Verano Announces Fourth Quarter and Full Year 2023 Financial Results

Record Revenue of $938 Million

Increased 2023 Net Cash Provided by Operating Activities by 16% to $110 Million

Generated $73 million in Free Cash Flow1 for 2023, Meeting Guidance

CHICAGO, February 29, 2024 (GLOBE NEWSWIRE) – Verano Holdings Corp. (Cboe CA: VRNO) (OTCQX: VRNOF) (“Verano” or the “Company”), a leading multi-state cannabis company, today announced its financial results for the fourth quarter and full year ended December 31, 2023, which were prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”).

Fourth Quarter and Full Year 2023 Financial Highlights

	For the Three Months Ended,						For the Year Ended,
($ in thousands)	December 31, 2023		September 30, 2023		December 31, 2022		December 31, 2023		December 31, 2022
Revenues, net of Discounts	$	237,189	$	240,088	$	225,927	$	938,452	$	879,412
Gross Profit	117,610		133,220		103,336		475,206		423,062
Income (Loss) from Operations	(11,143)		40,288		(206,977)		93,357		(161,131)
Net Loss Attributable to Verano Holdings Corp. & Subsidiaries	(72,579)		(17,842)		(216,110)		(112,719)		(269,164)
Adjusted EBITDA2	73,376		89,349		78,713		304,871		323,567

Fourth Quarter 2023 Financial Highlights

•Revenue of $237 million, an increase of 5% year-over-year, and decrease of 1% versus the prior quarter.

•Gross profit of $118 million or 50% of revenue.

•SG&A expense of $86 million or 36% of revenue.

•Net loss of $(73) million or (31)% of revenue.

•Adjusted EBITDA2 of $73 million or 31% of revenue.

•Net cash provided by operating activities of $32 million.

•Capital expenditures of $10 million.

•Free cash flow1 of $23 million.

Full Year 2023 Financial Highlights

•Revenue of $938 million, an increase of 7% year-over-year.

•Gross profit of $475 million or 51% of revenue.

•SG&A expense of $332 million or 35% of revenue.

•Net loss of $(113) million or (12)% of revenue.

•Adjusted EBITDA2 of $305 million or 32% of revenue.

•Net cash provided by operating activities of $110 million.

•Capital expenditures of $36 million.

•Free cash flow1 of $73 million.

Management Commentary

“I'm incredibly proud of our performance in 2023, highlighted by key wins across all aspects of the business," said George Archos, Verano Founder and Chief Executive Officer. "As excitement and anticipation builds in the industry, 2024 has the potential to be a game-changing year, and Verano is well positioned to continue capitalizing on growth opportunities both in the current regulatory environment and from any state or federal reform. While we’ve never been dependent on legislation to drive sustained growth, with adult use imminent in Ohio, on the horizon in Florida and Pennsylvania, and the growing anticipation of a federal rescheduling decision, there is limitless potential for Verano. I’m thankful for all that our team accomplished in 2023, and believe the sky is the limit for what we can achieve in 2024 and beyond.”

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Fourth Quarter 2023 Financial Overview

Revenue for the fourth quarter 2023 was $237 million, up 5% from $226 million for the fourth quarter 2022, and down 1% from $240 million for the third quarter 2023. The increase in revenue for the fourth quarter 2023 compared to the fourth quarter 2022 was driven primarily by strength from wholesale adult use sales in New Jersey, in addition to growth in Maryland and Florida retail.

Gross profit for the fourth quarter 2023 was $118 million or 50% of revenue, up from $103 million or 46% of revenue for the fourth quarter 2022, and down from $133 million or 55% of revenue for the third quarter 2023. The increase in gross profit for the fourth quarter 2023 compared to the fourth quarter 2022 was driven primarily by increased vertical mix and revenue growth.

SG&A expense for the fourth quarter 2023 was $86 million or 36% of revenue, up from $81 million or 36% of revenue for the fourth quarter 2022, and flat with $86 million or 36% of revenue for the third quarter 2023.

Net loss for the fourth quarter 2023 was $(73) million, or (31)% of revenue, versus a loss of $(216) million in the fourth quarter 2022, and $(18) million for the third quarter 2023. The decrease in net loss for the fourth quarter 2023 compared to the fourth quarter 2022 was due to a $229 million impairment charge in the prior year period. Excluding the impacts from impairments, net loss for the fourth quarter 2023 was primarily driven by the increase in provision for income taxes as the Company increased income from operations versus the fourth quarter 2022.

Adjusted EBITDA2 for the fourth quarter 2023 was $73 million or 31% of revenue.

Net cash provided by operating activities for the fourth quarter 2023 was $32 million, up from $29 million for the fourth quarter 2022.

Capital expenditures for the fourth quarter 2023 were $10 million, up from $9 million for the fourth quarter 2022.

Free cash flow1 for the fourth quarter 2023 was $23 million, up from $20 million for the fourth quarter 2022.

Full Year 2023 Financial Overview

Revenue for full year 2023 was $938 million, up 7% from $879 million for full year 2022. The increase in revenue for full year 2023 compared to full year 2022 was driven by a full year's adult use contribution from New Jersey in addition to adult use launches in Connecticut and Maryland.

Gross profit for full year 2023 was $475 million or 51% of revenue, up from $423 million or 48% of revenue for full year 2022. The increase in gross profit for full year 2023 compared to full year 2022 was driven primarily by increased vertical mix and revenue growth.

SG&A expense for full year 2023 was $332 million or 35% of revenue, down from $357 million or 41% of revenue for full year 2022. The decrease in SG&A expense was driven primarily by a decrease in stock based compensation.

Net loss for full year 2023 was $(113) million, or (12)% of revenue, down from $(269) million for full year 2022. The decrease in net loss for full year 2023 compared to the full year 2022 was due to a $229 million impairment charge in the prior year period. Excluding the impacts from impairments, net loss for the full year 2023 was primarily driven by the increase in provision for income taxes as the Company increased income from operations versus the full year 2022.

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Adjusted EBITDA2 for full year 2023 was $305 million or 32% of revenue.

Net cash provided by operating activities for full year 2023 was $110 million, up from $94 million for full year 2022.

Capital expenditures for full year 2023 were $36 million, down from $119 million for full year 2022.

Free cash flow1 for full year 2023 was $73 million, up from $(25) million for full year 2022.

2024 Guidance

•The Company issued first quarter 2024 revenue guidance of a 5-7% decline versus the prior year period as the growing dispensary count in New Jersey continues to normalize.

Fourth Quarter 2023 Operational Highlights

•Expanded the Company's retail footprint across key markets by opening the following new dispensaries:

◦MÜV locations in Apopka, Satellite Beach and North Miami-Biscayne, Florida;

◦and Zen Leaf Newington, a social equity joint venture dispensary, raising the Company's Connecticut retail footprint to four locations statewide.

•Commenced trading on Cboe Canada, elevating the Company's capital markets strategy and presence on a senior exchange with a global platform that spans 26 markets.

•Introduced Savvy Threads, a non-plant-touching e-commerce extension of the Company's Savvy brand featuring limited-edition, artist-driven streetwear available for sale and delivery to all 50 states.

•Announced the Company's participation in a coalition of industry stakeholders as a plaintiff challenging the legality of the federal government's intervention in legal intrastate cannabis commerce under the Commerce Clause and Controlled Substances Act.

•Launched reimagined (the) Essence brand combining bespoke graphic art and terpene-rich full-spectrum products, including the new (the) Essence Nectar line, across core markets.

Subsequent Operational Highlights

•Expanded the Company's retail footprint across key markets by opening the following new dispensaries:

◦MÜV Yulee in Northeast Florida, raising the Company's current statewide retail footprint to 74 dispensaries;

◦and in Pennsylvania, opened the Company's largest nationwide dispensary, Zen Leaf Abington, and Zen Leaf Norristown - both situated in prime Philadelphia area locations - elevating Verano's statewide footprint to 18 affiliated dispensaries.

•Current operations span 13 states, comprised of 138 dispensaries and 14 production facilities with more than one million square feet of cultivation capacity.

Balance Sheet and Liquidity

As of December 31, 2023, the Company’s current assets were $394 million, including cash and cash equivalents of $175 million. The Company had a working capital deficit of $(18) million and total debt, net of issuance costs, of $446 million.

The Company’s total Class A subordinate voting shares outstanding was 344,074,096 as of December 31, 2023.

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Conference Call and Webcast

A conference call and webcast with analysts and investors is scheduled for February 29, 2024 at 8:30 a.m. ET / 7:30 a.m. CT to discuss the results and answer investor and participant questions.

•Investors and participants can register in advance for the call by visiting: https://conferencingportals.com/event/sxTSCKLn

•After registering, instructions will be shared on how to join the call for those who wish to dial in.

•On February 29, 2024, the live webcast can be accessed via the following link: https://events.q4inc.com/attendee/601934273

•The live and archived webcast will be available on the Events and Presentations page of the Company’s investor relations website at investors.verano.com.

_________________________

1 Free cash flow is a non-U.S. GAAP financial measure. It is derived from U.S. GAAP net cash provided by operating activities, which is also its most directly comparable U.S. GAAP financial measure, and is defined in this news release in the section below titled “Non-U.S. GAAP Financial Measures.” The reconciliation of free cash flow to U.S. GAAP net cash provided by operating activities is set forth below in the tables included in this news release.

2 Adjusted EBITDA is a non-U.S. GAAP financial measure. It is derived from EBITDA, another non-U.S. GAAP financial measure, and is defined in this news release in the section below titled “Non-U.S. GAAP Financial Measures.” The most directly comparable U.S. GAAP financial measure to adjusted EBITDA is net income (loss). The reconciliation of adjusted EBITDA to U.S. GAAP net income (loss) is set forth below in the tables included in this news release.

Non-U.S. GAAP Financial Measures

Verano uses non-U.S. GAAP financial information to evaluate the performance of the Company. The terms “EBIT,” “EBITDA,” “adjusted EBITDA,” and “free cash flow” do not have any standardized meaning prescribed within U.S. GAAP and therefore may not be comparable to similar measures presented by other companies. Accordingly, this non-U.S. GAAP financial information is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with U.S. GAAP.

The Company calculates EBIT as net income (loss) before interest expense and income tax expense; EBITDA as net income (loss) before interest expense, income tax expense, depreciation, and amortization; adjusted EBITDA as net income (loss) plus net interest expense, income tax expense, depreciation and amortization and also excludes certain one-time extraordinary items; and free cash flow as net cash provided by operating activities less capital expenditures. The calculations of the non-U.S. GAAP financial measures used in this news release and the reconciliations to the most comparable U.S. GAAP financial numbers are included in the tables below.

Management believes that this non-U.S. GAAP financial information is useful as a supplement to comparable U.S. GAAP financial information because it provides consistency and comparability with past financial performance and assists in comparisons with other companies, some of which use similar non-GAAP information to supplement their GAAP results. Management reviews these non-U.S. GAAP financial measures on a regular basis and uses them, together with financial measures included in the Company’s financial statements, to evaluate and manage the performance of the Company’s operations. These measures should be evaluated only in conjunction with the comparable U.S. GAAP financial numbers reported by the Company.

About Verano

Verano Holdings Corp. (Cboe CA: VRNO) (OTCQX: VRNOF), one of the U.S. cannabis industry’s leading companies based on historical revenue, geographic scope and brand performance, is a vertically integrated, multi-state operator embracing a mission of saying Yesto plant progress and the bold exploration of cannabis. Verano offers a superior cannabis shopping experience in medical and adult use markets under the Zen Leaf™ and MÜV™ dispensary banners and produces a comprehensive suite of high-quality, regulated cannabis products sold under its diverse portfolio of trusted consumer brands including Verano™, MÜV™, Savvy™, BITS™, Encore™, and Avexia™. Verano’s active operations span 13 U.S. states, comprised of 14 production facilities with over 1,000,000 square feet of cultivation capacity. Learn more at www.verano.com.

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Contacts:

Investors

Verano

Julianna Paterra, CFA

VP, Investor Relations

julianna.paterra@verano.com

Media

Verano

Steve Mazeika

VP, Communications

steve.mazeika@verano.com

312-348-4430

Forward Looking Statements

This press release contains “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Such forward-looking statements are not representative of historical facts or information or current condition, but instead represent only the Company’s beliefs regarding future events, plans, strategies, or objectives, many of which, by their nature, are inherently uncertain and outside of the Company’s control. Generally, such forward-looking statements can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “future”, “scheduled”, “estimates”, “forecasts”, “projects,” “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases, or may contain statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “will continue”, “will occur” or “will be achieved”. Forward-looking statements involve and are subject to assumptions and known and unknown risks, uncertainties, and other factors which may cause actual events, results, performance, or achievements of the Company to be materially different from future events, results, performance, and achievements expressed or implied by forward-looking statements herein, including, without limitation, the risk factors described in the Company’s annual report on Form 10-K for the year ended December 31, 2023 filed with the U.S. Securities and Exchange Commission at www.sec.gov. The forward-looking statements contained in this press release are made as of the date of this press release, and the Company does not undertake to update any forward-looking information or forward-looking statements that are contained or referenced herein, except as may be required in accordance with applicable securities laws. All subsequent written and oral forward-looking information and statements attributable to the Company or persons acting on its behalf is expressly qualified in its entirety by this notice regarding forward-looking information and statements.

Financial Information Tables

The following tables include select financial results and the reconciliations of the non-U.S. GAAP financial measures to the respective most directly comparable U.S. GAAP financial measures for the presented periods.

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VERANO HOLDINGS CORP.

Highlights from Unaudited Consolidated Statements of Operations

($ in Thousands)

	For the Three Months Ended,									For the Year Ended,
	December 31, 2023			September 30, 2023			December 31, 2022			December 31, 2023			December 31, 2022
Revenues, net of Discounts	$	237,189		$	240,088		$	225,927		$	938,452		$	879,412
Cost of Goods Sold, net	119,579			106,868			122,591			463,246			456,350
Gross Profit	117,610			133,220			103,336			475,206			423,062
Gross Profit %	50		%	55		%	46		%	51		%	48		%
Operating Expenses
Selling, General and Administrative	85,709			86,316			81,038			331,928			356,569
Loss on Impairment of Investment in Associates	—			6,571			—			6,571			—
Loss on Impairment of Intangibles – Goodwill	37,931			—			113,031			37,931			113,031
Loss on Impairment of Intangibles – License	5,113			—			116,151			5,113			116,151
Total Operating Expenses	128,753			92,887			310,220			381,543			585,751
Income (Loss) from Investments in Associates	—			(45)			(93)			(306)			1,558
Income (Loss) from Operations	(11,143)			40,288			(206,977)			93,357			(161,131)
Other Income (Expense), net:
Loss on Disposal of Property, Plant and Equipment	(568)			(234)			(408)			(1,123)			(157)
Gain on Deconsolidation	—			—			—			—			9,560
Gain on Previously Held Equity Interest	—			—			—			—			14,103
Loss on Debt Extinguishment	—			—			(7,987)			(663)			(7,987)
Interest Expense, net	(14,708)			(15,166)			(15,349)			(59,793)			(49,431)
Other Income, net	2,057			2,145			14,083			4,594			31,640
Total Other Income (Expense), Net	(13,219)			(13,255)			(9,661)			(56,985)			(2,272)
Income (Loss) Before Provision for Income Taxes and Non-Controlling Interest	(24,362)			27,033			(216,638)			36,372			(163,403)
Provision for Income Tax (Expense) Benefit	(48,295)			(44,797)			528			(149,091)			(105,470)
Net Income (Loss) Attributable To Non-Controlling Interest	(78)			78			—			—			291
Net Loss Attributable to Verano Holdings Corp. & Subsidiaries	(72,579)			(17,842)			(216,110)			(112,719)			(269,164)

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VERANO HOLDINGS CORP.

Highlights from Unaudited Consolidated Balance Sheets

($ in Thousands)

	December 31,		December 31,
	2023		2022
Cash and Cash Equivalents	$	174,760	$	84,851
Other Current Assets	219,436		233,424
Property and Equipment, Net	509,877		525,905
Intangible Assets, Net	1,086,146		1,180,766
Goodwill	231,291		269,088
Other Long-Term Assets	105,808		102,021
Total Assets	$	2,327,318	$	2,396,055
Total Current Liabilities	$	412,188	$	386,645
Total Long-Term Liabilities	670,421		667,860
Total Shareholders' Equity	1,244,709		1,341,550
Non-Controlling Interest	—		—
Total Liabilities and Shareholders' Equity	$	2,327,318	$	2,396,055

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VERANO HOLDINGS CORP.

Segmented Revenue By State (Unaudited)

	For the Three Months Ended,		For the Year Ended,
Net Retail Sales by State	December 31, 2023		December 31, 2023
($ in thousands)
Florida	$	59,695	$	221,957
Illinois	29,299		123,040
New Jersey	26,337		126,876
Arizona	15,626		67,061
Pennsylvania	12,587		55,010
Maryland	10,875		28,594
Connecticut	8,862		29,673
Nevada	7,097		29,158
Ohio	5,868		25,152
Massachusetts	2,984		12,628
West Virginia	1,625		5,777
Other	4,264		16,500
Total Net Retail Sales	$	185,119	$	741,426

	For the Three Months Ended,				For the Year Ended,
Wholesale Sales by State	December 31, 2023				December 31, 2023
	Gross		Net1		Gross		Net1
($ in thousands)
New Jersey	$	24,049	$	15,511	$	99,928	$	51,291
Illinois	19,227		11,027		79,204		45,858
Connecticut	14,204		10,342		54,584		42,011
Maryland	8,444		5,384		28,273		19,357
Pennsylvania	7,476		3,781		29,168		15,903
Arizona	7,084		2,575		25,989		9,888
Nevada	2,924		845		10,359		2,963
Ohio	1,857		914		7,816		3,693
Massachusetts	1,640		809		6,967		3,249
West Virginia	1,665		882		5,528		2,793
Other	—		—		20		20
Total Wholesale Sales	$	88,570	$	52,070	$	347,836	$	197,026

1Net of intercompany eliminations

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VERANO HOLDINGS CORP.

Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow (Non-U.S. GAAP)

	For the Three Months Ended,				For the Year Ended,
	December 31, 2023		December 31, 2022		December 31, 2023		December 31, 2022
($ in thousands)	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Net Cash Provided by Operating Activities	$	32,349	$	29,036	$	109,710	$	94,347
Purchase of property, plant, and equipment	(9,827)		(9,454)		(36,330)		(119,174)
Free Cash Flow	$	22,522	$	19,582	$	73,380	$	(24,827)

VERANO HOLDINGS CORP.

Reconciliation of Net Loss to EBITDA (Non-U.S. GAAP)

	For the Three Months Ended,						For the Year Ended,
	December 31, 2023		September 30, 2023		December 31, 2022		December 31, 2023		December 31, 2022
($ in thousands)	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Net Loss Attributable to Verano Holdings Corp. & Subsidiaries	$	(72,579)	$	(17,842)	$	(216,110)	$	(112,719)	$	(269,164)
Interest Expense, net	14,708		15,166		15,349		59,793		49,431
Income Tax Expense (Benefit)	48,295		44,797		(528)		149,091		105,470
Depreciation and Amortization - COGS	18,417		18,384		18,580		73,851		78,120
Depreciation and Amortization - SG&A	17,157		16,882		16,578		67,282		63,267
Earnings (Loss) Before Interest, Taxes, Depreciation and Amortization (EBITDA)	$	25,998	$	77,387	$	(166,131)	$	237,298	$	27,124

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VERANO HOLDINGS CORP.

Reconciliation of Net Loss to EBIT (Non-U.S. GAAP) and Adjusted EBITDA (Non-U.S. GAAP)

	For the Three Months Ended,									For the Year Ended,
	December 31, 2023			September 30, 2023			December 31, 2022			December 31, 2023			December 31, 2022
($ in thousands)	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Net Loss Attributable to Verano Holdings Corp. & Subsidiaries	$	(72,579)		$	(17,842)		$	(216,110)		$	(112,719)		$	(269,164)
Interest Expense, Net	14,708			15,166			15,349			59,793			49,431
Income Tax Expense	48,295			44,797			(528)			149,091			105,470
Earnings Before Interest, Taxes (EBIT)	$	(9,576)		$	42,121		$	(201,289)		$	96,165		$	(114,263)
COGS Add-backs:
Depreciation and Amortization - COGS	18,417			18,384			18,580			73,851			78,120
Acquisition, Transaction and Other Non-operating Costs	—			—			695			—			20,804
Employee Stock Compensation	970			625			2,231			2,669			8,003
SG&A Add-backs:
Depreciation and Amortization - SG&A	17,157			16,882			16,578			67,282			63,267
Acquisition, Transaction and Other Non-operating Costs	595			617			1,043			2,177			22,224
Employee Stock Compensation	3,281			4,062			2,599			10,561			31,051
Impairment - Goodwill & License	43,044			—			229,182			43,044			229,182
Acquisition Adjustments and Other Income (Expense), net	(512)			6,658			9,094			9,122			(14,821)
Adjusted EBITDA	$	73,376		$	89,349		$	78,713		$	304,871		$	323,567
Net Loss Margin	(31)		%	(7)		%	(96)		%	(12)		%	(31)		%
Adjusted EBITDA Margin	31		%	37		%	35		%	32		%	37		%

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