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VH

Verano Holdings Corp. (VRNOF)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $218.2M, down 8% year-over-year but up 1% sequential; gross margin was 49% and adjusted EBITDA was $62.9M (29% margin) .
  • GAAP net loss ballooned to $(272.7)M due to significant intangible and fixed asset impairments and fair value measurements; without these non-recurring charges, adjusted EBITDA remained resilient .
  • Management introduced 2025 capex guidance of $25–$40M and highlighted operational optimization, product innovation (Essence J’s, Extra Savvy 2g vapes), and expansion in CT/NJ/FL as growth drivers .
  • Comparisons versus Wall Street consensus estimates (S&P Global) were unavailable for this quarter; focus shifts to trajectory (sequential revenue improvement, cost actions) and regulatory catalysts (Ohio adult-use, Virginia entrance, potential Florida adult-use) for stock reaction .

What Went Well and What Went Wrong

What Went Well

  • Sequential revenue stabilization (+1% q/q) amid price compression, with adjusted EBITDA of $62.9M and 29% margin demonstrating operating resilience .
  • Product innovation in fast-growing categories: Essence J’s barrel-style pre-rolls and Extra Savvy 2g vapes gained traction, becoming three of the top five best-selling products in IL Zen Leaf stores since December .
  • Retail/market expansion: completed conversion of 5 CT dispensaries to hybrid adult-use, opened Zen Leaf Mount Holly in NJ (broadening Garden State footprint), and continued FL footprint growth to 80 dispensaries .
  • Quote: “We have a clear vision to harness innovation, automation and differentiation across all parts of the business…” — George Archos, CEO .

What Went Wrong

  • Significant non-cash impairments drove a large GAAP net loss (loss on impairment of intangibles – license & fixed assets $319.5M in Q4), overshadowing otherwise steady operating metrics .
  • Gross profit and margin ticked down versus both prior year and prior quarter given promotional activity and price compression in key markets .
  • SG&A as a percent of revenue remained elevated y/y for FY24 (40%) due to process/technology enhancements and higher salaries tied to store openings and acquisitions; while SG&A improved sequentially in Q4, the annual run-rate reflects heavier cost structure .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Revenue ($USD Millions)$237.2 $216.7 $218.2
Gross Profit ($USD Millions)$117.6 $109.1 $107.5
Gross Margin (%)50% 50% 49%
SG&A ($USD Millions)$85.7 $92.3 $83.7
Adjusted EBITDA ($USD Millions)$73.4 $64.5 $62.9
Adjusted EBITDA Margin (%)31% 30% 29%
Net Loss ($USD Millions)$(77.2) $(42.6) $(272.7)
Net Cash from Operations ($USD Millions)$32.0 $30.0 $44.0
Capital Expenditures ($USD Millions)$10.0 $57.0 $14.0

Notes:

  • EPS not disclosed in the Q4 press release/8-K; company emphasizes net income/loss and adjusted EBITDA frameworks .
  • Estimate comparisons (S&P Global) unavailable this quarter.

Balance Sheet (Selected):

  • Cash & Equivalents: $87.8M (12/31/24) vs $174.8M (12/31/23) .
  • Total Debt (net of issuance costs): $414M (12/31/24) .
  • Working Capital: $160M (12/31/24) .

Segment Breakdown (latest available)

  • The company did not provide Q4 state-level segment revenue detail in the release/8-K. For context, Q3 2024 segmented retail and wholesale contributions by state are shown below:
Segment (Q3 2024)FloridaIllinoisNew JerseyArizonaPennsylvaniaMarylandConnecticutNevadaOhioMassachusettsWest VirginiaVirginiaOtherTotal
Retail Revenue ($USD Thousands)$45,301 $23,926 $19,991 $14,653 $11,266 $11,315 $9,845 $6,828 $8,585 $2,909 $1,899 $4,720 $3,166 $164,404
Wholesale Revenue Net ($USD Thousands)$—$13,373 $13,970 $2,255 $2,544 $4,974 $9,532 $939 $1,904 $1,085 $1,317 $386 $—$52,279

KPIs and Footprint:

  • Operations span 13 states; 153 dispensaries; 15 production facilities; >1.1M sq ft cultivation capacity (as of Q4 and subsequent updates) .
  • FL dispensary count reached 80 (January update) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Organic TrendsQ4 2024“Similar to Q3 2024” directional commentary (no numeric guidance) Actuals delivered (see Financial Results)N/A (context only)
Capital ExpendituresFY 2025None provided prior $25–$40M New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4 2024)Trend
Wholesale account pruningNot highlighted in Q2; Q3 focused on footprint and adult-use rollouts “We are still holding back some accounts…clearing them out. It is getting better.” — management on wholesale discipline Tightening relationships; selective distribution to protect pricing/mix
SKU rationalization & product innovationQ2/Q3 launched Cabbage Club; continued new store/product initiatives Essence J’s pre-rolls and Extra Savvy 2g vapes tapped fastest-growing categories; top sellers in IL Innovation-focus; concentrating on high-velocity SKUs
Retail expansion (CT/NJ/FL)Q2: CT & FL openings; Q3: NJ Mount Holly; Ohio adult-use start CT full conversion to hybrid adult-use; NJ Mount Holly opened; FL footprint raised to 80 Continued footprint optimization and adult-use positioning
Pricing/promotions & marginQ3: price pressure in IL/NJ; temporary FL cultivation shift Q4: increased promotional activity and price compression cited; adjusted EBITDA margin held ~29% Margin resilience amid pricing headwinds
Regulatory catalystsQ2/Q3: Ohio adult-use launch, Florida Amendment 3 support, Virginia entry Ongoing federal rescheduling hopes; leveraging new adult-use markets Medium-term upside drivers
Impairments/GAAP opticsNot a Q2/Q3 driver (smaller charges) Large Q4 impairments drove GAAP net loss $(272.7)M One-off, non-cash impacts; focus on adjusted metrics

Management Commentary

  • “I am tremendously proud of our team’s resilience in 2024…we laid the foundation to strengthen and optimize our core business to pursue long-term growth.” — George Archos, CEO .
  • “Looking ahead, we have a clear vision to harness innovation, automation and differentiation…in pursuit of growth and…build Verano into a cannabis powerhouse in 2025 and beyond.” — George Archos, CEO .
  • On wholesale discipline: “We are still holding back some accounts. We are clearing them out. It is getting better.” — Management, Q4 call .
  • Q4 operational highlights include product extensions (BITS Dragonfruit LOL gummies, Essence J’s pre-rolls, Extra Savvy 2g vapes) aligned to fastest-growing categories .

Q&A Highlights

  • Themes: wholesale account management and door expansion; SKU rationalization vs innovation pipeline; trajectory of wholesale line into 2025; cost optimization and margin sustainability .
  • Participants included AGP, Beacon Securities, Roth, and Canaccord, focusing on distribution discipline and growth vectors .
  • Management clarified continued pruning of certain third-party accounts to protect mix/pricing, with improvement noted, and emphasized innovation-driven sell-through .

Estimates Context

  • S&P Global consensus estimates for Q4 2024 EPS and revenue were unavailable during this analysis window; therefore, vs-consensus comparisons are not presented.
  • As a result, we anchor performance on company-reported actuals and sequential/YoY trends .
  • Expect estimate revisions to consider: price compression impacts, wholesale discipline, impairment optics on GAAP vs non-GAAP, and 2025 capex guidance .

Key Takeaways for Investors

  • Sequential stabilization with adjusted EBITDA margin near 29% underscores operating resilience despite price pressure; watch mix shift and promo cadence in IL/NJ/FL .
  • Large non-cash impairments drove Q4 GAAP optics; the adjusted EBITDA framework remains the more informative lens for ongoing performance .
  • Product innovation in high-growth categories and selective wholesale relationships are central to 2025 margin strategy; transcript commentary supports continued pruning and SKU focus .
  • 2025 capex guidance ($25–$40M) indicates disciplined investment; monitor deployment into capacity, automation, and retail enhancements .
  • Regulatory tailwinds (Ohio adult-use underway; Virginia entry; potential Florida adult-use) provide medium-term growth optionality; footprint positions Verano to capitalize .
  • Near-term trading: impairment headline risk vs. underlying margin resilience; catalysts include product sell-through, CT/NJ/FL retail momentum, and any rescheduling developments .
  • Medium-term thesis: footprint breadth, brand innovation, and operational optimization can offset pricing compression, with disciplined capex and wholesale strategy supporting cash generation .