Vireo Growth Inc. Announces Second Quarter 2024 Results

– Q2 2024 revenue of $22.5 million excluding discontinued operations and NY increased 42.5% year-over-year –

– Operating income of $5.8 million driven by consistent execution in core markets –

– Recently extended credit facility supports the continued execution of Vireo’s CREAM & Fire Strategy –

MINNEAPOLIS, Aug. 06, 2024 (GLOBE NEWSWIRE) — Vireo Growth Inc. (formerly Goodness Growth Holdings) (“Vireo” or the “Company”) (CSE: VREO; OTCQX: VREOF), a cannabis company committed to providing safe access, quality products and great value to its customers, today reported financial results for its second quarter ended June 30, 2024. Key financial results are presented below in summary form with supporting commentary and discussion from management of certain key operating metrics which the Company uses to judge its performance. All currency figures referenced herein are denominated in U.S. dollars.

Summary of Key Financial Metrics                      
Three Months Ended   Six Months Ended
  June 30,   June 30,
US $ in millions 2024   2023   Variance   2024   2023   Variance
                       
GAAP Revenue $25.1   $20.2   24.3%   $49.2   $39.3   25.2%
Revenue (excluding discontinued operations & NY) $22.5   $15.8   42.5%   $43.6   $30.4   43.3%
GAAP Gross Profit $13.6   $9.3   45.2%   $25.8   $18.9   36.8%
Gross Profit Margin 54.0%   46.2%   780 bps   52.4%   48.0%   440 bps
SG&A Expenses $7.6   $8.1   -6.1%   $14.6   $15.2   -3.9%
SG&A Expenses (% of Sales) 30.1%   39.9%   980 bps   29.7%   38.7%   900 bps
Operating Income (Loss) $5.8   ($1.0)   NM   $10.6   ($0.7)   NM
Operating Income Margin 23.1%   (5.2%)   2,820 bps   21.5%   -1.7%   2,320 bps
EBITDA* $8.1   $2.8   185.7%   $14.9   $4.3   NM
EBITDA Margin* 32.4%   14.1%   1,830 bps   30.3%   10.9%   1,940 bps
* 2Q24 EBITDA includes a $1.6 million gain on Grown Rogue warrants which are marked to market at each period end        
NM Not Meaningful                      
                       

Management Commentary

Chief Executive Officer Josh Rosen commented, “Our second quarter results reflect continued solid performance across our core markets and the ongoing commitment to executing our CREAM & Fire strategy. We were pleased to recently activate recreational wholesale sales in New York after receiving our ROND license in July and are continuing to work through our ongoing divestiture process. Our improved operating and financial performance enabled us to secure a 30-month extension of our credit agreement last week, although we still have significant room for improvement on credit metrics as we continue navigating through the challenging circumstances caused by what we believe was the wrongful termination of our merger agreement with Verano.”

Amber Shimpa, President and CEO of Vireo Health of Minnesota commented, “Our core market key performance indicators reflect more stable year-over-year comparisons as well as normal variances in harvest schedules and weather conditions, but we’ve been pleased with recent improvements in cultivation yields and quality. We are optimistic about improved year-over-year performance as we enter our more challenging summer conditions in our greenhouses based upon modest capital improvements and our augmented team. We’re continuing to support our recently launched hemp-derived beverages and have established distribution relationships with both local and national distributors of hemp and alcohol products. We also recently activated the wholesale sales channel in New York’s recreational use market with vape and edible products and look forward to launching sales of flower products near the end of the third quarter. Our teams remain focused on preparation for the launch of adult-use sales in Minnesota next spring, and we plan to share additional details on these initiatives later this year.”

Core Market KPIs1                      
                     
Three Months Ended   Six Months Ended
US $ in millions June 30,   June 30,
  2024   2023   Variance   2024   2023   Variance
Total Flower Harvested (lbs) 3,502   3,088   13.4%   6,775   5,115   32.5%
% “A” Flower2 49.0%   57.9%   -890 bps   50.9%   54.5%   -360 bps
Total Retail Revenue $19.2   $14.0   37.7%   $37.0   $27.0   37.0%
Same Store Sales Growth     37.7%       37.0%
Minnesota     6.6%       4.6%
Maryland     182.2%       186.4%
Total Wholesale Revenue $3.3   $1.8   79.1%   $6.6   $3.4   95.0%
1Core Markets refer to the Company’s operations in Maryland and Minnesota.                
2“A Flower” refers to produced biomass that meet the Company’s highest internal standards for flower quality, size, and appearance.
 

Other Events

On June 17, 2024, the Company announced that it completed a non-brokered private placement of its subordinate voting shares. In aggregate, the Company issued 1,300,078 subordinate voting shares at a 30-day volume weighted average price (VWAP) of US $0.5384 as of May 17, 2024, representing gross proceeds of US $700,000. The private placement was funded by the Company’s senior secured lender, with proceeds from the transaction to be utilized in connection with a mortgage note to support the relocation of one of the Company’s retail dispensaries in Minnesota.

On July 1, 2024, the Company announced that it changed its name to Vireo Growth Inc. and on July 8, 2024, its subordinate voting shares began trading as “Vireo Growth Inc.” under the ticker symbol “VREO” on the Canadian Securities Exchange (CSE: VREO) and on the OTCQX Market in the United States under ticker symbol “VREOF” (OTCQX: VREOF).

On August 1, 2024, the Company announced that on July 31, 2024, it executed a ninth amendment to the Company’s Green Ivy credit agreement with Chicago Atlantic and affiliates. The ninth amendment extends the maturity date on the credit facility loans to January 29, 2027, adjusts and extends the designated event of default with respect to the Company’s ongoing disposition of its New York operations through July 31, 2025, and amends certain financial measure definitions and covenants within the agreement. The Company issued 12,500,000 Subordinate Voting Shares to the lenders in consideration for the credit facility amendment.

On August 1, 2024, the Company also announced that on July 31, 2024, Chicago Atlantic notified the Company of its intent to voluntarily convert all of the outstanding convertible notes issued in connection with its April 2023 convertible loan financing. The convertible loan had an outstanding balance of approximately $10.5 million, carried an interest rate of 12.0 percent, and was convertible into equity shares of the Company at a strike price of US $0.145. As a result of the conversion, Vireo will issue approximately 73.0 million Subordinate Voting Shares to Chicago Atlantic and its affiliates. The early, voluntary conversion of all outstanding convertible notes is expected to result in interest expense savings of approximately $1.2 million and PIK interest savings of approximately $1.1 million which would have resulted in the issuance of an additional approximately 7.7 million Subordinate Voting Shares if the debt had been converted at maturity.

Balance Sheet and Liquidity

As of June 30, 2024, total current assets were $148.6 million, including cash on hand of $11.2 million. Excluding current debt that was extended as part of the ninth amendment to the credit facility, total current liabilities were $126.3 million, including $88.4 million in liabilities held for sale related to the Company’s businesses in the State of New York. As of July 31, 2024, the Company had a total of 251,179,987 shares outstanding on the treasury method basis.

Conference Call and Webcast Information

Vireo management will host a conference call with research analysts today, August 6, 2024, at 4:30 p.m. ET (3:30 p.m. CT) to discuss its financial results for its second quarter ended June 30, 2024. Interested parties may attend the conference call by dialing 1-800-715-9871 (Toll-Free) (US and Canada) or 1-646-307-1963 (Toll) (International) and referencing conference ID number 3718174.

A live audio webcast of this event will also be available in the Events & Presentations section of the Company’s Investor Relations website and via the following link:
https://events.q4inc.com/attendee/837840088.

About Vireo

Vireo was founded as a pioneer in medical cannabis in 2014 and sustained with an entrepreneurial drive that fuels our ongoing commitment to serve and delight our key stakeholders, most notably our customers, our employees, our shareholders, our industry collaborators, and the communities in which we live and operate. We work every day to get better and our team prioritizes 1) empowering and supporting strong local market leaders and 2) strategic, prudent capital and human resource allocation. For more information, please visit www.vireogrowth.com.

Additional Information

Additional information relating to the Company’s second quarter 2024 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) in circumstances in which the Company believes that doing so provides additional perspective and insights when analyzing the core operating performance of the business. 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.

Contact Information

Investor Inquiries: Media Inquiries:
Sam Gibbons Amanda Hutcheson
Investor Relations Senior Manager, Communications
[email protected] [email protected]
(612) 314-8995 (919) 815-1476
   

Forward-Looking Statement Disclosure

This press release contains “forward-looking information” within the meaning of applicable United States and Canadian securities legislation. To the extent any forward-looking information in this press release constitutes “financial outlooks” within the meaning of applicable United States or Canadian securities laws, this information is being provided as preliminary financial results; the reader is cautioned that this information may not be appropriate for any other purpose and the reader should not place undue reliance on such financial outlooks. Forward-looking information contained in this press release may be identified by the use of words such as “should,” “believe,” “estimate,” “would,” “looking forward,” “may,” “continue,” “expect,” “expected,” “will,” “likely,” “subject to,” “transformation,” and “pending,” variations of such words and phrases, or any statements or clauses containing verbs in any future tense. These statements should not be read as guarantees of future performance or results. Forward-looking information includes both known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of the Company or its subsidiaries to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements or information contained in this press release. Financial outlooks, as with forward-looking information generally, are, without limitation, based on the assumptions and subject to various risks as set out herein and in our Annual Report on Form 10-K filed with the Securities Exchange Commission. Our actual financial position and results of operations may differ materially from management’s current expectations and, as a result, our revenue, EBITDA, and cash on hand may differ materially from the values provided in this press release. Forward-looking information is based upon a number of estimates and assumptions of management, believed but not certain to be reasonable, in light of management’s experience and perception of trends, current conditions, and expected developments, as well as other factors relevant in the circumstances, including assumptions in respect of current and future market conditions, the current and future regulatory environment, and the availability of licenses, approvals and permits.

Although the Company believes that the expectations and assumptions on which such forward-looking information is based are reasonable, the reader should not place undue reliance on the forward-looking information because the Company can give no assurance that they will prove to be correct. Actual results and developments may differ materially from those contemplated by these statements. Forward-looking information is subject to a variety of risks and uncertainties that could cause actual events or results to differ materially from those projected in the forward-looking information. Such risks and uncertainties include, but are not limited to: risks related to the timing and content of adult-use legislation in markets where the Company currently operates; current and future market conditions, including the market price of the subordinate voting shares of the Company; risks related to epidemics and pandemics; federal, state, local, and foreign government laws, rules, and regulations, including federal and state laws and regulations in the United States relating to cannabis operations in the United States and any changes to such laws or regulations; operational, regulatory and other risks; execution of business strategy; management of growth; difficulties inherent in forecasting future events; conflicts of interest; risks inherent in an agricultural business; risks inherent in a manufacturing business; liquidity and the ability of the Company to raise additional financing to continue as a going concern; the Company’s ability to meet the demand for flower in Minnesota; risk of failure in the lawsuit with Verano and the cost of that litigation; our ability to dispose of our assets held for sale at an acceptable price or at all; and risk factors set out in the Company’s Form 10-K for the year ended December 31, 2023, which is available on EDGAR with the U.S. Securities and Exchange Commission and filed with the Canadian securities regulators and available under the Company’s profile on SEDAR at www.sedar.com.

The statements in this press release are made as of the date of this release. Except as required by law, we undertake no obligation to update any forward-looking statements or forward-looking information to reflect events or circumstances after the date of such statements.

Supplemental Information

The financial information reported in this news release is based on unaudited financial statements for the second fiscal quarter ended June 30, 2024, and June 30, 2023. All financial information contained in this news release is qualified in its entirety with reference to such financial statements. To the extent that the financial information contained in this news release is inconsistent with the information contained in the Company’s audited financial statements, the financial information contained in this news release shall be deemed to be modified or superseded by the Company’s audited financial statements. The making of a modifying or superseding statement shall not be deemed an admission for any purposes that the modified or superseded statement, when made, constituted a misrepresentation for purposes of applicable securities laws.

VIREO GROWTH INC.            
CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2024 AND DECEMBER 31, 2023            
(Amounts Expressed in United States Dollars, Unaudited and Condensed)            
    June 30,   December 31,
    2024   2023
Assets            
Current assets:            
Cash   $ 11,229,297   $ 15,964,665
Accounts receivable, net of credit losses of $230,623 and $254,961, respectively     2,260,137     3,086,640
Income tax receivable     12,261,964     12,278,119
Inventory     20,092,498     19,285,870
Prepayments and other current assets     771,186     1,336,234
Notes receivable, current     3,750,000     3,750,000
Warrants held     4,867,643     1,937,352
Assets Held for Sale     93,401,886     91,213,271
Total current assets     148,634,611     148,852,151
Property and equipment, net     26,261,755     23,291,183
Operating lease, right-of-use asset     10,941,864     2,018,163
Intangible assets, net     8,308,953     8,718,577
Deposits     533,745     383,645
Deferred tax assets        
Total assets   $ 194,680,928   $ 183,263,719
Liabilities            
Current liabilities            
Accounts payable and accrued liabilities   $ 9,176,236   $ 7,674,389
Long-Term debt, current portion     61,502,285     60,220,535
Right of use liability     953,389     890,013
Uncertain tax liability     26,726,000     22,356,000
Liabilities held for sale     88,414,795     88,326,323
Total current liabilities     186,772,705     179,467,260
Right-of-use liability     19,466,941     10,543,934
Other long-term liabilities     196,598     155,917
Convertible debt, net     9,682,176     9,140,257
Long-Term debt, net     1,121,306    
Total liabilities     217,239,726     199,307,368
Stockholders’ deficiency            
Subordinate Voting Shares ($- par value, unlimited shares authorized; 114,605,008 shares issued and outstanding at June 30, 2024 and 110,007,030 at December 31, 2023)        
Multiple Voting Shares ($- par value, unlimited shares authorized; 300,714 shares issued and outstanding at June 30, 2024 and 331,193 at December 31, 2023)        
Super Voting Shares ($- par value; unlimited shares authorized; 0 shares issued and outstanding at June 30, 2024 and December 31, 2023)        
Additional Paid in Capital     188,249,124     187,384,403
Accumulated deficit     (210,807,922)     (203,428,052)
Total stockholders’ deficiency   $ (22,558,798)   $ (16,043,649)
Total liabilities and stockholders’ deficiency   $ 194,680,928   $ 183,263,719
 
VIREO GROWTH INC.                        
CONSOLIDATED STATEMENTS OF OPERATIONS                  
THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023                  
(Amounts Expressed in United States Dollars, Unaudited and Condensed)                  
    Three Months Ended   Six Months Ended
    June 30,   June 30,
    2024   2023   2024   2023
Revenue   $ 25,108,247   $ 20,196,556   $ 49,195,562   $ 39,284,980
Cost of sales                        
Product costs     11,516,604     10,275,584     23,663,492     19,853,795
Inventory valuation adjustments     41,000     589,676     (263,000)     579,676
Gross profit     13,550,643     9,331,296     25,795,070     18,851,509
Operating expenses:                        
Selling, general and administrative     7,564,231     8,059,427     14,615,844     15,216,262
Stock-based compensation expenses     (60,568)     2,037,204     119,221     3,712,798
Depreciation     72,925     117,681     146,471     277,191
Amortization     180,033     159,028     360,067     318,794
Total operating expenses     7,756,621     10,373,340     15,241,603     19,525,045
                         
Gain (loss) from operations     5,794,022     (1,042,044)     10,553,467     (673,536)
                         
Other income (expense):                        
Gain (loss) on disposal of assets     (97,471)     (2,747,881)     (218,327)     (2,747,881)
Interest expenses, net     (7,518,454)     (7,744,794)     (16,241,091)     (14,879,584)
Other income (expenses)     1,593,492     5,798,335     2,911,081     5,820,648
Other income (expenses), net     (6,022,433)     (4,694,340)     (13,548,337)     (11,806,817)
                         
Loss before income taxes     (228,411)     (5,736,384)     (2,994,870)     (12,480,353)
                         
Current income tax expenses     (440,000)     (1,652,871)     (4,385,000)     (3,377,871)
Deferred income tax recoveries         60,000         123,000
Net loss and comprehensive loss     (668,411)     (7,329,255)     (7,379,870)     (15,735,224)
Net loss per share – basic and diluted   $ (0.00)   $ (0.06)   $ (0.05)   $ (0.12)
Weighted average shares used in computation of net loss per share – basic & diluted     143,583,496     128,126,330     143,354,913     128,126,330
                         
VIREO GROWTH INC.            
CONSOLIDATED STATEMENTS OF CASH FLOWS            
SIX MONTHS ENDED JUNE 30, 2024 AND 2023            
(Amounts Expressed in United States Dollars, Unaudited and Condensed)            
    June 30,
    2024   2023
CASH FLOWS FROM OPERATING ACTIVITIES            
Net loss   $ (7,379,870)   $ (15,735,224)
Adjustments to reconcile net loss to net cash used in operating activities:            
Inventory valuation adjustments     (263,000)     579,676
Depreciation     146,471     277,191
Depreciation capitalized into inventory     1,121,141     1,294,065
Non-cash operating lease expense     211,319     327,692
Amortization of intangible assets     360,067     318,794
Amortization of intangible assets capitalized into inventory     49,557    
Stock-based payments     119,221     3,712,798
Warrants receivable         (1,248,224)
Warrants held     (2,930,291)    
Interest Expense     2,916,255     3,223,635
Deferred income tax         (123,000)
Accretion     108,902     593,063
Loss on disposal of Red Barn Growers         2,909,757
Loss (gain) on disposal of assets     120,856     (161,727)
Change in operating assets and liabilities:            
Accounts Receivable     842,353     (60,197)
Prepaid expenses     565,048     608,486
Inventory     (407,734)     (1,737,376)
Income taxes     16,154     592,427
Uncertain tax position liabilities     4,370,000    
Accounts payable and accrued liabilities     1,215,694     2,557,998
Changes in operating lease liabilities     (281,874)    
Change in assets and liabilities held for sale     (2,100,143)     (91,247)
Net cash provided by (used in) operating activities     (1,199,874)     (2,161,413)
CASH FLOWS FROM INVESTING ACTIVITIES:            
PP&E Additions     (4,088,734)     (2,478,645)
Proceeds from sale of Red Barn Growers net of cash         439,186
Proceeds from sale of property, plant, and equipment         125,000
Deposits     (150,100)     (260,545)
Net cash provided by (used in) investing activities     (4,238,834)     (2,175,004)
CASH FLOWS FROM FINANCING ACTIVITIES            
Proceeds from long-term debt, net of issuance costs     1,131,400    
Proceeds from convertible debt, net of issuance costs         3,497,462
Proceeds from issuance of shares     700,000    
Proceeds from warrant exercises     29,000    
Proceeds from option exercises     16,500    
Debt principal payments     (1,062,000)     (1,976,362)
Lease principal payments     (111,560)     (987,953)
Net cash provided by (used in) financing activities     703,340     533,147
Net change in cash     (4,735,368)     (3,803,270)
Cash, beginning of period     15,964,665     15,149,333
Cash, end of period   $ 11,229,297   $ 11,346,063
             

VIREO GROWTH INC.
STATE-BY-STATE REVENUE PERFORMANCE
THREE MONTHS ENDED JUNE 30, 2024 AND 2023

    Three Months Ended            
    June 30,            
    2024   2023   $ Change   % Change  
Retail:                        
MN   $ 12,238,957   $ 11,479,371   $ 759,586   7 %
NY     1,604,327     2,279,635     (675,308)   (30) %
NM         911,969     (911,969)   (100) %
MD     6,975,735     2,472,124     4,503,611   182 %
Total Retail   $ 20,819,019   $ 17,143,099   $ 3,675,920   21 %
                         
Wholesale:                        
MD     3,283,635     1,837,145     1,446,490   79 %
NY     998,724     1,176,585     (177,861)   (15) %
NM         39,727     (39,727)   (100) %
MN     6,869         6,869   100 %
Total Wholesale   $ 4,289,228   $ 3,053,457   $ 1,235,771   40 %
                         
Total Revenue   $ 25,108,247   $ 20,196,556   $ 4,911,691   24 %
NY and NM Revenue   $ (2,603,051)   $ (4,407,916)   $ 1,804,865   (41) %
Total Revenue excluding NY and NM   $ 22,505,196   $ 15,788,640   $ 6,716,556   43 %
NM Not Meaningful                        
                         

SIX MONTHS ENDED JUNE 30, 2024 AND 2023

    Six Months Ended            
    June 30,            
    2024   2023   $ Change   % Change  
Retail:                        
MN   $ 23,216,046   $ 22,198,288   $ 1,017,758   5 %
NY     3,425,596     4,641,577     (1,215,981)   (26) %
NM         1,964,285     (1,964,285)   (100) %
MD     13,776,817     4,810,749     8,966,068   186 %
Total Retail   $ 40,418,459   $ 33,614,899   $ 6,803,560   20 %
                         
Wholesale:                        
MD     6,637,296     3,401,020     3,236,276   95 %
NY     2,132,938     2,229,334     (96,396)   (4) %
NM         39,727     (39,727)   (100) %
MN     6,869         6,869   100 %
Total Wholesale   $ 8,777,103   $ 5,670,081   $ 3,107,022   55 %
                         
Total Revenue   $ 49,195,562   $ 39,284,980   $ 9,910,582   25 %
NY and NM Revenue   $ (5,558,534)   $ (8,835,196)   $ 3,276,662   (37) %
Total Revenue excluding NY and NM   $ 43,637,028   $ 30,449,784   $ 13,187,244   43 %
NM Not Meaningful                        
                         

Reconciliation of Non-GAAP Financial Measures

Vireo management occasionally elects to provide certain non-GAAP financial measures such as Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA). EBITDA is a non-GAAP measure and does not have a standardized definition 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 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 EBITDA1                        
(Amounts Expressed in United States Dollars, Unaudited and Condensed)                  
    Three Months Ended   Six Months Ended
    June 30,   June 30,
    2024   2023   2024   2023
Net income (loss)   $ (668,411)   $ (7,329,255)   $ (7,379,870)   $ (15,735,224)
Interest expense, net     7,518,454     7,744,794     16,241,091     14,879,584
Income taxes     440,000     1,592,871     4,385,000     3,254,871
Depreciation & Amortization     252,958     276,709     506,538     595,985
Depreciation included in cost of goods sold     585,740     559,978     1,170,698     1,294,065
EBITDA (non-GAAP)   $ 8,128,741   $ 2,845,097   $ 14,923,457   $ 4,289,281
12Q24 EBITDA includes a $1.6 million gain on Grown Rogue warrants which are marked to market at each period end      


Bay Street News