Verano Hits Record Revenue of $938 Million in 2023

CHICAGO, Feb. 29, 2024 – PRESS RLEASE – Verano Holdings Corp., a leading multistate cannabis company, announced its financial results for the fourth quarter and full year ended Dec. 31, 2023, which were prepared in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP).

The company’s fourth quarter and full year 2023 financial sheet can be found here.

Fourth Quarter 2023 Financial Highlights

• Revenue of $237 million, an increase of 5% year-over-year, and decrease of 1% versus the prior quarter.
• Gross profit of $118 million or 50% of revenue.
• SG&A expense of $86 million or 36% of revenue.
• Net loss of $(73) million or (31)% of revenue.
• Adjusted EBITDA² of $73 million or 31% of revenue.
• Net cash provided by operating activities of $32 million.
• Capital expenditures of $10 million.
• Free cash flow¹ of $23 million.

Full Year 2023 Financial Highlights

• Revenue of $938 million, an increase of 7% year-over-year.
• Gross profit of $475 million or 51% of revenue.
• SG&A expense of $332 million or 35% of revenue.
• Net loss of $(113) million or (12)% of revenue.
• Adjusted EBITDA² of $305 million or 32% of revenue.
• Net cash provided by operating activities of $110 million.
• Capital expenditures of $36 million.
• Free cash flow¹ of $73 million.

Management Commentary

“I'm incredibly proud of our performance in 2023, highlighted by key wins across all aspects of the business," Verano founder and CEO George Archos said. "As excitement and anticipation builds in the industry, 2024 has the potential to be a game-changing year, and Verano is well positioned to continue capitalizing on growth opportunities both in the current regulatory environment and from any state or federal reform. While we’ve never been dependent on legislation to drive sustained growth, with adult use imminent in Ohio, on the horizon in Florida and Pennsylvania, and the growing anticipation of a federal rescheduling decision, there is limitless potential for Verano. I’m thankful for all that our team accomplished in 2023, and believe the sky is the limit for what we can achieve in 2024 and beyond.”

Fourth Quarter 2023 Financial Overview

Revenue for the fourth quarter 2023 was $237 million, up 5% from $226 million for the fourth quarter 2022, and down 1% from $240 million for the third quarter 2023. The increase in revenue for the fourth quarter 2023 compared to the fourth quarter 2022 was driven primarily by strength from wholesale adult-use sales in New Jersey, in addition to growth in Maryland and Florida retail.

Gross profit for the fourth quarter 2023 was $118 million or 50% of revenue, up from $103 million or 46% of revenue for the fourth quarter 2022, and down from $133 million or 55% of revenue for the third quarter 2023. The increase in gross profit for the fourth quarter 2023 compared to the fourth quarter 2022 was driven primarily by increased vertical mix and revenue growth.

SG&A expense for the fourth quarter 2023 was $86 million or 36% of revenue, up from $81 million or 36% of revenue for the fourth quarter 2022, and flat with $86 million or 36% of revenue for the third quarter 2023.

Net loss for the fourth quarter 2023 was $(73) million, or (31)% of revenue, versus a loss of $(216) million in the fourth quarter 2022, and $(18) million for the third quarter 2023. The decrease in net loss for the fourth quarter 2023 compared to the fourth quarter 2022 was due to a $229 million impairment charge in the prior year period. Excluding the impacts from impairments, net loss for the fourth quarter 2023 was primarily driven by the increase in provision for income taxes as the company increased income from operations versus the fourth quarter 2022.

Adjusted EBITDA² for the fourth quarter 2023 was $73 million or 31% of revenue.

Net cash provided by operating activities for the fourth quarter 2023 was $32 million, up from $29 million for the fourth quarter 2022.

Capital expenditures for the fourth quarter 2023 were $10 million, up from $9 million for the fourth quarter 2022.

Free cash flow¹ for the fourth quarter 2023 was $23 million, up from $20 million for the fourth quarter 2022.

Full Year 2023 Financial Overview

Revenue for full year 2023 was $938 million, up 7% from $879 million for full year 2022. The increase in revenue for full year 2023 compared to full year 2022 was driven by a full year's adult-use contribution from New Jersey in addition to adult-use launches in Connecticut and Maryland.

Gross profit for full year 2023 was $475 million or 51% of revenue, up from $423 million or 48% of revenue for full year 2022. The increase in gross profit for full year 2023 compared to full year 2022 was driven primarily by increased vertical mix and revenue growth.

SG&A expense for full year 2023 was $332 million or 35% of revenue, down from $357 million or 41% of revenue for full year 2022. The decrease in SG&A expense was driven primarily by a decrease in stock-based compensation.

Net loss for full year 2023 was $(113) million, or (12)% of revenue, down from $(269) million for full year 2022. The decrease in net loss for full year 2023 compared to the full year 2022 was due to a $229 million impairment charge in the prior year period. Excluding the impacts from impairments, net loss for the full year 2023 was primarily driven by the increase in provision for income taxes as the company increased income from operations versus the full year 2022.

Adjusted EBITDA² for full year 2023 was $305 million or 32% of revenue.

Net cash provided by operating activities for full year 2023 was $110 million, up from $94 million for full year 2022.

Capital expenditures for full year 2023 were $36 million, down from $119 million for full year 2022.

Free cash flow¹ for full year 2023 was $73 million, up from $(25) million for full year 2022.

2024 Guidance

The company issued first quarter 2024 revenue guidance of a 5%-7% decline versus the prior year period as the growing dispensary count in New Jersey continues to normalize.

Fourth Quarter 2023 Operational Highlights

• Expanded the company's retail footprint across key markets by opening the following new dispensaries:
• MÜV locations in Apopka, Satellite Beach and North Miami-Biscayne, Florida; and
• Zen Leaf Newington, a social equity joint venture dispensary, raising the company's Connecticut retail footprint to four locations statewide.
• Commenced trading on Cboe Canada, elevating the company's capital markets strategy and presence on a senior exchange with a global platform that spans 26 markets.
• Introduced Savvy Threads, a non-plant-touching e-commerce extension of the company's Savvy brand featuring limited-edition, artist-driven streetwear available for sale and delivery to all 50 states.
• Announced the company's participation in a coalition of industry stakeholders as a plaintiff challenging the legality of the federal government's intervention in legal intrastate cannabis commerce under the Commerce Clause and Controlled Substances Act.
• Launched reimagined (the) Essence brand combining bespoke graphic art and terpene-rich full-spectrum products, including the new (the) Essence Nectar line, across core markets.

Subsequent Operational Highlights

• Expanded the company's retail footprint across key markets by opening the following new dispensaries:
• MÜV Yulee in Northeast Florida, raising the company's current statewide retail footprint to 74 dispensaries; and
• in Pennsylvania, opened the company's largest nationwide dispensary, Zen Leaf Abington, and Zen Leaf Norristown—both situated in prime Philadelphia area locations—elevating Verano's statewide footprint to 18 affiliated dispensaries.
• Current operations span 13 states, comprised of 138 dispensaries and 14 production facilities with more than 1 million square feet of cultivation capacity.

Balance Sheet and Liquidity

As of Dec. 31, 2023, the company’s current assets were $394 million, including cash and cash equivalents of $175 million. The company had a working capital deficit of $(18) million and total debt, net of issuance costs, of $446 million.

The company’s total Class A subordinate voting shares outstanding was 344,074,096 as of Dec. 31, 2023.

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¹ Free cash flow is a non-U.S. GAAP financial measure. It is derived from U.S. GAAP net cash provided by operating activities, which is also its most directly comparable U.S. GAAP financial measure, and is defined in this news release in the section below titled “Non-U.S. GAAP Financial Measures.” The reconciliation of free cash flow to U.S. GAAP net cash provided by operating activities is set forth below in the tables included in this news release.
² Adjusted EBITDA is a non-U.S. GAAP financial measure. It is derived from EBITDA, another non-U.S. GAAP financial measure, and is defined in this news release in the section below titled “Non-U.S. GAAP Financial Measures.” The most directly comparable U.S. GAAP financial measure to adjusted EBITDA is net income (loss). The reconciliation of adjusted EBITDA to U.S. GAAP net income (loss) is set forth below in the tables included in this news release.