Verano Holdings Corp. (CSE: VRNO) (OTCQX: VRNOF) (“Verano” or the “Company”), a leading multi-state cannabis company, today announced its financial results for the fourth quarter and year ended December 31, 2022, which were prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”).
Management Commentary
“I’m very proud of our results in 2022, highlighted by record revenue and one of the industry’s leading margin profiles, which demonstrate our continued execution in driving efficiencies across the business and positioning ourselves ahead of growth,” said George Archos, Verano Founder, Chairman and Chief Executive Officer. “Since the end of 2021, we grew our retail footprint by adding more than 30 dispensaries across multiple core markets, significantly expanded our brand portfolio by launching a number of differentiated products that cater to a variety of consumers, celebrated the launch of adult use sales across our East Coast footprint in New Jersey and Connecticut, refinanced debt in a rising rate environment to include optionality, and made strategic investments to drive greater efficiencies across the business. Our products also continued to gain popularity with patients and consumers, demonstrated by an increased sell-through rate of Verano-branded products that have elevated our brands into top positions across many core markets, including our leading position in New Jersey.”
“From a policy perspective, while we’re disappointed in the lack of substantive legislative or banking reforms which will place additional pressure on many industry operators, we’re encouraged by continued momentum in support of cannabis at the state level and progressive conversations at the federal level,” Archos continued. “Our strategy since inception has been focused on establishing a self-sustaining business regardless of macroeconomic factors and legislative reforms, and we will continue to stay engaged with policymakers and be ready to take advantage of any future reforms at the federal level. In 2023, we will consider selective opportunities to further expand our footprint, focus on free cash flow generation, and leverage our leading position in markets that are poised for adult use transition in the near future, including Maryland. I am proud of what we’ve accomplished in just two years since our IPO, and remain excited and confident in our plans to drive long-term, sustainable growth.”
Fourth Quarter and Full Year 2022 Financial Highlights
| For the Three Months Ended | For the Year Ended | |||||||||||||||||||
| ($ in thousands) | December 31, 2022 | September 30, 2022 | December 31, 2021 | December 31, 2022 | December 31, 2021 | |||||||||||||||
| Revenues, net of discounts | $ | 225,927 | $ | 227,588 | $ | 211,420 | $ | 879,412 | $ | 737,850 | ||||||||||
| Gross Profit | 103,336 | 122,994 | 109,318 | 423,062 | 331,019 | |||||||||||||||
| Income (Loss) from Operations | (206,977 | ) | 37,075 | 29,429 | (161,131 | ) | 64,713 | |||||||||||||
| Net Loss Attributable to Verano Holdings Corp. | (216,110 | ) | (42,993 | ) | (7,419 | ) | (269,164 | ) | (57,507 | ) | ||||||||||
| Adjusted EBITDA | 78,713 | 82,124 | 81,616 | 323,567 | 324,063 |
Fourth Quarter 2022 Financial Highlights
- Revenue of $226 million increased 7% year-over-year and decreased 1% versus the prior quarter.
- Gross profit of $103 million or 46% of revenue.
- SG&A expense of $81 million or 36% of revenue.
- Net loss of $(216) million, which includes a $229 million impairment charge.
- Adjusted EBITDA1 of $79 million or 35% of revenue.
- Cash Flow from Operations of $29 million.
- Capital expenditures of $9 million.
- Free Cash Flow2 of $20 million.
Full Year 2022 Financial Highlights
- Revenue of $879 million increased 19% year-over-year.
- Gross profit of $423 million or 48% of revenue.
- SG&A expense of $357 million or 41% of revenue.
- Net loss of $(269) million, which includes a $229 million impairment charge.
- Adjusted EBITDA1 of $324 million or 37% of revenue.
- Cash Flow from Operations of $94 million.
- Capital expenditures of $119 million.
- Free Cash Flow2 of $(25) million.
Fourth Quarter 2022 Financial Overview
Revenue for fourth quarter 2022 was $226 million, up 7% from $211 million for fourth quarter 2021, and down 1% from $228 million for third quarter 2022. The increase in revenue for fourth quarter 2022 compared to fourth quarter 2021 was driven primarily by strength from adult use sales in New Jersey, in addition to increased retail contributions from Florida store openings.
Gross profit for fourth quarter 2022 was $103 million or 46% of revenue, down from $109 million or 52% of revenue for fourth quarter 2021, and down from $123 million or 54% of revenue for third quarter 2022. The decrease in gross profit for fourth quarter 2022 compared to fourth quarter 2021 was driven primarily by increased discounting and cost increases associated with expansion activities.
SG&A expense for fourth quarter 2022 was $81 million or 36% of revenue, down from $82 million or 39% of revenue for fourth quarter 2021, and down from $86 million or 38% of revenue for third quarter 2022. The decrease in SG&A expense for fourth quarter 2022 compared to fourth quarter 2021 was driven primarily by lower stock based compensation and decreased M&A activities offsetting increased costs associated with additional stores.
Net loss for fourth quarter 2022 was $(216) million, down from $(7) million for fourth quarter 2021, and down from $(43) million for third quarter 2022. The increase in net loss for fourth quarter 2022 compared to fourth quarter 2021 was driven by a $229 million impairment charge, primarily of intangible assets related to the Arizona cultivation license and Pennsylvania and Arizona retail reporting units.
Adjusted EBITDA1 for fourth quarter 2022 was $79 million or 35% of revenue, down from $82 million or 39% of revenue for fourth quarter 2021, and down from $82 million or 36% of revenue for third quarter 2022.
Cash flow from operations for fourth quarter 2022 was $29 million, down from $63 million for fourth quarter 2021.
Capital expenditures for fourth quarter 2022 were $9 million, down from $49 million for fourth quarter 2021.
Free Cash Flow2 for fourth quarter 2022 was $20 million, up from $14 million for fourth quarter 2021.
Full Year 2022 Financial Overview
Revenue for full year 2022 was $879 million, up 19% from $738 million for full year 2021. The increase in revenue for full year 2022 compared to full year 2021 was driven primarily by strength from adult use sales in New Jersey, in addition to increased retail contributions from Florida store openings.
Gross profit for full year 2022 was $423 million or 48% of revenue, up from $331 million or 45% of revenue for full year 2021. The increase in gross profit for full year 2022 compared to full year 2021 was driven primarily by increased revenues and lack of prior year inventory step-up.
SG&A expense for full year 2022 was $357 million or 41% of revenue, up from $271 million or 37% of revenue for full year 2021. The increase in SG&A expense was driven primarily by increased headcount to service 29 additional retail locations.
Net loss for full year 2022 was $(269) million, down from $(58) million for full year 2021. The increase in net loss for full year 2022 compared to 2021 was driven by a $229 million impairment charge, primarily of intangible assets related to the Arizona cultivation license and Pennsylvania and Arizona retail reporting units.
Adjusted EBITDA1 for full year 2022 was $324 million or 37% of revenue, which was flat compared to $324 million or 44% of revenue for full year 2021.
Cash flow from operations for full year 2022 was $94 million, down from $183 million for full year 2021.
Capital expenditures for full year 2022 was $119 million, down from $141 million for full year 2021.
Free Cash Flow2 for full year 2022 was $(25) million, down from $42 million for full year 2021.
Fourth Quarter 2022 Operational Highlights
- Refinanced $350 million credit facility with enhanced flexibility to reduce capital costs.
- Opened three new MÜV dispensary locations in Panama City Beach, Port Orange, and Lake City, Florida.
- Launched BITS™, a new brand and product line consisting of five unique flavors of low-dose, high-function edibles that blend THC, cannabinoids and adaptogens, appealing to cannabis enthusiasts of all experience levels.
- Relocated Zen Leaf dispensary in Highland Park, Illinois, to a more convenient and optimized commercial location in the city with enhanced amenities including larger store space and additional parking.
Subsequent Operational Highlights
- On January 10, 2023, Verano welcomed Connecticut Lieutenant Governor Susan Bysiewicz and cannabis customers at Company’s Zen Leaf Meriden dispensary to commemorate the state’s launch of adult use sales.
- Opened Zen Leaf Clifton Heights, the Company’s 16th affiliated Pennsylvania dispensary.
- Elevated the Company’s current Florida retail footprint to 66 stores statewide with the opening of four new MÜV dispensary locations in Navarre, Orlando, West Palm Beach, and Winter Springs.
- Received approval from Connecticut’s Social Equity Council that allows Verano and the Company’s local social equity partners to move forward with licensing six equity joint venture dispensaries across the state.
- Completed conversion of all outstanding proportionate voting shares to subordinate voting shares.
- Active operations span 13 states, comprised of 125 dispensaries and 14 cultivation and processing facilities with more than one million square feet of cultivation capacity.
Balance Sheet and Liquidity
As of December 31, 2022, the Company’s current assets were $318 million, including cash and cash equivalents of $85 million. The Company had a working capital deficit of $(68) million and total debt, net of issuance costs, of $413 million.
The Company’s total Class A subordinate voting shares outstanding, including Class B proportionate voting shares on an as-converted to Class A subordinate voting share basis, was 339,983,374 as of December 31, 2022.
