• Revenue of $6.3M compared to $4.3M in Q3 2022, an increase of 48%
  • Operating Cash Flow (OCF), before changes in working capital (BC WC), of $1.9M compared to $0.9M in Q3 2022, an increase of 94%
  • Free Cash Flow1 (FCF) of $1.1M, after $0.8M spend on WC and capital expenditures
  • Announced a strategic advisory agreement with Goodness Growth Holdings to focus on improving quality and efficiencies in their Minnesota and Maryland operations
  • Closed a convertible debenture financing for gross proceeds of US$5,000,000 and subsequent to quarter-end, closed a second and final tranche of convertible debenture financing for total gross proceeds of US$6,000,000
  • Subsequent to quarter-end, US$1,650,000 of the Company's existing convertible debentures have been converted, leaving the Company with US$6,350,000 in total convertible debt as of the date of the release

MEDFORD, Ore., Sept. 28, 2023 /CNW/ - Grown Rogue International Inc. ("Grown Rogue" or the "Company") (CSE: GRIN) (OTC: GRUSF), a craft cannabis company operating in Oregon and Michigan, and in Minnesota and Maryland through an advisory agreement with Goodness Growth Holdings, Inc., is pleased to report its fiscal third quarter 2023 results for the three months ended July 31, 2023. All financial information is provided in U.S. dollars unless otherwise indicated.

Third Quarter 2023 Financial Summary ($USD Millions)

Third Quarter 2023 Summary

Q3 2023

Q3 2022

+/- %

Revenue

6.3

4.3

+48 %

aEBITDA

2.1

1.2

+79 %

aEBITDA %

33.2 %

27.5 %

+570 bps

OCF (BC WC)

1.9

0.9

+103 %

OCF %

29.5 %

21.5 %

+800 bps

 

Management Commentary "We are pleased to announce another quarter with record revenue, operating cash flow and free cash flow. Our $6.3M in revenue continues an upward trajectory with a sequential increase of 5%, after last quarter's 18% increase over our previous record quarter", said Obie Strickler, CEO of Grown Rogue.

"Our year-over-year revenue and EBITDA growth of 48% and 79%, respectively, shows our commitment to controlling costs and our focus on producing high quality cannabis products that delight our team and customers. We are proud to recently launch new strain specific packaging in Michigan and craft pre-rolls in Oregon and are pleased with the initial traction in both, led by our improvements in our genetic quality and quantity over the past twelve months.

We believe our focus on genetics, and our strength in branding and distribution will allow us the opportunity to be market share leaders in new categories as we engender more customer trust and deepen the relationship we have with our existing fans," continued Mr. Strickler. 

"Our team continues to lean into our partnership with Goodness Growth and we have been very pleased with our progress, particularly how quickly our team is expanding their abilities and improving processes. An important 2023 objective for us was mapping our talent against more assets and this partnership has done nothing but show the readiness of our team.

Finally, it was especially rewarding to complete the convertible debenture financing in July to further strengthen our balance sheet, particularly in such a challenging credit market. The trust and commitment from our existing and new shareholders show the belief they have in our business plan and their excitement around new opportunities that are available to us. I want to thank the entire Grown Rogue team for their continued efforts and look forward to updating investors on our new market efforts shortly."

Oregon Market Highlights ($USD Millions)

Oregon

Q3 2023

Q3 2022

+/- %

Revenue

3.2

2.4

+35 %

aEBITDA

1.1

0.6

+100 %

aEBITDA Margin %

34.6 %

23.8 %

+1080 bps

 

  • #1 Flower brand for nine consecutive quarters, according to LeafLink's MarketScape data
  • Launched a 10-pack craft pre-roll product during the quarter and are pleased with the initial traction
  • September to date moved up to #2 total wholesaler in the state from #3, according to MarketScape
  • Indoor wet weight harvested in the state of Oregon YTD through August decreased 3.5% year-over-year and outdoor wet weight YTD decreased 43% year-over-year, according to the Oregon Liquor and Cannabis Commission

Michigan Market Highlights ($USD Millions)

Michigan

Q3 2023

Q3 2022

+/- %

Revenue

2.8

1.9

+53 %

aEBITDA

1.3

0.8

+59 %

aEBITDA Margin %

47.1 %

45.2 %

 +180 bps

 

  • Launched strain specific packaging during the quarter, and have seen an increase in both pricing and higher product mix of our pre-packaged products
  • Sales in Michigan in July was a new record at $277M, making it the second largest market in the U.S
  • Pricing per ounce of flower in Michigan in July was the highest since October 2022, according to the Michigan Cannabis Regulatory Agency

Michigan operations are through Golden Harvests, LLC.

Financial Statements and aEBITDA reconciliation

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

July 31, 2023

October 31, 2022


$

$

ASSETS



Current assets



Cash and cash equivalents

8,482,768

1,582,384

Accounts receivable (Note 18)

2,276,195

1,643,959

Warrants receivable (Note 13.2)

1,232,253

-

Biological assets (Note 3)

1,987,677

1,199,519

Inventory (Note 4)

2,702,618

3,131,877

Prepaid expenses and other assets

465,756

352,274

Total current assets

17,147,267

7,910,013

Property and equipment (Note 8)

9,118,551

7,734,901

Other investments and purchase deposits

211,041

-

Intangible assets and goodwill (Note 9)

725,668

725,668

TOTAL ASSETS

27,202,527

16,370,582

LIABILITIES



Current liabilities



Accounts payable and accrued liabilities

1,720,596

1,821,875

Current portion of lease liabilities (Note 7)

920,118

1,025,373

Current portion of long-term debt (Note 10)

1,445,050

1,769,600

Business acquisition consideration payable (Note 5)

360,000

-

Warrants payable (Note 13.2)

1,232,253

360,000

Unearned revenue

88,126

28,024

    Derivative liability (Note 11.1 and Note 11.2)

4,708,194

-

Income tax

366,056

311,032

Total current liabilities

10,840,393

5,315,904

Lease liabilities (Note 7)

2,484,597

1,275,756

         Long-term debt (Note 10)

199,391

839,222

         Convertible debentures (Note 11.1 and Note 11.2)

3,140,188

-

TOTAL LIABILITIES

16,664,569

7,430,882

EQUITY



Share capital (Note 12)

21,894,633

21,858,827

Shares issuable (Note 12)

-

35,806

Contributed surplus (Notes 13, 14)

6,752,429

6,505,092

         Accumulated other comprehensive loss

(108,696)

(109,613)

Accumulated deficit

(18,893,089)

(21,356,891)

Equity attributable to shareholders

9,645,277

6,933,221

         Non-controlling interests (Note 22)

892,681

2,006,479

TOTAL EQUITY

10,537,958

8,939,700

TOTAL LIABILITIES AND EQUITY

27,202,527

16,370,582

 

Condensed Consolidated Statements of Comprehensive Income

Three months ended July 31,


2023

2022


$

$

Revenue



Product sales

6,076,652

4,251,808

Service revenue

219,065

-

Total revenue

6,295,717

4,251,808

Cost of goods sold



Cost of finished cannabis inventory sold

(3,047,971)

(2,226,593)

Costs of service revenue

(99,212)

-

Gross profit, excluding fair value items

3,148,534

2,025,215

Realized fair value amounts in inventory sold

(585,392)

(788,083)

Unrealized fair value gain on growth of biological assets

583,879

707,453

Gross profit

3,147,021

1,944,585

Expenses



Accretion expense

234,028

68,736

Amortization of property and equipment

196,363

238,497

General and administrative

1,641,725

1,207,892

Share-based compensation

97,672

12,194

Total expenses

2,169,788

1,527,319

Income from operations

977,233

417,266

Other income and (expense)



Interest expense

(91,623)

(98,084)

Other income (expense)

13,566

(1,420)

Gain on debt settlement

-

455,674

Unrealized loss on marketable securities

-

(146,891)

Unrealized loss on derivative liability

(472,970)

-

Loss on disposal of property and equipment

-

-

Gain from operations before taxes

426,206

626,545

Income tax

(80,718)

(55,139)

Net income

345,488

571,406

Other comprehensive income (items that may be
subsequently reclassified to profit & loss)



Currency translation gain (loss)

4,227

(788)

Total comprehensive income

349,715

570,618

Gain per share attributable to owners of the parent – basic and diluted

0.00

0.00

Weighted average shares outstanding – basic and diluted

170,832,611

170,632,611

Net income (loss) for the period attributable to:



Non-controlling interest

75,837

249,055

Shareholders

269,651

322,351

Net income

345,488

571,406

Comprehensive income (loss) for the period attributable to:



Non-controlling interest

75,837

249,055

Shareholders

273,878

321,563

Total comprehensive income

349,715

570,618

 

CONSOLIDATED CASH FLOW STATEMENTS

Nine months ended July 31,


2023

2022


$

$

Operating activities



Net income

1,350,004

871,581

Adjustments for non-cash items in net income:



Amortization of property and equipment

379,822

530,190

Amortization of property and equipment included in costs of inventory sold

1,268,928

589,884

Unrealized gain on changes in fair value of biological assets

(1,634,625)

(2,667,102)

Changes in fair value of inventory sold

1,829,170

2,779,674

Share-based compensation

-

21,264

Stock option expense

247,337

87,333

Accretion expense

597,909

358,215

Loss on disposal of property & equipment

168,144

6,250

Gain on debt settlement

-

(455,674)

Unrealized loss on marketable securities

-

333,777

Loss on fair value of derivative liability

679,322

-

         Effects of foreign exchange

3,270

3,181


4,889,281

2,458,576

Changes in non-cash working capital (Note 15)

(1,203,332)

(1,135,375)

Net cash provided by operating activities

3,685,949

1,323,198




Investing activities



Purchase of property and equipment and intangibles

(735,718)

(822,982)

        Other investment

(211,041)

-

        Payments of acquisition payable

-

(2,000)

Net cash used in investing activities

(946,759)

(824,982)




Financing activities



Proceeds from convertible debentures

7,000,000

-

Proceeds from long-term debt

-

100,000

Proceeds from private placement

-

1,300,000

Repayment of long-term debt

(1,290,585

(601,160)

         Repayment of convertible debentures

(105,000)

-

         Payments of lease principal

(1,443,221)

(880,378)

Net cash provided by financing activities

4,161,194

(81,538)




Change in cash

6,900,384

416,678

 

 

                                         SEGMENTED aEBITDA – THREE MONTHS ENDED JULY 31, 2023


Oregon

Michigan

Services

Corporate

Consolidated

Sales Revenue

3,240,946

2,835,706

219,065

-

6,295,717

Costs of goods sold, excluding fair value

   ("FV") adjustments

(1,902,582)

(1,145,389)

(99,212)

-

(3,147,183)

Gross profit before fair value adjustments

1,338,364

1,690,317

119,853

-

3,148,534

Net fair value adjustments

(238,228)

236,715

-

-

(1,153)

Gross profit

1,100,136

1,927,032

119,853

-

3,147,021

Operating expenses:






General and administration

559,045

538,057

-

544,623

1,641,725

Depreciation and amortization

26,577

145,386

-

24,400

196,363

Share based compensation

-

-

-

97,672

97,672

Other income and expense:






Loss on sale of assets

-

-

-

-

-

Interest and accretion

(85,199)

(47,802)

-

(192,650)

(325,651)

Unrealized loss on derivative liability

-

-

-

(472,970)

(472,970)

Other income and expense

16,961

910

-

(4,305)

13,566

Net income (loss) before income tax

446,276

1,196,697

119,853

(1,336,620)

426,206

Income tax

-

77,718

-

9,000

80,718

Net income after tax

446,276

1,124,979

119,853

(1,345,620)

345,488

Add back (deduct) from net income after tax:






Net FV adjustments in costs of goods sold

238,228

(236,715)

-

-

1,513

Amortization of property & equipment included

   in cost of sales

325,534

182,800

-

-

508,334

Interest and accretion expense

85,199

47,802

-

192,650

325,651

Amortization of property and equipment

26,577

145,386

-

24,400

196,363

Share-based compensation

-

-

-

97,672

97,672

Unrealized loss on derivative liability

-

-

-

472,970

472,970

Income tax expense

-

71,718

-

9,000

80,718

EBITDA

1,121,814

1,335,970

119,853

(548,928)

2,028,709

Add back to EBITDA:






  Compliance costs

-

-

-

22,946

22,946

  Costs associated with acquisition of Golden Harvests

-

-

-

40,000

40,000

aEBITDA

1,121,814

1,335,970

119,853

(485,982)

2,091,655

aEBITDA margin %

34.6 %

47.1 %

54.7 %

-

33.2 %

 

NOTES:


1. The Company's "Free cash flow" metric is defined by cash flow from operations minus capital expenditures.

2. The Company's "aEBITDA," or "Adjusted EBITDA," is a non-IFRS measure used by management that does not have any prescribed meaning by IFRS and that may not be comparable to similar measures presented by other companies. The Company defines "EBITDA" as the Company's net income or loss for a period, as reported, before interest, taxes, depreciation and amortization, and is further adjusted to remove transaction costs, stock-based compensation expense, accretion expense, gain (loss) on derecognition of derivative liabilities, the effects of fair-value accounting for biological assets and inventory, as well as other non-cash items and items not representative of operational performance as reported in net income (loss). Adjusted EBITDA is defined as EBITDA adjusted for the impact of various significant or unusual transactions. The Company believes that this is a useful metric to evaluate its operating performance. NON-IFRS FINANCIAL MEASURES

 

EBITDA and aEBITDA are non-IFRS measures and do not have standardized definitions under IFRS. The Company has provided the non-IFRS financial measures, which are not calculated or presented in accordance with IFRS, as supplemental information and in addition to the financial measures that are calculated and presented in accordance with IFRS. These supplemental non-IFRS financial measures are presented because management has evaluated the financial results both including and excluding the adjusted items and believe that the supplemental non-IFRS financial measures presented provide additional perspective and insights when analyzing the core operating performance of the business. These supplemental non-IFRS financial measures should not be considered superior to, as a substitute for or as an alternative to, and should only be considered in conjunction with, the IFRS financial measures presented herein. Accordingly, the following information provides reconciliations of the supplemental non-IFRS financial measures, presented herein to the most directly comparable financial measures calculated and presented in accordance with IFRS.

About Grown Rogue

Grown Rogue International (CSE: GRIN | OTC: GRUSF) is a craft cannabis company operating in Oregon and Michigan, and in Minnesota and Maryland through an advisory agreement with Goodness Growth Holdings, Inc., is focused on delighting customers with premium flower and flower-derived products at fair prices. Our roots are in Southern Oregon where we have demonstrated our capabilities in the highly competitive and discerning Oregon market and, more recently, we successfully expanded our platform to Michigan. We combine our passion for product and value with a disciplined approach to growth, prioritizing profitability and return on capital. Our strategy is to pursue capital efficient methods to expand into new markets, bringing our craft quality and value to more consumers. We also continue to make modest investments to improve our outdoor craft cultivation capabilities in preparation for eventual interstate commerce.

FORWARD-LOOKING STATEMENTS

This press release contains statements which constitute "forward‐looking information" within the meaning of applicable securities laws, including statements regarding the plans, intentions, beliefs and current expectations of the Company with respect to future business activities. Forward‐ looking information is often identified by the words "may," "would," "could," "should," "will," "intend," "plan," "anticipate," "believe," "estimate," "expect" or similar expressions and include information regarding: (i) statements regarding the future direction of the Company (ii) the ability of the Company to successfully achieve its business and financial objectives, (iii) plans for expansion of the Company and securing applicable regulatory approvals, and (iv) expectations for other economic, business, and/or competitive factors. Investors are cautioned that forward‐looking information is not based on historical facts but instead reflect the Company's management's expectations, estimates or projections concerning the business of the Company's future results or events based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made. Although the Company believes that the expectations reflected in such forward‐looking information are reasonable, such information involves risks and uncertainties, and undue reliance should not be placed on such information, as unknown or unpredictable factors could have material adverse effects on future results, performance or achievements of the combined company. Among the key factors that could cause actual results to differ materially from those projected in the forward‐looking information are the following: changes in general economic, business and political conditions, including changes in the financial markets; and in particular in the ability of the Company to raise debt and equity capital in the amounts and at the costs that it expects; adverse changes in the public perception of cannabis; decreases in the prevailing prices for cannabis and cannabis products in the markets that the Company operates in; adverse changes in applicable laws; or adverse changes in the application or enforcement of current laws; compliance with extensive government regulation and related costs, and other risks described in the Company's public disclosure documents filed on Sedar.

Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward‐looking information prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Although the Company has attempted to identify important risks, uncertainties and factors which could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated or intended. The Company does not intend, and does not assume any obligation, to update this forward‐looking information except as otherwise required by applicable law.

The Company is indirectly involved in the manufacture, possession, use, sale and distribution of cannabis in the recreational cannabis marketplace in the United States through its indirect operating subsidiaries. Local state laws where its subsidiaries operate permit such activities however, these activities are currently illegal under United States federal law. Additional information regarding this and other risks and uncertainties relating to the Company's business are disclosed in the Company's Listing Statement filed on its issuer profile on SEDAR+ at www.sedarplus.ca. Should one or more of these risks, uncertainties or other factors materialize, or should assumptions underlying the forward-looking information or forward-looking statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected.

No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein.

For further information on Grown Rogue International please visit www.grownrogue.com

SOURCE Grown Rogue International Inc.

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