Vext Science, Inc. (“VEXT” or the “Company”) (OTCQX: VEXTF) (CSE: VEXT) a cannabinoid brand leader based in Arizona, leveraging its core expertise in extraction, manufacturing, cultivation, and marketing to build a profitable multi-state footprint, today reported its financial results for the period ended September 30, 2022. All currency references used in this news release are in U.S. currency unless otherwise noted.
Summary Financial Results (unaudited)
| Q3 2022 | Q2 2022 | Q3 2021 | |
| Revenue | $7,673,101 | $8,765,798 | $9,399,700 |
| Gross margin before fair value adjustments (%)1 | 60 % | 65 % | 44 % |
| Adjusted Gross Margin (%)1, 2 | 60 % | 75 % | 44 % |
| Adjusted EBITDA1 | $3,279,009 | $4,847,110 | $3,526,093 |
| Adjusted EBITDA margin (%)1 | 43 % | 55 % | 38 % |
Management Commentary
Eric Offenberger, CEO of Vext commented, “During Q3, Vext continued to execute in an environment where pressure on consumer discretionary income continues to grow. With inflation in Phoenix topping 13% in September3, we maintained an emphasis on value, rapid innovation, targeted promotions, and mix to generate 60% Adjusted Gross Margins in the quarter. In addition, our consistent focus on driving efficiencies led to a reduction in core cash operating expenses4 compared to Q2 and contributed to Adjusted EBITDA margins of 43%. The impact of inflation on discretionary spending will persist for the foreseeable future, however, we expect that Vext’s proven strategy of meeting the customer’s needs, complemented by the Company’s financial flexibility, cash flow, and a growing presence in two limited license states position Vext well for revenue and profitability growth,” added Mr. Offenberger.
Summary of Recent Announcements
- On August 29, 2022, the Company announced a grant of incentive stock options and restricted share units to certain directors and officers of Vext.
- On September 20, 2022, the Company announced that its research and development team has filed a provisional patent application with the United States Patent Office in collaboration with researchers at BioSciTech and Arizona State University.
- On November 3, 2022, Vext announced that an affiliated entity of its joint venture partner, Appalachian Pharm Processing, LLC, has passed state inspection and been granted a Certificate of Operation by the Ohio Department of Commerce to begin production at its Jackson, Ohio facility to an initial cultivation area of 25,000 square feet.
- On November 7, 2022, the Company announced the refinancing of its existing US$4,400,000 principal amount of 10% secured non-convertible debentures issued by the Company on December 31, 2019, and maturing December 31, 2022.
Q3-2022 Financial Results Conference Call
Vext will host a conference call and webcast on Thursday, November 17 at 8:00 a.m. ET to discuss its third quarter financial results.
Date: November 17, 2022 | Time: 8:00am ET
Participant Dial-in: 416-764-8609 or 888-390-0605
Replay Dial-in: 416-764-8677 or 1-888-390-0541
Conference ID: 59779001
Playback #: 779001 (Expires on December 1, 2022)
Listen to the webcast: https://app.webinar.net/PmoZpPDpYrR
For more details, visit Vext’s investor website or contact the IR team at investors@vextscience.com.Non-IFRS Financial Measure
The Company has provided certain non-IFRS financial measures including “Gross margin”, “Adjusted EBITDA” and “Adjusted EBITDA margin”. These non-IFRS financial measures do not have a standardized definition under IFRS, nor are they calculated or presented in accordance with IFRS and may not be comparable to similar measures presented by other companies. The Company defines “Gross margin” as Gross Profit divided by Revenue. The Company defines “Adjusted EBITDA” as net income (loss) from operations, as reported, before interest and tax, adjusted to exclude extraordinary items, non-recurring items, other non-cash items, including stock-based compensation expense, depreciation and amortization, foreign exchange and acquisition related costs, if applicable. The Company defines “Adjusted EBITDA margin” as Adjusted EBITDA divided by Revenue.
The Company has provided these non-IFRS financial measures as supplemental information and in addition to the financial measures that are calculated and presented in accordance with IFRS. The Company believes that these supplemental non-IFRS financial measures provide a valuable additional measure to use when analyzing the operating performance of the business. These supplemental non-IFRS financial measures should not be considered superior to, as a substitute for or as an alternative to, and should only be considered in conjunction with, the IFRS financial measures presented herein. The following tables provide a reconciliation of each of the non-IFRS measures to its closest IFRS measure.
The following information provides reconciliations of the supplemental non-IFRS financial measure presented herein to the most directly comparable financial measure calculated and presented in accordance with IFRS.
Gross Margin Before Impact of Biological Assets and Adjusted Gross Margin
Gross Margin Before Impact of Biological Assets is defined as: Gross Profit Before Impact of Biological Assets, divided by Revenue.
Adjusted Gross Margin is defined as: Gross Margin Before Impact of Biological Assets, adjusted for one-time
| Q3 2022 | Q2 2022 | |
| Revenue | $7,673,101 | $8,765,798 |
| Gross Profit | $4,876,471 | $6,127,276 |
| Change in Fair Value of Biological Assets | ($252,041) | ($456,060) |
| Gross Profit Before f air value adjustments | $4,624,430 | $5,671,216 |
| Relative fair value adjustment to inventory | – | $863,000 |
| Adjusted Gross Profit | $4,624,430 | $6,534,216 |
Adjusted EBITDA
| Q3 2022 | Q2 2022 | Q3 2021 | |
| Net Income after taxes | $423,385 | $1,952,210 | $970,106 |
| Interest (Net) | $620,835 | $337,407 | $33,840 |
| Income Taxes | $190,425 | $322,725 | $538,308 |
| Depreciation & Amortization | $1,579,906 | $1,543,027 | $886,920 |
| EBITDA | $2,814,699 | $4,155,368 | $2,429,173 |
| Accretion | – | – | $785,192 |
| Share (Profit) / Loss on JVs | $53,014 | $190,783 | $2,602 |
| Share-based compensation | $660,488 | $104,762 | $171,479 |
| (Gain)/Loss on Asset Disposal | $2,893 | ($10,164) | – |
| Office and General | – | – | – |
| Gain on derecognition of ROU | – | – | – |
| (Gain)/Loss on Investment | – | – | $212,675 |
| Other Income | – | – | ($75,000) |
| Foreign Exchange | ($45) | ($580) | ($29) |
| Relative FV adjustment to inventory | – | $863,000 | – |
| Change in FV of Biological | ($252,041) | ($456,060) | – |
| Adjusted EBITDA | $3,279,009 | $4,847,110 | $3,526,093 |
