VRNOF - Earnings call transcript Q4 2021

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Verano Corporation Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] And please be advised that this conference is being recorded. [Operator Instructions]

to conference like speaker to now Ms. today, would hand over the your I Paterra. Julianna ahead. go please Ma'am,

Julianna Paterra

Thank you call. Miles, and morning, and Weiss, full by and Chief good Officer. Archos, our Co-Founder; year quarter Verano's George and Financial XXXX Chief and Brett fourth Operating Summerer, Investment earnings Officer; Executive Officer Aaron conference Chief I'm Chief today everyone. joined Officer Welcome Darren to Counsel; General

from meaning make call, applicable we uncertainties our risks, implied statements. forward-looking forward-looking statements forward-looking developments and results, will actual which statements based by security of and and that of or are assumptions and the achievements materially this the unknown laws, in During industry may and current business those cause the within company, business such involve discuss other management's factors known the outlook performance Such on expectations. differ to

Actual our for events mentioned XXXX. differ filings uncertainties could December ended our on due statements and risks XX, financial considerably to or fiscal year results EDGAR, and including in the MD&A

addition, measures. performance, flow. enhance of the will financial results adjusted not are non-GAAP useful and not cash that do as to non-GAAP supplemental the believes meaning refer any but GAAP, company's EBITDA today's to considered Verano isolation understanding substitute from GAAP a for standardized In ongoing in are be measures should and or as have EBITDA, prescribed free to by discussion, Management throughout such

in acquisition. beginning GAAP for GAAP also The with today account XX, measures the the statements these These financial available actual non-GAAP reconciliation measures date February are which comparable the EDGAR and AltMed filed earnings the on financial the issues in of defined includes measures. most Companies are we to and release on accordance our at investors.verano.com press earlier of

X, will acquisition the XX, XXXX. that For January fiscal pro is close also XXXX as the consolidated Companies on a AltMed information December present includes forma on we financial for convenience, basis year

Lastly, all otherwise noted. currency U.S. dollars unless is in

I Please over the to will turn George. now call go ahead.

George Archos

To emphasize what of we our publicly the accomplished enter last the most begin, markets profitable am Verano, you XXXX largest to as for we Thank the our a plans beginning I one today. year for how announced and proud I first truly At traded enough year, joining cannot was public transformational U.S. and a what all Tier the operators multi-state of company. become and in X of

developments am Officer Weiss, these organizational that then preliminary I have I goals. to Financial will by a my I towards Operating Officer, Summerer. last operational After significant will our pleased growth achieving detailed some our months. from highlight discuss Chief cover of detail Darren our that been progress, and report those and these results progress results our in Verano in XXXX, six for Brett the review vision Chief followed over financial instrumental initiatives

improve XXXX, in the it and our that against into important health. and was be upon We strategic bolster going knew to public most we visibility executed and our deepen our Verano's Heading history. our to financial in expand developed markets, footprint plan the year-to-date

us, continue growth. pursue Our cash business to differentiate profitability positive flow as the relentlessly us and free in reinvest allow to to they

activity, consolidation, cultivation and last increased million to with February pending. acquisitions, our total year, demonstrated have Since pending set continued from increased capacity to by we dispensaries the Between closed our nationwide, XX we pace the two XX of organic including in and feet. square have X.X to going public XXX for XX acquisitions over inorganic contribution announced by dispensary and

by draws terms on managed also two demand, we care facility. fundamental along amendments our we three To with proactively support equity our raise XXXX, with increased Due made rapid growth, one credit table held our favorable to long-term in and of COVID, inflation Of institutional items disruptions. of and lack our umbrella investors. attract I the just and and liquidity and chain virtually were note, facilitate under mentioned accelerating schedule done of supply to the all additional

More and up portfolio. strong a importantly, these profile. have with to new we a of attract believe with our partner solidifies actions will industry ability set groups, We and which the increase choice believe us while growth to we talent and operational and also reputation identify prioritizing in in strategic We this strategic margin assets. remaining one addition all strongest actions profitable as achieved of the platforms of expertise our for combination incorporate our these as Verano's

in than more of revenue On EBITDA the strong adjusted $XXX margin a full XXXX I industry am not faced we and Diving basis, the into to XX%. AltMed a and extremely fourth million the $XXX the notwithstanding year rising quarter, full headwinds of of including achieved COVID-related XX%. macro report quarter pleased fourth of quarter, we adjusted impacts from million inflation, came margins at pressure, financials with the pricing that revenue but including with in EBITDA contribution

on maintain profile. the revenue forma pro premium And pricing transaction a XXXX position, what profile we were maintain pressure, the despite $XXX with XXXX, within able achieved of range guided X, pricing market downward a a to we we also assuming closed which helped And strong margin AltMed our January margin million basis, us of to.

consumer the were XXXX across first chain supply by Looking January by Omicron ahead expected sweeping top on challenges, quarter to led and impacted seasonality. results, of both our base issues variants February inflation, and significant our

weeks. was vape that to impacted for ban our in industry six Pennsylvania the sales subject a Additionally,

While its and March. of share that the is beginning good experienced the in growth fair had year have news of obstacles, the normalization we

headwinds, for from however, all have rate our quarter, would note, as excluding March these for the first percentage from Of sequentially the even fourth Given acquisition. revenue using revenue. digit the top-line a CT contribution QX decline mid-single for run a increased quarter, anticipate XXXX, Pharma we of

carry We turning have quarter, second to sales Jersey. in into adult the which see New continued use the includes momentum on

April quickly Cannabis Commission, New CRC, XX week, or on and marked XX. to sales year. our finally supply example the to use of we a April week later, New date use build legalization use voted deploy what demand. nearly for One advised that sales. mind, ability state, begin operations sales our approve and for CRC a XX, the April of Last state, adult We with for in would of On first scale the Jersey more in was Regulatory is adequate Jersey adult the adult were for strategy. a preparing XXXX, our strong which extremely day than had the prime

demand store per prioritize fact, I Jersey confident our kick this operator packaging in were festivities. sales, ground-zero, continuing as only meeting New not that last knowledge, In that while were dispensaries our to we did to could New meet cap in extra customer we spent the at patients. coaching Jersey medical week Murphy even our staff, the our Elizabeth and at Governor off product, to with quality-checking we

the our base. excitement from I consumer new first-hand saw

managed patients. were dispensaries, repeat we chaos a to lines our wrapped as around cannabis Although team buyers exceptional customers our an and the deliver (ph) and for first-time experience

days first a success. been few of have New sales Jersey in Our huge

We also core other remain well positioned in markets. our

half the across flower than XXXX, market because, in volume our In held of the Florida, reports despite largest XX% points, we our market significant state, products. Florida. basis, prices market we that price to price operators above true more industry share is slightly truly of this a in positioning. in and the understates pricing, our other between the and on position other significant the This averaging dollar premium given achieved compression premium July Florida Further, our despite third quality and so gained not second December,

primed our the opened for for and adult market footprint, ourselves important throughout To very an the stand of plans of the XX portfolio supply a full We operating legalization expand is recently openings indoor state store to dispensaries in example our of positioning Hobe we us Florida that facility. a and continue the are year. of second states ensure use. including we suite process are of dispensary currently have is state, out at Sound adequate building offerings as our in in location,

our this by the supporting to growing legalization year. are resulting prepared in we the which brand, in into are to the MUV playbook capacity use advance Similar ensuring brand, introduced a the includes of our demand. Illinois, operations state, this Florida to of addition ahead ourselves increased was we curve earlier high-quality meet In adult positioning Verano we now employed like

investments ground Of In we which Pennsylvania, we the the our building end up to are current this build-out facility adult through facility state-legalized of online we top market. in deliver us specs, facility products to the cultivation our of from and by state-of-the-art also a phased market preparing to use our Pennsylvania empowering for cultivation a this second year. anticipate wholesale quality a coming new note, are

in market this QX our the introducing through our anticipate addition, into current In strains Pennsylvania Verano we year. operations, of

In approval additional state, dispensaries other in Nevada. to recently plants and ground mid-March, facility newest Virginia, in West Morgantown in the facility dispensary cultivation had we active first processing our the open operational the we expanded cultivation six and In option the markets, for opened across in newly operational our state. received our maintain in

we previously Growth in its we to $X.X the which entering legislative are billion progress Holdings additional Overall, age with one legal market state the just close are the XX XX XX, of adults cannabis announced cannabis. level. We into is projected saw do the year. states total of ahead these the right adult five a program, to of thrilled million at New the to the be use nearly access approved time, markets is next acquisition. expanding, rollout state’s largest believe pending approximately use XXXX sales a significant market adults which York, million of of over giving Goodness programs, A The of over at adult

in gives York option future. of give XX facility areas state’s in the a standards. a with legalized dispensaries vertical open XX under expansion the use in state, close one of four New highest upon ground in with operational to built cultivation existing to which, was Growth’s licenses this out current high-traffic the state close, the demand, the already ability dispensaries, the state-of-the-art Verano of running for us the acquisition hit to and four adult preparation The will facility additional Goodness the

Closing incredibly this to add presents excited we one in next which to Growth on portfolio. is medical just for the two only introduced our million edible additional sales believe of generate the sales $XXX Verano is The state Verano. in to also to that market Goodness over by projected We get license are will licenses also growth license this flower year. transaction with significantly opportunities sales, state Minnesota, recently a and follow, underappreciated soon existing

also to in are the transitioning ahead. incremental by the pleased adult years state’s prospects of the use legalization discussions We surrounding

In will sales just enter this adult New Mexico, on also too to addition, closing us use allow the state-legalized Growth transaction much month, which Goodness launched excitement.

$X million first day. nearly achieved state in sales the on fact, In its

We continue we by the to expect to approvals. the end be Growth Goodness about year, occur appropriate the pending transaction, the which excited of regulatory

is the Company turn COO, Darren operational invaluable Now the I and and an on helping asset company us growth. of our go-public and talk to He operational to our our with been some extremely period it an Weiss background. Darren about the its to to want has transaction XXXX during fronts. led strategic through operations since having organizational explosive over initiatives the build strong team, recent of the has

Darren Weiss

scale reinvent set role to the COO execution We and to market-level more and organization. quicker build standards we industry for across Thanks, focus framework existing regional of organization. the continue the and was across sales with Beginning one for the retail while our of structure the we tailored key markets. maintaining last ensuring deployed for is allowing on agile reorganize and in levels, a unwavering high-quality George. Considering year, initiatives cultivation, Verano oversight more further in known my company, the at our new QX, we operations, corporate a

and see together Research we As our genetics team create to from preserve exploration product and continue tiered of factors Development the new beyond. and to we products new to organization can and pipeline and Verano and patients form to new different compelling and catalyze strains extensions part line and exciting innovation opportunities. flower put corporate customers and brands, in XXXX of efforts, product offerings a From as expect our explore talented new

is tiered of the bigger lines. strategy the As to we’ve discussed premium through a product market just historically, shopper, and the community that we the serve than to pricing rollout entire our want recognize

meant line to Reserve and we’ve Essence middle brand will market. our is line Verano Verano top-quality a launched the Our that recently remain serve

We’re capture down This is also upon launching value pyramid. a the market nationwide not analysis. by a consumers will value brand our approach, be market to based instead but

and brand, Verano mission, marketing in revamped alongside was late released will and launched including developed values. up our see company of our stepped vision refresh today. In we our addition, the investments, XXXX, signature presentation newly which reflected This you

progress, and efforts our customers, statement, vision with Our and products, progress means our we our improve we our tireless processes, our relationships our and communities. in cultivate to are employees our industry

combined Our enthusiasm say, guide business consumers. today igniting in vision when and script new flipping yes, we prohibition cannabis with the are we and and team historical our our will the branding future, strategy, our and the in on

turn over I’ll now it George. back to

George Archos

Thanks, Darren.

investments growth, included often deepen internal with This talent and acquisitive I naming XXXX. emphasize cultivation Summerer corporate of year. attracting to headcount our bringing made to beginning our our our additional of executive investing in importance external at and our While elevating the enhancements across propel CFO keep Brett by experienced key nearly up this our want bench the Verano. doubled our leaders. get internally by and expertise the headlines, to To headcount We tripled operational business we and retail improvements

continued planned hire We XXXX as people in we ahead have for anticipated investments growth. of

And with some pass thoughts now, Brett, XXXX conclude I it on final before I’ll our outlook. to

Brett Summerer

highlights discuss in strategy. before review on and quarter financial our detail the balance year fourth moving XXXX, sheet you, Today full from allocation George. Thank to capital I’ll and

Before I’d from our I like discuss IFRS to to our GAAP. U.S. financial address results, conversion

transition our I’ll had the quarter more and differences preparation exchange IFRS result Starting in as We fourth with on our forward accounting the has reviewing financials the impacts financials XXXX, a GAAP step in our it is conform to as of for U.S. by welcome between the GAAP. methodology transition, a dual-listing. this domestic begin of now U.S. standards. one

quarterly In touch IFRS addition, I financials. the on want to of XXXX briefly restatement our

those in audit, acquisitions. of identified was and to for valuation net minor we revaluation in resulted course assets certain the QX liabilities classification a year-to-date $X than certain year-end small, positive in This change The of total positive the impact less acquisitions. change for of During a equity. our these million through to of shareholders’ consideration

we our filing While decided forward, to XXXX only are we U.S. going financials GAAP IFRS financials. restate

speaking, IFRS biological treatment GAAP Moving under of four previous treatment: IFRS Three which U.S. assets, there leases. assets, and are key and inventory and Verano from GAAP for are AltMed on our step-up books to financial biological broadly our different of are books. versus items U.S. the transactions’ primarily these the specific

with to to depreciating that, In addition start like GAAP U.S. we conversion. would concurrent our licenses our

in Traditionally, the industry our due impact largest GAAP leasebacks. in an U.S. expenses is sale increase conversion to

to Verano under our added it However, minimal that as continues to hold of a be leasebacks, XX aversion the sale million to years now the Licenses will U.S. for expense for amortized strong was year on P&L XXXX. $X impact line a full GAAP.

tax impact fall enjoy these gross and years. as will cultivation of impact and of continue profit, will no EBITDA. will to on Adjusted has savings positive under licenses This our sold Because fall goods gross cost we’ll the impact retail licenses XXXX, for to we realize This the savings under and in impact SG&A. many tax profit,

part longer XXXX we forma AltMed QX. transition, pro no report the of as will for with results Finally,

$XXX was XXX% and Turning full growth for results not Florida, Jersey. and performance to also by organic driven in U.S. year, GAAP revenue million, the Pennsylvania our Illinois up in and XXXX from but acquisitions Arizona, New only subsequent to

pro comparison forma full for basis, was our transaction revenue we’re pro results January reporting XXXX While AltMed X, XXXX, closed pro $XXX not the a sake million. of the forma on financial forma assuming year

Connecticut, Maryland our are adult making and our Florida, Of portion during in we Arizona, to New in Jersey Ohio. by was note, Pennsylvania, transition encouraged state’s Illinois by large although, market generated and progress from the use, revenue we’re a legalized of the positioning and

full of if $XXX $XXX adjusting includes $XXX million million, to XXXX step-up, profit gross the or margin in as inventory was slightly or XXXX million, recognize margin XX% versus our of noted important items to compared These amortization periods, has and improved licenses. It’s million, worth as year over are items well XXXX. Gross for two for revenue, both in revenue, XXXX. the both new XX% of item previously one-time in $XX gross that

expense SG&A million. XXXX $XXX was

However, essentially to is of made. this all we’ve increase simply acquisitions the related cost

firmly our which a We people have create efficiencies testament on close management, investments. kept expense a operations and we their our overhead is We have to business. watch believe key making industry-leading ability that the streamline teams despite to and

As demonstrated by efficiently our generating our operational results in scaling XXXX, we business are and leverage.

driven a Florida, million. the by adjustments, the inventory EBITDA step-up net had We in $XX was primarily million, year for the year of licenses. to choice amortize and $XXX loss Full our Adjusted one-time

margin extremely of happy percent line to remain a in pleased We the with Adjusted and was EBITDA year closed our with guidance. revenue, XX%. profile are have our As XXXX

the the and In October, balance a and credit our we We flows. sheet in the $XXX year cash credit a $XXX to exercised draw additional cash recently of X.X% and non-diluted announced Turning existing we $XXX bringing million with option $XX our statement of upsizing to to with cash of total equivalents. basis facility million, ended million our million. facility

We on the with of cost improving terms amounts, take to rates expect to decrease capital. and of debt to measured in continue goal our

broaden evaluate us we The as M&A million in our provided has footprint additional further to continue new and existing footprint markets markets. $XXX to deepen our targets both into optionality

cash flow. expenditures market generation. manage our in totaled feel capital We We to fully by investment operating cash light well invest of our million, self-funded positioned our our $XXX XXXX, In cash also actively and anticipate flow with growth. expected continued infrastructure in continuing in

million. and cash flow $XXX was flow Cash was from operations $XX XXXX in free million

of advantage Looking in ahead, to position our strategic enhance to invest us to further market and we growth projects take continue plan opportunities. to capabilities

we capital business. into between expect $XXX and $XXX our million to invest in back spend as in million XXXX We

however, slower winter has we was reminder, all anticipated, believe a seasonality I’m and quarter are quarter carried report metrics summer are over to effects onto in the financial U.S. than we continued trend challenging develop of environment. has months, XXXX, revenue softer than a of Moving XXXX. in see to as in growth the million fourth be that Sales these months what very which happy for are in the results the continuing industry, very to GAAP, first of $XXX a into

for and number. Revenue from gross XX% retail year and was a wholesale the XX%, assuming respectively, wholesale

Pennsylvania, building out in are On the cultivation Arizona. to our facilities wholesale and side, continue in we capacity Connecticut, invest further Nevada currently and Florida,

and in XX giving came our XX our Virginia integration of online, active us Additionally, West facilities vertical recently Massachusetts primary markets.

side growth quarter, sales year. the retail On same-store in the prior X.X% was versus

However, seeing decreases size, slight we we inflationary recent basket which largely are highs. in attribute to

For fourth quarter-over-quarter basket which about in quarter, expenses of the our $XX X%, XX% by quarter-over-quarter is about million size with QX revenue. line in inflation. in SG&A fell example, were or

we identified expense management, While maintain and opportunities. plan continue to our focus in a of sales market efforts, people on to we marketing ahead growth continue and investment

anticipate Net a in of impact as Looking ahead, XX% percentage quarter. for SG&A $XX the we favorable was reduction income the quarter, continue to across of fourth or organization. especially increase as to was the liabilities. about top-tier driven EBITDA of with million, slightly, we by revenue million a Adjusted talent fourth the $XX for invest acquisition revenue,

to of GAAP, I’m to U.S. growing another taken acquisitions growth depth, top excel and we for within would finance, with proud We To complex profitability systems, committed team’s Also, The including experienced who change, to my I’ve our executing growing while of line. of financial finance team a groundwork to U.S. strong take most GAAP I periods recognize to acquisitions the one XX by team, moment function in recap, the actions industry-leading reporting continue grueling in marked two breadth delivering is quarter remain and converting organization integration. the years auditors. my the like state-of-the-art through have the continued finance an for and XX and future. deploying incredibly as our setting during the

than other I the not have we of that is operator lot while want we may to in no highlight immediate is for growth over have that, a taken feel to are. positioned better financial Before shown turning thing the George, we actions up biggest results,

footprint As and we Connecticut actions product on market are possibility use sales, good a is positioning adult across our sales, mindset QX, use company, we near-term the Jersey our New exit news tiered of is and our improvements, cultivation the already as strategy. updated seeing adult

on Our continue the capital to strategic efforts for our Verano profitable allocation stage in XXXX the growth. set path and continued of on focus

our the and to strategy. most access highest returns invested we’re capital, on offering strategic have on We markets, the executing

I for to over will final now some it thoughts. back turn George

George Archos

built year. proud since Thank I’m To tremendously have you, Brett. of public going we grown and last recap, what

while I about now markets, integrated active active Goodness XX important am our in acquisition. XX of vertically year We more was of the XX and incredibly XX are Holdings And XXXX. Growth close upon for primary of past markets even out Verano, this excited

adult to Goodness positioning four On the New Ohio and pass in Jersey, position including we a term, as Pennsylvania, very as we that of could that use the Mexico, New acquisition, closing use, Maryland. strong leading well markets have near will Florida, programs in adult York the believe and transitioning in Growth four are New markets Connecticut,

opportunities ourselves growth. of We ahead and are additional Pennsylvania organic to new to dispensary openings continue of West have this with we planned in how best position market plans year dispensary Florida, These examples a open Virginia. also growth

front, our and opportunities interesting we M&A portfolio. selectively exploring the remain On new to by acquisitive strengthen

lot year, we a accomplished we’ve work more understand to past there that do. While is this

progressed, we XXXX realized industry challenges that As would arise.

processes, opportunity meet enhance this accelerate operational demand our time from growth our to an However, ever-changing organizational and consumers. the represented and

which it for no effects and months, our also strongest witnessed summer and in surprise for active more had We social sales geographic one typical our we’ve much footprint. months that should are seasonality of the industry,

chain industry Supply have COVID. hung inflation, two these is price compression all discussion that past business disruptions, the and over clouds the muddling Additionally, years.

quarter’s other the call for top-line We more Jersey on visibility as will gain into market and next we XXXX earnings guidance built. drivers we’ve New growth revisit that

a with we volatility model, anticipate given margin want that we’ve ending is the and our variables year, with legislative we beyond our not it time. profile what guidance year control, guided year XXXX We the to remain from business in numerous and provide do with margin our uncertainty to building top-line although low-XXs at quarter-to-quarter, throughout to full margin. some a current prudent perspective, with of this past reiterate XXXX feel Again, comfortable significant full we

the have model remain our we ability confident deliver margins. in business built, efficient of we to industry-leading because However,

one Before we I markets use for to increased same Verano in reiterate I strategy We our remained close, we sales. has are of today, industry. adult the to our with us that since leave of want positioning target The prudently apart are medical takeaway with state in core sets prepared I our relentless presence believe you legalizes margins, strategically our inception, attractive so growth. paired the ahead and that grow demand once want the this, prioritization

please up Q&A. open it that, With for

Operator

[Operator question comes Matt McGinley you. first the Thank have line Instructions] of from We of the Needham.

Your open. line is now

You may ask your question.

Matt McGinley

Thank you.

in fourth the decline looks you've retail in that it side What business that to ratable on first wholesale wholesale in business? are quarter? between in the more they side, on the that digit in Where fourth in And and revenue see had alluded softness wholesale or down the mid-single or is split the quarter, with like net more fairly that a the the first quarter. is fairly Verano that was quarter? retail your step you large So the wholesale did

Brett Summerer

Yeah.

where QX, has with stronger more see lower and see retail XX% your to profitability. versus and bit And about therefore discounting wholesale. So terms were is and flat question, we're or a answer increased you're going of in QX the retail then, numbers in that to total for XX% retail first we net side about and less that the seeing wholesale

George Archos

Yeah. here. George Matt. morning, Good

stocking Jersey market Another time building of make in sure that have big there. for on. transition to enough wholesale we've been to stores we'll goes and as inventory component more our New supply we that in also is, up up But

Matt McGinley

XXXX were consolidated night then how under XXXX statement. P&L related of accounting the from I'm disagreement those XXXX? that restatement this an what so be financials had the And in restatements dispensary to to on evaluation I and there go of IFRS the you some was a last restatement, inconsequential on regarding not I auditor how like income dispensary stated your purchase curious single guess, was would on restatements back guess

Brett Summerer

are So two separate it's not, items. those

transaction week up debate, to the about and just that the Green RX was again was a half and auditors and process. week, that took were with wrap we then the QC the subsequent this So continuous that to having that another debate just

as we GAAP, felt finalized restated. best was U.S. back However, numbers IFRS went go through be and to should evaluate the it whether and we

of we do, equity if So right balance basis $XXX,XXX the it was did on the ahead net at see think that because impact we look and went you'll to but is what thing shareholders you billion. a the $X.X sheet, was to

So speaking. very we're talking about a very, small number, relatively

fact, in I long So doesn't really it in investor perspective, there our think is some But story P&L from that. geography or some balance effect, with sheet geography short, opinion. associated

Matt McGinley

you. Thank Okay.

Operator

you. Thank

the of Next Grey question of Partners. Alliance line Aaron Global comes from

is line Your now open.

You question. may your ask

Aaron Grey

Good for and morning thanks the questions. Hi.

by in So first XQ. the margin about the in one there is, remaining want talk you to comfortable low-XXs, the I from appreciate to me get profile. I expect commentary,

the on some Just near-term volatility, you provided right. detail

can margin an EBITDA profile about kind count maybe head XQ get quarter have plans so off, first would profile basis expect then just on you you volatility as on of apples-to-apples So you how talk that should much forward for kind the just fared? expect the just how of near-term, And we the forward it the on you any low-XXs as increase be some helpful. the you into margin last near-term going Thanks. would to about year, doubled talked additional commentary going had

Brett Summerer

happening talking QX QX and you QX? more guidance about or Are you're more talking about

Aaron Grey

going XQ forward it? then Comment of and apples-to-apples XQ both, what kind when happened Thanks. term about we on basis an think on near

Brett Summerer

Sure.

an on we due did to QX to our holiday competitors season. discounting like basis, So some QX, see apples-to-apples

of the but doing some do it's what in that we So well as better and participated. were they market, than did

that a of little bit drove So it.

We year. from the towards and of bonuses increased also items Growth that costs Goodness had some some one-time perspective also end an we the the SG&A acquisition

a driving of are So largely of in the you're those drivers and not ton that's speaking, probably seeing. they're what's margin, what key but there

not position, that For sure want to in we reach QX, we're a out. and I'm

Aaron Grey

you. through, Thank store guys Great. Okay. Elizabeth [indiscernible] in on inventory amount And yeah, Jersey, weekend, going New you limitations this then and I so of saw your on purchasing. and edibles a good had

the on New do market, you. of the you product of how kind kind ensure in while supply advantage you Jersey that about constrained just stores for position forward, wholesale use think your inventory a stores to selling you opportunity, also Thank going guys, more So getting have taking of going of forward? adult enough own the for opportunity

George Archos

Aaron. Thanks,

So obviously, that up patients adult of couple make sure year, the New access gearing the next do for that do Jersey wholesale have have scale last We to use the on and adult throughout consumers weeks. sure the brands to as wholesale more this the side we've new supply enough use getting want we anticipate our all here also new supply We Verano well been time. some sure back the use We and as make in did patients going base. just year, consumer quite and throughout we importantly adult market state. the on have to for medical ready we make not but launch anticipated

light about excited and it. shining opportunity, we're So going about in beyond XXXX a for Jersey think the to is be excited New us I we're really and

Aaron Grey

back queue. All Great. the Thanks to I'll color. for the jump right.

Operator

Thank you.

BTIG. of comes Lyon have next the of question from We line Camilo the

open. now is line Your

ask You your question. may

Mackenzie Boydston

Hi. This and just reset progressing? for Camilo. production question My in you're our talk Boydston then could about you how you Mackenzie question. Illinois, on is is where stands today, first this market for just is Thanks taking ramp on

George Archos

going Good take. I’ll really actually Mackenzie. morning, well. It's

mechanical operation some be gear again where made And historically. up changed it back about. We're and bringing which we've our has again, market. really the down our to was quality happened there, to on just able process in to of changes we're part it we're fantastic So to product putting now excited that

tremendously side, a on flower has middle which We received is tier the also Essence which introduced the line brand, well. been

anticipate up happen It overnight. we doesn't gearing So year. the throughout

us give stores but in share a still slowly anticipate litigation. there, that. coming we better unfortunately, We these market have going online was We back get to to that opportunity and tied that thought new we are doing

for back. So does get be it happen, easier when that us that to will

Mackenzie Boydston

Good. there Maryland, you need the on Thanks. it think the those is invest what also appetite on might look timeline kind you any like Growth when on the will of of idea to And And on update acquisition, the close? in assets? then Goodness assets any for then

George Archos

Yeah. here A assets, Maryland I order. is the strong short adult great The going question. in think appetite to Maryland's legalize pretty use for very

assets high demand those currently. have we So for

We run have we yet, but very soon. process will not the

be in order. So that anticipate We in should happen do QX. to closing short

guys York, New be anticipate it's but QX, as the we with going more we'll keep to updated Although, you information. late I get

Mackenzie Boydston

Thanks Great. so much.

Operator

Thank you.

Capital have from Scott next ROTH comes question the Fortune of We Partners. line of the

now is open. line Your

You your ask question. may

Scott Fortune

you Florida appreciate mainstream products, premium value how in can in you the and morning Florida the sizing? color margins lower or a and Good from help those or you up promotion the the sales on of versus here. provide holding Florida strategically the in and Can value premium how premium strategically more questions sales coming on of mix look up real margins fact little and the the on understand the focus at side. and and pricings holding Florida of from you discussion hit A discounting prime more in end market kind days that sales

George Archos

Florida markets We're years many the for there, of our key be out and building I it mean, facility for listen, to plants are second in ground. us will our one come. is

retail continue up We ramp our mix. to

open which this year great new new online have out plant sites the We the of coming comes locations, as facility. material eight will

with added a and higher for it's going out, in majority in the the us. every very Again, sales. premium feel a of as in market time we're sells today price that going it, at we tier As now branding side, in the point what's we is premium the product of be well it introduce going to new far we on it macro our sales,

that our we've it to it. margins, we and built company and up likely Most in but not, and it's continue comfortable product will mix our our feel drive a company

strategy these we the good it, we premium on we confident still The And in than being Now the goes lower the three strong. wholesale on, into our markets, time margins tier as associated categories, and feel in although market is the what we both some we put strong all enter declared feel as very the and side. products, side retail with middle Good-Better-Best lower about costs of right.

Scott Fortune

Thanks, last board all of can positioned George. states bit the forward Arizona, are your color little on going recovery you state, are you in me, kind comments for March can question in color. with Appreciate a across seasonality the improvement and seasonality, in with and And seeing then provide the here? Florida or market you you like the saw that being already felt that

George Archos

Jan coming continued March of I was stronger mean, rate run I and strong mean into very April. Feb. significantly than out March

the of that's top off year think which So saw everyone the good soft, and Again, across country. extremely I line as we improvement as margin Feb coming see Jan well throughout improvement.

game excited for So us launching time all Jersey than and year. some about very changer it's obviously been better And something we're quite we're expected waiting excited half the with we've about. of the obviously, back for, for New which a been it's

Scott Fortune

will in Thanks. I jump back queue.

Operator

Thank you.

question of line Stanley Securities. have the from Next Beacon Russell of we

line Your now is open.

may question. your ask You

Russell Stanley

and my thanks morning Good question. taking for

is Thanks. to development wanted six battles? three additional now guess battles Just I how has your can borderline issue? are around up legal lack elaborate developments assumptions retail latest George to I know on changed when impossible I the last or on your, are comments given over the how but around to thinking predict, your what or thinking get licenses the maybe about of and guess on you you your those planning that months Illinois. are might follow legal

George Archos

quite dragged this thing get apparently time. could lawsuit this Unfortunately, out some with

stores these in here be don't us So this year, a happen might pretty flat sales so is we're new for anticipating flat think forward open, until moving state. anything in going I of bit it but until next to Illinois little patch a

So ready we're be it. going for to just

social stores, they ready happen does to continue the don't here we'd whenever to I make worse their and some and have be only we crystal the build one, are getting sure that on will have ball that clarity reach out equity it's and that in honest. to We now, partners open to March, thought those relationships. right But

Russell Stanley

if Thanks so, could, a $XXX might give at looking be range, drivers getting If I the if to correctly, upper us CapEx range? of behind wondering just and what if that's million, is for wide can outlook. the you relatively the million just a to end Thanks. to $XXX that sense as on Okay. And you're I million heard that. maybe a that it $XXX

George Archos

Connecticut, out Sure. in a brand brand Florida, multiple in Maryland. new the timelines. states, Ohio, across in Pennsylvania, building out Maybe really building locations we're expansion it’s facility We're facility new in facility retail expansion in

the upper really there's and If pushed if being it's end, That's facilities job done being a we the quickly. built the So us affected hit we just and supply hasn't we've lower these great mean I hit happening. next end, just, into year. what's are chain

Russell Stanley

Got it.

George Archos

Speakers] we closes Growth on will going construction [Multiple significant in Minnesota. Goodness and earlier So in if New QX, have there York

So say, a all timeline it's let's thing. just

Russell Stanley

get Excellent. in queue. Thanks. back I'll

Operator

Thank you.

Echelon Semple line We Andrew Capital have comes of the the of Markets. from next question

open. now is line Your

You your may ask question.

Andrew Semple

Hi, there. morning. Good

that or profile, those expansions to impact QX, the QX? within on just to in go on gross the to the currently which comments go given just back facility came And of numerous fourth into margins which drivers on want quarter, expansions behind some First to underway, More the bit an persist question margin underway? the then here, want of specifically, the the largest the in expected might be production margins. having there to the gross back all some margins, a just of

George Archos

Sure.

So in follow the is to of compete. right, on drivers time year. sure in discounting don't other regard But very market biggest different the the discount it out basis than and make the QX apples-to-apples we QX others. lays the holidays we that are an we about we that that QX discounting talked margins, two the is Again,

should we're So that items of see driver the then we out that about very as that. before seasonal that nature. be in being Illinois other the as you And talked said, and that would we've coming

should on So in both resolved QX. of their those way items be

Andrew Semple

Great.

Jersey. the question next here adult sales Just in on New use

then you there? in expectations expect above Neptune of if And in you convert the to any week wondering, the came demand surprises Just whether the perhaps had adult the program could you secondly, if store to that timeline use? first to Township clarify the

George Archos

that a product say, biggest like surprise the then Jersey, change about waiting them But excited it much week. were making in happen, et on SKU change, we count We week, that There's away fire they needs coming turning it. executed. country, is, very in to okay, teams across The after New that one of we cetera, labeling work into time sure had made for and lot so from one I'm in were in we it et cetera. nonetheless, go

great creating continue will people only a did goes as and that's time better for job, we will jobs in bring SKUs, So exactly the we'll and what local more New Jersey, community. happened we there new on get to it introduce on online and

was that great. all So

throughput, As to of most in people over we happy of I gear anticipate press about multiple which use don't more smiles lot in know efficiency very about we there what's happening. go, bigger launch right? we get a markets faces lot all more up ready A just there lot it. and Jersey happens use we're we'll Jersey around is bright as far couldn't adult though better. and and come still of as sales other a New and day anticipate New Right known like markets it, it's So to even month this and bigger adult as be and for media that's day people now, and and good be to be

our we hearing. couple in out when, have commission if store. did be not will should to of the in in that we obviously, it so excited zoning, community, if, should it's there's across a June, We we're hopefully and happen, Jersey Neptune, May there New hurdles a get pay there, a open hopefully it's just an but about have next we end start of June, by not very but

Andrew Semple

you Thank Great. much. very

George Archos

Thank you.

Operator

Thank you.

We have the line of Kenric the Capital comes ATB question next from Markets. Tyghe of

Your line is now open.

question. your ask may You

Kenric Tyghe

those select all markets, that on could fairly too with the concentration, this broad-based sort guide is concentrated digits respect of macro decrease, your it that pressures mid-single a you is a we're the and you. George, little and Good the specific related market at all first what Thank more if in with speak are? there with to point quarter familiar is pressures of to or perhaps morning.

George Archos

this March seeing macro specific the market. every side. for across which is the on we country. you it We're more for it, same wasn't And take right, across in just country, obviously then is thing with again, will exciting know the a – it but was to market let we we about us. It’s find up If

thing a broader a is Verano. So to specific it more of trend and this is

Kenric Tyghe

on any Great. the then dislocation a re-org, benefits want what we would provide can a and you beyond, any the that question, likely are in you sort the to to Thanks. of just side cross-reference. healthy XXXX flip and And to clearly quarter? them then there these of payback additional as was be have around useful. further speak And expected I pretty here, rationale that color taken and and being, or color and strategic 'XX decisions to look created expect made

George Archos

Kenric. I exactly you said there. catch what didn't clarify the you Can first part

Kenric Tyghe

structure sort and Sorry, also repositioning to quarter expect re-org and Can you and QX and sort of you in of changes the were, in the the in your what with cetera. the wise out you that's on brand undertook setup, one assumes to of et Those then play new from speak quarter, credits merits, sort dislocations. and benefits cost disrupt-able had like et regional the that cetera? the were and dislocation

George Archos

everything every started it out supply really all over cetera. inventory quite as issues to But chain wasn't have these year QX, happen rolling I much. products has for of to some et regulatory launches This there is something XXXX, mean to those by far body earlier order place, something this get is year. everything or we gear we inventory, of in up, in, get in been state will had this the build buildup you takes as obviously some be every time the is brands in dislocation you in rebranding up it which new occur to there approved

on the on there's issues and across the packaging the side brought construction board. side, so many of supply had also, we we in a chain quite everything because inventory that on And on just and we bit

So in we stored up quite a XXXX. bit

of XXXX, for, have too just but again in many curve, what we ahead efficiencies. which issues that's that's known operational and just is getting the we're So don't

Kenric Tyghe

enough. Fair back Thank queue. in you. I'll get

Operator

you. Thank

comes from We the line of of Canaccord next the Bottomley question Matt have Genuity.

Your line is now open.

ask You may your question.

Matt Bottomley

Yeah. all Good questions. taking morning. for these Thanks

you know understanding to one-time the look just how of in et pressures, to to Just back at profile. Maybe prepared it, a have basis. able to any way that I Q&A bit I'm curious in are the profiles guys quantification the go much another and sequential in remarks the wanted little changed treatment Again, talked cetera. SG&A, on this you is, margin provide just change accounting there your about is a some pricing

mentioned factors as fundamental accounting other just that your at just versus that some not business mentioned? GAAP. there to in I'm adjusted under calculation all you cost well to the those EBITDA had sold into So are of carve differences goods out U.S. and for as you of things some the were trying amortization related went

Brett Summerer

Yeah. Sure.

stuff if depreciation think that mean profile, I are our adjustments that. like about the all EBITDA anyway and So, you margin about things essentially eliminated because we that's talked

the which and from our non-issue it's step-ups in lack whatnot discounting cases, anything replace. kind an So and From perspective. in QX, should from a the impact. perspective, in numbers is the both so that And very seeing of gross a of strength it EBITDA if minimal margin so stuff QX, like it's we're perspective, very, margin and

Matt Bottomley

then, get unknowns get And a of on sort And wanted your gave might turn just might initiatives touch things given have, Understood. capital of the the range lot approved. CapEx. to for Okay. that you and wide a so on of guys the just you when positioning, things just

given are soon. capital anytime sufficiency the equity where your your you’ve upside just terms the you that in the and of have that facility, Just internally that that, existing to credit tap want done of in partner markets

Just forward. capital. going to your level of comfort for these initiatives secure and your ability

George Archos

Sure.

a fully positive. only flow flow free cash We’re are right? the high there’s few cash a very that business, industry, In people

right. perspective, them. partner a We’re one for we From that, don’t a of capital need

our Our for in available optionality to comes M&A partnership open keep and us.

Matt Bottomley

guys. Thanks Okay.

George Archos

Thanks, Matt.

Operator

you. Thank

We have of Research. the next of question comes from line Spencer the Hanus Wolfe

is now line open. Your

your You question. may ask

Spencer Hanus

to adjacent think first I in much comment able Can you back you'll and If state? morning. Good that stores moment. the volume store guys to in and for shift ticket a transaction six then the seen do the be you your through days, how push you on just could have the

George Archos

numbers. to but on really we Both, great enough comment questions, transactions yet and basket seen size haven’t

we’ll talk Not to of that right call, we that. keep to that here more on [Multiple QX ourselves. now want give So but about enough kind the to information Speakers]

Spencer Hanus

has there makes Florida you and seeing industry any in Pennsylvania change what pressure standpoint Got on been mix And are XXXX, it. any from comments importance then a saw Totally from then that sense. the in pricing guys? given the of to XQ. from for pricing what you you're the And just start seeing stack,

George Archos

dropped introduce we're market is The line new that a haven't thing of at we done strong a pricing premium tier product in in. but different point, that every anywhere. We only our is really stage of price

is deploying be at very national a on for roll about and that we'll we looking Good-Better-Best higher it's won't prices in out it that point end brand states make introducing is value So that something low and needs. happen, market dropping analysis sure just roll some talked this there going last rollout, market at and by be based throughout just and slowly demand strategy, is will out because time, now, our and price We're the but it mid-tier we'll brands. not we and there year in that the make our a well to multiple which year will we're our quality we're category

Darren Weiss

add lower the times just have few about as to in a not I'll also we've because talked going we're that, holiday And we're discounting lower seasonally to have we already, season.

Spencer Hanus

Thank you. Yeah. Got it.

Operator

Archos? questions turn and CEO now no at conference are over like this you. George Thank to time, There further Archos, I would back the Founder. Mr. to

George Archos

on everyone we XX. revisiting you, to look forward Thank May and

Operator

concludes you Thank call. all conference gentlemen, and this Ladies Thank for you. today's participating.

disconnect. now may You

Verano (VRNOF) 27 Apr 222021 Q4 Earnings call transcript