Grown Rogue International, Inc. Q2 FY2026 earnings call

Refined Corporate Culture Pillars

• Love the plant: Cultivation is the company's core passion, rooted in its Rogue Valley heritage, with a focus on sourcing and breeding premium genetics
• Craft cultivators: Prioritize boutique-quality flower produced at scale in right-sized facilities, rather than pursuing maximum size for scale's sake
• Continuous improvement: Constantly iterate on growing practices to boost quality and yield, to remain competitive in a maturing cannabis market
• Cost control: Aggressively manage costs across all operations to maintain customer pricing power and profitability regardless of market pricing conditions
• Team-first mentality: Center the business on employee development, building a culture of accountability, hard work, and fun, with a focus on growing internal leaders

Geographic Market Operational Updates

• New Jersey: 100% of the company's packaged flower sales in the quarter were sold, and the company purchased additional bulk product to meet unmet demand for its brands. Full buildout to the planned 16,000 square foot production capacity is on track to complete by the end of 2026. The Yeti Ready to Roll product, which utilizes shake cannabis sold at a lower ASP per pound, is excluded from reported yield and ASP metrics to avoid skewing core results. The company is working to bring yields and costs in line with the top performance seen in Michigan and Oregon.
• Oregon: After pricing headwinds at the start of 2026, the market saw modest price recovery in the second quarter, with demand remaining strong. Most planned technical improvements designed to drive yield and cost gains, matching the performance of Michigan, have been completed, with improvements expected to show up in results over the second half of 2026.
• Michigan: Achieved record operational performance, hitting 90 grams of flower per square foot and a production cost of $277 per pound. The team has successfully navigated ongoing industry pricing pressure and the new state wholesale tax implemented earlier in 2026, setting a new performance benchmark for all of the company's markets.
• Illinois: Plants were moved into the facility in early June 2026, with the first harvest expected in September 2026. The company received regulatory approval to expand from the initial 5,000 square feet of flowering canopy to 10,000 square feet, and full buildout to 10,000 square feet is expected to be completed by the end of 2026.
• Minnesota: Phase 1 construction is near completion, with the company working through final regulatory occupancy approvals. The company expects to move plants into the facility in August 2026, with the first harvest by the end of 2026, and commercial product launch in the Minnesota market in Q1 2027. An experienced long-tenured general manager from Oregon is relocating to lead the project, with ongoing cultivation leadership support planned for the first year of operations.

Capital Allocation Strategy

• The company focuses on opportunities that align with its core competency: efficient production of high-quality cannabis flower. Deals may include retail or manufacturing assets if the core value driver aligns with this competency.
• The company targets a return profile of $0.75 in operating profit for every $1 invested, achieved within 12 to 18 months of deal closing, and only pursues opportunities that meet this high hurdle rate.
• The company avoids pursuing scale for scale's sake, and prioritizes opportunities that leverage existing team bandwidth and add long-term value to the platform. Earlier in 2026, the company bid for 4Front's Massachusetts cultivation and retail operations, but walked away when the bid price exceeded the company's return requirements.

This earning call transcript does not break out or provide specific absolute financial results or revenue contribution percentages for individual product or geographic operating segments. Only operational performance metrics for individual geographic markets are discussed, and no formal segment-level financial performance data is disclosed.

Management raised full year 2026 guidance during this call, driven by two key factors:

• Improved visibility into results after the first half of the year, with stronger than expected production growth and revenue from Michigan, and stabilizing and modestly recovering pricing in Oregon after significant pricing headwinds in 2025
• Consistent strong progress on the New Jersey market expansion, which has performed better than initial cautious expectations, giving management added confidence in full year results
• All expansion projects (New Jersey full buildout, Illinois 10,000 sq ft canopy, Minnesota phase 1 launch) remain on track to meet their previously communicated timelines for completion and commercial launch.

• Regulatory approval timelines for new market entry and expansion (particularly for the Minnesota phase 1 occupancy approval) are uncertain and can impact planned launch schedules
• Cannabis pricing remains volatile and competitive across all U.S. markets, particularly in mature markets like Oregon and Michigan
• New market projects carry startup risks, including facility retrofitting needs, regulatory delays, and ramp-up of yields and costs to target levels
• Energy and labor costs vary across markets, and higher input costs in new markets like New Jersey and Minnesota can pressure margins until production ramps up and scale efficiencies are achieved

Q: Can the record 90 grams per square foot yield and $277 per pound production cost achieved in Michigan be replicated in the company's other markets (Oregon, New Jersey, Illinois, Minnesota) long-term? / A: Management says there is no structural reason the performance cannot be replicated across markets. The technical improvements that drove Michigan's results have already been partially installed in Oregon, with yield and cost improvements expected to show up in Q3 and Q4 2026 at a low capital cost with very strong ROI. Target timelines for upgrades in other markets will depend on production capacity, demand, and capital tradeoffs, but management now views 90-100 grams per square foot and sub-$300 per pound production as the new company-wide target standard.

Q: What gave management the confidence to raise full year guidance during this quarter? / A: Management cites two core drivers: after two quarters of the year, there is much better visibility into full year performance. Michigan has delivered stronger than expected production and revenue growth, and Oregon saw stabilizing and modestly recovering pricing after significant volatility and headwinds in 2025. When combined with on-track strong performance in New Jersey's ramp-up, these stable underlying trends gave management enough confidence to lift guidance after a cautious start to the year.

Q: What drives cost differences across markets, what share of cost comes from energy, and is energy much more expensive in New Jersey than other markets? / A: Management explains that consumables (nutrients, soil, pest control) have fairly consistent costs across markets via bulk purchasing. The biggest variable cost differences come from labor and baseline facility costs: New Jersey has slightly higher energy and labor costs, but the main reason for higher current costs in New Jersey is that production is still ramping up, so fixed overhead (management, facility rent) is spread across lower current output. Once full capacity is online, fixed cost per pound will drop. Management expects sub-$400 per pound production to be achievable across most markets, with Michigan already achieving a flower-only cost of $277 per pound, which management believes is among the best in the U.S. indoor cannabis industry.