Grown Rogue International Inc. - Third Quarter 2026 Results - DEFI TECHNOLOGIES INC

Financial Performance:

• No specific Q3 2026 revenue or earnings figures were disclosed; the company highlighted a $10M preferred equity investment and $5M term loan from a capital partner for the New York acquisition.
• A non-cash accounting write-down was recorded for the "Rogue EBC" Illinois asset due to a strategic pivot to the Dwight facility; the asset was impaired as it does not qualify as discontinued operations.
• Management projects 50% revenue growth and ~100% adjusted EBITDA growth in 2027 (excluding full New York contribution), driven by a six-state footprint.
• New York operations are expected to reach after-tax operating cash flow positivity within nine months, targeting $600k/month in after-tax cash flow from operations by month 18.
• Estimated annual cost savings of $20M identified from the New York acquisition are expected to be realized over the first six months.
• New Jersey operations maintain 100% package sales (finished goods) with demand exceeding current production capacity.

Guidance and Future Outlook:

• Full-year 2027 financial guidance assumes 50% top-line growth and doubling of adjusted EBITDA, excluding any contribution from New York until it is fully integrated.
• New York sales are targeted to begin in mid-late January/early February 2027, following harvests starting in December 2026.
• Minnesota: First harvest scheduled for late November 2026, with sales targeting January 2027; full capacity planned at 30,000 sq ft flowering canopy.
• New Jersey: Expansion adding 6,000 sq ft of flowering canopy planned for December 2026/population early 2027 to yield an additional ~400 lbs/month.
• New York: Targeting ~2,000 lbs/month of indoor flower production from the Hamptonburg facility; expected to become the largest market in the portfolio.
• Purchase agreement for Pharmacan's New York operations is anticipated to be executed by the end of the current month, with regulatory approval expected in Q1 2027.

Business Segments and Product Lines:

• Minnesota: Phase 1 construction complete with 8,000 sq ft flowering canopy (500 lbs/month); addressing supply constraints for craft indoor flower.
• Illinois: Acquired an existing facility; several harvests completed with focus on building brand presence against larger vertical operators; product sales primarily B2B/wholesale.
• New Jersey: Strong brand performance; ranked #3 in the 3.5g category and #5 in the 7g category (per Potient data); full capacity pending expansion.
• New York: Revitalization of the 20,000 sq ft Hamptonburg facility (15 indoor flower rooms); management taking direct control via a 51% owned entity (Grown Rogue New York) and a Goods & Services Agreement with Pharmacan.
• Retail Strategy: Shifting from a pure production model to a brand-driven model, particularly in New Jersey and the upcoming New York launch; focus on "customer-first" retail restocking.
• Team Expansion: Key hires include Michael Johnson (New York GM), Naya Gunnett (Corporate Controller), and internal promotions for Eamon McGettrick (National Director of Cultivation) and Jordan Storms (Post-Harvest Lead).

Market and Competitive Landscape:

• Market Trends: Industry-wide shift in New York from outdoor/greenhouse to indoor flower; the regulated market remains undersupplied for quality indoor flower due to initial regulatory prioritization of outdoor growers.
• Competition: New York market is fragmented (700+ dispensaries) preventing heavy consolidation; competitors include GTI, Gearleaf, and Vireo, who have gained traction in indoor flower.
• Competitive Advantage: Grown Rogue emphasizes controlling the entire supply chain (production and retail) in new markets to ensure quality and brand consistency, unlike licensing models.
• New Jersey Success: Strong brand resonance allows the company to command shelf space and maintain high package sales ratios.

Risks and Challenges:

• Operational Strain: Management acknowledges being "stretched thin" across six states during rapid expansion and the New York integration.
• Regulatory Uncertainty: Finalizing purchase agreements and obtaining regulatory approval for the New York transaction (expected Q1 2027) poses timeline risks.
  Back-Office Complexity: First-time consolidation of retail and manufacturing operations creates significant accounting, procurement, and inventory management burdens.
• Illinois Asset: The "Rogue EBC" asset write-off represents a risk to balance sheet efficiency until a monetization strategy is executed.
• Market Dynamics: Navigating a New York market with many small, independent dispensaries and creditworthiness issues.

Management Commentary and Tone:

• Tone is highly confident and optimistic, describing 2026 as a "big year" and 2027 as "amazing."
• Leadership emphasizes "unwavering commitment," "high standards," and a transition from a "sales-driven producer" to a "brand-driven" company.
• Management downplays the complexity of the New York deal, framing it as a strategic fit that leverages their core competency in low-cost, high-quality indoor flower.
• CEO Obi Strickler highlighted the team's "entrepreneurial scrappiness" despite the heavy lift of rapid scaling.

Analyst Questions and Answers:

• The Q&A session contained no questions; the call concluded immediately after management's closing remarks.

Other Key Points:

• The company experienced a minor disruption due to a global Microsoft Outlook outage but ensured all filings and the press release were released on time.
• Grown Rogue New York is structured as a 51% owned entity with a capital partner providing $15M total in equity and debt, while Grown Rogue manages operations and retains the license to acquire the assets.
• The company is actively investing in brand marketing and customer engagement, a shift from previous years' focus solely on production efficiency.
• CEO noted the company is 10 years old and has evolved from a small operation to a multi-state operator controlling its entire supply chain.