Vireo Health Announces First Quarter 2021 Financial Results
— Q1 GAAP revenue of $13.2 million increased 9% compared to Q1 2020 —
— Excluding former PA subsidiaries, Q1 revenue increased 30% YoY and 14% sequentially —
— Gross profit margin of 42.6% reflects improving efficiency of operations across core markets —
MINNEAPOLIS, May 14, 2021 /PRNewswire/ — Vireo Health International, Inc. (“Vireo” or the “Company”) (CSE: VREO; OTCQX: VREOF), the leading physician-led, science-focused multi-state cannabis company, today reported financial results for its first quarter ended March 31, 2021. All currency figures referenced in this press release reflect U.S. dollar amounts.
“Our first-quarter results are consistent with the trends from last quarter. We continued to see double-digit sequential revenue growth excluding our former Pennsylvania subsidiaries, and substantial improvement in our gross margin due to our focus on operational efficiencies,” said Chairman and Chief Executive Officer, Kyle Kingsley, M.D. “Wholesale performance in Maryland was temporarily impacted by the move to our recently-completed 110,000 square foot cultivation facility in Massey, but our increased scale in this market will drive stronger revenue growth and profitability in the second half of the year.”
The phase two expansion projects we discussed last quarter in Arizona and Maryland are underway, and our teams are now aggressively focused on finalizing our expansion plans in New York. The recent passage of adult-use legislation in New York and New Mexico has improved our outlook for both of these markets, and further potential for regulatory change at local and federal levels could meaningfully impact the trajectory of our performance.
Chairman and Chief Executive Officer, Kyle Kingsley, M.D.
We are excited by all the growth opportunity we see across our core markets, and look forward to sharing more details on our long-term outlook at our upcoming Investor Day events which we plan to announce in the coming weeks.
First Quarter Business Highlights
- Total revenue of $13.2 million increased 8.8 percent year-over-year. Excluding results from the Company’s former subsidiaries in Pennsylvania, revenue increased 29.8 percent compared to Q1 2020.
- Gross profit increased by $2.3 million to $5.6 million, or 42.6 percent of sales as compared to $3.3 million, or 27.0 percent of sales in Q1 2020.
- During the quarter, the Company closed on its previously disclosed purchase of four cannabis licenses in Nevada. These licenses allow for the cultivation and production of cannabis products for both medical and adult-use purposes.
- The Company also completed and received regulatory approval of its 110,000 sq. ft. cultivation facility in Massey, Maryland, and opened its first retail dispensary in Maryland in the City of Frederick which brought its total number of operational dispensaries to 16.
- On March 25, 2021, the Company closed on the first tranche of a previously-announced senior secured, delayed draw term loan with Chicago Atlantic Group, an affiliate of Green Ivy Capital, and a group of lenders. The first tranche of $23.0 million, net of all fees and closing costs, will be utilized to support the Company’s ongoing growth initiatives and working capital requirements.
- On March 31, the Company closed on the previously announced transaction to divest its former affiliate, Ohio Medical Solutions, Inc. In connection with the closing of the transaction, Vireo received cash proceeds of $1.15 million, and was relieved of $3.6 million in right of use liabilities affiliated with lease obligations.
First Quarter Financial Summary
Total revenue was $13.2 million in the first quarter, an increase of 8.8 percent as compared to Q1 2020, including the Company’s former subsidiaries in Pennsylvania. Excluding contributions from Pennsylvania, revenue increased 29.8 percent. Retail revenue excluding Pennsylvania increased 33.7 percent to $10.4 million in Q1 2021 and reflected growth in each of the Company’s retail markets. Wholesale revenue, excluding Pennsylvania increased by 17.4 percent to $2.8 million, driven by strong growth in the Arizona market.
Gross profit was $5.6 million, or 42.6 percent of revenue, as compared to gross profit of $3.3 million or 27.0 percent of revenue in Q1 last year. The improvement in gross profit compared to the prior year was driven by stronger performance in Minnesota where the Company recently opened four additional Green Goods™ retail dispensaries, as well as higher throughput across all markets which led to lower fixed costs per unit.
Total operating expenses in the first quarter were $10.7 million, an increase of $0.9 million or 9.8 percent as compared to $9.8 million in the first quarter of 2020. The increase in total expenses was attributable to an increase in selling, general and administrative expenses of $1.1 million. The increase in SG&A expenses was driven by operational expansion in Arizona, Maryland, and New Mexico, as well as the addition of four new retail dispensaries in Minnesota.
Total other expenses were $373,842 during Q1 2021, a reduction of $219,766 compared to $593,608 in Q1 2021. The decrease was primarily attributable to the gain on the divestiture of Ohio Medical Solutions, Inc. during the quarter.
EBITDA, as described in accompanying disclosures and footnotes, was a loss of $3.6 million during Q1 2021, compared to a loss of $5.0 million in Q1 2020. Adjusted EBITDA was a loss of $1.8 million in Q1 2021, as compared to a loss of $3.1 million in Q1 2020. Please refer to the Supplemental Information and Reconciliation of Non-GAAP Financial Measures at the end of this press release for additional information.
Net loss in Q1 2021 was $7.0 million, as compared to a net loss of $7.5 million in Q1 2020. The improvement in net loss was primarily the result of the gain on the divestiture of the Company’s former affiliate, Ohio Medical Solutions, Inc.
On April 14, the Company announced the completion of a planned expansion of its cultivation and processing facility in New Mexico, which is now operating following the receipt of regulatory approval. The Company also announced that two recently completed retail dispensaries in Albuquerque and Las Cruces are ready to open, pending regulatory approval. Once approved, Vireo will have four operating dispensaries in the state of New Mexico.
On April 29, the Company announced the launch of ground medical cannabis flower in the state of New York. The ground flower line is being sold in 3.5-gram and 7-gram jars and will be expanded to feature indica, sativa, and hybrid strains such as Killer Kush, Wedding Cake, and a Kosher-approved Tangie Kush. The new line of ground flower will be available at all four of the Company’s dispensaries in New York and via Home Delivery.
Balance Sheet and Liquidity
As of March 31, 2021, the Company had 125,196,702 equity shares issued and outstanding on an as-converted basis, and 153,577,058 shares outstanding on an as-converted, fully diluted basis.
As of March 31, 2021, total current assets were $58.6 million, including cash on hand of $40.6 million. Total current liabilities were $24.1 million, with $2.0 million in debt due within 12 months.
Conference Call and Webcast Information
Vireo Health management will host a conference call with research analysts today, Friday, May 14, 2021 at 8:30 a.m. ET (7:30 a.m. CT) to discuss its financial results for its first quarter ended March 31, 2021. Interested parties may register to attend the conference call via the following link: http://www.directeventreg.com/registration/event/2254847.
Upon registration, each participant will be provided with call details and a registrant ID for Vireo’s conference ID number 2254847. A live audio webcast of this event will also be available in the Events & Presentations section of the Company’s Investor Relations website at https://investors.vireohealth.com and will be archived for one year.
About Vireo Health International, Inc.
Vireo Health International, Inc. is a physician-led cannabis company focused on bringing the best of technology, science, and engineering to the cannabis industry. Vireo manufactures proprietary, branded cannabis products in environmentally friendly facilities, state-of-the-art cultivation sites and distributes its products through its growing network of Green Goods™ and other retail locations and third-party dispensaries. Vireo’s team of more than 450 employees, led by scientists, engineers, and cultivation experts, is focused on efficiency and the creation of best-in-class products, while driving scientific innovation within the cannabis industry and developing meaningful intellectual property. Today, Vireo is licensed to grow, process, and/or distribute cannabis in eight markets and operates 16 dispensaries nationwide. For more information about Vireo Health, please visit www.vireohealth.com.
Additional information relating to the Company’s first quarter 2021 results will be available on EDGAR and SEDAR later today. Vireo refers to certain non-GAAP financial measures such as Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and adjusted EBITDA (defined as earnings before interest, taxes, depreciation, amortization, less certain non-cash equity compensation expense, one-time transactions, and other non-recurring non-cash items. These measures do not have any standardized meaning and may not be comparable to similar measures presented by other issuers. Please see the Supplemental Information and Reconciliation of Non-GAAP Financial Measures at the end of this news release for more detailed information regarding non-GAAP financial measures.
Reconciliation of Non-GAAP Financial Measures
EBITDA and Adjusted EBITDA are non-GAAP measures and do not have standardized definitions under GAAP. The following information provides reconciliations of the supplemental non- GAAP financial measures, presented herein to the most directly comparable financial measures calculated and presented in accordance with GAAP. The Company has provided the non- GAAP financial measures, which are not calculated or presented in accordance with GAAP, as supplemental information and in addition to the financial measures that are calculated and presented in accordance with GAAP. These supplemental non- GAAP financial measures are presented because management has evaluated the financial results both including and excluding the adjusted items and believe that the supplemental non- GAAP financial measures presented provide additional perspective and insights when analyzing the core operating performance of the business. These supplemental non- GAAP financial measures should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented.
Reconciliation of Net Loss to EBITDA and Adjusted EBITDA