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 record pro-forma revenue of $2.75M, helping to drive the sixth consecutive quarter of positive adjusted pro-forma EBITDA1,3 of $0.5M for the three months ended April 30, 2021. All amounts are expressed in United States Dollars unless otherwise indicated. Certain metrics, including those expressed on an adjusted basis, are non-IFRS measures.
“Grown Rogue continues to execute upon our strategy of low cost, high quality cannabis cultivation with another quarter of record revenues and profitability”Tweet this
Financial and Business Highlights
- Company record pro-forma revenue3 of $2.75M, a sequential increase of 37% over Q1 2021
- Sixth consecutive quarter of positive Adjusted pro-forma EBITDA1,3 of $0.5M, a sequential increase of 137%
- Company record pro-forma EBITDA margin of 19% vs 11% sequentially, due to operational efficiencies from scaling our business
- Transformed the balance sheet with assets increasing from Q1 2021 by 51% to $8.7M and liabilities decreasing 52% to $3.8M
- Closed a brokered private placement for aggregate gross proceeds of $4.7M CAD
- Retired senior secured convertible debentures including a cash payment of $1.5M CAD. The repayment of the principal results in the elimination of a potential issuance of 12.3M shares or approximately 8% of the current outstanding shares and saves the Company CAD$100k in interest payments.
- Completed construction to add 40% additional capacity at current Oregon indoor facility
- Executed an asset purchase agreement to acquire a turn-key 30,000 square foot indoor growing facility in Medford, Oregon and a retail dispensary in Portland, Oregon from HSCP, LLC, a subsidiary of Acreage Holdings Inc.
- Acquired remaining equity of subsidiary Grown Rogue Distribution, LLC to return to 100% ownership
- Subsequent to quarter-end, Grown Rogue exercised option and acquired 60% controlling interest of Golden Harvests
“Grown Rogue continues to execute upon our strategy of low cost, high quality cannabis cultivation with another quarter of record revenues and profitability,” said Obie Strickler, CEO of Grown Rogue. “Starting in Q1 2021 we put a plan in place to triple our indoor production in Oregon by Q3 of 2021, which we made possible with the additional 40% capacity expansion at our existing facility and the purchase of the new 30,000 sq ft facility. These improvements, along with having added another 30% flowering capacity in Michigan in Q2, are positioning Grown Rogue to continue reporting industry leading metrics.”
Grown Rogue continued to leverage its simplified, flower-focused, business model, resulting in its sixth consecutive quarter of positive Adjusted Pro-Forma EBITDA1,3. These improvements have led to a record quarter of pro-forma Revenue 3 of $2.75M while maintaining its industry leading cash margins2 of 60%+. With the tripling of Oregon production in Q2 to 600 pounds per month, and continued improvements in Michigan, Grown Rogue is well positioned to continue executing on its goal to become the leading low cost, high quality cultivator in the industry.
Highlights by State
- Oregon Revenue of $1.54M, a sequential increase of 46% over Q1 2021
- Grown Rogue Indoor flower sold at an average price of $1,147/lb., versus $1,068/lb. in Q2 2020, an increase of 1%
- Strong cash margin of 59%
- Tripled indoor growing capacity with the acquisition (pending regulatory approval) of a turn-key 30,000 square foot facility, with 3 harvests completed subsequent to quarter end and expansion at the existing Medford facility.
Michigan Operations (through its partner Golden Harvests, LLC)
- Pro-forma3 Revenues of approximately $1.38M, a sequential increase of 23%
- Pro-forma EBITDA1,3 of approximately $336K, a sequential increase of 59%
- Pro-forma EBITDA1,3 margin of 24% vs 19% in Q1 2021
- Continued to gain traction with our branded Certified Fresh Nitrogen Sealed Jars by moving into the Top 10 of packaged flower sold in Michigan
- Results over the last several months showing jars representing approximately 30 to 40% of sales and commanding approximately 1000/lb. more than bulk sales.
- Construction continued to maximize output from the 80,000 square foot facility. 30,000 square feet are now under cultivation with another 15,000 square feet expected to be online by December 2021
- Currently operating 2 Adult Use Producer Licenses and 2 Medical Producer Licenses, bringing total plant count capacity to 7,000. The application processes have begun for 8 additional licenses that would provide sufficient capacity for full operation.
Selected Financial Information (Complete financial tables have been filed on www.sedar.com)
The Company’s “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 Adjusted EBITDA 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. The Company believes that this is a useful metric to evaluate its operating performance. The following is a reconciliation of the Company’s net income (loss) to Adjusted EBITDA.
The Company has provided Cash Margin Analysis to demonstrate the methodology for calculating its non-IFRS production cost and margin metrics. Cash production costs of Grown Rogue products is calculated by taking the cost of finished cannabis inventory sold and deducting non-cash production costs, packaging and distribution costs, inventory write-offs and adjustments, and cost of products purchased from other Licensed Producers that were sold. Cash cost of sales per gram of dried cannabis sold is calculated by taking cash production costs of Grown Rogue products by total grams of dried cannabis sold in the period. Management believes these measures provide useful information as they remove noncash amortization and packaging costs and provide a benchmark of the Company against its competitors.
The Company has provided unaudited pro-forma revenue information, which assumes that closed and pending mergers and acquisitions in 2020 are included in the Company’s financial results as of the beginning of the quarterly and annual periods in 2020 for the Company and target companies.
NON-IFRS FINANCIAL MEASURES
Cash production costs of Grown Rogue products, EBITDA and Adjusted EBITDA 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 2020 are included in the Company’s financial results as of the beginning of the quarterly and annual periods in 2020. 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.