Q4 2025 Grown Rogue International Inc Earnings Call
All right. Thanks, and thanks everyone for joining us. Uh, sorry for the head fake last week, but
But I personally found the conversion proved to be a little more tricky than expected, but excited to have it done now and get that behind us.
One of the start, today's call on one of the critical items that we've discussed in the past: bandwidth, and the ability of our team to handle the growth.
Knowing Talent was potentially limiting factor to our expansion. Um, we got a lot of questions over that we talked about it. Um, and, you know, building our team out over the last couple of years has been a focus priority of the organization. You know, not only through our internal growth and how we're building up people, um, inside the organization but also how we're attracting external Talent, you know, who want to join our mission and
Kind of our platform.
Sarah, my wife, says it best, and she says, 'We aren't just growing plants; we're growing leaders.'
But when we started growing Rogue, it really never occurred to us that one of the most exciting, rewarding portions of this business for us was going to be watching, you know, our early top performers just crushing and growing into these advanced leadership roles within the organization, where, you know, early people in our company are now running sales, cultivation, and production, you know, across our states.
And we're starting to see kind of the next generation of management to have come up through our system. Um, it's obviously very exciting for the company and you know, how we're able to put people in positions in these states to be successful, but it's also really good for our culture, you know, and the rest of the team where everyone sees this opportunity for growth. Um, it's something we've talked about, we think it's really quite special with regard to what, you know that does for grown Road. Um, and something I strongly believe will continue to separate us going forward. Um,
So as you couple this reputation we are building as a disciplined, you know, focused operator with great culture, you know, it's really starting to attract some outside talent, which we were, you know, I wouldn't say was—
kind of as available, you know, in previous years, um, because they see a system that they want to be a part of, um,
And I wanted to take this moment to highlight, kind of, you know, three recent hires we've made in key areas of our business, you know, over the last, you know, call it 8 to 12 months.
The first 1 is on the construction side, you know, obviously with the growth, you know, not only in Phase 2 in New Jersey. But, you know, the Minnesota project, the new project in Dwight, um, you know, someone that could be the centralized leader for our construction was going to be super critical and so we brought on Mark Doherty um kind of early summer last year, you know, really to manage the construction the facilities.
Since previously, you know, we've been doing this by committee, you know, effectively. I was kind of the lead of that, um, you know, we had our team focused on it, but there wasn't like a centralized kind of leader inside of that critical area of our business. Um, and Mark has just been a complete game changer for us, not only with his technical knowledge and organization.
But he's got like a long history in Port culture, um and just a real passion for quality products, so really kind of meets our culture and kind of, you know, where our business sits and what we prioritize. And that really gets into his kind of design and construction criteria that kind of fit the growing role model. Um, it's just been a, you know, huge effort he's taken off my plate again, you know, to manage the different phases of growth that we're embarking on this year. Um, and yeah, don't know where we would be without him at this point. But yeah, just kudos to mark for, you know what he's done and continues to do for the organization.
Situated, you know, take the committee out of it, but a single source of responsibility, you know, inside of this, you know, kind of department in the organization. Um, and she started off kind of part-time, you know, fractional, maybe 20 hours a week, um, that kind of thing just to see right fit.
Is the culture good? And she turned out to be fantastic. Um, and she's joining us full-time in March. Um, she's just very much a result-oriented leader that brings the marketing and branding strategy lens that we need, while fitting right in with that, you know, sales-driven culture that we talked about and kind of where the foundation of Grown Rogue sets.
Last person on that list, and this is the most recent one. I think he started in February of this year. And this is Josh Crane, who was really focused on our New Jersey business. We brought him on just
He was a general manager at what was the kind of built the most successful independent and uh business in Jersey. Um, so he's kind of looking at all things right culture, team production, you know, brand and marketing, you know, sales apparatus relationships. Um, and you know, Josh just brings a tremendous amount of expertise deep seated relationships in New Jersey market and then he comes from California where he had a long history in cannabis, you know, kind of out in the west coast. So just another kind of key component to kind of our cultural, um, you know influence. You know, as we continue to build the organization.
Next, I'll kind of talk about 2025 a little bit. Um,
Almost like, 2025 in review—like, 2025 was about growth, scale, and Eastern markets. Um,
And we learned very quickly, you know, high price doesn't always mean under-supplied, you know, more packaging, um, you know, different kind of, uh, design inside of these markets in terms of how the sales process works, you know, what the consumers are looking for. Um, so it's really interesting for us to kind of embark upon that, or launch New Jersey, you know, and get us prepared for, you know, again soon to be Illinois, you know, Minnesota coming. Um, but it was really an exciting time to just think about scale, growth, you know, how these more packaged markets work. Um, and very excited about the progress we made there.
Um, you know, New Jersey was able to ramp up, albeit slower than we kind of anticipated, going back to some of the, you know, um, dynamics inside of that sales market. But I was really excited to watch this get to full sell-through of phase 1, you know, kind of come and add in the summer into the fall. Um, and most importantly, at a very high package rate, right? I think our package rates in Q4 were 95% of our total sales at full sell-through of phase 1. Um, so really kind of meeting that brand apparatus and how we're putting that together. You know, one of the things we learned early on in Jersey was, you know, the importance of having multiple brands. Um, you know, there's different tiers, there's different price points customers are looking for, and we should have launched Yeti from day one. You know, Yeti is our kind of value brand. That's the same great product that you can expect.
Girl Rogue, but at a better price point, you know, maybe a little bit lower potency, you know, maybe a strain that we're not quite as happy with, uh, but still an amazing product for the customer. Um, and it's just been nice to see that sell through and that adoption, um,
And that brand, since we officially launched—I think in June or July of last year—so just some good learnings, and then reinforce, you know, just the brand power and the strategy around that.
um,
The gun construction on Phase 2 in New Jersey—and I'll stick with that state. Uh, our fifth flower room is already painted, um, and we expect our first harvest, um, out of that room sometime in May.
Uh, we plan to bring the rest of the facility to get the full construction of Phase 2 completed in Jersey during this year. Um, and as we talked about publicly, since we built Phase 1, we're going to do that incrementally, right? We'll probably turn another flower room every 1 to 3 months to kind of balance additional capacity versus our cell group.
And so, you know, excited to get that thing fully built, you know, get the economy to scale, you know, see our cost of production go down, which I'm pretty happy with right now, kind of on a, you know, cost of pound basis. Um, but, you know, as we put more production against some of our fixed costs, you know, we expect to drive that down even more, you know, as we come out of '26 into '27. Um, everyone knows, not a surprise—you know, it's painful when you're there, and I've gone through several of these cycles now, you know, in Oregon specifically, but, you know, Oregon and Michigan, very challenging year. Um, you know, that second—
Pricing pressure that you'll see in markets, like, this is just—it's painful, um, especially when you're in the middle of it. But again, having gone through this, like, it wasn't, like, uncomfortable, disappointing, frustrating—all those things—but it wasn't unknown. Um,
Times like this, where the, you know, you really understand like who's in the Foxhole with you, right? Who do you want on your side like who's going to battle with you every day? Um and it's during these times like we have our biggest improvements, you know the focus and the intensity tune up. Um
And those things we keep, you know, as we start to dial in, little things make different planning decisions, you know, tighten up the way our apparatus works, and just make our business even that much stronger and more resilient.
That being said, we are in this—it's typical to predict, right? We're always trying to look at cycles and, you know, kind of the timeline of the curve—is it a month? Is it a year? Is it two years? Um...
It does seem like we're starting to see a little bit of stabilization, um, and Recovery in those markets. Um, in particular, in More in Oregon, I mean, we did mention in the press release. You know, we expect to see double digits Revenue growth in 2126 for c125, you know. So, we're seeing some of the benefits of Jersey, but we're also seeing some improvements in Oregon. Um, and what we see most interestingly and this usually is a signal for kind of Return of pricing. Is your demand starts to go up, you see more interest? You see more buying? You see more buyers coming through, you see bigger demand at the dispensary. Um and so hopefully that's a signal of price recovery. Um you know it's gotten pretty rough through Oregon, you know, over the last you know 12 months or so especially as we look at the trends but again these things are cyclical, they go up to go down. Um you know the key is to, you know, kind of grind through the low points and take advantage of where the pricing comes back.
Um, we also secured our next real estate. You know, Minnesota, as everyone knows, is, you know, kind of the core focus of the organization. Over 26, um, buildings secured, you know, construction has started, you know, we're estimating a completion date of construction, you know, sometime in Q3 of this year. Um, and again, going back to Mark, like, he's leading that charge and, you know, making sure we hit that schedule and budget.
And then from, you know, kind of construction completed plants, go on the ground, you know, it's a 3 to 4 month process. So I'm targeting internally and pushing the team super hard for a Q4. Kind of delivery date, you know, obviously q1 Could Happen. Um, q1 is potentially the conservative side of that. But, you know, we're pushing as far as we can to get product into that market as soon as possible. Um, anyone who's watching Minnesota know, there's really no Independence. Um, very few businesses have turned on and so the opportunity to go into Minnesota. Um, we should be a monster Market early with some level of scale, you know, we're targeting.
8 to 8,500 square feet of flowering canopy in Phase 1. Um, it's pretty exciting and so, you know, really excited to get that market through and kind of get operational out there.
Uh, 25 was another year, I mean, a kind of a growth component for the company where we were able to secure our, you know, first term debt uh with amazing banking Partners at industry-leading rates and we have a what a 12 million total facility. Um it's a sub 8% interest rate. Um, that's really allowing us to manage. You know, our expansions in Minnesota to completion of phase 2 in Jersey and so can't think the bank enough and make it shows you know, kind of the support of our credits and you know what we're doing in the industry that's a little unique um compared to others and so pretty excited about that.
Um, well, subsequent to year-end, um, you know, we did have those entry into Illinois through the Dwight facility. You know, Josh will get a little bit more into his kind of focus and, you know, on M&A and kind of distress. Um, but I just want to reiterate, you know, entering this market at a fraction of the price of a conventional build, you know, in terms of the capital outlay. Um, and then because it's already constructed, it allows us to go much faster in terms of activation and getting plants in the building, getting our first crop, getting to first sales. Um, so the team is in the effect of kind of planning and preparation as we get through the regulatory stuff to get, you know, approval to move plants in. Um, but excited to get this market kind of activated, um, and just, you know, start bringing great products, like Grown Rogue is known for, you know, to the great people that are on the web.
Um, a little bit on the future. Um, you know, before I'll turn this over to Josh as he talks about kind of growth framework and some of the guidance that we're going to start putting out. Um, a couple things I really want to highlight, that I think are important. Uh, current production capacity for Grown Rogue in the three states that we operate—Oregon, Michigan, and New Jersey—and this is flowering canopy—is 37,000 square feet, give or take.
In '26, between our Phase 2 expansion, New Jersey,
The new asset in Illinois and the phase 1 in Minnesota, um, we'll probably add 21,000 square feet this year of flowering capacity, you know, which is a 50%—greater than 50%—improvement.
And Minnesota, with a little bit more to add inside of Dwight—which is the Illinois facility—it would take us almost 90,000 square feet, you know, which is, give or take, a 140–150% improvement over what Grown Rogue is currently operating. Um, which is pretty exciting to think that we have got so much growth kind of in things we control, things that we're building, not to mention the other things we continue to look at and kind of assess. Um,
We continue to drive quality and yield in our business with modest infrastructure and technology improvements.
I think you'll see a lot of this as you start to watch the trends in Michigan. Um, you know, we looked at prioritizing this, you know, kind of technology and, you know, yield improvements solution that's a very low cost in Michigan first.
A, we think Michigan's a bigger market than Oregon, and we thought it could handle additional capacity much faster. Um, but you'll see a yield—I think in Q4 we averaged over 80 grams per square foot in Michigan. As we're starting to look at numbers in Q1, as you know, all these rooms get outfitted and the team really dials in this new kind of growing apparatus. Um, I would not be surprised to start seeing this push 85 and, you know, 90 grams per square foot on average.
Which you know, as you make those improvements and we're starting to do these in Oregon. So we'll start implementing some of this in Oregon again to drive yield. Uh while maintaining our quality, which is just going to have a, you know, an outsized influence on our cost of production, you know, same fixed costs.
You know, bigger number of business, dominator. You know, we expect to see our, can, you know, cost of production continue to go down? Um,
I do want to take a little time to remind everyone, you know, several years ago as we laid out kind of our expansion goals, you know, we talked about getting into one to two markets per year. Um, no doubt, very lofty goal, and this is hard, humbling work, you know, that we go through every day.
But I honestly couldn't be feeling better about our progress against those goals and how that future is lining up. I mean, you think about where we were in '23, '24, two-stage, trying to get into Jersey?
As we leave, 26 will be operational in five states. It's just a completely different business. Um,
And you know, growth is not a straight line. It's bumpy, it's messy, there's ups, there's downs. As much as we want it to just be a straight line up and to the right, it's hard—like, what we do every day, battling our markets, you know, dealing with all the regulatory influence and outside kind of, you know, components—like, it's just bumpy.
The benefit we see is we have a very strong team who's committed to this growth and this platform, and bringing our products across into these new markets.
And for the most part, we've got a very kind of long-term oriented shareholder base that shows that vision. Um, and, well, nobody is immune, myself included, to, you know, seeing a stock price that's, you know, been under pressure for the last year. Uh, our focus is and will continue to be on building value over the long term.
And not managing these short-term fluctuations, um, and so I know it's a little painful these days, but, uh, couldn't be more excited about where growth fits today and then the future of what's coming. Um, and so, yeah, thanks for listening, and I will pass it off to Josh to talk about guidance and the growth framework.
All right.
Thanks Obie.
First, I thought I'd give a little bit more background to our recent announcement in Illinois that Obi was referencing. I thought it might give a little perspective on our inner workings, as will be referenced. We've been evaluating a number of distressed opportunities.
And we do continue to do so. In my various roles in the industry, I've worked with a number of the larger lenders in the space, as well as the larger landlords, including, as is the case with Dwight and Innovative Industrial Properties.
Uh, this Dwight property of theirs was not high on our list to start. In terms of the kind of distressed portfolios we were looking at, I had two already years ago. I was not a big fan of the greenhouse at the time, uh, and that was before Pharmacan had added the indoor capacity that they built.
So, we had been discussing a number of other properties with IIP, and when PharmaCann announced they were closing the Dewey facility, we had a very quick, efficient, exploratory discussion with them.
First, we explored whether we can get the facility, uh, to be turned over in, with continuity, uh, kind of an overarching preference if we can make that happen. Uh, but it was really clear pretty quickly that that was going to be too complex a transaction with PharmaCan to put together on the timeline that was needed. Uh, so we pivoted to discussing how efficiently new operations could be established in that facility.
Northern Greenhouse from a capacity standpoint, and that meant largely ignoring the greenhouse from a value in rent standpoint as well.
Um,
We also determined with regulatory council that matching this facility with a social equity license holder would likely facilitate the fastest movement to getting plants back in the building. So
really pleased at the end of the day with what we were able to accomplish in a, in a tight timeline in terms of putting that together. Uh, at this point, I can report that we found the regulator to be very supportive of our group's efforts to move efficiently and I I'll say similar to Minnesota. It's the star of the line from a process standpoint, we hope to beat our anticipated timeline. In this case, we've talked about, you know, a fourth quarter timeline. It's possible. We could be a little bit before then uh but I'm I'm the conservative 1 that that will be references. Uh, you know, on the
From a timeline standpoint—you know, I think we are articulated, and it's part of the guidance that I'll get to—that we will, you know, okay, that will only turn on in the fourth quarter. Minnesota turned on in the first quarter from a revenue standpoint, contribution standpoint.
Next, I want to comment on the evolution of our KPIs. Uh, it's something near and dear to me and my history as an equity analyst.
Our goal is to help investors better understand the key drivers of our business.
Because a lot of complexity behind the scenes with a large number of the S with a large number of skus, and a very different supply chain in each market that we operate in.
So, it's not always an easy task, and it's still down to a few numbers that are comparable across markets.
As New Jersey and future states, that should have a much higher portion of sales coming from packaged products.
Become a more meaningful part of our business. We want the comparison between our cultivation costs and cross-markets to be as close to apples-to-apples as possible.
We made the decision to no longer include the packaging and sales costs in the externally shared KPI.
We also saw an opportunity to provide what we think should be a higher-fidelity way to share pricing and our business mix, with respect to how we think about the business.
Ultimately, we want to be held accountable to being low cost and delivering quality, with that quality and value playbook translating to the full selfie of our products with profitable price points.
In our KPIs and directly to our financials in order to quarter is likely to prove challenging.
But over longer durations, they should map well.
This would likely go without saying, but we expect overall market pricing to remain volatile, which we think serves us well, as we believe we're the lowest cost producer of indoor commercial craft cannabis.
One other highlight: that's just where the referencing, with respect to how we're articulating a combination of KPIs and low cost. You know, we referenced, uh, I believe, in the press release.
Having.
Overall costs—and this is overall biomass costs, so not just flower costs—being below $225 a pound in our mature facilities, organic Michigan. Uh, so I just wanted to provide that contrast. That number is a number that includes all biomass, trim included.
So folks understood that number versus what is reported in the KPIs.
And then last, with respect to our decision to provide guidance and long-term growth objectives, we believe we have a strong growth platform based upon our view of the industry opportunities and our team's capabilities.
Many industry participants have not delivered on their growth commitments, and that does make us cautious. We don't take this process lightly, nor do we expect investors to give us credit for execution until we start delivering against it.
Similar to our KPIs, we hold ourselves accountable to perform to standards, and we think investors should do the same.
We also don't have analyst coverage, so we're opting to transparently share what we're working hard to execute against with a clear roadmap for investors.
I should be evidence.
By the longer-term growth objectives, mainly 25% compound revenue growth and 35% compound profit growth.
We see the opportunity for us to be a much larger, profitable company in our future.
And that's what we're building for.
So, we'll be referenced. This industry is not easy, and we believe we're up to the challenge.
With that.
I'll put it over to Andrew for a few comments.
Thanks Josh.
Um, okay, well, uh, 2025 was, uh, our first year here. Uh, at least the first full year, uh, reported under US GAAP. So, um, as noted, we undertook an IRS US GAAP conversion process.
Um, this is a pretty in-depth exercise that, uh, really reopened up 2024 for the prior year, um, as well as a time. Um,
Activity that occurred before that date, um, in terms of, um, conforming to these standards. So, there's an in-depth process and, you know, the primary places where this impacted things that were
Calculation, um, and financial instruments as well.
So, our team executed pretty well. Unfortunately, we had a delay, but we're happy with the results, at least at this point in time.
Um,
1 important note, we we previously published 2025, um, IFRS quarters. These will be refiled um within 45 days. Um under us, gaap in comparative format on Cedar in accordance with regulations so that will be um that'll be filed.
Around the same time as our first quarter.
And so, in a little bit more depth, in terms of the changes—28,
There was a bit of an issue with this GAP conversion. Um,
The standards under US GAAP are simply stricter.
More rule-based and less interpretive than IFRS as it pertains to calculating an uncertain tax position. We, like many of our peers in the space, take the position that 280 doesn't apply to us. So we file our tax returns accordingly. This does result in a disclosure for an uncertain tax position, and in the past we've taken a different approach to calculating that which was acceptable under IFRS and is no longer acceptable under US GAAP.
Just created a bit of rework, uh, late in the process and has resulted in a larger uncertain tax position balance on the balance sheet.
We also had a bit of a bad debt adjustment related to conforming to the new US GAAP standard, which resulted in an approximate year-end increase in bad debt expense, so that had a kind of drag impact on our G&A expense.
and uh,
Then in terms of the reporting schedule, our Q1 2026 will be due mid-May.
We plan on hitting that deadline, and then the restated US GAAP quarters, as I noted earlier, will, um, be filed on or before that date as well.
So with that, I'll pass it back to Obie.
Great, thanks, guys. Um, I think we can open up to questions, you know.
Ladies and gentlemen, we will now begin the question-and-answer session.
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You said no questions.
We have no questions.
Okay, great. Uh,
Yeah, just in summary, but things are running for joining. Uh, looking forward to '26 and, uh, yeah, not repeating the—
I first the Gap transition again, I know the accounting finance team will be happy with that. Um, but yeah, looking forward to doing exciting '26. Um, and appreciate everyone joining and, you know, listening to the grown-up story.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
