Verano Earnings + Call Notes
U.S. cannabis leader shares Q224 results.
$222M revs; est. $225M
$71M AEBITDA; est. $68M
$114.3M GP; est. $114.4M
$27.3 M OI; est. $26.9M
51% GM; est. 50.8%
($ 21.7M) NI; est. ($17.3M)
*The Company is not issuing guidance at this time given the timing uncertainties surrounding the closing of the pending acquisitions of The Cannabist Company's Arizona and Eastern Virginia operations.
“Looking ahead, we are prepared to leverage near-term catalysts including this week’s launch of OH adult use sales, positive polling trends in FL, ongoing adult use discussions in PA, and continued rescheduling momentum at the federal level. Adding VA to our portfolio and deepening our robust AZ business also provides additional growth opportunities regardless of federal rescheduling timing and progress. We remain excited and confident in Verano’s ability to continue driving long-term, sustainable growth throughout 2024 and beyond.” CEO George Archos
Call Notes
Wholesale growth in key markets.
Performance in line w previous guidance.
Strength in net wholesale revenue offsetting continued retail pressure.
On the offense, announced accretive M&A last week.
Proactively / aggressively pursuing smart growth + expansion.
Agreement to acquire licenses in AZ + VA.
VA is a new limited license market for VRNO.
VRNO VA will own 66k sq ft cult/manu and 6 dispensaries.
Zone is home to nearly two million residents and 14 million annual tourists.
^ Norfolk, Chesapeake, Virginia Beach.
AZ transaction provides deeper reach.
Will own 8 dispensaries (+2), 3 cult/manu facilities (90k sq ft total; acquiring 22k sq ft)
Expect to close acquisitions in the coming weeks, depending on regulatory approvals.
$222m revs, in line w guidance.
$71m aEBITDA, 32% margin.
$114m GP, up 221bps YoY.
Continued growth in net wholesale, offsetting sequential retail pressure / declines.
Focused on efficiencies / cost management.
In FL, took a temporary capacity offline to reconfigure rooms for A/U.
Believe output bottomed July, expect output to continue to grow over coming months.
In NJ, top 2 share, seeing relative price stability.
Craft growers gained some market share, but remain committed to wholesale leadership.
Relationships with almost every NJ dispensaries.
In IL, wholesale revs increased 25% QoQ and YoY.
Modestly grew market share vs. prior year period.
Await DEA Schedule III rule.
Would save $80m 280e taxes annually.
Navigated AU shift in 8 states to date (incl OH).
Three additional markets to flip in the coming years (FL PA VA).
BDSA estimates OH to generate over $1b in ’25.
6th OH dispensary will be located in Antwerp, near Indiana border/ near Fort Wayne.
Expect location operational within next few months.
FL could contribute $300-450m annual revenue.
^ one of VRNOs highest margin markets.
See FL becoming easily one of the largest markets in the US.
^ helped by 140m tourist visits annually.
PA recently decoupled 280e from state tax, should lead to a slight lift to bottom line.
Optimistic PA enters A/U in ’25.
Strong possibility of VA a/u program in ’26.
BDSA estimates $430m in cannabis sales in VA for ’27.
Focused on operational efficiencies.
Revs up slightly QoQ, driven by wholesale strength.
64% retail, largest contributions from FL IL NJ / 36% wholesale split.
^ largest contributions from NJ IL CT.
GM of 51%, up 220bps YoY, driven by higher third party wholesale sales.
Expect wholesale growth trend to continue.
SG&A of 37% of revenue.
($21.8m) net loss.
$70.6m aEBITDA, 32% margin.
$130m cash/equivs.
Anticipate paying $35m cash consideration in Q3 to acquire VA AZ operations.
$39m CFFO YTD, $28m capex (largely on FL expansion / dispensary openings).
Previous guidance of $25-50m capex base for the year.
^ begun expansion initiatives in FL, will make pending investments in AZ PA.
Increasing CAPEX guidance to $90-130m, heavily dependent on catalysts.
Focusing on OPCF vs. FCF for ’24.
Substantial footprint in AZ already.
Needed additional cultivation, acquisition fit current needs.
Both AZ retail stores acquired are in good areas, sales are very stable for a few years.
View acquisition as very strong.
Very accretive deal overall and for that market.
Wanted to be in VA for some time.
This a perfect acquisition.
Facility has expansion capabilities in anticipation of AU.
6 stores are built out, 1 sitting at cultivation, will move that store out.
VA a strong medical market.
AU passed there once, think it happens in ’26.
IL VRNO home market.
Previously had substantial wholesale market share, then pivoted to retail focus.
Team has gained traction on wholesale side, think will continue to gain traction and get on more store shelves.
VRNO brands have done very well in IL.
View wholesale in new doors as additional opportunity.
Some limited competition coming online in IL from craft grows.
Pricing has been relatively stable.
Have more rooms in IL that could turn online, but feel comfortable currently.
Retail spread evenly throughout OH.
Have a nice moat around Indiana state line store.
Expect continued pressure in NJ as stores come online.
Don’t know how many stores are left to come online, but pace should slow down.
Took a large majority of FL facility from single tier to double tier.
Significant upside within current facility.
End of July began matching what was taken down.
^ through additional yield through double tiered facility.
Will see increased canopy through end of year, and a higher variety of strains.
Pricing pressure varies market to market.
Operators drop price and create pressure that sometimes isn’t needed.
Basket sizes haven’t changed much.
Some transition to value brand over last 12-18 months, but has stabilized recently.
Demand continues to remain high.
Additional efficiencies to add to VA M&A facility.
^ add automation, increase canopy size.
Think can make VA a better, more efficient facility.
Thought M&A would be stronger in ’23, but no one was ready for M&A.
Entered this year wanting to aggressively look at deals.
Will continue to look at transactions.
Good track record of closing great transactions.
Looking at everything / anything, but will only close on the best.
Additional capex in guidance is FL, acquisitions.
^ very preliminary, wouldn’t take guide too seriously yet.
Important to maintain a strong balance sheet.
VA a strong medical market, continued upside there.
View A/U transition on the horizon.
View FL A/U for a May ’25 sales start.
No change in FL A/U wholesale ruleset / allowance thus far.
Compliant w/ 280e, will continue to be compliant until rescheduling happens.
No change in strategy.
Evaluating hemp business model.
Could be part of the model in the future.
/end
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CB1 has a position and nothing contained herein should be considered advice.