Release Date: November 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Vext Science Inc (VEXTF, Financial) reported $9 million in revenue for Q3 2024, marking an 11% year-over-year growth.
- The company achieved an adjusted EBITDA of $2.9 million, up from $1.1 million in Q3 2023, with a margin of 32%.
- Ohio operations showed significant growth, with over 200% sequential growth in certain locations following the launch of adult-use cannabis sales.
- Vext Science Inc (VEXTF) is expanding its retail footprint in Ohio, with plans to operate up to eight dispensaries by early 2026.
- The Eloy cultivation facility in Arizona improved average crop yield and potency, supporting strategic promotions and market share capture.
Negative Points
- Cash flow from operations was negative at $0.7 million as of September 30, 2024, despite strong EBITDA performance.
- Arizona operations faced sales headwinds due to consumer discretionary spending pressures and an oversupply of products, leading to a decrease in total sales.
- The company has a relatively low cash balance of $2.8 million, raising concerns about liquidity and access to capital.
- Ohio wholesale sales declined sequentially due to significant market stocking in anticipation of adult-use sales launch.
- Margins in Arizona are expected to remain challenged due to market conditions, including oversupply and pricing pressures.
Q & A Highlights
Q: Can you provide insights on the cash balance fluctuations and access to capital for growth?
A: Trevor Smith, CFO: The cash balance was impacted by timing issues like annual license fees and insurance payments. We didn't finance these, opting for annual payments for lower rates. We expect operational improvements in Q4 and beyond, and we're comfortable financing the Big Perm acquisition without additional capital.
Q: What is the outlook for the Arizona market, considering current challenges and competition?
A: Eric Offenberger, CEO: We can't call the bottom yet, but there's some stability. The market faces pressure from hemp-derived products and overcapacity. Our model, treating cannabis as a commodity, works well in this environment. We anticipate political changes and tourism to help improve the situation.
Q: Any updates on the 10B license allocation for additional retail stores in Ohio?
A: Eric Offenberger, CEO: We're waiting for regulatory approval for the Big Perm acquisition. We have plans and zoning projects ready and hope to start sharing details in early Q1. We're actively working to accelerate store openings.
Q: Can you discuss the drivers behind the improved gross margins in Q3 and future margin expectations?
A: Trevor Smith, CFO: Improved margins were due to better Ohio pricing and cost-cutting measures. We expect margins to remain consistent with Q3, with potential improvements from Ohio and Arizona recovery.
Q: What are your thoughts on potential distressed acquisition opportunities in Arizona?
A: Eric Offenberger, CEO: We believe there will be opportunities, but we must be cautious about multiples and avoid acquiring cultivation assets that could become liabilities as the market balances.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
