Grown Rogue International, Inc. Q1 FY2026 earnings call

Strategic Positioning & Regulatory Updates

• Following the April 23 DOJ announcement on federal cannabis regulation, management will not make large speculative pivots amid ongoing uncertainty, but is pursuing low-cost optionality for potential future interstate commerce. The company obtained new medical licensure in Oregon and is pursuing DEA registration for its existing medical licenses in Oregon and Michigan, positioning the firm to capitalize on future rule changes.
• Oregon's 2019 Senate Bill 582 already permits the state to enter into interstate cannabis commerce agreements should federal law allow, and management expects Oregon to act as a cooperative partner if pathways open.

Active Expansion Projects

• New Jersey Phase 2 Expansion: First harvest from the new flower room 5 is scheduled for late May 2026, with all remaining flower rooms targeted for full completion by the end of 2026. A small power upgrade to support the remaining capacity is currently underway. New Jersey is already hitting 97% package sales, confirming strong consumer demand for the Grown Rogue brand.
• Illinois Dwight Facility: The company acquired a fully built-out operational facility, and is completing modest infrastructure improvements while waiting for regulatory occupancy approvals to move plants in. Approvals are still on track to be completed in Q2 2026, with all technical and team preparations already complete.
• Minnesota Facility: Active construction is ongoing, with occupancy and plant move-in targeted for late Q3 2026. The facility has 30,000 square feet of potential canopy, double the size of most of the company's other market facilities.

Operational Improvements

• Full LED lighting retrofits have been completed across all Oregon facilities, improving product quality, consistency, and yield. New low-cost yield improvement technology, trialed in Oregon and rolled out in Michigan in mid-2025, has delivered a 20-30% yield improvement, pushing average yields in Michigan to 82 grams per square foot. Full rollout across Michigan will be completed in 2026, with half of Oregon's indoor footprint already outfitted.
• Early signs of pricing recovery are emerging in Oregon after extended price pressure, with increased inbound inquiries for product and slight upticks in average selling price (ASP) in late March through April.

Brand & New Product Development

• The company recently launched strain-specific vape carts in Oregon, with strong initial consumer feedback, and is scaling the offering gradually in a disciplined fashion. Consumers in other markets have already requested the product, creating a pipeline for future expansion.
• Grown Rogue won first place for indica flower and second place for non-infused pre-rolls at a New Jersey industry competition, and a recent brand event in New Jersey drew over 500 attendees, demonstrating strong growing brand loyalty. The company continues to invest in brand building aligned with its core value proposition of high-quality, low-cost flower.

M&A Activity

• Management continues to evaluate distressed cannabis assets, leveraging the firm's expertise in turning around underperforming cultivation infrastructure (the strategy that delivered the Illinois Dwight opportunity). The company is not forced to pursue deals, given its strong existing organic growth path, and opportunities remain episodic and uncertain in timing.

The transcript does not provide explicit absolute financial values or revenue contribution percentages for individual product segments. It notes that the core business is flower-forward, with a newly launched vape cart product being scaled in Oregon. It also highlights that 97% of sales in New Jersey were packaged products this quarter, confirming strong brand fit for the company's core flower products in that market.

• Management modestly increased full-year 2026 revenue guidance, driven by better-than-expected market performance in Michigan following implementation of the new 24% adult-use wholesale excise tax. Early 2026 performance in Michigan has outperformed the heightened uncertainty management entered the year with.
• The company reaffirmed its existing full-year adjusted EBITDA guidance, and management stated it strongly expects results will land at the higher end of the current guidance range.
• No changes were made to the timeline guidance for the company's three active expansion projects: all remain on track for their previously announced completion and launch targets.

• Federal cannabis regulation remains uncertain, even after recent DOJ announcements, and any shift could create unanticipated changes to market dynamics and operating requirements.
• New market expansion is dependent on regulatory approvals, which can be delayed and do not always follow original projected timelines. New Jersey has experienced extended staffing delays due to the state's slow employee badging process, which has impacted near-term yield.
• The 24% adult-use wholesale excise tax in Michigan has impacted profitability, as the company often has to split the tax burden with customers by reducing underlying product prices, leading to lower comparative margins going forward.
• Industry-wide capital constraints limit the pace of new market growth across the sector, and distressed acquisition opportunities are difficult to time and close successfully.
• Pricing and supply conditions in mature cannabis markets such as Oregon and Michigan can change quickly, so early signs of pricing recovery may not be sustained.

Q: What is the magnitude of CapEx and expected return for the new yield improvement technology being rolled out across Michigan and Oregon? / A: Total CapEx to deploy the technology across all current facilities will total less than $150,000, a very low cost for a 20-30% yield increase. This adds 200-300 additional pounds of production per month in Oregon alone, with a return on investment realized in just 2-3 harvest cycles. The improvement also delivers secondary benefits, including giving the team experience applying the new practice ahead of rolling it out to new facilities.

Q: How has the new Oregon vape cart launch performed, what are its margins, and what would trigger expansion to other markets? / A: The launch was done on a small, disciplined scale with 20,000 initial cartridges, produced by a third-party manufacturer to avoid large upfront infrastructure investment. Initial consumer response has been very strong, with the next order set to double volume, targeting a six-figure annual business in Oregon. The company will only expand to other states once it confirms sustained demand, locks in a reliable third-party manufacturer that meets quality standards, and addresses state-specific regulatory logistics, with early discussions already underway for Michigan.

Q: Why is A-flower yield lower in New Jersey than in Oregon and Michigan, and will it improve over time? / A: Lower yield is solely a function of ramping up operations in a new market: New Jersey has a slow employee badging process that creates staffing gaps that disrupt plant care, and the team is still being trained on the company's system and acclimating to the new facility. Management expects no structural barriers to reaching Oregon/Michigan yield levels, and projects New Jersey will hit ~45-50 grams of A-flower per square foot by the end of 2026 as operations mature.

Q: What is your strategy for potential interstate cannabis commerce out of Oregon, and what capacity could you bring? / A: Any opportunity will depend on which states allow imports, so plans remain preliminary. Grown Rogue is well positioned: it is based in Oregon's Emerald Triangle, has existing production capacity, strong existing relationships with in-state quality producers, and an existing brand footprint across multiple U.S. states that creates pre-built demand if interstate commerce opens. Management notes that building brand loyalty and customer relationships in current markets today sets the company up to capitalize on any future interstate opportunity, but does not expect it to open in the near term.