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topicnews · August 27, 2024

Grown Rogue Reports Second Quarter 2024 Results

Grown Rogue Reports Second Quarter 2024 Results

Grown Rogue International Inc. (CSE: GRIN) (OTC: GRUSF), a craft cannabis company born from the amazing terroir of Oregon’s Rogue Valley, is pleased to report its second quarter 2024 results for the three months ended June 30, 2024. The comparison period for 2023 is the three months ended July 31, 2023, due to the recent fiscal year-end change from October 31 to December 31. All financial information is provided in U.S. dollars unless otherwise indicated. 

Second Quarter 2024 Financial Summary ($USD Millions) 

Second Quarter 2024 Summary  2024 2023*  +/- % 
Revenue  $7.7 $6.3 +23 %
aEBITDA  $2.5 $2.1 +21 %
aEBITDA %  32.7 % 33.2 % -50 bps 
OCF (Before Changes in WC)  $1.21  $1.9 -38 %
OCF %  14.9 % 29.5 % -1460 bps 
*Comparable 2023 data is May-July due to the fiscal year end change
1) Includes $0.5M in one-time consulting and royalty fees only incurred in 2024

Management Commentary  

“This was another exciting quarter for Grown Rogue with record revenue and aEBITDA showing the continued execution by our team. We continue to see strong sell-through, record indoor production in both yield and revenue, continued consumer loyalty with our existing products, and strong consumer response to our new, branded pre-rolls – moderated somewhat by market pricing softness in Oregon and Michigan in the quarter.  We want to thank our customers who are continuing to find value in our offerings, and we strongly believe that high-quality, low-cost cannabis cultivation, that delights consumers, is a protectable moat when done at the proper scale,” said Obie Strickler, CEO of Grown Rogue.

“We had a decline in our operating cash flow before changes in working capital, which was largely attributable to the ramp of SG&A spending in advance of launching New Jersey and some royalty and consulting payments to our Michigan partner that were only incurred this year.  We maintain a strong balance sheet with a positive working capital position, minimal debt, and sufficient cash to fund our near-term plan, so we continue to be well positioned to take advantage of new market opportunities.

Our primary growth drivers in 2024 and 2025 continue to be our expansion efforts in New Jersey and Illinois. We expect sales in New Jersey in the fourth quarter of this year and will have an update on the specific timing very soon. Illinois design and engineering is underway, and we are targeting sales starting in the second half of 2025. Our plan for expansion remains one new market every 9 to 12 months, but we are only going to swing at the fat pitches,” continued Mr. Strickler.

“I want to personally thank all of our customers, the entire Grown Rogue team, and our supportive shareholders for each doing their part to help Grown Rogue achieve our goal of becoming the first nationally recognized craft cannabis company in the U.S.”

Oregon Market Highlights ($USD Millions) 

Oregon  Q2 2024  Q2 2023*  +/- % 
Revenue  3.7 3.2 +13 %
aEBITDA  1.1 1.1 +2 %
aEBITDA Margin %  31.3 % 34.6 % -330 bps 

Michigan Market Highlights ($USD Millions) 

Michigan  Q2 2024  Q2 2023*  +/- % 
Revenue  3.5 2.8 +22 %
aEBITDA  1.6 1.3 +18 %
aEBITDA Margin %  45.6 % 47.1 %  -150 bps 

Michigan operations are through Golden Harvests, LLC. 

Financial Statements and aEBITDA reconciliation

  Consolidated Statements of Financial Position June 30, 2024 December 31,
2023
$ $
ASSETS
Current assets
Cash and cash equivalents 7,521,886 6,804,579
Accounts receivable 2,337,007 1,642,990
Biological assets 1,700,167 1,723,342
Inventory 3,839,952 5,021,290
Prepaid expenses and other assets 527,937 420,336
Notes receivable 2,016,422 –
Total current assets 17,943,371 15,612,537
Property and equipment 9,354,186 8,820,897
Notes receivable 4,325,033 2,449,122
Warrants asset 3,717,688 1,761,382
Intangible assets and goodwill 725,668 725,668
Deferred tax asset 391,465 246,294
Other investments 2,034,782 –
TOTAL ASSETS 38,492,193 29,615,900
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities 1,828,943 1,358,962
Current portion of lease liabilities 724,742 925,976
Current portion of long-term debt 608,929 780,358
Current portion of business acquisition consideration payable 1,904,649 360,000
Derivative liability1 13,800,806 7,471,519
Income tax payable 1,640,850 873,388
Convertible debentures2 1,964,092 –
Total current liabilities 22,473,011 11,770,203
Lease liabilities 1,657,353 1,972,082
Long-term debt 1,615,972 82,346
Convertible debentures – 2,459,924
Business acquisition consideration payable 1,277,233 –
TOTAL LIABILITIES 27,023,569 16,284,555
EQUITY
Share capital 37,114,080 24,593,422
Contributed surplus 8,142,520 8,186,297
Accumulated other comprehensive loss (115,941) (108,069)
Accumulated deficit (34,784,564) (20,353,629)
Equity attributable to shareholders                                        10,356,095 12,318,021
Non-controlling interests 1,112,530 1,013,324
TOTAL EQUITY 11,468,625 13,331,345
TOTAL LIABILITIES AND EQUITY 38,492,193 29,615,900
1) Represents derivative liability associated with the fair valuation of the outstanding convertible debentures and is a non-cash liability, settleable in equity upon conversion
2) Face value of outstanding convertible debentures as of June 30, 2024 is $4,350,000
Consolidated Statements of Comprehensive Income (Loss) Three months
ended		 Three months
ended
June 30, 2024 July 31, 2023
$ $
Revenue
Product sales 7,109,563 6,076,652
Service revenue 608,566 219,065
Total revenue 7,718,129 6,295,717
Cost of goods sold
Cost of finished cannabis inventory sold (3,567,522) (3,047,971)
Costs of service revenue (59,632) (99,212)
Gross profit, excluding fair value items 4,090,975 3,148,534
Realized fair value loss amounts in inventory sold (1,020,633) (585,392)
Unrealized fair value gain on growth of biological assets 305,250 583,879
Gross profit 3,375,592 3,147,021
Expenses
Amortization of property and equipment 211,293 196,363
General and administrative 3,008,543 1,641,725
Share option expense 28,186 97,672
Total expenses 3,248,022 1,935,760
Income from operations 127,570 1,211,261
Other income and (expense)
Interest expense (79,636) (91,623)
Accretion expense (378,404) (234,028)
Other income 191,834 13,566
Unrealized loss on derivative liability (7,546,164) (472,970)
Unrealized gain on warrants asset 663,459 –
Loss on disposal of property and equipment – –
Total expense, net (7,148,911) (785,055)
Gain (loss) from operations before taxes (7,021,341) 426,206
Income tax (552,481) (80,718)
Net income (loss) (7,573,822) 345,488
Other comprehensive income (items that may be
subsequently reclassified to profit & loss)
Currency translation gain (loss) (5,132) 4,227
Total comprehensive income (loss) (7,578,954) 349,715
Gain (loss) per share attributable to owners of the parent – basic (0.04) 0.00
Weighted average shares outstanding – basic 210,438,579 170,832,611
Gain per share attributable to owners of the parent –diluted 0.01 0.00
Weighted average shares outstanding – diluted 243,741,268 170,832,611
Net income (loss) for the period attributable to:
Non-controlling interest 109,472 75,837
Shareholders (7,683,294) 269,651
Net income (loss) (7,573,822) 345,488
Comprehensive income (loss) for the period attributable to:
Non-controlling interest 109,472 75,837
Shareholders (7,688,426) 273,878
Total comprehensive income (loss) (7,578,954) 349,715
Consolidated Statements of Cash Flows  Six months ended Six months ended
June 30, 2024 July 31, 2023
$ $
Operating activities
Net income (loss) ($11,739,521) $757,467
Adjustments for non-cash items in net income (loss):
Amortization of property and equipment 466,345 264,183
Amortization of property and equipment included in costs of inventory sold 1,004,759 992,366
Unrealized fair value gain amounts on growth of biological assets (708,664) (1,003,753)
Realized fair value loss amounts in inventory sold 1,948,112 1,222,455
Deferred income taxes (145,171) –
Share option expense 84,371 191,715
Accretion expense 760,067 433,801
Loss on disposal of property and equipment 2,177 –
Unrealized loss on fair value of derivative liability 13,206,204 679,322
Unrealized gain on warrants asset (1,956,306) –
Currency translation loss (7,872) 2,337
Loss on acquisition of non-controlling interest paid in shares – 64,360
2,914,501 3,604,253
Changes in non-cash working capital 425,091 (784,047)
Net cash provided by operating activities 3,339,592 2,820,206
Investing activities
Purchase of property and equipment and intangibles (527,811) (699,340)
Cash advances and loans made to other parties (3,814,868) –
Payments of acquisition payable (362,453) –
Repayment of NJ Retail promissory note 250,000
Equity investment in ABCO Garden State LLC (1,784,782)
Other Investment (211,041)
Net cash used in investing activities (6,239,914) (910,381)
Financing activities
Proceeds from convertible debentures – 5,000,000
Proceeds from warrants exercises 4,657,460 –
Proceeds from options exercises 195,608 –
Proceeds from sale of membership units of subsidiary 600,000 –
Payment of equity and debt issuance costs (126,914) –
Repayment of long-term debt (714,304) (869,855)
Repayment of convertible debentures (337,203) (90,000)
Payments of lease principal (657,018) (955,248)
Net cash provided by (used in) financing activities 3,617,629 3,084,897
Change in cash and cash equivalents 717,307 4,994,722
Cash and cash equivalents, beginning 6,804,579 3,488,046
Cash and cash equivalents, ending $7,521,886 $8,482,768
SEGMENTED aEBITDA  6 months ended June 30, 2024
  Oregon   Michigan Services    Corporate   Consolidated
Revenue  $6,707,566 $6,673,302 $874,236 $117,499 $14,372,603
Costs of revenue, excluding fair value adjustments (3,676,346) (2,663,862) (159,700) – (6,499,908)
Gross profit (loss) before fair value adjustments 3,031,220 4,009,440 714,536 117,499 7,872,695
Net fair value adjustments (856,581) (382,868) – (1,239,449)
Gross profit 2,174,639 3,626,572 714,536 117,499 6,633,247
Operating expenses:
General and administration 1,376,014 1,594,733 – 2,057,120 5,027,867
Depreciation and amortization 57,916 363,991 – 44,438 466,345
Share based compensation – – – 84,371 84,371
Other income and expense:
Interest and accretion (141,160) (45,052) – (743,179) (929,391)
Loss on disposal or property and equipment (2,177) – – – (2,177)
Unrealized (loss) gain on derivative liability – – – (13,206,204) (13,206,204)
Unrealized (loss) gain on warrants asset – – – 1,956,307 1,956,307
Other income and expense 190 – – 310,094 310,284
Net income (loss) before tax 597,562 1,622,796 714,536 (13,751,412) (10,816,517)
Tax 22 808,199 – 114,785 923,006
Net income after tax 597,540 814,597 714,536 (13,866,197) (11,739,523)
EBITDA Oregon Michigan Services Corporate Consolidated
Net FV adjs 856,581 382,868 1,239,449
Depreciation in COGS 654,476 350,283 1,004,759
Depreciation expense 57,916 363,990 44,439 466,345
Share comp – – – 84,371 84,371
Unrealized derivative – – – 13,206,204 13,206,204
Loss on disposal of property plant and equipment 2,177 – – 2,177
Unrealized warrants asset – – – (1,956,307) (1,956,307)
Interest and accretion 141,160 45,051 – 743,180 929,391
Income tax 22 808,199 – 114,785 923,006
EBITDA before one-time adj. 2,309,872 2,764,988 714,536 (1,629,525) 4,159,872
Add back to EBITDA:
Costs associated with acquisition of Golden Harvests 208,000 280,000 488,000
New production location startup costs 154,628 154,628
Non-recurring legal and transaction costs 177,641 177,641
aEBITDA $2,309,872 $2,972,988 $714,536 ($1,017,256) $4,980,141
Adjusted EBITDA margin % 34.4 % 44.6 % 81.7 % 34.7 %
NOTES:
1. The Company’s “Free cash flow” metric is defined by cash flow from operations minus capital expenditures and expansion related advances 
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.

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