Josh Rosen

@NoSAMScams what other stocks do you like?

Higher Exchanges: Elevating the Game with Jamie Mendola x.com/i/broadcasts/1…

Josh Rosen @analyst_exec, was kind enough to share some of his thoughts on $GRUSF and the broader industry in the comment section of a recent publication of mine. Since comment sections are often missed by readers, I’d like to share his thoughts here. So, without further ado, here is what he had to say: This response and forum might be unusual, but it is starting to feel normal in today’s time of information democratization. I have an amateur writing project on this platform (Scar Tissue Club) and prefer Substack’s community to X’s. I haven’t mixed my professional life with my writing project, yet this longform post by Market Musings refers to the company that I’ve decided to put an outsized amount of my personal time and resources into, Grown Rogue. It also includes some of the better fundamental analytic thinking applied to the emerging cannabis industry - not a high bar mind you. I find writing helps clarify my own thinking and perhaps others will find it beneficial. T hank you Market Musings (“MM”) and@PoliticoStocker (Truth Seeker, “TS”) on X for providing the back and forth thread that frames this response. My investment firm, Bengal Capital, invested in Grown Rogue in late 2021 as we were souring on the investability of the larger public and private companies in the nascent cannabis industry. We developed a “small ball” investment thesis tied to our greater comfort (ability to assess risk) in understanding individual operations and assets that we could model with our fundamental view that price normalization was inevitable in every market. My partners and I had experienced the challenges of building and investing in MSOs, as well as Canadian LPs, with a lot of scar tissue to show for it. As a longtime equity analyst and spreadsheet jockey, my partners heard me preach that in cannabis, precision is the enemy of knowing what’s most relevant. I had migrated toward being much simpler with analysis. There’s not a single answer to what’s most important, particularly with the patchwork regulatory environments leading to differing supply chain dynamics state to state, but a common theme for me is that efficiently (low cost) producing quality flower (bud), whether indoor, greenhouse or outdoor, is a core economic driver up and down the supply chain. With some help from the Vireo team that I joined on an interim basis in late 2022 and leaning on Grown Rogue as an advisor, I was able to see this thesis play out very tangibly in Maryland with how Vireo improved both its operations and its culture. For an organization that had struggled when facing modest competition in its markets, Vireo’s Maryland operations captured meaningful share with strong incremental profit margins, as measured by growth compared to the overall market and operating profits, translating increased productivity to outsized profit growth. The combination of Grown Rogue’s capability set and what I view as an earnest and fair-minded ethos that’s embodied by the CEO, Obie Strickler, is what attracted us as an investor and is what convinced me to partner with Grown Rogue Note that I didn’t join Grown Rogue because of the value of its Michigan assets, nor an anticipated super fast ramp in New Jersey to drive unsustainably high profits and margins. In fact, Obie will attest that I told him at the outset of New Jersey to find the balance between driving the team with aggressive timelines while moderating the external expectations. I’m at Grown Rogue because I see a bright future based upon the existing core strengths of the team, augmented with my personal confidence in how we can build the platform over time with more like-minded talent that wants to win in this industry doing things the right way. Comment 2: Okay, let’s get to the analysis part of this response. To avoid being overly repetitive, I add most of the content that MM shared from TS, but only sprinkle in MM’s commentary where it helps the flow; it can all be found in MM’s main post. I seem to lose formatting capabilities in the response section and the content author is called out in each paragraph below. MM: I can understand why pubcos don’t provide more granular detailed information. Josh: This is truly Pandora’s Box. We’ve elected to provide more data than anyone in the industry, but as can be seen, it’s not without creating its own mess at times. It’s important to remember that our KPIs are by definition Key Performance Indicators, they are not part of our financial package. I assure you that they are a core part of what we look at regularly as operators and there’s a lot of complexity trying to keep things apples to apples and high integrity. I have developed strong opinions on what it means to be data driven and the over-reliance on that terminology vs. being data supported with a decision making framework that’s agile to what’s most relevant. TS: Last point $GRUSF. Bulls never talk of valuation or impending dilution. Co. trades at >11x EBITDA if I assume full build out & sell through of NJ & 70% allocation to GRUSF (~$9M EBITDA) and annualize base-business EBITDA ($2M with corp o/h). Also has no 280E benefit from resched. Josh: Despite having opinions wearing my Bengal hat and some outstanding valuation mentorship in my formative analyst years, I’m not going to tread aggressively into valuation, as I think the industry comparables make this particularly challenging for most; it’s a lot of apples and oranges. EBITDA multiples are a proxy for a DCF framework. The industry has lent itself to asset-by-asset approaches and from a growth platform vantage point, I find that approach reductive when evaluating core competencies and longer-term positioning. I’ll also refer back to the fact that the capabilities are why I’m here; I see a lot of blue sky growth applying 1) capabilities and 2) empowered culture against this industry opportunity, all while assuming mature-market economics (not as much of a good market/bad market lens). My thinking with valuation ties more to what I think our platform is capable of (in terms of building and growing profits) in the next 3-5 years balanced by how much access to capital and dilution this will entail. There’s no way to be precise with this given how dynamic things are in our industry, but I’m motivated by it. TS: One of the highest valuations for essentially a cottage scale grower with no brands, an inability to scale in existing markets to take advantage of its "cost superiority" & impending dilution to expand in new states or long delays. MM: $GRUSF does have brands (Grown Rogue Reserve, Grown Rogue, Yeti), now the prominence of those brands is a different question. Are all the pre-rolls white label? If not, that must suggest some brand presence. They don’t need to scale in existing markets to take advantage of their cost superiority. Their cost superiority is inherently an advantage in and of itself. Josh: First, my lens is fairly seasoned, but I’m rightfully biased to where I’ve put my attention. You can clearly choose to not believe me and watch us over time. I can see how an outsider’s perspective is that Grown Rogue is a cottage-scale grower, but I don’t have any qualms about scaling into larger cultivation opportunities with our team and access to talent. I’ve spent a lot of time with Obie and larger-scale cultivators (including visiting together with Obie) and I’m here for a reason; I have plenty of alternative, “larger” leadership opportunities available to me in the industry. And we’re going to keep getting better and learning more; that’s what this industry requires. Second, it’s easy to take offense to “no brands”, but one of my softer mandates is to help address what’s been an under-invested brand approach at Grown Rogue. There are two culprits for this, in my opinion. One is simply the Oregon origins, where deli-style reigns supreme at retail, with very little attention applied to packaging for flower. The second is Grown Rogue keeps things very lean and we are a sales-driven culture, not marketing-driven, and because we’ve successfully been selling our product in our markets, we’ve not had to focus on brand. Having spent time with a lot of industry taste makers, I also have no qualms putting our capabilities and quality in the same tier as Alien Labs, Jungle Boys and The TenCo for instance; they clearly have a much stronger brand than we do and we respect them. We won’t get there overnight, nor are we aggressively throwing dollars at this, but I’m excited about our increased focus and the support we’ve engaged. There will be many winners in our industry over time. TS: I would argue that the "flywheel" was entirely made up slop to help fundraise and it seems the goalposts keep being moved to "new states" when the company cannot realistically fund those on the timelines stated. Josh: It’s posts like this that prompt me to not respond to folks like TS, as it cheapens the analysis to simply accuse us of “made-up slop”. For me, most of this is covered in why I joined Grown Rogue. I responded recently on X to someone that asked the intelligent question about how we fund our full expansion plans. Here was my response: As a permanently recovering analyst, this is the first question I'd ask. First, I'd note we have a supportive cap table and lender; this is not something we take for granted. Second, NJ's ramp may be a bit slower than we expected, but its return profile remains strong (expected sustainable EBITDA vs. invested capital) and we still expect surplus EBITDA (higher pricing) in the next couple of years. Third, for our incremental needs, we expect the combination of NJ cash flow ramping (reminder - much of this shows up in financing cash flow), ongoing discussions with our lender to expand with us and modest amounts of project-specific or general equity to serve our needs. Last is distressed - we're evaluating smaller and larger opportunities; we're only pursuing the fat pitches in our wheelhouse. Should something larger materialize, we're confident that it will be compelling (likely much of it from our existing cap table). TS: To be clear, $GRUSF trades at 25x EBITDA today and at >11x EBITDA INCLUDING full build out of NJ, full sell-through of NJ at a $2k wholesale price per pound. None of those things are true today. Dividing their NJ revenue by pounds produced shows a ~$1,800/pound realization. Josh: MM covers this fairly well. We’re not at full sell through, particularly with our penetration of pre-packaged A flower, nor are we at our efficiency and quality metrics yet. We provide A Flower ASPs largely because we think it’s a great indicator of a market’s pricing environment and a key internal metric for us; it’s not intended to tie to our financials. Investors can determine what they want to pay for us. In the public markets, I don’t think there’s anything that looks like us today. TS: Lastly, the rest of the universe trades at much lower multiples despite for some 40-80% of EBITDA being from medical states that have inherent growth in them. Should none of that be priced in? But it should be for this company? Josh: From a growth opportunity and approach to execution standpoint, I think we’re mostly comparing apples and oranges, but I don’t dismiss that this is the natural comparison for most investors and something that we think will work itself out over time. At Bengal, we’ve written extensively, perhaps too much, about the challenges of the standard MSO business model. That doesn’t mean we don’t have appreciation for, nor watch closely to learn from, the things that work over time. Personally, I’m a big fan of the single-state operator, C21’s operating capabilities in Nevada for instance and have viewed them as moderately undervalued, but they’re also a much different company than we are, as I don’t see the long-term growth platform outside Nevada. It’s very possible they prove that wrong and either way, I appreciate that they run a good business and should continue to do well. TS: The fundamental issue is three fold: 1. With $9M in cash, they cannot afford to build out these states without an additional fundraise, so need to keep pitching the future to raise current $'s. Josh: I already covered the core of this (capital needs), but I’m not sure what TS is expecting as we’re trying to explain how we’re running the business and what we’re playing for; this is how this works. Of course there are risks inherent and I’m confident that many things won’t go as we expect, both for the worse and for the better, hopefully leaning toward the latter, at least for the big things. Comment 3: TS: NJ, arguably least competitive state in the US, has had an extremely slow ramp, poor sell-through (they don't disclose sale data only production) and much worse than expected realizations. Expect worse in other states. Also, pls adjust for them owning only 70% at best of NJ. Josh: First, in my opinion, New Jersey is coming along nicely, albeit slower than the Grown Rogue team anticipated. Oregon and Michigan are very different market structures and this was Grown Rogue’s first foray into an MSO-dominated market, where what could be referred to as “cartel economics” are pervasive. In my opinion, the cartel states in order of challenging for outsiders are Pennsylvania, Illinois and New Jersey, all tied to the initial and evolving regulatory environments. One of the benefits of underwriting projects to more normalized pricing environments is that I can be modestly disappointed in the pace of capturing surplus profits, while also gaining incremental confidence in the underlying approach to things. There have been some valuable lessons learned with this expansion that will serve us well as we move into Illinois. The two most significant being 1) having experience selling to MSOs that heavily prioritize their shelf space for their own products and secondarily trading shelf space among themselves and 2) we should have had our YETI brand as part of our initial launch. The ramp of a new facility isn’t just sales, it’s also quality and efficiency and it was a miss on our part to not have our value brand prepared to support more packaged products vs bulk wholesale. TS: COGS numbers seem massaged. Costs are being reallocated to corporate to show better state numbers. Here's a clue: despite QoQ flat pricing in Michigan. +15% higher production and -14% stated "costs". EBITDA in the state declined -14.5% and revenue -9%. How is that possible? Josh: The accusatory nature of this post aside, my tongue-in-cheek response is that I don’t think we have the overhead resources to be proactively moving things around to massage public numbers. As I hope is obvious to those that have followed us, we’re doing our best to educate and provide transparent disclosure. With respect to Michigan specifically, I pointed out to Obie and Andrew when we internally first saw our 2Q numbers that Michigan was confusing and we needed to dig in. This is where the extra disclosure of KPIs helps and hurts us. There’s a lot of complexity beneath the surface to make sure we provide consistent apples-to-apples comparisons. A few thoughts for context: Looking back at 4Q24 and 1Q25 KPIs, we slipped on A Flower yield in Michigan and Obie referenced this on our 1Q25 conference call. This skewed our overall sales mix away from A Flower. When you couple sub-optimal quality performance with a challenging pricing environment, it can hit surprisingly hard. Of note, this is the opposite effect that I was referring to when I highlighted earlier how the efficient production of A flower is the economic engine of the supply chain. Obie also referenced on our recent 2Q25 conference call that we haven’t put enough priority to our strain-specific packaging in Michigan and this ties somewhat into my earlier commentary on needing to focus on being more brand forward. Our 2Q25 quality performance rebounded, but the combination of sales lagging harvest and this business mix issue had a pronounced impact on our 2Q revenue and EBITDA. For more context, our KPI is for pounds produced, but physical sales of harvested product may take 30-45 days to be dried, cured, trimmed, tested, packaged and then sometimes a bit longer to be sold (not very often longer for us). There’s inevitably going to be variability in how our KPIs relate to our financial statements at any point in time. Last note that’s unrelated to MI, but our financial results include outdoor for OR, while our KPIs focus on indoor performance. Conclusion: Given the lack of consistent metrics and the different state market dynamics, this industry is incredibly complex for fundamental analysis. In as much as I wish TS would avoid the credibility attacks, as MM points out, he’s providing a reasonable fundamental bear view on Grown Rogue and given how the public companies have performed in our industry, it’s based on a reasonable asset by asset view. For me, I find this asset by asset approach overly reductive and inconsistent with how I view the opportunities in the industry. If you listened to our recent conference call, you’ll know that I’m most excited about capitalizing on distressed opportunities that complement our organic, new build approach to growth.

@PoliticoStocker A Flower pricing was flat QoQ, not all pricing. Pre roll and other pricing was down, which explains the rev/aEBITDA reduction. No "massaging" or "reallocation" tin foil hat required, just take a quick look at the financials.