Verano Holdings Corp. (OTC: VRNOF) reported more than $200 million in net losses despite pulling in record revenue for 2022.
The Chicago-based multistate cannabis operator posted financial results for the fourth quarter and full-year 2022.
Revenue hit $226 million during the quarter, a 7% rise versus $211 million the previous year was mostly driven by strong sales in New Jersey and new stores in Florida. However, revenue dropped 1% from $228 million sequentially.
Verano’s co-founder and CEO George Archos expressed pride in the company’s 2022 financial results, citing record revenue and impressive margin profiles.
He noted the addition of more than 30 dispensaries across different core markets since the end of 2021, expansion of the company’s brand offerings, and the launch of adult-use sales in Connecticut and New Jersey, where its products sell for more at retail.
Archos also mentioned the company’s debt refinancing and investments plays in lieu of rising rates.
“Our strategy since inception has been focused on establishing a self-sustaining business regardless of macroeconomic factors and legislative reforms, and we will continue to stay engaged with policymakers and be ready to take advantage of any future reforms at the federal level,” Archos said in a statement.
Profits during the period were $103 million, or 46% of income, lower than $109 million, or 52% of income, the previous year. The decrease was due to more discounts and higher costs from expansion.
Selling, general and administrative costs (SG&A) during the quarter were $81 million or 36% of income, lower than $82 million or 39% of income in the same quarter in 2021. The decrease was mostly due to lower stock-based compensation and a decrease in merger and acquisition activities, offsetting higher costs from extra stores.
Despite the positive sales trajectory, the company recorded a net loss of $216 million, much higher than the $7 million loss in the same period in 2021. The big rise in losses was due to a $229 million charge, mainly tied to the Arizona cultivation license and Pennsylvania and Arizona retail reporting units.
The impairment charge was related to intangible assets (assets that are not physical in nature) connected to the Arizona cultivation license and Pennsylvania and Arizona retail reporting units.
Verano reassessed the value of the intangible assets and found them to be worth much less than the previously reported value.
For the full year of 2022, the company’s revenue grew by 19%, reaching $879 million versus $738 million in 2021. New adult-use sales in New Jersey and new stores in Florida were, again, the primary drivers of the growth.
Profits during the whole year rose to $423 million or 48% of income, up from $331 million or 45% of income in 2021. Growth in profits was mostly driven by higher incomes and the lack of inventory step-up.
The net loss during 2022 was $269 million, much higher than the net loss of $58 million in 2021. The steep rise was mainly due to the Pennsylvania and Arizona impairment charges.
Over the year, Verano refinanced a $350 million credit facility, opened three new MÜV dispensaries in Florida, launched a new brand and product line called BITS, and relocated a Zen Leaf dispensary in Illinois.
The company also happens to be entangled in a lawsuit after it backed out of its planned $413 million all-stock deal with Goodness Growth.
In January, the company had Connecticut’s lieutenant governor visit its Zen Leaf dispensary in Meriden to “commemorate the end of cannabis prohibition in Connecticut” and the state’s adult-use sales rollout. The company earlier this month received approval for six equity joint venture dispensaries in the state.
Verano currently operates in 13 states with 125 dispensaries and 14 cultivation and processing facilities.
By the end of 2022, the company’s current assets stood at $318 million, including $85 million in cash and cash equivalents. The company had a working capital deficit of $68 million and a total debt of $413 million, net of issuance costs.
“In 2023, we will consider selective opportunities to further expand our footprint, focus on free cash flow generation, and leverage our leading position in markets that are poised for adult use transition in the near future, including Maryland,” Archos said.