VEXTF - Earnings call transcript Q1 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, everyone. Welcome to Vext Science's First Quarter 2022 Financial Results Conference Call.

As a reminder, this conference is being recorded today, May 31, 2022. [Operator Instructions] I now would like to turn the call over to Jonathan Ross. Please go ahead, sir.

Jonathan Ross

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

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

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

Eric Offenberger

questions recently keep Vahan January our and leave and Annual joined will quarter held my we the are XXXX results On I'm to to financial John. -- we I thank more on model. shorter given this for X quarter Call. for-profit time by today transitioned conference X XXXX for we a Good you X, your morning just remarks Thanks, morning, joining everybody, our call call. Ajamian.

sales consolidation the the quarter the offer XX% transition than same Vext to of the little revenue revenue highlights the and quarter a first the just of that this during regarding XXXX. up are the X given XX% of we more to the translate model, to X generated Even will under to $XX.X higher at quarter the full full quarter continued with of X dispensaries million into if end continue would prepared operating our am the EBITDA reported of first cash remarks. for-profit in in the I quarter quarter. be had model we the not under positive adjusted tune XX% year. reporting highlight I of quarter. for performance I to some quarter last Vext compared operations $X.X robust of pleased As million margin flow from is year for my compared a the quarter. we're importantly, team's

The into medical are sales recreational quarter revenue sequential a -- budgets. given that consumer high cannabis first marked and pressure into consumer X% drop hitting in inflationary Arizona's

foreseeable future. the positions inflationary impact will the of an company like to are and execution discretionary mentioned last In our I confident quarter culture that we continue call results. operational As pressures spending track X we continue record Vext's month, environment generating excellence this, to consumer proven expect of for on

that all seasonal competitiveness can growing customer see consumer continued opportunity we our XXXX, portfolio effectively of see the to core facility absorbed solid shareholders. be of vertical Our strength the Over Companies and their our square build completed selection, consistent bringing through by of XXXX offer first we Valley dispensaries flower The coming to cultivation also brand Prescott quarter X, while to produced have targeted generating quarter indoor bases. feet. the this of the continue In completely traffic profit of been campaigns, and we quality will the promote promotional in to quarter current to loyalty. enduring in owning total the price expansion and in proximity out will for X share and value operations. absorbing production cultivation foster the XX,XXX we an

we under our absorption phases that quarter into facility. with the will month, on bring last track approximately Eloy Phase square and discussed have we completion expansion. to expect footage third As expansion our match us which XXXX split of canopy current better in cultivation is XX,XXX to feet flower by two rate X

Greenlight will we moderate able quarter retail. the the our costs our X, and were about not of have falling. to supplier for go an bulk most costs we of flower fully until leverage construction is Phase see We in market. XX% X quarter the flower It own consumption. to for anticipate Through we that of flower XX% time X stopped to market to during opportune will product sourcing We

of X, on less However for be this factor expect X margins. in we manufacturing year. expansion will quarter The have track. quarter Eloy to a impact comes plans this Phase and retail remain next footprint on slight Once at a would our X on

lower is recreational that this city. dropped we our and discussion Margins for well support move. decreased growth City One quarter of Phoenix partner these products, vaping our to shift favor in began are Arizona of and square current bills market X,XXX during from of sales ahead trend that consecutive the medical to the take add to five but medical are feet feet shape third recreational wholly Also the the Phoenix to market. market brands. in with as months In to have our well sales. of during in X,XXX the party the manufacturing another owned are dispensary We Central will operations to rec overall in as quarter largely a expand square of X our the

Edibles grow margins. Arizona. are expansion relatively in shelves enable growing new will a and to product of kitchen high rapidly the onto and Vext market average and products to rec us get to manufacturing portfolio majority generate rapidly segment Our continue the dispensaries the the the

we with will which and X market, gummy consumer on new flavors contribute remainder in retaining Edibles to increased to continue through introduced margin innovate margins sensitive quarter the six during loyalty. focus performance solid store while we will the also base and our price of XXXX. customer During an come

Ohio. Turning to

the that We competence in state. continue upside have of to

As primarily our state. last have conference in mentioned progress there. significant the towards quarter our on call, we integrated we operating vertically joint-venture becoming already are made Currently, through

another established to after last immediately have transfer to license apply JV the that year, LOI to LOI, As to dispensary we relates track we announced in which in Columbus. to early license on retail approval. place a to are establish an be a JV Through

build we one entity up state JV continue through in the an in the cultivation quarter, our license partner, state shelves area been square after from state partner and a of existing in received have ownership JV the the majority the announced and also to As the -- the are are our to Jackson, Level of that partner of arrangements manufacturing we quarter up affiliated of of X Last XX,XXX cultivation to ongoing Ohio. and our feet feet JV XX,XXX sales granted available on partner through operation. in grow. to to dispensary fourth statement our brands received approval And initial expand with year square potential provisional out XXXX. of the license Vapen

months were In in their April fact, the two operating best March history. and

the the as both manufactured Vapen as distributed Wynk expanded to and We in have offerings line, introducing product market. well brands and party like third MAJOR Ohio

market We in the those grow offerings to company's will continue the share expand to state. to continue

sheet obviously movements related the significant to given changes the of leave the some which flow moving operations. through parts P&L cash those two and of on some you model for-profit our project the major walk balance I'll one-time address to statement, Now items to and statements. a had in other items transition to I'll

under than to basis. we are As normalized had for a higher consolidated, I the fully boosted the are in would of operating we quarter X also items margins quarter than on which expect the mentioned not past both our these higher earlier, in model, entities gross little sales line if because now remain the for-profit reported a

the model, P&L. under profit. model, our customer built transitioned immediately impacts only for-profit line depress which item quarter, the inventory, under in we as When sales value sold would certain dispensary the line. is we One gross the but inventory goods flowed the consolidated way not resulting inventory transition cost most notable it Because of to the product the and under be therefore a for-profit of not of one-time could in inflated from reduced the the only inventory book artificially and

of in that this value margin consideration the reflects the during the the dispensaries. We billing underlying as of standard model which which receivable value one-time which and the quarter new acquisition gross reflects based as P&L the for given at model, the better the fact the as level, from the a related the practice is Accounts and significantly intangibles number for-profit really an dispensaries of additions under came biological into gross a by their was to the to Vext primarily impact trends. and have assets, expected, adjusted to profit captured shareholder licenses the profit to takes the on fair well AR given account, Vext under us provided was impact for gross the industry, X, down

make broader while as simpler for-profit positioned. comparable more that Vext market we the to closing, understand players the forward, it is difficult, is and to Going current shift Vext market in reporting expect space. the the reiterate story just to I'd will In environment our well make other for

share strategic for investments macro sheet cash pressures gaining expect as the have significant balance operations We making pay and to moderate. that and shareholders team continue we flow dividends will

for all to call to time. his for I Engel be company, that Daniel over. to will call, and this done personally transitioning time. last to you turn Daniel But the over Vahan, friendship and it not to done. the participating thank he's him pass I is he wanted for listening I taking over the Vahan, the all he's you the to help Before you've Thank future. but in

Vahan Ajamian

direct margin $X.X QX million continue for-profit compared the prior to in much, $X.X demonstrate to biological even periods with first Thank was XX.X% of XXXX. solid assets the in quarter XX% million for in the period, XX% QX. prior QX. up Eric. a prior the in And a the you comparisons gross QX, also more $X so was year This QX of Adjusted financial quarter over And and up XX%. from adjustment XXXX. model is impact for gross underlying $X.X million to year was EBITDA at to the for margins Vext Revenue shift the fair for $X.X QX Adjusted increase period. was in the quarter. million in of value inventory was performance during accounts the of the challenging a compares which before profit gross profit profit and adjusted more Gross accurate XXXX. quarter of million in million, representation one-time of $XX.X profit gross makes and

funded As to the with quarter $X.X we fully Vext a cash Thanks, Eric are to for balance have our steady for mentioned, we joining outlined it for cash flow as generation. Vext in QX. internal And $X.X XXXX. well I'll from continue cash with balance operations results now over the the financial for everyone questions. rest QX conference flow cash had at as the million coming call. million XX, your of We us year the operator turn between during expansion in ended plans at solid sheet. cash March generate

Operator

[Operator Instructions] ahead. Your of question Russell go Beacon. comes first from Stanley Please

Russell Stanley

morning the transition. for-profit congrats quarter the Good on and and

start you're inflationary consumers in I you benefit market premium a brands brands, that the to drawing Arizona come -- positioning forgive of release and And elaborate question how a that press down the around the could guess are the environment? comparison on second segment I beyond, remarks guess your to and Just of in priced? the a around term is, Eric, around maybe focusing made prepared brands the are comments on number you I more to question the an with guess seeing during competitively

Eric Offenberger

that always brand, I base. of kind not in Nordstrom use how as top XXXX. didn't up we've But started kind that's analogy brand think particularly you to that, the brand. of We really price target a you always my And plug. level we originally consumer enough of seen the Well, brand. a or always we've gave happened know, the give being

you Our can urban setting you been base It's stores a loyal, many but discretionary know, there, of and very has that located it. a consumer less market. It's you in that's see income. great

we always price So in brand to that had the realm.

are is that the is get see really because the Metro less Phoenix they X.XX stores that think to that spread and they in you're Arizona, on they the store. consumer, in at think that are know, that really what fuels service the what gone I I what about gallon beneficial the that. you And between drive as likely our What and yes, not that there's you're our get trend So seeing Russ spreads is consumers located is can here to that customer rapid that can a that's if up, street get been they sticky in down come us. that and and loyal get speed, much, versus you good

can buy and said, can a to are because are partly definitely declining. buy on switch from recreational the prices at more much they medical a that placed function that your of limits medical transaction. average they that's Now how ticket the of what And customer recreational there's

some impact retail. of on the are So we that seeing

earlier, As remain sales in It's get to been doing volume. good solid. sales we about traffic talked just the more and to the you're has transactions comments that

Russell Stanley

it. just a edibles. And Got color. around great follow-up That's your maybe in remarks

talked guess, your to relative can seeing expectations update you're and gummies, in MAJOR there? on I Arizona, how and You Wynk us performing you about what but

Eric Offenberger

with of difficult, people up more of XX MAJOR alternative go edible. milligram you to class of think a out a to, introduce that's seltzer a you're have, Wink, there's the you instead a a take it expectations. take other that's couple into bit product normal you to or pressure. you going an Wynk's I a five dosage Because to more know, lower end it's and let's the been seltzers going you something that six bit of And Wynk with is of inflationary product. that's It's exceeding the marketplace. is and Arizona, in dose In four that especially little having marketing know, pack, party the would your with my and time. get

bit more milligram price than of it's some but little the points lines. So, other product a dramatic. Per

So I product, type sells of the more little get bit But very well. have think base. a that it's going consumer take to to time a broad MAJOR a

we of In stock fact, out it.

increasing our with on Same with We're right thing happy MAJOR. now. Ohio product. in It's levels So really production that MAJOR we're great product. a

Russell Stanley

Maybe more one in before the get just I back queue.

guess, XX you to wholesale addressable represents, state guess, equity open a question Just for come online around, issued and of when that I there? an of do licenses envision starting how social there the expansion guess, just I the and a stores market. you I much lift are

Vahan Ajamian

stores how I come zoning the think months do stores. to they depends XX it's get online and well before with it to

I with and challenge on getting in going the a think the be through to everything activity valley. going all zoning that's the

and semiconductor stuff like that. As builds far as

you these I goes. So, to that, they'll know, of that'll the that That think same I cultivation think interesting time. said, know, lot see you that build be think people get how you a at know, licenses,

cultivation think the proposition know, before I doing bottom control margins. XX in trying XX to really So and -- what far And absorbed vertical our, it you're how you is on it also the translate our you being I unique as expansion margin think market. stock the you month down because into see gone price, as to see what, we're and watch is you the know, it's to your how I our still that's rewarded in but don't think don't all you're that's margins marketplace that's line. that

cultivation of it's have have if XX going licenses front, to months. that XX lease you're the doing for that think the or a the I operating will been people sledding just doing tough retail same don't said, to thing. next the think I be else be That that So everybody one the

Russell Stanley

back That's great in color. queue I'll again. get the and congrats

Vahan Ajamian

Thank you.

Operator

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

Neal Gilmer

here, best bit joined on But that Congrats the you sure commented were Ohio was to earlier. whole morning. March you you. profit. their your with of with if covered months and where I April behind two But good a Hi, have that market I fun to two one had that's comments in little on I'm apologies they've wanted I where history. and questions quarter transition the follow-up got the so more late, lots

So Obviously, in February that Ohio? sort January, you're sort seeing of slow. a market, a are just maybe with in sort it's with led sort surprising that of coming trends respect the you -- to what you of similar the smaller best increased inflationary it ever. to Russ Arizona But to environment answered was bit are this of Ohio to and seeing off what sizes in volumes basket little that what

Vahan Ajamian

for-profit Well, was of to a Neal, morning. good that lot Yes, assets fun. transition biological the and

we up deadline to taken get So, the care to went thing of. right that

through how with Thornton, in and going based great had anyway, now seeing talk it growth their of the good help it's is So some they're team and everything. three program, we're did think the so state's The more I said a and things the license year One for did that Ohio. was Ohio, I well. upon accounting job there's acceptance really into think and nice more and recreational we a done around That us. team on limited market and couple coming Grant from that

what starts team and But team's starting really getting think that the done it. and our we thing two been and designed a think sales good leadership of target. biggest we level we're has, production managing why vacant that's the in out out not these, helping and And have a that's bring, out we've of to three with there there on in. these that's brand everything firm has for I kicking and Vapen a the background team know, volume, you I'm sales. with the Ohio I really know, for established you that's are had good is there SOPs good partner side click and the that believer Then

for competitively, and your and in get and starting people to sales. stuff like operations that set sales been it's click price and up So things you are got efficiency you've into place now those there

more been some we've that's And doing bar will you it, a and instead live lines product Ohio. that a risen think product added I we're bit beverages, of available distillation seeing of lines with a So expanded so the that or major think gummy little can a those do of product product you're of biomass type we've more lines, go we can there. offerings, the continue to help expanded types we've the doing other chocolate of

Neal Gilmer

good your hear. My maybe call is Okay, the may $X sort just of said XXXX? been Vahan's are expectations the CapEx that's have with great. obviously, you CapEx That's what question cultivation just a Ohio in in is to expansion beginning CapEx over I to the like or comments second million on a follow-up Arizona. respect for you because the missed what plans budget when of -- of for your the at the just and QX in year? had little on And But and balance

Eric Offenberger

right the in go. a the it inflation, we've disclosed, like so all left fast in is market -- we anything how it It and what going the stuff how the in right down now cautious pretty I sales we've and way price because can go like cultivation cash chain vertical off were slow the made that get think on the mode got around cash think really you store get and that operating And in those expenses margins. we're quick mindset we've the there Ohio, from I left to it's the balance opportunity going $X.X market's doing really In we're you market, the We're up bring was what more of past. candidly, and matter now, have comments apply efficiencies, operations built the soon the Arizona the as got And gotten seeing as get for as we you gets and and got throw and done, than that. of control more growth how do from down. that's Vahan we we're sheet funding is so for come more you that the with it right as Well, you and and existing or somewhere it. to normally can the the those is you've to is million in CapEx now up

to of stuff at So kind build that's just but say we're -- of back the to of want a back don't I We've to it. looking it. mindset, how kind let's the thought build to gone internally we've not mindset bootstrap gone bootstrap gone we've

the seen and do really and we'll we've I'm and anything period gain. to transition then the put be retail a I until So XXXX. able haven't efficiency that, really don't going use city to still the And the they now. through. and to completely I'm to to with through get going say, It think stuff They're within long the getting It's COVID. time just stuff backed permit of tough just a zoning, right up takes came out

all that and a at and get you permits, time retail looking and the that you're the address expanding by up. sure we'll that's cleaning make use the build, where permitted and probably stores So XXXX through

Neal Gilmer

great. very Okay, that color. additional much Thanks for

Eric Offenberger

Thanks.

Operator

comes Markets. of Instructions] next Semple question Please Your go ahead. Echelon [Operator Capital Andrew from

Andrew Semple

the Congrats on morning. there, good QX results. Hi

Eric Offenberger

Good morning, Andrew.

Andrew Semple

initial of improvement to I that better want stores an the here. much ownership is at And or end was that? full business seems our if of that last go the that at some we underlying first the here conversion quarter, maybe Maybe the maybe discussion accounting surrounding in EBITDA the see it held or on of question margin morning. pressure up I initial a anticipated some My margins how Good back that with bit. EBITDA believe might conservatism conversion to maybe little dig the we there's of margins. than expectation some around just the to maybe

Vahan Ajamian

had it of Well, I lot value a -- think to we definitely accounting a do fair adjustment. had that with the market

it -- comments, you or we the value the in that assets up valuation up a ended we when fairness inventory do we the that we to got upon had reduce having the you opinion, picking ended down. that to what up up as the consideration push versus to gave mentioned based we So in on

So actuals. not just these -- let's say you numbers, are had example

say $X for million down to picked fairness it you values because $X a go had couldn't couldn't So have million go inventory up, above. above let's you the but push you opinion of you you to --

So we gave we for in the up got of than the less value dispensaries. stock

that valuation And see So and on what out down that's it valuation created, didn't up was really -- come really that you pushed going got all moving down, couldn't we receivables that's we happened. and the that into the And you you you on really where sheet. of see and it where the until minutia that opinion. intangibles detail got balance to and the dropped

visibility a really impact I little a So I'm second favorably of come in bit. have its quarter but I happening. that continue time, what impact through than to the more not had think this really I will at we will an think that enough -- On that foresaw happen. on go-forward basis, is some don't

you So it? Or little bit want address go to does it add do to a more? that try

Andrew Semple

that, coming seen the off-line. being on expect That's would online? you and lane market there? kind want product hitting production within here. facility being benefits in margin you kind facility from there take I from some the QX, gone? that that Or to the expanded can Prescott and that expansion quarter. see on speak question to on some online in improvement first completed so of benefits from we from moving you're But how maybe Did seeing sales the ask have first might And could any first quarter room commenting have of you to runs No. And next on maybe that expanded maybe of more to those facility first from helpful. that just the be

Eric Offenberger

more we We've like -- they there really everything strains facility the the expand of offer. in job else. Prescott growing. that's last in and what We've That and we're -- the It's really a and to continue and past. they're had the Phoenix done about the that year that lot a doing, of variety it's and between amount up team have increasing we we've the than got strains offering options Yes. good

only we seeing for keep expansion, genetics. new So more mother controlled strains. not on can those what life rooms, you're some and is We've out better but cycle brought the the rooms the bigger that better, in mother so plants

we're yes, of impact So seeing some that.

As like up, not while at manufacturing dramatically far yet through process. it's as -- the point overall that this still production, bringing that's up still because you're the it's

for of I improvement. changes that flower thing think buy margin But strains think frequency that potential customers bigger potential a luring there's is and more by more more So my in it. I a in there's for having

Andrew Semple

Great. That's back Thank my helpful. taking you for questions. get I'll into the queue.

Operator

morning. further your thank please you conference to like that conclude questions, disconnect lines. your call We would Ladies and and for this this for no ask as there are participating will you gentlemen,

Vext Science (VEXTF) 31 May 222022 Q1 Earnings call transcript