Grown Rogue Triples Gross Profit, Reports Positive Cash from Operations in Q1
An Oregon-based, vertically-integrated cannabis Company is proving that there is profitability and real shareholder value to be had from a sector that would like to forget much of 2019.
Grown Rogue International Inc. (GRIN) (
C:GRIN,
OTCMKTS: GRUSF,
Forum) – a multi-state cannabis company with operations and assets in Oregon, California and Michigan, has just released its financial and operating results for the three months ended January 31, 2020.
Since Q2 2019, the company has shifted its business strategy away from low margin, third-party product distribution and towards
highly profitable Grown Rogue branded product sales. In turn, this has allowed the GRIN to streamline its organizational structure, evaluate and improve internal production efficiencies, and adjust its sales strategy to focus on building long term partnerships with many of the best retailers in the state. In addition, Grown Rogue has benefited from a large increase in sun-grown flower pricing versus Q1 2019, which the Company locked in with key accounts as part of its ‘futures’ strategy.
The Company’s new business strategy generated very tangible benefits in Q1 2020 as margin rates nearly tripled to 53 percent, Grown Rogue branded product sales doubled, and overall revenue was up 33 percent versus Q1 2019.
These positive results come on the heels of Grown Rogue’s record breaking gross margin in
Q3 2019.
Q1 2020 Highlights
- GRIN generated over $150,000 in positive cash flow from operations for the first time as a public company
- Revenue grew 33 percent year over year to $1.1 million, with sales of Grown Rogue-branded product more than doubling from Q1 2019
- Margin rate increased significantly from 20 to 53 percent
- Average sun-grown flower selling price almost doubled versus Q1 2019
- Indoor flower sales volume almost tripled with average selling price increasing 9 percent year-over-year
- Subsequent to quarter end signed a subscription agreement for a CAD$1.5 million equity investment by Cannabis Growth Opportunity Corp. (CSE.GOC)
- Subsequent to quarter end, the Company signed an option to acquire, pending regulatory approval, a controlling interest in Golden Harvests LLC – a fully- licensed and operating cultivator in Michigan
Obie Strickler, CEO of Grown Rogue, commented on the results:
“We are very proud of our Q1 2020 results as our strong performance reflects the tremendous commitment the Grown Rogue team has put into streamlining operations, procedures, and our product line in order to drive increased revenue in a much more efficient manner. The ability to build a fundamentally sound cannabis business, in the incredibly competitive Oregon market, has us all very excited about transporting our winning formula to the Golden Harvests partnership in Michigan, one of the fastest growing cannabis markets in the country.”
Oregon Operational Highlights
- Operated approximately 90,000 square feet of canopy in Oregon, including two outdoor farms and a state-of-the-art indoor facility with annual production rates of approximately 6,000 pounds increasing to 7,000 pounds at full construction of the indoor facility
- Sun-grown flower price nearly doubled versus Q1 2019
- Indoor flower sales volume almost tripled and average sales price increased by 9 percent as compared to Q1 2019
- Product line was focused on low cost and high margin branded flower, and majority of third-party product distribution was eliminated.
Michigan Operational Highlights
- Subsequent to quarter end, Company signed option to acquire, pending regulatory approval, a controlling interest of fully licensed and operating Michigan cultivator Golden Harvests
- Golden Harvests operates an 80,000 square foot indoor cultivation facility, with approximately 10,000 square feet currently producing.
- Grown Rogue signed an exclusive management agreement with Golden Harvest to oversee production to increase efficiencies and quality during the option period
- GRIN has begun the licensing process with the State of Michigan, whose approval is required prior to exercising the option. Grown Rogue expects this to be complete during calendar year 2020.
California Operational Highlights
- Market instability due to legislative and regulatory confusion has developed a negative incentive to enter a hyper-competitive state with significant illicit sales
- The Company continues to evaluate its future plans for this market
For the first quarter of fiscal 2020 Grown Rogue revenue grew to $1.1 million – an increase of 33 percent from revenue of $0.8m in its fiscal first quarter ended January 31, 2019.
And the numbers speak for themselves.
Since the Company's products first began selling in late 2017, GRIN has demonstrated meaningful sales traction in one of the world's most competitive cannabis markets. In 2019, Grown Rogue implemented a new sales strategy focused on “fewer, better” which led to the development of strong partnerships with several-best-in-class single and multi-door retailers in Oregon. Grown Rogue, by combining the new sales strategy with a more efficient and streamlined operational structure, has seen a strong increase in consistent repeat sales to well respected retail partners.
A Lean, Mean Operational Machine
The new sales strategy, increased product pricing, along with a streamlined and more efficient operation structure, drove a significant increase in margin versus Q1 2019.
General and Administrative expenses declined from $1.0 million to $0.7 million, dropping from 121 percent of revenue to 61 percent. These improvements were the result of the streamlined operations noted above, along with a larger allocation of overhead to inventory.
The Company earned $150,000 cash flow from operations, driven by the operational improvements noted above and aided by the seasonal increase in sales from its Sungrown product.
About the Company
Grown Rogue a vertically-integrated, multi-state Cannabis family of brands on a mission to inspire consumers to “enhance experiences” through cannabis. A seed-to-experience cannabis brand, GRIN says it is “passionate about the environment, community, and education.” All of Grown Rogue’s products and strains are categorized and marketed based on unique effects and designed for the full range of a consumers’ lifestyle.
As responsible corporate citizens, Grown Rogue is a company based on five core values – transparency, integrity, honesty, authenticity, and education.
Complete financial tables have been filed on
www.sedar.com.
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.