Release Date: May 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Vext Science Inc (VEXTF, Financial) generated a revenue of $8.4 million and adjusted EBITDA of $1.9 million in Q1 2024.
- The company outperformed state averages in Arizona despite significant market headwinds.
- Wholesale operations in Ohio grew by 8.3% compared to Q4 2023 and 136% year-over-year.
- The Eloy facility in Arizona is fully operational, offering significant flexibility for future expansion.
- Vext Science Inc (VEXTF) anticipates the launch of adult-use sales in Ohio during the second half of 2024, which is expected to drive significant growth.
Negative Points
- Revenue remained flat at $8.4 million compared to the previous quarter and down from $9.1 million in Q1 2023.
- Operating expenses were higher in Q1 2024 compared to Q1 2023, primarily due to increased depreciation and non-cash amortization expenses.
- Cash flow from operations was only $0.1 million during the first quarter.
- The legal cannabis market in Arizona and Ohio faced significant pricing pressure, impacting revenue and gross margins.
- There is uncertainty regarding the exact timing of the launch of adult-use sales in Ohio, which could affect future financial performance.
Q & A Highlights
Highlights of Vext Science Inc (VEXTF)'s Q1 2024 Earnings Call
Q: Can you provide more color on your expectations for the Arizona market and the progression in Ohio, especially considering the pricing pressures and potential launch of adult-use sales?
A: (Eric Offenberger, CEO) Arizona's market needs to stabilize from a supply standpoint, as demand remains but pricing is under pressure. In Ohio, we anticipate a significant increase in consumer base from 150,000 to potentially 1.8-2 million customers once adult-use sales begin, expected to be exponential and fast-growing.
Q: Are there any specific investments or operational changes needed to support the potential demand in Ohio?
A: (Eric Offenberger, CEO) No significant CapEx is anticipated other than for new dispensaries. We are prepared to support the current footprint and have the liquidity for inventory builds. The wholesale market is being managed efficiently to meet demand.
Q: Can you clarify the status of your operations and capacity in Ohio, including the number of stores and cultivation facilities?
A: (Eric Offenberger, CEO) We have a 25,000 sq. ft. cultivation facility with potential for expansion. Two retail stores are fully consolidated, and two are under LOI, expected to be consolidated by late September. We are supporting four retail stores and planning to expand to eight as regulations allow.
Q: What are your priorities for deploying the expected cash flow from Ohio's adult-use sales?
A: (Eric Offenberger, CEO) Priorities include making the final payment on the Big Perm acquisition, building out new stores, and retiring debt. We aim to accomplish these quickly and efficiently.
Q: How do you view the wholesale market in Ohio, and what are your plans for cultivation and production capacity?
A: (Trevor Smith, CFO) Our priority is to stock our retail stores first. Any excess capacity will be directed towards wholesale. We are prepared to support both internal and third-party wholesale demands as the market evolves.
Q: What is the expected process for transitioning to adult-use sales in Ohio, and how prepared are you for this change?
A: (Eric Offenberger, CEO) We expect a quick transition with minimal fees and paperwork. Our stores are staffed and ready, and we are confident in our ability to manage the increased demand.
Q: Have you seen increased activity or pricing changes in the Ohio wholesale market recently?
A: (Eric Offenberger, CEO) Yes, there has been more inbound interest and some pricing adjustments. However, the market is still stabilizing, and we expect more significant changes as adult-use sales commence.
Q: How does the new standby credit facility impact your liquidity and operational plans for the remainder of the year?
A: (Eric Offenberger, CEO) The standby credit facility provides additional flexibility and liquidity, helping us manage inventory builds and operational needs during this transition period. We are very pleased with the terms and support from our lending group.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
