Verano Holdings Corp. (PNK:VRNOF) Q4 2022 Earnings Call Transcript

Brett Summerer: Yes. So other than the inventory movement, I don’t think our margins are all that different than what we would have expected them to be. We’ve talked in the past about having an adjusted gross margin in that kind of 59% to 61% range. And that’s kind of the same place that we feel that we’re at when you don’t think about the inventory piece. In terms of the brand and the differentiation there and the fact that we’re going to some more value-oriented branding, that allows us to sell more and allows us to sell to reach other customers and to help offset as people get more price conscious. So and we’re still making it ourselves, selling it ourselves. So we’re getting a good margin from that as well. So even though it is slightly dilutive on the lower side, it’s being offset with volume. And I think overall, we’re still pretty happy with where our margins are.

Aaron Grey: Okay. Great. Thank you. And then you guys did speak to M&A opportunities kind of coming up. Obviously, we talked about in the past a disconnect between the public and private markets, a lot has changed in the last couple of months, particularly with Safe not passing. So talk about or not those opportunities are actively coming available now or you think they will be in the next couple of months. What type of markets you might want to be going into, new markets? Expanding deeper into existing markets? Any color in terms of how you’re seeing those potential M&A opportunities evolving? Thanks.

George Archos: A combination of both. I mean, we want to continue to go deeper in some of the markets that we’re in, and we’re also looking at expanding in other markets. But we’re being, like we said on the call, highly selective. There are opportunities currently that we are evaluating, and we believe there will be much more opportunities between now and the next couple of years, right? And it’s €“ there’s no rush for us to do anything. We have a fantastic base. We have good organic growth. We have adult use ahead of us, preparing for certain markets. So we’ll continue to evaluate, and we’ll make the decisions as we see fit. As far as valuations, when the public evaluations come down, so do the private ones. Maybe not as steeply as some of the public evaluations have, but in order to make a deal, it still has to be highly accretive for Verano in order for us to transact. So, we’ll be selective, and we anticipate some deals in the next 24 months.

Aaron Grey: Okay, great. Thanks very much. I’ll jump back in the queue.

George Archos: Thanks, Aaron.

Operator: We’ll go next to Kenric Tyghe at ATBCM.

Kenric Tyghe: Thank you and good morning. George, you spoke to a strong performance in New Jersey. You also highlighted that, as increased capacity has come online, we’ve seen some constraints at wholesale. Could you speak to how orderly do you expect the evolution of that market to be, just given some of the capital constraints, given some of the real estate availability and the like? How should we think about that the evolution this year as we get into the first full year of New Jersey?

George Archos: Good morning, Kenric. Great question. Obviously, we love New Jersey. Legacy state for us, adult use has been fantastic for the company and for other operators there. What I generally see happening is, we think dispensaries will continue to open throughout the year, albeit slowly because zoning is very difficult in the Northeast, particularly in New Jersey, but I don’t see much cultivation capacity coming online. But we’re not hearing your projects being built out. Obviously, there’s not much cash available to the cannabis companies currently, especially new operators. So, we see it as a strong opportunity for us for many years to come. So we think, although we might see some decline in some of our retail outlets, if the municipalities allow stores closer to us, I think we’ll be in a very strong position to be able to supply the wholesale market.

We built a large-scale facility there, high quality, one of the best facilities that we have in the company. So, we really like what we see in the future for New Jersey.

Kenric Tyghe: Thanks, George. That’s great color. And if I could, just on the balance sheet, commentary with respect to preservation of cash and strengthening the balance sheet. Could you sort of speak to that in the context of the deferred tax liability? How are you thinking about your priorities as uses of cash? And also perhaps just philosophically, how you think about some of the, let’s call it, some of the levers in the discussion?

George Archos: I’ll pass off to Brett and I will add any additional comments for that.