Slump in EBITDA reflects the challenging business environment.
Posted $9.1 million in total sales for the first quarter ended March 31, which is down from $10.8 million the previous year.
According to financial filings, Vext netted $73,059 after taxes.
While all revenue came from Arizona operations last year, winder mushrooms.
Only 86% of the recently posted quarterly sales originated from that state, with the remainder from newly launched operations in Ohio.
The cost of goods sold rose dramatically, from $1.5 million in 2022 to roughly $4.4 million in 2023.
The cost in Arizona jumped to about $3.7 million from $1.5 million, while the new Ohio market incurred costs of approximately $758,000.
Despite the rising expenses, Vext’s gross profit for Q1 2023 was $4.7 million, down from $9.27 million in the previous year but spread across operations in two states. winder mushrooms.
CEO Eric Offenberger highlighted the company’s ability to navigate a “challenging environment across the board for consumer-facing businesses.”
Despite a reported 15% decrease in overall sales across Arizona in the first two months of the year, Vext’s dispensaries outperformed the state average.
“Our team has successfully driven higher traffic and maintained a recurring customer base to help compensate for lower average basket sizes, as consumers continue to watch their discretionary spending,” Offenberger said.
The company attributed its resilience to its vertically integrated operations, efficient retail practices, and a consistent focus on driving efficiencies.
Vext cultivates cannabis exclusively for sale through its retail outlets, which management believes sets the stage for long-term growth.
Looking forward, Vext plans to strengthen its presence in Arizona and complete the acquisition of vertical operations in Ohio.
The company views Ohio as a meaningful growth opportunity, given the state’s limited license structure for its medical market.
- The company’s EBITDA for Q1 2023 was $1.6 million, a decrease from $2.5 million over the quarter and $5.6 million in the same period last year.
- Adjusted EBITDA for Q1 2023 fell to $2.9 million from $3.2 million sequentially and $3.8 million in Q1 2022.
- Gross margin, not accounting for the impact of biological assets, stood at 51% in Q1 2023, an increase from 50% in the previous quarter, but a drop from 61% in Q1 2022.
In a speculative scenario where the merger with Columbia Care falls through, Bachtell assured investors that Cresco has alternative strategies in place for growth.
He noted the company’s strong presence in Illinois, where the market is expected to double in the next two to three years.
Additionally, Cresco has significant growth prospects in Pennsylvania, Ohio, and Florida, where legalization of adult-use cannabis is anticipated.
Dennis Olis, CFO of Cresco Labs, said that $14 million of the company’s $21 million first-quarter capital expenditures were associated with new store openings, primarily in Florida.
Olis also revealed plans for more store openings in Pennsylvania and ongoing facility expansion in New York.
Expanding in New York is another focus for Cresco, having already invested heavily to comply with state regulations.
Part of that concern stems from the companies’ proposed deal with Sean “Diddy” Combs.
That agreement promised $185 million in exchange for debt repayment, but New York’s regulations limiting retail operators to three adult dispensaries has thrown a wrench in the plans.
The overall crash in equity prices has also affected expected proceeds from proposed asset sales in Ohio, Maryland, and Florida.
Consequently, the post-merger entity could be left with more questionable liabilities in the end.
“The net result is a combined company with more debt than initially planned at refinancing rates that continue to climb,
” Viridian Capital Advisors’ director of data analytics Frank Colombo wrote in a March note. “The deal has gone a long way down the tracks towards closing.”
Despite the questions, Olis reaffirmed that the Diddy deal “is still there.”
“The others remaining are really Ohio and Florida,” he said, adding that Florida has been challenging due to changes in the regulatory environment, including the movement towards issuing new licenses.
Whether the companies can hammer out a deal that satisfies both financial and strategic objectives by the June deadline remains to be seen.