Verano Holdings’ Earnings Call: A Balanced Outlook

Verano Holdings Corp. ((TSE:VRNO)) has held its Q4 earnings call. Read on for the main highlights of the call.

Verano Holdings Corp. recently held its earnings call, presenting a mixed outlook for the company. The call highlighted strong wholesale performance, retail expansion, and successful new product launches, but also pointed out significant challenges such as a net loss due to asset impairments, revenue decline in key markets, and pricing pressures. The overall sentiment was neutral, balancing both positive achievements and notable setbacks.

Strong Full Year Revenue and Wholesale Performance

Verano Holdings reported impressive figures for the full year 2024, with $879 million in revenue and an adjusted EBITDA of $264 million. The company achieved $353 million in total wholesale revenue, marking the highest annual total ever in the wholesale segment, with a slight 1% gain compared to the previous year.

Expansion of Retail Footprint

In a strategic move to strengthen its market presence, Verano added 17 new dispensaries across key markets including Virginia, Arizona, Pennsylvania, New Jersey, Connecticut, and Florida in 2024. This expansion is expected to bolster the company’s retail performance.

Innovative Product Launches

Verano introduced innovative products such as the Extra Savvy 2 gram vape cartridges and Essence J’s barrel-style pre-roll joints. These products have quickly become top sellers in their respective markets, showcasing the company’s commitment to product innovation.

Improved Retail Productivity

The fourth quarter saw a significant increase in retail productivity for Verano, with transactions per headcount rising by 54% in Florida and 14% in other markets compared to the third quarter. This improvement highlights the effectiveness of Verano’s retail strategies.

Positive Performance in Florida

Verano reclaimed the number two market position in Florida, capturing an 11% market share. This success was driven by facility upgrades and the launch of new products, reinforcing the company’s stronghold in the region.

Net Loss and Impairments

Despite the positive developments, Verano reported a net loss of $342 million for the year, primarily due to impairments of intangible and fixed assets. These impairments were notably in Pennsylvania retail licenses and an Arizona cultivation facility.

Revenue Decline in Key Markets

The company faced a 6% year-over-year revenue decline, attributed to increased competition, promotional activity, and cultivation facility upgrades in critical markets like New Jersey, Illinois, and Florida.

Pricing Compression and Competition

Verano experienced pricing compression and heightened competition in markets such as Illinois, New Jersey, and Florida, which impacted retail revenue. This challenge underscores the competitive landscape in these regions.

Increased SG&A Expenses

SG&A expenses rose to $353 million in 2024, representing 40% of revenue, up from 35% the previous year. This increase was driven by the costs associated with new store openings.

Challenges with Third-Party Accounts

The company faced issues with third-party accounts due to non-payment, affecting wholesale performance. However, improvements are underway to address these challenges.

Forward-Looking Guidance

Looking ahead to 2025, Verano anticipates capital expenditures between $25 million and $40 million, focusing on efficiency initiatives at cultivation facilities and targeted retail expansion. The company is also exploring potential mergers and acquisitions to strengthen its market position.

In summary, Verano Holdings Corp.’s earnings call revealed a balanced sentiment, with strong wholesale and retail achievements countered by financial challenges and competitive pressures. The company’s forward-looking guidance reflects a strategic focus on efficiency and expansion, aiming to navigate the complexities of the market effectively.