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Back

Grown Rogue Reports First Quarter 2023 Results, Record Operating Cash Flow and Free Cash Flow

Mar 29, 2023 • 5:21 AM EDT
10 MIN READ  •  By Michael Berger
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MEDFORD, Ore., March 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, is pleased to report its fiscal first quarter 2023 results for the three months ended January 31, 2023. All financial information is provided in U.S. dollars unless otherwise indicated.

First Quarter 2023 Financial Summary ($USD Millions)

First Quarter 2023 Summary

Q1 2023

Q1 2022

+/- %

Revenue

4.5

3.7

+21 %

aEBITDA

1.3

1.0

+33 %

aEBITDA %

29.5 %

26.9 %

+2.6 %

OCF (Before Changes in WC)

1.3

0.5

+176 %

OCF %

28.4 %

12.5 %

+15.9 %


Management Commentary

“We continue to demonstrate our operating abilities by generating substantial free cash flow margins while operating in extremely competitive markets. Our financial results for Q1 2023 were improved from Q4 2022 due to of our continued pursuit of operating efficiencies, and a modest increase in average wholesale pricing in Oregon,” said Obie Strickler, CEO of Grown Rogue.

“As we move forward, we are proactively ramping up our genetics programs in both Oregon and Michigan to make sure we stay on the front line of delivering industry-leading quality to our consumers. We believe that our philosophy and practice of constant iteration and improvement will engender more customer trust and deepen the relationship we have with our existing fans,” Mr. Strickler continued.

“Regarding capital allocation, we continue to focus on producing free cash flow to best position ourselves to meet our balance sheet obligations while being prepared for new market opportunities, using only a modest amount on increased working capital. With our internal cash generation and the recent $2M convertible debenture capital raise, we feel confident in our ability to take advantage of high-quality opportunities as they arise.

I want to thank the entire Grown Rogue team for their continued efforts and look forward to updating investors on our new market efforts in due course.”

Oregon Market Highlights ($USD Millions)

Oregon

Q1 2023

Q1 2022

+/- %

Revenue

2.0

1.4

+41 %

aEBITDA

0.7

0.4

+79 %

aEBITDA Margin %

37.4 %

29.4 %

+8 %

  • #1 Flower brand for seven consecutive quarters, according to LeafLink’s MarketScape data
  • Grown Rogue increased Oregon sungrown capacity with a lease option of 35 additional acres in Oregon’s Rogue Valley, that includes an addition cultivation license
  • Focusing on increasing market share by launching craft pre-roll products in Q2-Q3 2023

Michigan Market Highlights ($USD Millions)

Michigan

Q1 2023

Q1 2022

+/- %

Revenue

2.6

2.3

+10 %

aEBITDA

1.1

1.0

+10 %

aEBITDA Margin %

43.6 %

43.5 %

+0.1 %

  • Grown Rogue exercised its option and acquired 87% of Canopy Management, LLC resulting in its controlling interest in Golden Harvests, LLC
  • Launching strain specific packaging in Q2-Q3 2023 which has garnered significant interest from customers

Michigan operations are through Golden Harvests, LLC.

Financial Statements and aEBITDA reconciliation

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

January 31, 2023

October 31, 2022

$

$

ASSETS

Current assets

Cash and cash equivalents

3,488,046

1,582,384

Accounts receivable (Note 18)

1,276,546

1,643,959

Biological assets (Note 3)

1,434,080

1,199,519

Inventory (Note 4)

3,614,247

3,131,877

Prepaid expenses and other assets

362,345

352,274

Total current assets

10,175,264

7,910,013

Property and equipment (Note 8)

7,880,350

7,734,901

Intangible assets and goodwill (Note 9)

725,668

725,668

TOTAL ASSETS

18,781,282

16,370,582

LIABILITIES

Current liabilities

Accounts payable and accrued liabilities

1,664,264

1,821,875

Current portion of lease liabilities (Note 7)

1,280,277

1,025,373

Current portion of long-term debt (Note 10)

1,956,428

1,769,600

Current portion of convertible debentures (Note 11)

194,426

Business acquisition consideration payable (Note 5)

360,000

360,000

Unearned revenue

52,318

28,024

Derivative liability (Note 11.1)

721,849

Income tax

311,032

311,032

Total current liabilities

6,540,594

5,315,904

Lease liabilities (Note 7)

1,251,759

1,275,756

Long-term debt (Note 10)

339,664

839,222

Convertible debentures (Note 11)

1,062,828

TOTAL LIABILITIES

9,194,845

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)

6,560,714

6,505,092

Accumulated other comprehensive loss

(111,035)

(109,613)

Accumulated deficit

(19,531,463)

(21,356,891)

Equity attributable to shareholders

8,812,849

6,933,221

Non-controlling interests (Note 22)

773,588

2,006,479

TOTAL EQUITY

9,586,437

8,939,700

TOTAL LIABILITIES AND EQUITY

18,781,282

16,370,582

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three months ended January 31,

2023

2022

$

$

Revenue

Product sales

4,530,540

3,732,713

Total revenue

4,530,540

3,732,713

Cost of goods sold

Cost of finished cannabis inventory sold (Note 4)

(2,037,281)

(1,699,026)

Gross profit, excluding fair value items

2,493,259

2,033,687

Realized fair value amounts in inventory sold

(606,715)

(1,010,478)

Unrealized fair value gain on growth of biological assets

630,872

1,289,514

Gross profit

2,517,416

2,312,723

Expenses

Accretion expense

164,108

151,687

Amortization of property and equipment

115,639

52,010

General and administrative

1,535,242

1,603,926

Share-based compensation

55,622

18,487

Total expenses

1,870,611

1,826,110

Income from operations

646,805

486,613

Other income and (expense)

Interest expense

(99,504)

(114,660)

Other income (expense)

223,774

(5,440)

Unrealized loss on marketable securities

(167,804)

Unrealized gain on derivative liability

64,360

Loss on disposal of property and equipment

(168,144)

(6,250)

Gain from operations before income tax

667,291

192,459

Income tax

(74,754)

(37,018)

Net income

592,537

155,441

Other comprehensive income (items that may be subsequently

 reclassified to profit & loss)

Currency translation loss

(1,422)

(13,658)

Total comprehensive income

591,115

141,783

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

0.01

0.00

Weighted average shares outstanding – basic and diluted

169,193,812

164,976,815

Net income (loss) for the period attributable to:

Non-controlling interest

(339,408)

564,607

Shareholders

931,945

(409,166)

Net income

592,537

155,441

Comprehensive income (loss) for the period attributable to:

Non-controlling interest

(339,408)

564,607

Shareholders

930,523

(422,824)

Total comprehensive income

591,115

141,783

CONSOLIDATED CASH FLOW STATEMENTS

Three months ended January 31,

2023

2022

$

$

Operating activities

Net income

592,537

155,441

Adjustments for non-cash items in net income:

Amortization of property and equipment

115,639

52,010

Amortization of property and equipment included in costs of inventory sold

276,562

147,463

Unrealized gain on changes in fair value of biological assets

(630,872)

(1,289,514)

Changes in fair value of inventory sold

606,715

1,010,478

Share-based compensation

7,499

Stock option expense

55,622

54,797

Accretion expense

164,108

151,685

Loss on disposal of property & equipment

168,144

6,250

Unrealized loss on marketable securities

167,804

Gain on fair value of derivative liability

(64,360)

Effects of foreign exchange

933

1,807

1,285,028

465,720

Changes in non-cash working capital (Note 15)

(419,285)

(389,648)

Net cash provided by operating activities

865,743

76,072

Investing activities

Purchase of property and equipment and intangibles

(36,378)

(574,595)

Payments of acquisition payable

(2,000)

Net cash used in investing activities

(36,378)

(576,595)

Financing activities

Proceeds from convertible debentures

2,000,000

Proceeds from long-term debt

100,000

Proceeds from private placement

1,300,000

Repayment of long-term debt

(420,730)

(218,710)

Repayment of convertible debentures

(15,000)

Payments of lease principal

(487,973)

(186,922)

Net cash provided by financing activities

1,076,297

944,368

Change in cash

1,905,662

493,845

Cash balance, beginning

1,582,384

1,114,033

Cash balance, ending

3,488,046

1,607,878

SEGMENTED aEBITDA – THREE MONTHS ENDED JANUARY 31, 2023

Oregon

Michigan

Corporate

Consolidated

Sales revenues

1,955,720

2,574,820

4,530,540

Costs of goods sold, excluding fair value

   (“FV“) adjustments

(936,086)

(1,101,195)

(2,037,281)

Gross profit before fair value adjustments

1,019,634

1,473,625

2,493,259

Net fair value adjustments

(78,012)

102,169

24,157

Gross profit

941,622

1,575,794

2,517,416

Operating expenses:

General and administration

494,918

474,928

565,396

1,535,242

Depreciation and amortization

30,939

60,839

23,861

115,639

Share based compensation

55,622

55,622

Other income and expense:

Loss on sale of assets

(168,144)

(168,144)

Interest and accretion

(75,187)

(60,685)

(127,740)

(263,612)

Unrealized loss on derivative liability

64,360

64,360

Other income and expense

222,220

1,554

223,774

Net income (loss) before income tax

394,654

979,342

(706,705)

667,291

Income tax

24,754

50,000

74,754

Net income after tax

369,900

929,342

(706,705)

592,537

Add back (deduct) from net income after tax:

Net FV adjustments in costs of goods sold

78,012

(102,169)

(24,157)

Amortization of property & equipment included

   in cost of sales

152,443

124,119

276,562

Interest and accretion expense

75,187

60,685

127,740

263,612

Amortization of property and equipment

30,939

60,839

23,861

115,639

Share-based compensation

55,622

55,622

Unrealized gain on derivative liability

(64,360)

(64,360)

Income tax expense

24,754

50,000

74,754

EBITDA

731,235

1,122,816

(563,842)

1,290,209

Add back to EBITDA:

Compliance costs

17,997

17,997

Costs associated with acquisition of Golden Harvests

30,000

30,000

aEBITDA

731,235

1,122,816

(515,845)

1,338,206

aEBITDA margin %

37.4 %

43.6 %

29.5 %

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 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 Statesfederal 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.sedar.com. 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.

SOURCE Grown Rogue International Inc.

For further information: For further information on Grown Rogue International please visit www.grownrogue.com or contact: Obie Strickler, Chief Executive Officer, Obie@grownrogue.com; Jakob Iotte, Director of Business Development and IR, Jakeiotte@grownrogue.com, (458) 226-2100

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Michael Berger

Michael Berger is Managing Partner of StoneBridge Partners, LLC and Founder of Technical420.com. Prior to entering the cannabis industry, Michael was an Equity Research Analyst at Raymond James Financial covering the Energy Sector. Michael has been featured in publications such as The Street, Bloomberg, US Money News, and hosts various cannabis events across North America.

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