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

Ryan Allway

March 28th, 2023

News, Top News

  • Revenue of $4.5M compared to $3.7M in Q1 2022, an increase of 21%
  • Operating Cash Flow (OCF), before changes in working capital (WC), of $1.3M compared to $0.5M in Q1 2022, an increase of 176%
  • Free Cash Flow1 (FCF) of $0.8M, after $0.4M spend on WC and capital expenditures
  • Ended quarter with $3.5M of cash on hand, after $0.4M in debt repayment in the quarter
  • Closed a $2.0M convertible debenture financing at 9% interest and half warrant coverage

 

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 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.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.

This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.

About Ryan Allway

Mr. Allway has over a decade of experience in the financial markets as both a private investor and financial journalist. He has been actively involved in the cannabis industry since its inception, covering public and private companies.

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