5
brands as at Aug. 20. Purchase orders for SKUs launched earlier in the summer rolling in from
AB, BC, ON.
Sep. 2021: ROMJ executed a supplier agreement with Shoppers Drug Mart (owned by Loblaw
[L-TSX, not covered]), expanding distribution into the Canadian medical cannabis market.
The supply agreement includes SimplyBare Organic hash and ROMJ’s Wildflower CBD topical
products.
Jul. 2021: ROMJ launched its Homestead mainstream brand, with large format 28g offerings
expected to be on shelves for the first time this Oct. in ON.
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