Grown Rogue International Inc. (“Grown Rogue” or the “Company”) (CSE: GRIN) (OTC: GRUSF), a multi-state cannabis company with operations and assets in Oregon and Michigan, reports fiscal first quarter 2022 results for the three months ended January 31, 2022. All financial information is provided in U.S. dollars unless otherwise indicated.
First Quarter 2022 Financial Summary
- Ninth consecutive quarter of positive aEBITDA1, including pro-forma2results
- Third consecutive quarter of positive operating cash flow, before changes in working capital
- Third consecutive quarter of positive net income
- #1 indoor flower wholesaler in Oregon, according to LeafLink’s MarketSpace data
- Named fastest growing brand in Oregon during January, according to LeafLink; the third time in five months
- Net assets (excluding intangibles and goodwill) of $8.23M compared to $1.5M in net liabilities in Q1 2021
- Closed a non-brokered private placement for gross proceeds of $1.30M which included an investment from Bengal Capital, a venture capital firm with significant cannabis expertise, and the Company’s CEO
- Subsequent to quarter end, Grown Rogue launched nitrogen sealed pre-rolls in Michigan
“Grown Rogue had a very strong quarter considering Q1 is typically the weakest quarter of our fiscal year”, said Obie Strickler, CEO of Grown Rogue. “Michigan was particularly strong with revenue up 10% quarter over quarter and Michigan state sales down 3% leading to large market share gains during the quarter. With our recent launch of pre-rolls in Michigan and continued build out of our 80,000 square foot facility, we expect further market share gains in 2022. I could not be more proud of our team as we were north of $1M in aEBITDA for the second consecutive quarter and established Grown Rogue as the clear leader in the Oregon flower market, one of the most competitive states in the US. With our industry leading efficiencies and rapidly expanding craft production, we are excited to kick off 2022, where we are focused on continuing to gain market share, by offering consistent quality and service, and launching into additional product categories in our states. We expect additional economies of scale will lower our breakeven costs in 2022, even as our data suggests Grown Rogue has the lowest indoor production breakeven of any public company in the U.S.”
Highlights by State
Oregon Operations
- Revenue of $1.39M compared to $0.87M in Q1 2021, an increase of 59%
- Gross profit, before fair value adjustments, of $0.70M compared to $0.49M in Q1 2021, an increase of 41%
- Gross margin, before fair value adjustments, of 50.4%
- Segmented aEBITDA1 of $0.41M and aEBITDA1 margin of 29.4% compared to segmented aEBITDA1 of $0.05M and aEBITDA1 margin of 4.8% in Q1 2021
- Average selling price of indoor whole flower of $781/pound
- Indoor production run rate expected to increase to 1,000 pounds in Q2 2022
- #1 indoor flower wholesaler in Oregon, according to LeafLink’s MarketSpace data
- Named fastest growing brand in Oregon during January, according to LeafLink, and the third time in five months
Michigan Operations
- Revenue of $2.34M compared to pro-forma2 revenue of $1.13M in Q1 2021, an increase of 108%
- Gross margin, before fair value adjustments, of 57.0%
- Segmented aEBITDA1 of $1.02M and aEBITDA1 margin of 43.5% compared to pro-forma2 segmented aEBITDA1 of $0.2M and aEBITDA1 margin of 18.8%
- Average selling price of indoor whole flower of $1,322/pound
- Indoor production run rate expected to increase to 750 pounds/month in Q2 2022
- Top 10 flower wholesaler in Michigan, according to LeafLink’s MarketSpace data
- Subsequent to quarter end, Grown Rogue launched nitrogen sealed pre-rolls
| January 31, 2022 | October 31, 2021 | |
| $ | $ | |
| ASSETS | ||
| Current assets | ||
| Cash | 1,607,878 | 1,114,033 |
| Accounts receivable | 1,029,971 | 739,248 |
| Biological assets | 1,521,500 | 1,188,552 |
| Inventory | 3,808,761 | 3,306,312 |
| Prepaid expenses and other assets | 299,013 | 357,541 |
| Total current assets | 8,267,123 | 6,705,686 |
| Marketable securities | 426,823 | 610,092 |
| Other investments and purchase deposits | 750,000 | 750,000 |
| Property and equipment | 6,392,274 | 5,742,584 |
| Intangible assets and goodwill | 399,338 | 399,338 |
| TOTAL ASSETS | 16,235,558 | 14,207,700 |
| LIABILITIES | ||
| Current liabilities | ||
| Accounts payable and accrued liabilities | 1,910,861 | 1,766,707 |
| Current portion of lease liabilities | 1,117,642 | 624,935 |
| Current portion of long-term debt | 1,192,916 | 843,900 |
| Business acquisition consideration payable | 360,000 | 358,537 |
| Interest payable | 15,000 | 13,750 |
| Unearned revenue | 49,007 | – |
| Income tax | 269,133 | 254,631 |
| Total current liabilities | 4,914,559 | 3,862,460 |
| Accrued liabilities | 60,514 | 123,413 |
| Lease liabilities | 1,589,584 | 1,735,503 |
| Long-term debt | 1,046,259 | 1,365,761 |
| TOTAL LIABILITIES | 7,610,916 | 7,087,137 |
| EQUITY | ||
| Share capital | 21,845,062 | 20,499,031 |
| Shares issuable | 35,806 | 74,338 |
| Contributed surplus | 6,462,732 | 6,407,935 |
| Accumulated other comprehensive income (loss) | (104,036) | (90,378) |
| Accumulated deficit | (22,213,515) | (21,804,349) |
| Equity attributable to shareholders | 6,026,049 | 5,086,577 |
| Non-controlling interest | 2,598,593 | 2,033,986 |
| TOTAL EQUITY | 8,624,642 | 7,120,563 |
| TOTAL LIABILITIES AND EQUITY | 16,235,558 | 14,207,700 |
| Three months ended January 31, | ||
| 2022 | 2021 | |
| $ | $ | |
| Revenue | ||
| Product sales | 3,732,713 | 874,824 |
| Service revenue | – | 176,361 |
| Total revenue | 3,732,713 | 1,051,185 |
| Cost of goods sold | ||
| Cost of finished cannabis inventory sold | (1,699,026) | (470,554) |
| Cost of service revenues | – | (84,153) |
| Gross profit, excluding fair value items | 2,033,687 | 496,478 |
| Realized fair value amounts in inventory sold | (1,010,478) | (169,328) |
| Unrealized fair value gain (loss) on growth of biological assets | 1,289,514 | (186,806) |
| Gross profit | 2,312,723 | 140,344 |
| Expenses | ||
| Accretion expense | 151,687 | 248,357 |
| Amortization of intangible assets | – | 4,997 |
| Amortization of property & equipment | 52,010 | 38,155 |
| General and administrative | 1,603,926 | 666,739 |
| Share-based compensation | 18,487 | 88,438 |
| Total expenses | 1,826,110 | 1,046,686 |
| Gain (loss) from operations | 482,593 | (906,342) |
| Other income and (expense) | ||
| Interest expense | (114,660) | (8,527) |
| Other income | (5,440) | – |
| Gain on debt settlement | – | 16,623 |
| Unrealized gain (loss) on marketable securities | (167,804) | 302,808 |
| Unrealized loss on derivative liability | – | (319,627) |
| Gain (loss) on disposal of property and equipment | (6,250) | – |
| Gain from operations before taxes | 192,459 | (915,065) |
| Income tax | (37,018) | – |
| Net income (loss) | 155,441 | (915,065) |
| Other comprehensive income (items that may be subsequentlyreclassified to profit & loss) | ||
| Currency translation | (13,658) | (75,934) |
| Total comprehensive income (loss) | 141,783 | (990,999) |
| Gain (loss) per share attributable to owners of the parent – basic & diluted | – | (0.01) |
| Weighted average shares outstanding – basic & diluted | 164,976,815 | 108,038,431 |
| Net income (loss) for the period attributable to: | ||
| Non-controlling interest | 564,607 | 4,896 |
| Shareholders | (409,166) | (919,961) |
| Net income (loss) | 155,441 | (915,065) |
| Comprehensive loss for the period attributable to: | ||
| Non-controlling interest | 564,607 | 4,896 |
| Shareholders | (422,824) | (995,895) |
| Total comprehensive income (loss) | 141,783 | (990,999) |
| Quarter ended January 31, 2022 | Oregon | Michigan | Corporate | Consolidated |
| Sales revenues | 1,388,945 | 2,343,768 | – | 3,732,713 |
| Costs of goods sold, excluding fair value adjustments | (691,311) | (1,007,715) | – | (1,699,026) |
| Gross profit (loss) before fair value adjustments | 697,634 | 1,336,053 | – | 2,033,687 |
| Net fair value adjustments | 474,511 | (195,475) | – | 279,036 |
| Gross profit | 1,172,145 | 1,140,578 | – | 2,312,723 |
| Operating expenses: | – | |||
| General and administration | 341,037 | 739,196 | 523,693 | 1,603,926 |
| Depreciation and amortization | 7,041 | 19,166 | 25,803 | 52,010 |
| Share based compensation | – | – | 18,487 | 18,487 |
| Other income and expense: | – | – | – | |
| Gain on sale of assets | 6,250 | – | – | 6,250 |
| Interest and accretion | 77,387 | 74,494 | 114,466 | 266,347 |
| Unrealized loss (gain) on marketable securities | – | – | 167,804 | 167,804 |
| Other income and expense | – | – | 5,440 | 5,440 |
| Net income (loss) before tax | 740,430 | 307,722 | (855,693) | 192,459 |
| Tax | 2,951 | 34,067 | – | 37,018 |
| Net income after tax | 737,479 | 273,655 | (855,693) | 155,441 |
| Three months ended | ||
| January 31, | ||
| Adjusted EBITDA Reconciliation | 2022 ($) | 2021 ($) |
| Net income (loss), as reported | 155,441 | (915,065) |
| Add back realized fair value amounts included in inventory sold | 1,010,478 | 169,328 |
| Add back (deduct) unrealized fair value gain (loss) on growth of biological assets | (1,289,514) | 186,806 |
| Add back amortization of property & equipment included in cost of sales | 147,463 | 159,545 |
| 23,868 | (399,386) | |
| Add back interest and interest accretion expense, as reported | 266,347 | 256,884 |
| Add back amortization of intangible assets, as reported | – | 4,997 |
| Add back amortization of property and equipment, as reported | 52,010 | 38,155 |
| Add back share-based compensation | 62,296 | 132,448 |
| Add back (deduct) unrealized loss (gain) on marketable securities, as reported | 167,804 | (302,808) |
| Add back (deduct) unrealized loss (gain) on derivative liability | 319,627 | |
| Add back income tax expense | 37,018 | – |
| EBITDA before other adjustments | 609,343 | 49,917 |
| Performance incentive bonus payment | 179,685 | – |
| Severance and inactive employee compensation | 61,077 | – |
| Business development incentive bonus | 153,825 | – |
| Adjusted EBITDA | 1,003,930 | 49,917 |
About Grown Rogue
Grown Rogue International (CSE: GRIN | OTC: GRUSF) is a vertically integrated, multi-state Cannabis family of brands on a mission to inspire consumers to “enhance experiences” through cannabis. We have combined an expert management team, award winning grow team, state of the art indoor and outdoor manufacturing facilities, and consumer insight-based product categorization, to create innovative products thoughtfully curated from “seed to experience.” The Grown Rogue family of products include sungrown and indoor premium flower, along with nitro sealed indoor and sungrown pre-rolls and jars.
NOTES:
1.
The Company’s “aEBITDA” 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 aEBITDA as the Company’s net income (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 and the effects of fair-value accounting for biological assets and inventory, as well as the impacts of unusual or non-recurring items. The Company believes that this is a useful metric to evaluate its operating performance.
2.
The Company has provided unaudited pro-forma revenue information, which assumes that closed and pending mergers and acquisitions in 2021 are included in the Company’s financial results as of the beginning of the quarterly and annual periods in 2021 for the Company and target companies.
NON-IFRS FINANCIAL MEASURES
Cash production costs of Grown Rogue products, EBITDA and aEBITDA are non-IFRS measures and do not have standardized definitions under IFRS. The Company has also provided unaudited pro-forma financial information, which assumes that closed and pending mergers and acquisitions in 2021 are included in the Company’s financial results as of the beginning of the quarterly and annual periods in 2021. 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.
