Release Date: May 10, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Vext Science Inc (VEXTF, Financial) has enhanced its balance sheet flexibility, positioning its Arizona operations for long-term growth and profitability.
- In Ohio, Vext Science Inc (VEXTF) generated revenue of $34.8 million for the full year 2023 and adjusted EBITDA of $5.5 million, demonstrating strong financial performance despite market challenges.
- The company has successfully expanded its footprint in Ohio, adding two additional dispensaries and expecting to close on two more in 2024, which will enhance its market share and cash flow as the market transitions to adult use.
- Vext Science Inc (VEXTF) has a solid balance sheet with $8.7 million in cash as of December 31, 2023, and no material unfunded growth capital expenditures planned for the year.
- The company's Arizona dispensaries continue to outperform the state average in terms of customer traffic, transactions, and unit sales, thanks to effective store management and targeted promotional discounts.
Negative Points
- Vext Science Inc (VEXTF) faced industry-specific hurdles such as overproduction and falling wholesale prices in Arizona, impacting the overall market.
- The company recorded a 1.7% decrease in revenue from $35.4 million in 2022 to $34.8 million in 2023, mainly due to weakening revenue from Arizona operations.
- Adjusted EBITDA for the year 2023 was down compared to $15 million in 2022, with adjusted EBITDA margins decreasing to 16%.
- The company anticipates operating expenses as a percentage of revenue to remain elevated for the first half of 2024 due to necessary expenses to take advantage of the Ohio recreational market.
- Vext Science Inc (VEXTF) expects continued market pressures and challenges in the Arizona market into the first quarters of 2024, with ongoing pricing pressure and a tough consumer market.
Q & A Highlights
Q: Could you clarify the EBITDA impact of fully consolidating the Ohio cultivation assets within the quarter?
A: Eric Offenberger, CEO of Vext Science Inc, deferred the question to Trevor Smith, CFO, who mentioned that he doesn't look at that on an isolated basis but could follow up later.
Q: What are your expectations for the Arizona market's performance until it potentially stabilizes in late 2024 or early 2025?
A: Eric Offenberger, CEO, anticipates ongoing pressures in the Arizona market throughout the first quarters of 2024, citing tough consumer market conditions and the need for economic recovery.
Q: How prepared is Vext Science for the early days of adult use in Ohio later this year?
A: Eric Offenberger, CEO, expressed confidence in their preparedness, noting that while immediate demand might not be fully met, their facilities and staffing are well-positioned to handle increased volumes.
Q: Regarding the steep step down in adjusted EBITDA for the quarter, could you provide more details on the non-cash charges mentioned?
A: Eric Offenberger, CEO, explained that the charges were related to severance, potential bad debts, and other market adjustments. Trevor Smith, CFO, added that depreciation from the consolidation of Ohio assets also played a significant role.
Q: With the upcoming adult use launch in Ohio, how are you managing inventory levels in anticipation?
A: Eric Offenberger, CEO, indicated that inventory levels are being adjusted, with reductions in Arizona and increases in Ohio, expecting a net rise in inventory to meet the anticipated demand.
Q: Can you discuss the strategic positioning of your Ohio stores in relation to competitors and their geographic advantages?
A: Eric Offenberger, CEO, described the locations as strategically placed, with some near college towns or rural settings, which he views as advantageous. He emphasized the proximity to their manufacturing and cultivation facilities as a competitive edge.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
