Vireo Growth Inc. (VREOF)·Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 GAAP revenue was $48.1M, up 91.4% YoY, driven by the closing of WholesomeCo (UT), Proper Brands (MO), and Deep Roots Harvest (NV) during the quarter; pro forma revenue was $90.7M and pro forma adjusted EBITDA $23.2M, both in line with prior guidance .
• Versus Wall Street: revenue beat S&P Global consensus ($25.0M*) by 92% and Q2 EBITDA (S&P’s EBITDA*) missed consensus ($6.9M*) given non‑cash inventory step‑up and transaction costs; adjusted EBITDA (company non‑GAAP) was $13.25M .
• Gross margin compressed: GAAP gross margin 42.5% versus 54.0% YoY and 50.6% in Q4 2024, reflecting non‑cash inventory step‑up ($4.15M) and a termination fee in COGS, partially offset by scale from acquisitions .
• Balance sheet catalyst: completed a $153M refinancing post‑quarter, lowering cost of capital (first‑lien 1‑month SOFR+4% ~8.3%) and expected to reduce annual interest expense by >$10M; cash ended Q2 at $106.2M .

What Went Well and What Went Wrong

What Went Well

• Closed three pending mergers (WholesomeCo, Proper Brands, Deep Roots) and expanded active operations to six states; management emphasized “industry leadership” post‑closing .
• Pro forma results met prior ranges: “pro forma revenue and pro forma adjusted EBITDA…$90.7M and $23.2M” in line with communicated expectations; CEO: “position us well for continued acquisitive growth” .
• Refinancing strengthened liquidity and cost of capital: $120M first‑lien + $33M second‑lien and new $10M convertible; expected >$10M annual interest savings and >$100M cash on closing .

Quote: “Our second quarter results were in line with the expectations…We believe that our recently completed merger transactions and refinancing event position us well for continued acquisitive growth and industry leadership.” — CEO John Mazarakis .

What Went Wrong

• GAAP gross margin fell to 42.5% (−1,150 bps YoY) due to non‑cash inventory amortization ($4.15M) and a termination fee in COGS, weighing on GAAP profitability despite strong sales .
• GAAP operating income negative (−$2.0M) versus +$5.8M YoY, reflecting transaction expenses ($4.73M) and stock‑based comp ($4.15M) in the quarter .
• State mix showed softness in legacy markets: retail revenue declined in MN (−11% YoY) and NY (−32% YoY) within the quarter’s retail breakdown, though offset by new UT/NV/MO contributions .

Financial Results

Consolidated actuals (oldest → newest)

Notes: “EBITDA” and “Adjusted EBITDA” per company’s non‑GAAP reconciliations .

Actual vs S&P Global consensus (oldest → newest)

S&P Global disclaimer: Values retrieved from S&P Global. Consensus EPS was unavailable; revenue # of estimates: Q4 2024 = 1, Q2 2025 = 1*.

Highlights:

• Revenue: Beat in Q2 (actual $48.1M vs $25.0M* consensus) .
• EBITDA: Miss relative to S&P EBITDA consensus in Q2, reflecting quarter‑specific non‑cash and transaction items; company’s adjusted EBITDA was $13.25M .

State-by-state revenue (Q2 2025)

KPIs and balance sheet items

Non‑GAAP adjustments (Q2):

• Non‑cash inventory adjustments $4,152,108 and Grown Rogue termination fee $266,667 in COGS .
• Transaction expenses $4,729,444 and stock‑based compensation $4,150,630 .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Our second quarter results were in line with…expectations…with pro forma revenue and pro forma adjusted EBITDA of $90.7 million and $23.2 million…Our…merger transactions and refinancing…position us well for continued acquisitive growth and industry leadership.” — CEO John Mazarakis .
• “We believe our liquidity position will help support improved access to capital in the future…we expect to remain both patient and opportunistic…” — CFO Tyson Macdonald (FY24 release) .

Q&A Highlights

• Minnesota adult‑use: Management expects initial supply to come from Vireo and GTI; preparing with state for H2 launch, limited by eight‑store footprint .
• New York divestiture: Committed buyer pending regulatory approval; aim to be largest indoor flower supplier via partner network .
• Arches platform: Delivery being deployed in all permitted states; continued investment given belief in potential .
• Capital priorities & M&A: Engaging in M&A discussions across distressed and mature assets; priority remains organic growth and unit‑level FCF .

Estimates Context

• Revenue: Major beat vs S&P consensus ($25.0M*) driven by consolidation of UT/NV/MO operations and wholesale gains in MD/NY .
• EBITDA: Miss vs S&P EBITDA consensus ($6.9M*) on S&P’s EBITDA basis due to non‑cash inventory step‑up ($4.15M), termination fee ($0.27M), transaction costs ($4.73M), and stock‑based comp ($4.15M); company’s Adjusted EBITDA was $13.25M .
• EPS consensus unavailable for Q2; reported diluted EPS was $(0.03) .

S&P Global disclaimer: *Values retrieved from S&P Global.

Key Takeaways for Investors

• Revenue momentum is structural: consolidation added three growth markets; state mix now includes UT, NV, MO with strong retail and wholesale contributions; this drove the significant revenue beat .
• Expect gross margin normalization: Q2 margin compression was largely non‑cash (inventory step‑up) and transaction‑related; margins should improve as integration synergies flow and step‑up amortization rolls off .
• Refinancing is a tangible earnings lever: first‑lien SOFR+4% and second‑lien prime+5.5% support >$10M annual interest savings; de‑risked liquidity with $106.2M cash .
• Near‑term catalysts: Minnesota adult‑use launch (H2), New York asset sale approval, expanded Arches delivery — collectively potential stock drivers .
• Watch price dynamics in NV/MO and legacy MN/NY softness; management is leaning on scale and cost controls to offset deflation and hemp competition .
• Non‑GAAP lens matters: Adjusted EBITDA more closely reflects operating performance post‑M&A, while GAAP skewed by one‑time and non‑cash items; use both lenses to assess sustainability .
• Pro forma delivery on guidance builds credibility: Q2 pro forma revenue and adjusted EBITDA met guidance, reinforcing execution on integration .