Verano Announces Third Quarter 2023 Financial Results


Delivers Record Revenue of $240 Million, Increasing Net Cash Provided by Operating Activities, and Raises and Tightens 2023 Free Cash Flow1 Guidance Range to $72-76 Million

CHICAGO, Nov. 08, 2023 (GLOBE NEWSWIRE) -- Verano Holdings Corp. (NEO: VRNO) (OTCQX: VRNOF) (“Verano” or the “Company”), a leading multi-state cannabis company, today announced its financial results for the third quarter ended September 30, 2023, which were prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”).

Management Commentary

“I am tremendously proud of the strong results we delivered in the third quarter, highlighted by raising and tightening our free cash flow guidance range and generating record revenue, and the recent strategic elevation of our capital markets strategy by uplisting to Cboe Canada,” said George Archos, Verano Founder, Chairman and Chief Executive Officer. “Our strong performance resulted from key drivers that include another seamless adult use transition in Maryland, the continued expansion of our wholesale business and market-leading positions in Connecticut and New Jersey, successful new product launches and line extensions across our growing brand portfolio, and the addition of new dispensaries to bolster our expanding retail footprint in key states.”

Archos continued: “While we never run our business based on legislative assumptions, we are encouraged by the multi-faceted federal reform efforts surrounding cannabis, and although we remain confident in our ability to continue growing our business in the current environment, we will continue to position ourselves to capitalize on growth opportunities should any federal reforms materialize. I am grateful to our Verano team for their continued efforts to disrupt, innovate and differentiate Verano at every level of our business, and remain excited and confident for our growth prospects in the future.”

Third Quarter 2023 Financial Highlights

 For the Three Months Ended,
($ in thousands)September 30, 2023 June 30, 2023 September 30, 2022
Revenues, net of Discounts$               240,088  $               234,115  $               227,588
Gross Profit                 133,220                   115,191                   122,994
Income from Operations                   40,288                     30,430                     37,075
Net Loss Attributable to Verano Holdings Corp. & Subsidiaries                 (17,842)                  (13,061)                  (42,993)
Adjusted EBITDA2                   89,349                     71,512                     82,124

  • Revenue of $240 million increased 5% year-over-year and increased 3% versus the prior quarter.
    • Introducing state-level revenue to be reported on a recurring basis.
  • Gross profit of $133 million or 55% of revenue.
  • SG&A expense of $86 million or 36% of revenue.
  • Net loss of $(18) million.
  • Adjusted EBITDA2 of $89 million or 37% of revenue.
  • Net cash provided by operating activities of $37 million.
  • Capital expenditures of $10 million.
  • Free cash flow1 of $27 million.

Third Quarter 2023 Financial Overview

Revenue for the third quarter 2023 was $240 million, up 5% from $228 million for the third quarter 2022, and up 3% from $234 million for the second quarter 2023. The increase in revenue for the third quarter 2023 compared to the third quarter 2022 was driven primarily by strength from wholesale adult use sales in Connecticut and Maryland, which began adult use sales in January 2023 and July 2023, respectively.

Gross profit for the third quarter 2023 was $133 million or 55% of revenue, up from $123 million or 54% of revenue for the third quarter 2022, and up from $115 million or 49% of revenue for the second quarter 2023. The increase in gross profit for the third quarter 2023 compared to the third quarter 2022 was driven primarily by increased vertical sell through and revenue growth.

SG&A expense for the third quarter 2023 was $86 million or 36% of revenue, flat with $86 million or 38% of revenue for the third quarter 2022, and up from $85 million or 36% of revenue for the second quarter 2023.

Net loss for the third quarter 2023 was $(18) million, versus a loss of $(43) million in the third quarter 2022, and $(13) million for the second quarter 2023. The decrease in net loss for the third quarter 2023 compared to the third quarter 2022 was driven by higher operating income and lower tax provision.

Adjusted EBITDA2 for the third quarter 2023 was $89 million or 37% of revenue, up from $82 million or 36% of revenue for the third quarter 2022, and up from $72 million or 31% of revenue for the second quarter 2023.

Net cash provided by operating activities for the nine months ended September 30, 2023 was $77 million, up from $65 million in the prior year period.

Capital expenditures for the nine months ended September 30, 2023 were $27 million, down from $110 million in the prior year period.

Free cash flow1 for the nine months ended September 30, 2023 was $51 million, up from $(44) million in the prior year period.

2023 Guidance

  • The Company raises its free cash flow1 guidance for the year to $72-76 million, up from $65-75 million, and lowers its capital expenditures guidance to $30-37 million, down from $35-50 million.

Third Quarter 2023 and Subsequent Operational Highlights

  • Welcomed cannabis customers at the Company's four Maryland Zen Leaf retail locations to commemorate the state's historic launch of adult use sales on July 1.
  • Appointed John Tipton and Charles Mueller to the Company's Board of Directors.
  • Expanded the Company's retail footprint across key markets by opening the following new stores:
    • MÜV dispensary locations in Apopka, Fort Pierce and Satellite Beach, Florida, raising the Company's total Florida retail footprint to 72 storefronts statewide;
    • and Zen Leaf social equity joint venture dispensaries in Norwich and Newington, raising the Company's Connecticut retail footprint to four locations.
  • Commenced trading on Cboe Canada, elevating the Company's capital markets strategy and presence on a senior exchange with a global platform that spans 26 markets.
  • Introduced Savvy Threads, a non-plant-touching e-commerce extension of the Company's Savvy brand featuring limited-edition, artist-driven streetwear available for sale and delivery to all 50 states.
  • Relaunched national philanthropic donation campaigns benefiting the Lynn Sage Breast Cancer Foundation and The Weldon Project's Mission Green.
  • Leading coalition of industry stakeholders as a plaintiff challenging the legality of the federal government's intervention in legal intrastate cannabis commerce under the Commerce Clause and Controlled Substances Act.
  • Current operations span 13 states, comprised of 135 dispensaries and 14 production facilities with more than one million square feet of cultivation capacity.

Balance Sheet and Liquidity

As of September 30, 2023, the Company’s current assets were $355 million, including cash and cash equivalents of $130 million. The Company had working capital of $3 million and total debt, net of issuance costs, of $422 million.

The Company’s total Class A subordinate voting shares outstanding was 343,529,456 as of September 30, 2023.

Conference Call and Webcast

A conference call and webcast with analysts and investors is scheduled for November 8, 2023 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://conferencingportals.com/event/sxTSCKLn
  • After registering, instructions will be shared on how to join the call for those who wish to dial in.
  • On November 8, 2023, the live webcast can be accessed via the following link: https://events.q4inc.com/attendee/254800729
  • 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.

_________________________
1 Free cash flow is a non-U.S. GAAP financial measure. It is derived from U.S. GAAP net cash provided by operating activities, which is also its most directly comparable U.S. GAAP financial measure, and is defined in this news release in the section below titled “Non-U.S. GAAP Financial Measures.” The reconciliation of free cash flow to U.S. GAAP net cash provided by operating activities is set forth below in the tables included in this news release.
2 Adjusted 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 “free 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, adjusted EBITDA as net income (loss) plus net interest expense, income tax expense, depreciation and amortization, and also excludes certain one-time items, and free cash flow as net cash provided by operating activities less capital expenditures. 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.

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. (NEO: 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 offers a superior cannabis shopping experience in medical and adult use markets under the Zen Leaf and MÜV dispensary banners and produces a comprehensive suite of high-quality, regulated cannabis products sold under its diverse portfolio of trusted consumer brands including Verano, MÜV, Savvy, BITS, Encore, and Avexia. Verano’s active operations span 13 U.S. states, comprised of 14 production facilities with over 1,000,000 square feet of cultivation capacity. Learn more at www.verano.com.

Contacts:
Investors
Verano
Julianna Paterra, CFA
VP, Investor Relations
julianna.paterra@verano.com

Media
Verano
Steve Mazeika
VP, Communications
steve.mazeika@verano.com
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, 2022 filed and subsequent quarterly reports on Form 10-Q for 2023 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 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
($ in Thousands)

  For the Three Months Ended, 
  September 30,
2023
  June 30,
2023
  September 30,
2022
 
Revenues, net of Discounts $240,088  $234,115  $227,588 
Cost of Goods Sold, net  106,868   118,924   104,594 
Gross Profit  133,220   115,191   122,994 
Gross Profit %  55%  49%  54%
Operating Expenses            
Selling, General and Administrative  86,316   84,660   85,710 
Loss on Impairment - Investment in Associates  6,571       
Total Operating Expenses  92,887   84,660   85,710 
Loss from Investments in Associates  (45)  (101)  (209)
Income from Operations  40,288   30,430   37,075 
Other Income (Expense):            
Gain (Loss) on Disposal of Property, Plant and Equipment  (234)  (388)  1,443 
Gain on Deconsolidation        75 
Gain on Previously Held Equity Interest        175 
Interest Expense, net  (15,166)  (14,013)  (11,785)
Other Income (Expense), net  2,145   (1,411)  (595)
Total Other Income (Expense), Net  (13,255)  (15,812)  (10,687)
Income Before Provision for Income Taxes and Non-Controlling Interest  27,033   14,618   26,388 
Provision for Income Tax Expense  (44,797)  (27,679)  (69,381)
Net Income Attributable To Non-Controlling Interest  78       
Net Loss Attributable to Verano Holdings Corp. & Subsidiaries  (17,842)  (13,061)  (42,993)


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

  September 30,  December 31, 
  2023  2022 
  (Unaudited)    
Cash and Cash Equivalents $129,921  $84,851 
Other Current Assets  225,083   233,424 
Property and Equipment, Net  512,589   525,905 
Intangible Assets, Net  1,114,088   1,180,766 
Goodwill  269,222   269,088 
Other Long-Term Assets  104,200   102,021 
Total Assets $2,355,103  $2,396,055 
         
Total Current Liabilities $352,300  $386,645 
Total Long-Term Liabilities  689,318   667,860 
Total Shareholders' Equity  1,313,407   1,341,550 
Non-Controlling Interest  78    
Total Liabilities and Shareholders' Equity $2,355,103  $2,396,055 


VERANO HOLDINGS CORP.
Segmented Revenue By State

  For the Three Months Ended,  For the Nine
Months Ended,
 
Net Retail Sales by State September 30, 2023  September 30, 2023 
($ in thousands) (Unaudited)  (Unaudited) 
Florida $53,685  $162,265 
Illinois  30,914   93,741 
New Jersey  30,408   100,539 
Arizona  17,012   51,435 
Pennsylvania  13,329   42,423 
Maryland  10,578   17,719 
Connecticut  7,530   20,811 
Nevada  7,362   22,060 
Ohio  5,849   19,284 
Massachusetts  3,160   9,643 
West Virginia  1,611   4,152 
Other  4,269   12,235 
Total Net Retail Sales $185,707  $556,307 


  For the Three Months Ended,  For the Nine Months Ended, 
Wholesale Sales by State September 30, 2023  September 30, 2023 
  Gross  Net1  Gross  Net1 
($ in thousands) (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited) 
New Jersey $26,267  $16,254  $75,878  $35,778 
Illinois  20,353   12,149   59,977   34,832 
Connecticut  14,235   10,771   40,380   31,668 
Maryland  9,320   6,042   19,829   13,973 
Pennsylvania  7,890   4,239   21,693   12,123 
Arizona  7,034   1,898   18,905   7,313 
Nevada  2,555   769   7,435   2,118 
Ohio  1,669   825   5,959   2,779 
Massachusetts  1,570   644   5,327   2,440 
West Virginia  1,486   780   3,863   1,912 
Other  10   10   20   20 
Total Wholesale Sales $92,389  $54,381  $259,266  $144,956 

 1Net of intercompany eliminations

VERANO HOLDINGS CORP.
Free Cash Flow Guidance Reconciliation (Non-U.S. GAAP)

  Full-Year 2023 Guidance 
  Low  High 
($ in thousands) (Unaudited)  (Unaudited) 
Net Cash Provided by Operating Activities $102,000  $113,000 
Purchase of property, plant, and equipment  (30,000)  (37,000)
Free Cash Flow $72,000  $76,000 


VERANO HOLDINGS CORP.
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow (Non-U.S. GAAP)

  Nine Months Ended September 30, 
  2023  2022 
($ in thousands) (Unaudited)  (Unaudited) 
Net Cash Provided by Operating Activities $77,361  $65,311 
Purchase of property, plant, and equipment  (26,503)  (109,720)
Free Cash Flow $50,858  $(44,409)


  Three Months Ended September 30, 
  2023 
($ in thousands) (Unaudited) 
Net Cash Provided by Operating Activities $36,621 
Purchase of property, plant, and equipment  (9,962)
Free Cash Flow $26,659 


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

  For the Three Months Ended,  For the Nine Months Ended, 
  September 30, 2023  September 30, 2022  September 30, 2023  September 30, 2022 
($ in thousands) (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited) 
Net Loss Attributable to Verano Holdings Corp. & Subsidiaries $(17,842) $(42,993) $(40,140) $(53,054)
Interest Expense, Net  15,166   11,785   45,084   34,082 
Income Tax Expense  44,797   69,381   100,796   105,998 
Depreciation and Amortization - COGS  18,384   20,727   55,434   59,540 
Depreciation and Amortization - SG&A  16,882   15,592   50,125   46,690 
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) $77,387  $74,492  $211,299  $193,256 


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, 
  September 30,
2023
  June 30,
2023
  September 30,
2022
 
($ in thousands) (Unaudited)  (Unaudited)  (Unaudited) 
Net Loss Attributable to Verano Holdings Corp. & Subsidiaries $(17,842) $(13,061) $(42,993)
Interest Expense, Net  15,166   14,013   11,785 
Income Tax Expense  44,797   27,679   69,381 
Earnings Before Interest, Taxes (EBIT) $42,121  $28,631  $38,173 
             
COGS Add-backs:            
Depreciation and Amortization - COGS  18,384   18,529   20,727 
Acquisition, Transaction and Other Non-operating Costs        111 
Employee Stock Compensation  625   488   1,745 
             
SG&A Add-backs:            
Depreciation and Amortization - SG&A  16,882   16,708   15,592 
Acquisition, Transaction and Other Non-operating Costs  617   472   (1,791)
Employee Stock Compensation  4,062   3,260   8,075 
             
Acquisition Adjustments and Other Income (Expense), net $6,658  $3,424  $(508)
             
Adjusted EBITDA $89,349  $71,512  $82,124