Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Verano Holdings Corp (VRNOF, Financial) reported revenue of $222 million for Q2 2024, in line with previous guidance.
- Adjusted EBITDA was $71 million, representing 32% of revenue, which is an improvement over both the prior quarter and the prior year period.
- The company announced accretive M&A transactions in Arizona and Virginia, expanding its footprint to 14 states and 150 stores.
- Verano Holdings Corp (VRNOF) maintained a strong balance sheet with $130 million in cash and cash equivalents.
- The company is well-positioned for potential adult-use cannabis transitions in key markets like Florida, Pennsylvania, and Virginia, which could significantly boost future revenue.
Negative Points
- Net wholesale revenue saw a decline, offsetting some of the gains from retail operations.
- SG&A expenses increased to $87 million, or 39% of revenue, up from $85 million in the prior period.
- The company reported a net loss of $22 million, primarily due to the provision for income taxes under Section 280E of the tax code.
- There is continued pressure in the New Jersey and Illinois retail markets, impacting overall performance.
- The company refrained from providing specific top-line guidance due to uncertainties in the industry, making future revenue projections challenging.
Q & A Highlights
Q: Can you provide more details on the recent acquisitions in Virginia and Arizona?
A: (George Archos, CEO) We are very excited about both acquisitions. In Arizona, we needed additional cultivation capacity, and the two new sites fit perfectly into our needs. The retail stores acquired are in good areas with stable sales. Virginia is particularly exciting as it has a strong medical market and the potential for adult-use legalization by 2026. We view both acquisitions as highly accretive and are thrilled to bring the new employees on board.
Q: How did you achieve growth in the wholesale segment, particularly in Illinois?
A: (George Archos, CEO) We have a strong market share in Illinois and have been laser-focused on our brands. Our team has done an excellent job gaining traction in the wholesale market. We see additional opportunities to get our products on more store shelves, and our new brands have performed well. We feel comfortable with our position and have the capacity to increase supply if needed.
Q: Can you provide an update on the Ohio market and your strategic positioning there?
A: (George Archos, CEO) Ohio's adult-use launch went very well. We have six stores strategically located throughout the state, including one near the Indiana state line. We are excited about the market's potential, with estimates suggesting it could generate over $1 billion in revenue, inclusive of medical sales.
Q: What is the outlook for the New Jersey market, especially with new retail stores opening?
A: (George Archos, CEO) We expect some continued pressure from new store openings, but we anticipate the opening schedule will slow down. Our locations, especially along the shore, face less competition. We see New Jersey stabilizing into a mature market, with continued growth in wholesale. We remain confident in our position and expect it to be a strong market for us.
Q: Can you elaborate on the increased CapEx guidance and its allocation?
A: (Brett Summerer, CFO) Most of the increased CapEx will be focused on Florida, with some allocated to the new markets in Virginia and Arizona. We are expanding our Florida facilities and making investments in the pending acquisitions. The range we provided accounts for these initiatives and other opportunities.
Q: How are you viewing capital allocation, especially with the DNCIB in place?
A: (George Archos, CEO) We are focusing on maintaining a strong balance sheet given the market volatility and upcoming acquisitions. While the DNCIB is on the table, our priority is ensuring we have the necessary capital for growth and expansion.
Q: Can you provide more details on the Virginia medical market and its growth potential?
A: (George Archos, CEO) Virginia has a strong medical market with continued growth potential. We are confident about the eventual transition to adult-use sales, which will further enhance the market's attractiveness.
Q: What is your outlook for the wholesale segment in the second half of the year?
A: (George Archos, CEO) We are focused on expanding our wholesale presence in key markets like New Jersey, Illinois, and Arizona. We see opportunities for growth despite pricing pressures and increased competition. Our team is working hard to gain more traction and increase sales.
Q: Can you provide any guidance on the revenue or profit levels of the recent acquisitions?
A: (George Archos, CEO) We can't provide specific guidance at this time, but we will share more details in the next quarter. We expect the acquisitions to be highly accretive and beneficial to our overall portfolio.
Q: What is your view on the potential start date for adult-use sales in Florida if the ballot passes?
A: (George Archos, CEO) We anticipate that adult-use sales could start as early as May next year, although this could be influenced by legislative actions. We are preparing for this transition and expect it to be a significant growth driver.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
