Verano Announces Second Quarter 2024 Financial Results

In this article:
Verano Holdings Corp.Verano Holdings Corp.
Verano Holdings Corp.

CHICAGO, Aug. 07, 2024 (GLOBE NEWSWIRE) -- Verano Holdings Corp. (Cboe CA: VRNO) (OTCQX: VRNOF) (“Verano” or the “Company”), a leading multi-state cannabis company, today announced its financial results for the second quarter ended June 30, 2024, which were prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”).

Second Quarter 2024 Financial Highlights

 

For the Three Months Ended,

($ in thousands)

June 30, 2024

 

March 31, 2024

 

June 30, 2023

Revenues, net of Discounts

$

222,390

 

 

$

221,306

 

 

$

234,115

 

Gross Profit

 

114,340

 

 

 

112,960

 

 

 

115,191

 

Income from Operations

 

27,266

 

 

 

22,671

 

 

 

30,430

 

Net Loss Attributable to Verano Holdings Corp. & Subsidiaries

 

(21,764

)

 

 

(4,822

)

 

 

(13,061

)

Adjusted EBITDA1

 

70,599

 

 

 

66,547

 

 

 

71,512

 


Second Quarter 2024 Financial Highlights

  • Revenues, net of discounts, of $222 million, an increase of 0.5% versus the prior quarter, meeting Company guidance, and a decrease of 5% year-over-year.

  • Gross profit of $114 million or 51% of revenue.

  • SG&A expense of $87 million or 39% of revenue.

  • Net loss of $(22) million or (10)% of revenue.

  • Adjusted EBITDA1 of $71 million or 32% of revenue.

  • Net cash provided by operating activities of $8 million.

  • Capital expenditures of $19 million.

Management Commentary
“Our second quarter performance was strong, highlighted by proactive measures we executed to further bolster the business, including authorization of a share repurchase program, capex investments, and subsequent to quarter end, strategic M&A that upon closure, will grant us vertical access to the Virginia market ahead of adult use,” said George Archos, Verano founder and Chief Executive Officer.

“Looking ahead, we are prepared to leverage near-term catalysts including this week’s launch of Ohio adult use sales, positive polling trends in Florida showing strengthening support of Amendment 3, ongoing adult use discussions in Pennsylvania, and continued rescheduling momentum at the federal level. Adding Virginia to our portfolio and deepening our robust Arizona 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.”

Second Quarter 2024 Financial Overview
Revenue for the second quarter 2024 was $222 million, down 5% from $234 million for the second quarter 2023, and up slightly from $221 million for the first quarter 2024. The decrease in revenue for the second quarter 2024 compared to the second quarter 2023 was driven primarily by expected declines in New Jersey retail as dispensaries continue to open across the state, partially offset by increases in Maryland retail and wholesale in relation to the adult use program launch in July 2023, and new Zen Leaf? store openings in the Connecticut market.

Gross profit for the second quarter 2024 was $114 million or 51% of revenue, down from $115 million or 49% of revenue for the second quarter 2023, and up from $113 million or 51% of revenue for the first quarter 2024. Though gross profit for the second quarter 2024 decreased in absolute dollars compared to the second quarter 2023 primarily due to top line declines as a consequence of continued third-party New Jersey dispensary openings, gross profit margin increased over 220bps attributable to increased contribution from net wholesale revenue.

SG&A expense for the second quarter 2024 was $87 million or 39% of revenue, up from $85 million or 36% of revenue for the second quarter 2023, and down from $90 million or 41% of revenue for the first quarter 2024. The increase in SG&A expense for the second quarter 2024 compared to the second quarter 2023 was driven primarily by an increase in salaries and benefits, due to increased headcounts related to new store openings during the quarter.

Net loss for the second quarter 2024 was $(22) million, or (10)% of revenue, versus $(13) million, or (6)% of revenue in the second quarter 2023. The increase in net loss for the second quarter 2024 compared to the second quarter 2023 was driven by a largely non-cash loss on debt extinguishment attributable to a $50 million prepayment under the Company’s senior credit facility and a slight increase in selling, general and administrative expense.

Adjusted EBITDA1 for the second quarter 2024 was $71 million or 32% of revenue.

Net cash provided by operating activities year to date was $39 million, down from $41 million for the prior year period.

Capital expenditures year to date were $28 million, up from $17 million for the prior year period.

2024 Guidance

  • 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.

Second Quarter 2024 Operational Highlights

  • Expanded the Company's retail footprint by opening the following new dispensaries:

    • MüV? locations in Haines City, Naranja and Port Richey, elevating the Company's Florida retail operations to 77 dispensaries statewide;

    • Strengthened Connecticut retail footprint with the opening of Zen Leaf Naugatuck, the Company’s third social equity joint venture location and fifth dispensary statewide.

  • Joined industry stakeholders as active supporters of the Smart & Safe Florida campaign advocating for the passage of the Amendment 3 November ballot initiative.

  • Announced share repurchase authorization.

  • Launched Cabbage Club?, the first nationwide proprietary multi-state cannabis membership club, in Connecticut, Maryland and Michigan - following its successful debut in Illinois and New Jersey - with plans to further scale the club across the Company's footprint in 2024.

Subsequent Operational Highlights

  • Opened Zen Leaf Fairless Hills, the Company's newest affiliated Pennsylvania dispensary, in prime new Philadelphia area location.

  • Entered into an agreement with The Cannabist Company to acquire its Eastern Virginia operations subsidiary and its Arizona operations subsidiaries.

  • Welcomed adult use customers at Zen Leaf dispensaries in Ohio on August 6th.

  • Current operations span 13 states, comprised of 142 dispensaries and 13 production facilities with more than one million square feet of cultivation capacity.

Balance Sheet and Liquidity
As of June 30, 2024, the Company’s current assets were $358 million, including cash and cash equivalents of $130 million. The Company had a working capital deficit of $(3) million and total debt, net of issuance costs, of $396 million.

The Company’s total Class A subordinate voting shares outstanding was 346,417,144 as of June 30, 2024.
Conference Call and Webcast
A conference call and webcast with analysts and investors is scheduled for August 7, 2024 at 8:30 a.m. ET / 7:30 a.m. CT to discuss the results and answer investor and participant questions.

  • Investors and participants can register in advance for the call by visiting: https://registrations.events/direct/Q4I439151324

  • After registering, instructions will be shared on how to join the call for those who wish to dial in.

  • On August 7, 2024, the live webcast can be accessed via the following link: https://events.q4inc.com/attendee/694539185

  • The live and archived webcast will be available on the Events and Presentations page of the Company’s investor relations website at investors.verano.com.

_________________________
1Adjusted EBITDA is a non-U.S. GAAP financial measure. It is derived from EBITDA, another non-U.S. GAAP financial measure, and is defined in this news release in the section below titled “Non-U.S. GAAP Financial Measures.” The most directly comparable U.S. GAAP financial measure to adjusted EBITDA is net income (loss). The reconciliation of adjusted EBITDA to U.S. GAAP net income (loss) is set forth below in the tables included in this news release.

Non-U.S. GAAP Financial Measures
Verano uses non-U.S. GAAP financial information to evaluate the performance of the Company. The terms “EBIT,” “EBITDA,” “adjusted EBITDA”, and "Operating Cash Flow" do not have any standardized meaning prescribed within U.S. GAAP and therefore may not be comparable to similar measures presented by other companies. Accordingly, this non-U.S. GAAP financial information is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with U.S. GAAP.

The Company calculates EBIT as net income (loss) before interest expense and income tax expense; EBITDA as net income (loss) before interest expense, income tax expense, depreciation, and amortization; and adjusted EBITDA as net income (loss) plus net interest expense, income tax expense, depreciation and amortization and also excludes certain one-time extraordinary items. The calculations of the non-U.S. GAAP financial measures used in this news release and the reconciliations to the most comparable U.S. GAAP financial numbers are included in the tables below.

Operating Cash Flow is a non-U.S. GAAP financial measure. It is derived from U.S. GAAP net income (loss) which is also its most directly comparable U.S. GAAP financial measure. The reconciliation of operating cash flow to U.S. GAAP net income (loss) is set forth below in the tables included in this news release.

Management believes that this non-U.S. GAAP financial information is useful as a supplement to comparable U.S. GAAP financial information because it provides consistency and comparability with past financial performance and assists in comparisons with other companies, some of which use similar non-GAAP information to supplement their GAAP results. Management reviews these non-U.S. GAAP financial measures on a regular basis and uses them, together with financial measures included in the Company’s financial statements, to evaluate and manage the performance of the Company’s operations. These measures should be evaluated only in conjunction with the comparable U.S. GAAP financial numbers reported by the Company.

About Verano
Verano Holdings Corp. (Cboe CA: VRNO) (OTCQX: VRNOF), one of the U.S. cannabis industry’s leading companies based on historical revenue, geographic scope and brand performance, is a vertically integrated, multi-state operator embracing a mission of saying Yes to plant progress and the bold exploration of cannabis. Verano provides a superior cannabis shopping experience in medical and adult use markets under the Zen Leaf? and MüV? dispensary banners, including Cabbage Club?, an innovative annual membership program offering exclusive benefits for cannabis consumers. Verano produces a comprehensive suite of high-quality, regulated cannabis products sold under its diverse portfolio of trusted consumer brands including Verano?, (the) Essence?, MüV?, Savvy?, BITS?, Encore?, and Avexia?. Verano’s active operations span 13 U.S. states, comprised of 13 production facilities with over 1,000,000 square feet of cultivation capacity. Learn more at Verano.com.

Contacts:
Investors
Verano
Julianna Paterra, CFA
VP, Investor Relations
[email protected]

Media
Verano
Steve Mazeika
VP, Communications
[email protected]
312-348-4430

Forward Looking Statements
This press release contains “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Such forward-looking statements are not representative of historical facts or information or current condition, but instead represent only the Company’s beliefs regarding future events, plans, strategies, or objectives, many of which, by their nature, are inherently uncertain and outside of the Company’s control. Generally, such forward-looking statements can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “future”, “scheduled”, “estimates”, “forecasts”, “projects,” “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases, or may contain statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “will continue”, “will occur” or “will be achieved”. Forward-looking statements involve and are subject to assumptions and known and unknown risks, uncertainties, and other factors which may cause actual events, results, performance, or achievements of the Company to be materially different from future events, results, performance, and achievements expressed or implied by forward-looking statements herein, including, without limitation, the risk factors described in the Company’s annual report on Form 10-K for the year ended December 31, 2023 and any subsequent quarterly reports on Form 10-Q, in each case, filed with the U.S. Securities and Exchange Commission at www.sec.gov. The forward-looking statements contained in this press release are made as of the date of this press release, and the Company does not undertake to update any forward-looking information or forward-looking statements that are contained or referenced herein, except as may be required in accordance with applicable securities laws. All subsequent written and oral forward-looking information and statements attributable to the Company or persons acting on its behalf is expressly qualified in its entirety by this notice regarding forward-looking information and statements.

Financial Information Tables
The following tables include select financial results and the reconciliations of the non-U.S. GAAP financial measures to the respective most directly comparable U.S. GAAP financial measures for the presented periods.

VERANO HOLDINGS CORP.
Highlights from Unaudited Interim Condensed Consolidated Statements of Operations (Unaudited)
($ in Thousands)

 

 

For the Three Months Ended,

 

 

 

June 30, 2024

 

 

March 31, 2024

 

 

June 30, 2023

 

Revenues, net of Discounts

 

$

222,390

 

 

$

221,306

 

 

$

234,115

 

Cost of Goods Sold, net

 

 

108,050

 

 

 

108,346

 

 

 

118,924

 

Gross Profit

 

 

114,340

 

 

 

112,960

 

 

 

115,191

 

Gross Profit %

 

 

51

%

 

 

51

%

 

 

49

%

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

Selling, General and Administrative

 

 

87,074

 

 

 

90,289

 

 

 

84,660

 

Total Operating Expenses

 

 

87,074

 

 

 

90,289

 

 

 

84,660

 

Loss from Investments in Associates

 

 

 

 

 

 

 

 

(101

)

Income from Operations

 

 

27,266

 

 

 

22,671

 

 

 

30,430

 

Other Income (Expense), net:

 

 

 

 

 

 

 

 

 

 

 

 

Loss on Disposal of Property, Plant and Equipment

 

 

 

 

 

(143

)

 

 

(388

)

Loss on Debt Extinguishment

 

 

(3,068

)

 

 

 

 

 

 

Interest Expense, net

 

 

(14,237

)

 

 

(15,114

)

 

 

(14,013

)

Other Expense, net

 

 

(1,195

)

 

 

(759

)

 

 

(1,411

)

Total Other Income (Expense), Net

 

 

(18,500

)

 

 

(16,016

)

 

 

(15,812

)

Income Before Provision for Income Taxes

 

 

8,766

 

 

 

6,655

 

 

 

14,618

 

Provision for Income Taxes

 

 

(30,530

)

 

 

(11,477

)

 

 

(27,679

)

Net Loss Attributable to Verano Holdings Corp. & Subsidiaries

 

 

(21,764

)

 

 

(4,822

)

 

 

(13,061

)


VERANO HOLDINGS CORP.
Highlights from Condensed Consolidated Balance Sheets
($ in Thousands)

 

 

June 30, 2024

 

 

December 31, 2023

 

 

 

 

(Unaudited)

 

 

 

 

 

Cash and Cash Equivalents

 

$

130,052

 

 

$

174,760

 

Other Current Assets

 

 

227,511

 

 

 

219,436

 

Property, Plant and Equipment, net

 

 

507,447

 

 

 

501,304

 

Intangible Assets, net

 

 

1,040,572

 

 

 

1,086,146

 

Goodwill

 

 

231,291

 

 

 

231,291

 

Other Long-Term Assets

 

 

102,180

 

 

 

105,808

 

Total Assets

 

$

2,239,053

 

 

$

2,318,745

 

 

 

 

 

 

 

 

 

 

Total Current Liabilities

 

 

360,591

 

 

 

412,188

 

Total Long-Term Liabilities

 

 

657,070

 

 

 

666,477

 

Total Shareholders' Equity

 

 

1,221,392

 

 

 

1,240,080

 

Total Liabilities and Shareholders' Equity

 

$

2,239,053

 

 

$

2,318,745

 


VERANO HOLDINGS CORP.
Segmented Revenues, net of Discounts, By State (Unaudited)

 

 

For the Three Months Ended,

 

 

For the Six Months Ended,

 

Net Retail Revenues, net of Discounts

 

June 30, 2024

 

 

June 30, 2024

 

($ in thousands)

 

 

 

 

 

 

 

 

Florida

 

$

49,183

 

 

$

99,500

 

Illinois

 

 

26,331

 

 

 

53,676

 

New Jersey

 

 

20,910

 

 

 

43,692

 

Arizona

 

 

14,472

 

 

 

29,445

 

Pennsylvania

 

 

11,711

 

 

 

23,777

 

Maryland

 

 

11,064

 

 

 

21,317

 

Connecticut

 

 

10,186

 

 

 

20,209

 

Nevada

 

 

7,187

 

 

 

14,353

 

Ohio

 

 

5,471

 

 

 

10,933

 

Massachusetts

 

 

2,985

 

 

 

5,891

 

West Virginia

 

 

1,851

 

 

 

3,566

 

Other

 

 

3,332

 

 

 

6,912

 

Total Net Retail Revenues, net of Discounts

 

$

164,683

 

 

$

333,271

 


 

 

For the Three Months Ended,

 

 

For the Six Months Ended,

 

 

 

June 30, 2024

 

 

June 30, 2024

 

Wholesale Revenues, net of Discounts

 

Gross

 

 

Net1

 

 

Gross

 

 

Net1

 

($ in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

New Jersey

 

$

23,712

 

 

$

17,506

 

 

$

47,876

 

 

$

35,204

 

Illinois

 

 

22,046

 

 

 

13,736

 

 

 

40,250

 

 

 

24,754

 

Connecticut

 

 

14,873

 

 

 

10,338

 

 

 

27,726

 

 

 

19,104

 

Maryland

 

 

8,923

 

 

 

5,352

 

 

 

16,928

 

 

 

10,182

 

Pennsylvania

 

 

6,094

 

 

 

3,396

 

 

 

12,771

 

 

 

7,027

 

Arizona

 

 

6,454

 

 

 

2,562

 

 

 

13,138

 

 

 

4,927

 

Nevada

 

 

3,223

 

 

 

918

 

 

 

6,473

 

 

 

2,076

 

Ohio

 

 

2,771

 

 

 

1,341

 

 

 

4,950

 

 

 

2,501

 

Massachusetts

 

 

2,100

 

 

 

1,225

 

 

 

4,066

 

 

 

2,403

 

West Virginia

 

 

2,277

 

 

 

1,333

 

 

 

4,201

 

 

 

2,247

 

Total Wholesale Revenues, net of Discounts

 

$

92,473

 

 

$

57,707

 

 

$

178,379

 

 

$

110,425

 


1Net of intercompany eliminations

VERANO HOLDINGS CORP.
Reconciliation of Net Loss to Operating Cash Flow (Non-U.S. GAAP)

 

 

For the Six Months Ended,

 

 

 

June 30, 2024

 

 

June 30, 2023

 

($ in thousands)

 

(Unaudited)

 

 

(Unaudited)

 

Net Loss Attributable to Verano Holdings Corp. & Subsidiaries

 

$

(26,586

)

 

$

(22,298

)

Depreciation and Amortization

 

 

71,285

 

 

 

70,293

 

Other Non-cash Adjustments

 

 

23,070

 

 

 

10,270

 

Operating Cash Flow

 

$

67,769

 

 

$

58,265

 


VERANO HOLDINGS CORP.
Reconciliation of Net Loss to EBITDA (Non-U.S. GAAP)

 

 

For the Three Months Ended,

 

 

For the Six Months Ended,

 

 

 

June 30, 2024

 

 

June 30, 2023

 

 

June 30, 2024

 

 

June 30, 2023

 

($ in thousands)

 

(Unaudited)

 

 

(Unaudited)

 

 

(Unaudited)

 

 

(Unaudited)

 

Net Loss Attributable to Verano Holdings Corp. & Subsidiaries

 

$

(21,764

)

 

$

(13,061

)

 

$

(26,586

)

 

$

(22,298

)

Interest Expense, net

 

 

14,237

 

 

 

14,013

 

 

 

29,351

 

 

 

29,918

 

Income Tax Expense

 

 

30,530

 

 

 

27,679

 

 

 

42,007

 

 

 

55,999

 

Depreciation and Amortization - COGS

 

 

18,749

 

 

 

18,529

 

 

 

37,392

 

 

 

37,050

 

Depreciation and Amortization - SG&A

 

 

16,984

 

 

 

16,708

 

 

 

33,893

 

 

 

33,243

 

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)

 

$

58,736

 

 

$

63,868

 

 

$

116,057

 

 

$

133,912

 


VERANO HOLDINGS CORP.
Reconciliation of Net Loss to EBIT (Non-U.S. GAAP) and Adjusted EBITDA (Non-U.S. GAAP)

 

 

For the Three Months Ended,

 

 

 

June 30, 2024

 

 

March 31, 2024

 

 

June 30, 2023

 

($ in thousands)

 

(Unaudited)

 

 

(Unaudited)

 

 

(Unaudited)

 

Net Loss Attributable to Verano Holdings Corp. & Subsidiaries

 

 

(21,764

)

 

 

(4,822

)

 

 

(13,061

)

Interest Expense, Net

 

 

14,237

 

 

 

15,114

 

 

 

14,013

 

Income Tax Expense

 

 

30,530

 

 

 

11,477

 

 

 

27,679

 

Earnings Before Interest, Taxes (EBIT)

 

$

23,003

 

 

$

21,769

 

 

$

28,631

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COGS Add-backs:

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and Amortization - COGS

 

 

18,749

 

 

 

18,643

 

 

 

18,529

 

Acquisition, Transaction and Other Non-operating Costs

 

 

 

 

 

 

 

 

 

Employee Stock Compensation

 

 

680

 

 

 

474

 

 

 

488

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SG&A Add-backs:

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and Amortization - SG&A

 

 

16,984

 

 

 

16,909

 

 

 

16,708

 

Acquisition, Transaction and Other Non-operating Costs

 

 

2,570

 

 

 

3,476

 

 

 

472

 

Employee Stock Compensation

 

 

3,636

 

 

 

3,454

 

 

 

3,260

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition Adjustments and Other Income (Expense), net

 

 

4,977

 

 

 

1,822

 

 

 

3,424

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

70,599

 

 

$

66,547

 

 

$

71,512

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss Margin

 

 

(10

)%

 

 

(2

)%

 

 

(6

)%

Adjusted EBITDA Margin

 

 

32

%

 

 

30

%

 

 

31

%


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