VEXTF - Earnings call transcript Q4 2021

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Operator

Good morning, everyone. Welcome to Vext Science Fourth Quarter 2021 Financial Results Conference Call.

As a reminder, this conference is being recorded on April 20, 2022. At this time, all participants are in a listen-only mode.

Following the presentation, we will conduct a question-and-answer session. at questions. for provided queue analysts be for up will that research time to Instructions I would Instructions] Jonathan [Operator now Ross. over the to call like to turn Please ahead. go

Jonathan Ross

in today. and Thanks morning, and this well or that management's are will include listeners morning. financial materialize. MD&A results results accurate circumstances thanks Vext’s forward-looking these available website those could SEDAR, forward-looking Vext’s release, earlier statements fourth prove we will press or as Risks and or encourage for and were We remind assurance and listeners uncertainties Ennis. of vextscience.com. released included available other quarter everyone, expectations joining statements public to Vext’s Good factors The on future of with are financial that XXXX can as estimates that us in today’s MD&A the are to developments, be read circumstances at on contained release. no the detailed or on forward that made affect today's and in conjunction discussion the therein results statements to like today's developments, would call. the filings portions There looking statements future press be SEDAR, risk

of included non-IFRS and predicted disclosure earlier in the or risks results. information presentation are As in a This reconciliation materially financial result developments, actual measures release results the such circumstances developments, our these includes subject disseminate forward-looking and and differ circumstances or uncertainties, today. from statements may financial also press to non-IFRS

will US call. to Officer. results except law. required Vahan or of today intention made obligation of the Chief during Financial Eric. revise such the Chief in dollars. statements and this over call applicable during joined Eric made in dollars Vext conference update looking pass US Forward are by Ajamian, call by financial presented or as date Officer any the Vext; this now are are to this call and I I'm call disclaims Vext’s information, discussed as Offenberger, the on of Executive statements

Eric Offenberger

Thanks, full year million, XXXX Vext compared more up quarter pleased performance of $XX.X was call. during Vext John. of EBITDA joining conference I financial $XX.X growth Good XXXX. XXXX. you our for with million, that four very generated XX% indicating am Even everybody, into which revenue a importantly, XXXX. to thank morning, our team's and to and revenue XXX% of growth a results compared translated adjusted

flow long-term remain government will and results optimistic generated we the Arizona and a of demonstrating as off operations For translated that well four medical solid estimates, the sales in sales several roll emerging to combined offer year. well-published report as this continue then in for full million recreational that higher our team our to the over COVID Headset, and from According was than equally returns to in shareholders. $X.X cash from I'm was XX face was XX, billion Arizona market related pressure, $XX.X months and of by EBITDA the support. the December cash. into inflationary now quarter introduced pleased for recreational generated

quarter customer $X.X of making translated of operating loyalty. million quarter, aligned model and targeted the again flat three. of into effectiveness revenue the once Vapen dispensaries the and XX.X% in of the our proven and demographics the both and teams with gross with efforts margins strength Our the These promotion roughly brand in effective investments building

three. approximately with efficiency EBITDA even eye operating to to of levels cost commitment with million a steadfast keen quarter $X.X of our adjusted organization sell also Our drove

foreseeable will $X.X the earnings future. remain per In into four. quarter Inflationary for environment in continued operations fully million Our and and and pressures this, to the rise the have respectively skilled will diluted operators cash an share QX top. from were with like $X.XX us

culture these positions, execution are track of record factors. operational of the proven excellence of external face Vext's the confident generating company that We and results to in continue

sales the long Arizona Moving view, In brings In at that I'll expansions solid notably, small most Valley sensitivity it massive be long was for the square over term the in macro key we currently, attractive flower QX, market, our is This million start demand. dry non-residents where on of starting space industries, development layering, and expect price of of next remain transitionary very of as of indoor QX strong term roughly going phenomenon XX,XXX X.X annually just a cultivation. XX likely top the going of of and the growing and to the several to a a QX market direct ongoing market factor completed now growth some our to excess bringing Arizona, tourism absorbed. in we time multiple into as two, in a resolve pressures is turn with the our state is a initiatives cultivation State XXXX a and feet. billion population Prescott million gets into to all return quarter facilities, sector and it chain supply manufacturing the QX. in to total as most XX supply to over years points semiconductor and cultivation Phoenix

by flower we two absorbing vertical operations. these the We will absorbed produce completely expansions currently and are coming the our production of current be all out

footage Eloy on discussed phases our flower expansion. As call, better current cultivation split to to QX we expansion rate manage our two the have our we absorption with

X effectively two-phase flower costs, also This which of subject becoming we enable continue facility in market. completion Phase to XXXX. intention track. and supplier control on been by to the bring to third feet quarter We have target under inflationary that is to have will square pressure. us will approximately construction approach the Arizona canopy XX,XXX bulk It of a no us

remaining we been Through to able the build area our timing leverage retail. out fully to based market supply for consumption. Arizona We in are upon have currently QX, at conditions assessing flower the

QX, impact harvest we go on slight to the will During at to as Eloy have first have will we a X. Phase flower, for some margin which expect to market we transition

flower currently than more flower While an expensive in is situation, we still what produce is oversupply internally. can market

now, the our dispensary retail currently We expansion cafe initiate year. later discussions feet location. X,XXX but and at Phoenix manufacturing footprints are and area to can't bring timing square we to on would footprint At the additional waiting roughly CapEx zoning provide $X current foot to right estimate dispensary to the I minimal, main be total in pad. same we square million this expect our X,XXX combine Central the customer with our location,

both would see growth with feet into to of have in be MAJOR, CapEx Phoenix in and We Vapen of Wynk discussion of state are to our the operations brought the nicely. another will continuing are party our well add also City This brands brands buildout. which scaling to support and city. like as the low the This growth third X,XXX as we in manufacturing we relatively also square current are

the capital has Let's that Arizona on turn adult-use limited us discussed as Ohio license significant to Ohio we a medical-only, Ohio for look of currently calls, a state quarterly characteristics upside. reminds ways for. has potential return but for a is on in many and is moment, large previous

position the we Currently license In build state. Ohio. the license. to JVs transfer a license out an feet, further through XXXX, we in JV cultivator area X July, of our enables to our potential are cultivation to vertically the the state be following partner feet to operating up approval. significant provisional in with an partner XX,XXX a our This fourth application received JV. and During of made in in Columbus progress expand up we'll a square Level In initial square quarter, to becoming XX,XXX to integrated towards retail affiliate

as focused And the been Daniel make in state focused on upstream adult continue State stream through operating growth through Vext building we Sheriff's path will Vapen on remain Ohio. growth margin our and to continued channel. months. remain support on that both that the sense as quarter, look XXXX, capacity to work our high the has May cultivation a next we we'll additional for makes generating players the managing our in with make During facility I'll comparable for Arizona. and the the a organic other our that to to dispensaries Engel the organic penetration a programs understand to in fully limited expansion with our to Arizona make in learned your track footprint so. a both operated granted the out done an look and be the to the the growth shelf the I Jackson, for of Vext cash to a from passing This time QX us Prior sheet, opportunities a license growth and and approval retail Thank required states a COO, pass operations, able core to express will we'll joining to saying you past over CFO first solid with build CPA Daniel a of morning, large it be for as and market also brings of of Arizona we manufacturing to our the Daniel expect update results. this addition to to be is objectives, on Ohio year We'll Vahan, as CFO thanks continuing review is basis, and returns playbook to Vahan XXXX. it the call to ongoing an executing ground give revenue I M&A our wholesale for also XX at us CFO received which midstream in to want shareholders. we and take announced Vahan a announced the in next flexibility, to over to retail where which operations and to our next XXXX space sectors, broader will forward ownership brand financial use next Through flow populations option efficiency space. steps this to had period experience do solid story we today. more and We've from building we with like QX Ohio to At will as in the also effective integrations. upside had XX, clear you he company accretive when the over to and based second a is deep capital generating JV, entering financial clear the the for to have by daily manufacturing our connection it and will record balance expect, for-profit and the be just success XXXX. I'd plans on critical in month. generation. is for report licensed well close stage development, team. in Vahan. report we XXXX long funded look the with successful when on call company's continue and Vext

Vahan Ajamian

good Thanks everyone. Eric and morning,

assisting stepping XX. As May until be Eric transitioning mentioned, I down to with I'll the transition Daniel. will and be

pro-for in Daniel's performance to its grows of over the as $X be past at in from morning $X.XX ended Arizona during continued was QX in flow Revenue the forward months. balance quarter cash of key are EBITDA of QX which fourth been QX for To a was focus actual of million period. Vext demonstrate perspective, XXXX. the million profit in important. Vext from value quarter $X.X flat in the Gross to on the the the will to Adjusted sheet. level also plans strong operations XXXX. the CFO as He will revenue into dollars Vext with from in in and we higher Arizona at flat QX. for our solid $X.X of was QX had operation done we went structure in QX. that related the balance the quarter EBITDA I to to compared compared XX.X% to of $XX.X look Product in was continues coming up and XX up expansion services wholesale QX two shareholders. and dispensaries than beginning the profit a well to during under quarter a From ongoing the a we this roughly million and It XXXX. QX quarter our $X were Vext of operations Professional for will all company fully prior prepare last result XX.X% QX was in performance. this revenue XXXX. in will Management December quarter. as to increase revenue reiterate, the up in internal my Ohio, big operation XX solid mode. progress have both that in EPS in QX financial Eloy Gross positive, prior XXXX manufacturing mentioned. of of flat year move leverages results, XXXX through of We report touch the margins XX.X% company's businesses year. and of were comments cash during funded brings the be and our and that Gross to margins our pleasure financial Eric the fully construction with million were of Vext's watching a As from was as manage, to fourth sales manage has QX a new current next adjusted a the into down as the up substantially QX year despite grew as the Arizona. in to generated million facility in and QX quarter to Similar was picture pressures Vext operations. the and million. serve between last growth quarter XXXX. with very and year be quarter I cash The well QX as on macro in $X.X growing full Gross than we period revenue, for generation. presence in platform generated consolidate We experience from at $X.X in quarter fees and construction cash driving ground Eloy, senior the as XXXX, the million for $X.X XX.X%. profit the well retail both coming ensuring margin XX.X% compares licenses outlined work and the million as compared lower for diluted year-over-year XX.X% months solid cultivation were

our fluctuations result, As We to for-profit more as results typical we report make make to believe that easier compare with cleaner operators our this understand other to financial it those a expect be easier under structure. results, will quarter-to-quarter QX and we states. a of XXXX in reduce

managing of the holders as actual the until accordingly. the the including QX, up in the Starting and will billing know, we you As were sales report in be QX, we well sales. license dispensaries operations revenue and in Arizona, as wholesale

have actual result Accordingly, behind terms modest their been the be to billing our should in We in pickup new historically QX in structure. as rates. starting of reported revenue run financials, there of solely a the revenue a dispensaries revenue the

QX be from for results operations, I'll financial now your also be it expect may now operator similar cost will for turn you that we in necessarily a report wash don't the to to call. us to consolidating Thanks for of the in all a bump EBITDA questions. As everyone the joining over terms. for-profit related dollar conversion the conference

Operator

[Operator Russell sir. instructions] go comes with Your - you, Beacon Please ahead. question Securities. from Thank Stanley first

Russell Stanley

first taking Good I beverage that morning. products question. the are my for And scaling on up you Arizona, thank nicely. you guess, mentioned

seeing to wondering you pickup headwinds if cannibalization especially and market? these seeing with talked the any whether new elaborate Just what to you're seeing dry can on macro you're there, whether users any given you're cannabis the and you've the products

Eric Offenberger

see new is because customer base Well, the the to Russ growing users that whether tough in it's Eric. to you're Arizona. believe -- I'm market. inclined recreational this say It's cannabis to drawing you

cost. milligram that broadened that consistent reduce dosage and quantifying performs to hard. the point the than have from their to see brand of We to just time lend complete dosage major at the the that, with lower and better which in seems but would a our this But with we it looking that's Wynk that makes offering to customer, the a is actually it, believe pattern. be brand, XXX more that's standpoint, So, that it a sale micro

transactional have us from full cost line. by and they getting a So less buying

Russell Stanley

understanding with over there working but the that. its just potential XX how that wondering process through as the for the on Ohio expansion moving getting scope integrated just for is got And Got maybe manufacturing retail priority additional issue state existing it. to is here, entity. to Thanks operation you've vertically much and and the licenses, wholesale already, there a business

Eric Offenberger

Well, facility square in that facility, lot I large a think a growth XX,XXX it's that. -- That's a for there's existing its footprint. feet of is

is growth. facility is. to one So ample it's be got that cultivation and too. is it tier amount That's the has about got space one nice cultivation -- thing of it's the the where for tremendous opportunities a too, going The

So efficiency to it's a us give just there manage. of and a large complex, lot easy which it make will

we're So buildings, trying multiple our staff to the of expenses. we or have take won't care overhead various

So yeah, pretty excited about Ohio.

Russell Stanley

in on the might what one attractive. question stores undeveloped licenses And for cap wondering licenses before five retail just your licenses in per last additional and state coming a the whether get focus maybe owner, I the stores like as be given those retail Ohio be are or operating additional might is queue, back more whether additional acquiring on market just

Eric Offenberger

to and been operate really on it. be us. and do to candidly, and nicely one it's that going can What's look to to a what's we we it's which It depends what fit what on cost like I has to us We've going attracted better think focused at. in the everything always company ROI return such.

in on any in state Ohio obviously look opportunities yeah, that we'd Arizona vault. So at

Russell Stanley

color. That's queue. in Thanks. go it. Got back I'll great

Eric Offenberger

you. Thank

Operator

Thank you.

ahead. go Haywood Gilmer question next Neal Please Your comes from with Securities.

Neal Gilmer

prepared sector's about with and a inflation. pricing touched little you pressures of inflation in a everybody just in on remarks, respect your talking start, to bit every obviously I'll Eric, Maybe bit little

bit What dip you a XX% excellent. margins north control? outside Your sort mostly or of of sustainable expect in we sort are of levers that's of sort have EBITDA little should is and place, do a that your of of

Eric Offenberger

think, company, to the Yeah, it. Neal, our I I us it's expense through trying of is as the Still lever a have. we're From like feel way think biggest you control really else. everybody perspective an

side, not whole expense side. with able think operation nice the But the The do control. enter downward flower too, sales on pressure to have on is thing lot that to really overcapacity vertical have you the on the don't an of and going for a we the see where wholesale don't more we to You're the the oversupply and we price. be fact market other into

So as we're to that first fortunately absorb part everything much. We've not the the through we year are experiencing want. of able

comment to your impacted consume the made then I flow you're as majority excess continue help we we because the But on can your as long that'll have price supply the sales And really we've get stores see getting the use yeah, pressure labor discussion, on that getting positively. it's in a that margin. think market is from and flower continue to with supply tight. and ourselves, in the MD&A, think downward pressure management or as and it transactional pressure still that's us able to we been the you that price, of cash weird the pool I

maintaining on talent pressure of that have and still that you talent. upward So attracting costs

of right it's So interesting kind now an one

Neal Gilmer

no, fair Yeah, enough.

like, you a the think that, have perspective. ball pricing you talked other feel to crystal the pressure transitory when you of and normalizes? sort Do that of about now the that that sort of have you maybe forth we absorbed flower So Arizona? of so there the sort is pricing. sort a in say will of going Or maybe rebound right of is, and on that And into is over 'XX you're a time but then and don't your sense in you ground that are question what's how before my looking you also sense any be

Eric Offenberger

commodity my the to run about easily. things as you've because it's and the got you think a until got think actually excess. just experience, just you happen. it I that to got it perspective, From 'XX that's based an way upon now, I think

challenging at control our that's investments we've stuff basic and likely our territory that's capacity. and wise, sure pressure their that facilities the very realize markets cost and standpoint, and discipline the as price, same but we shop They're price there's it's to much So, demographic all could and a less and I on of to sale that's make going cost maintain for it's with that we when not outside we to looking drive gas, about and to pretty from possible, $X that structures flow people think have in the either. token, at made excess the serve because the as you're are why manufacturing going

Neal Gilmer

Certainly. Right.

my Okay. questions. Thanks taking for

Eric Offenberger

Oh, no, thank you all.

Operator

that, Markets. Andrew [Operator go Please from next question instructions] Capital ahead. with With your comes Semple Echelon

Andrew Semple

morning and Good stores. the congrats conversion and results the of on the

previously more First Whether just Ohio. cultivation you seen go with first want pressures a provide maybe question available back that timelines communicated to supply the overview detailed be constraints kind that's we've is to on given inflationary when here that a that of market bit expectations in track in might product facility and Could state. your buildout budgets little on going? and and the how of

Eric Offenberger

partnered contractors, it's make Yeah, here's now because and was the three which partner we would company thanks, manage my Ohio and or Right partnering pretty guess. Ohio attractions maybe for of on with the construction to are It's of The one was, with in darn that still be it a management weeks benefit the project, is people track. easy they for our behind aspect. Andrew. project easier of a the us, to two is plug to

that's really helpful. still budget. So on been It's

matter that installed. burden time. on and in stuff ample charge a built contractor, just and We less an where in save all been point we we it, because Most also, has this through the to chance can. little have, partner's a of have at of bit getting they It's overhead the of we it

So we're wood. knocking

up flower of produced the whole end looking probably the capacity plan to year. You're some have that to quarter and get fourth by actually late

on So cycle, on cycle. a nine-week normal that production into the XXXX you're

Andrew Semple

to to EBITDA Vahan prepared dollar I the gears That's helpful. Switching the in comment you. Thank neutral in just want store to go conversion. being upon the mentioned perhaps Arizona, back terms remarks about

the is going subject now taxation. EDE business to However, be to

any for-profit those if the So the flow wondering ownership with and expecting you're full cash model to I'm impact stores. with conversion just generation the after-tax to

Eric Offenberger

that one, then start their Andrew, really own I'll the I it and of the Vahan taxes still because really tax let will we'll you're clean from don't not file that think a change dispensaries standpoint, But kind up. federal return.

So you'll still that sure cost on have goods it you make the making statement this strategy of can to of income as dispensary. the legitimate is of

standpoint, a Arizona because I that side, going from to So tax going you're from you that. will the are make that on cash that to change of to we going have to yeah, dispensary tax maybe additional payments really nothing tax but see the have changes, a able to really be you to, you're flow State won't think have

there's there's and people tax now, working it a potential I'm tax to definitely, but The see. yeah, on not we'll more So expert, right are that.

Andrew Semple

Thank more, be taken And may remarks, Arizona I the expect mentioned back one to up Okay. want flower of market. just go to in prepared to Eric, also by the if you I you believe oversupply maybe you know, maybe you.

some demand you take you of the some are into maybe maybe bit How to to through want into slow. that supply? Are a market up Or little coming more about expecting might in a are comment dig balance bit wholesale you that that flower growth expecting Just of of a supply the that of course Some the market of of 'XX, flower Arizona thinking market? the into more.

Eric Offenberger

of be think economic demand. I it'll and like situation. every combination be supply It'll a

continues and that Vall is the John still cars as Valley there's as the plant the yesterday a you'll I in was billion LG battery with X.X continues grow now then for the as and on that population, that mentioned, Phoenix that's I it to think table here electric far see growth. semiconductors demand, [ph] at think another to

they'll existing Ohio some from licenses your also, the people doing those they -- Ohio somebody to they state's of going they let where anybody think players eventually is you're or also that's on have operating leased They'll that's margin that I we're the me if on the at vertical that's The that Ohio rationalize state producing got So a you That business wholesale won't excited that [ph] asset. structure. it like why future. grow too, control and taking using about and the don't wholesale because have you in so well, thing outlet vertical and that why structuring being can that because vertical, the have asset chance increase And because you cultivation, or I see it and have market of better the I least be works versus and will yourself, your nice the of license can what so the buy about flower in that anybody well does? vertical, they'll vertical else either don't demand. produce

a whammy, it's it's double ago. So years Arizona five

Andrew Semple

That's Appreciate you questions. my taking Thank great color. you.

Operator

you. Thank

with Please comes Canaccord Genuity. go Your Shaan question from Mir next ahead.

Shaan Mir

And your differences analysts your year? the kind I experiences they're maybe last could, your customers on in demographic the at you looking that. In other help for could versus pressures like if today think stores look purchasing the locations the Arizona given mid you stores? My more Have And have of question any quarter. the two what prepared Congrats those the on the you of quarter. what persistence baskets patterns like first in the into on of relates many in inflationary particular. to touched you remarks, commented noticed between outline,

Eric Offenberger

existing many been store continues as to the the but not have surprised customers good. pretty baskets central north transactional area. actually looking a the value in Well, store I've are as higher the

surprised came last lot haven't I me. business grew, The a standpoint, year So hasn't didn't from was and as much how, helps commented other demographic our actually I didn't, recreational period you and were on it that experienced and -- an -- the because the this as we that it thing they in surprised but grow nice been was where frequently. inflationary was of people too, store have that might I think they

wouldn't me in and be come They would or at $XXX and they $XX days buy hey, $XXX and come then four three in another to buy, $XX $XX. let buy time. back they'd $XX and and come or or So, a in

be really So and seems have by in whether you There's that's of it or gas been creative continued kind that's cards the your things, now, and more ran some stores some been stuff, to we've really, working. give specials and sweepstakes and away it's promotional that to nice. be

do doing to going been just every day. go to we're and to we've work what continue So

Shaan Mir

We've for the another that there facility. thank for Eloy to bring regulatory from online. number in color bit back believe I and more approvals the you quite regulatory then those MSOs of that on a And pushing the the dates me. a just facility their their Thank questions on have timing significantly. seen Arizona. the and onboarding of few delays, kind of delays update have the My about for a called even comments builds out you impacted one numbers

regulatory how And your you you wondering site? asset that timeline building for expectations I just to could the with approval online, conversations started is that the you're if add where in have tight are that that get in was process bringing regulatory of I state? the that So or regulators into

Eric Offenberger

regulatory the been good. standpoint, our For really approval has

and bitch doing because but come chemicals at you permitting that's I challenge a been with and Fire's stuff can always think getting that. necessarily -- most Phoenix people's and regulatory the a you're like things is state cannabis places issue existing in volatile yeah, not in operate. use board say, with permits, to and

a So that's always challenge. been

it, with foot school of transition that permitting it the we're new can on Fortunately kind been that go the one still then to bigger space Indian but a them the messing on the get around lots, manufacturing, us, through that's trying on brought permits the X,XXX on we to of commented retail permitting We to so join as for the you challenge. the about we square footprint. store have and and on able these let be build manufacturing, over existing to had you

a been that's So challenge.

that of As the year. fantastic. far project been last did as they've City Eloy, We

City. our all have We the from permitting

There occupancy it's the it'll operating. and have to we'll the in lighted. and bring and certificate and then the they'll state the just and green be early are things the of cameras ready be go. All We'll check just of up the once

go fast. So that should relatively

cultivations. in The existing of for right -- thing growing now on we've Eloy. additional in now talk the work got about other an room mother we're here nice out mothers right expansion the is, the the that we We're Phoenix

be at would of that of bit indication you on So we're where a timing. an little

Shaan Mir

you. Thank

I'll QX Looking on. forward pass to and it

Eric Offenberger

you. Thank

Operator

thank Have are There participating Ladies your this and and further please questions today. you a call gentlemen, for conference this that great for your you. disconnect Thank We at ask time. no lines. you concludes day.

Vext Science (VEXTF) 20 Apr 222021 Q4 Earnings call transcript