Its third quarter fell below his expectations but Haywood Capital Markets analyst Neal Gilmer is still bullish on Rubicon Organics (Rubicon Organics Stock Quote, Chart, News, Analysts, Financials TSXV:ROMJ), if a little less so.
On November 14, ROMJ reported its Q3, 2023 results. The company posted Adjusted EBITDA of $1.1-million on Net Revenue of $10.0-million, down five per cent from the same period a year prior.
“I am proud to announce Rubicon has achieved our sixth consecutive quarter of positive Adjusted EBITDA and fifth consecutive quarter of positive operating cashflow. Despite the challenges encountered in the demanding Canadian cannabis sector with competitive price compression alongside broader negative macroeconomic pressures faced by Canadian shoppers, we persist in fortifying the Company’s standing as a leading force in the premium cannabis market, and are looking forward to executing our strategy to leverage the strength of our leading premium brands.” said interim CEO and CFO Margaret Brodie.
Gilmer summed up the quarter.
Rubicon reported Q3/23 net revenue of $10.0M, a YoY decrease of 5%, below our estimate of $11.3M. Adjusted gross profit before fair value adjustments was $3.2M, representing a margin of 32.3% below our expectations for a margin of 43.0%. The Company reported adjusted EBITDA of $1.1M (11.4% margin) compared to our forecast for EBITDA of $2.0M (17.3% margin). Cash flow from operations was positive $1.4M while free cash flow was positive $0.5M. The Company finished the period with $9.4M in cash and $10.6M in total debt, of which only $0.8M is due in the next 12 months. Following the results and commentary from management we have moved our estimates lower for Q4 2023 and 2024. Lower gross margins impacts EBITDA to a larger degree, however we forecast the Company to remain EBITDA and cash flow positive.
In a research update to clients November 15, Gilmer maintained his “Buy” rating on ROMJ, but lowered his twelve-month price target from $1.75 to $1.40, implying a return of 233 per cent at the time of publication.
The analyst thinks ROMJ will post EBITDA of $4.5-million on revenue of $41.0-millio in fiscal 2023. He expects those numbers will improve to EBITDA of $7.7-million on a topline of $47.7-million in fiscal 2025.
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