Release Date: March 31, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Vext Science Inc (VEXTF, Financial) reported a strong fourth quarter of 2024, with revenue reaching $10.2 million and adjusted EBITDA of $3.2 million, marking the strongest operating quarter in recent years.
- The successful launch of Ohio's adult-use market significantly contributed to revenue growth and increased cash flow, with Ohio's retail locations delivering 40% growth in total sales in Q4 2024.
- For fiscal year 2024, Vext Science Inc (VEXTF) generated revenue of $36 million, a 3% increase over fiscal 2023, and adjusted EBITDA of $9.2 million, up 66% year-over-year.
- The company is well-positioned for future growth in Ohio, with plans to expand to eight retail locations, maximizing its license cap and enhancing its vertically integrated operations.
- Vext Science Inc (VEXTF) has a solid balance sheet with $4.6 million in cash as of December 31, 2024, and does not anticipate any capital raises for operational expenses or Ohio retail expansion plans.
Negative Points
- Arizona's cannabis market faced significant challenges in 2024, with total statewide sales declining 12.6% and average per store sales dropping 25% due to oversupply and heightened competition.
- Despite strong performance in Ohio, Vext Science Inc (VEXTF) experienced pricing pressures in Arizona, impacting overall profitability.
- The company recorded a noncash impairment charge of $2.9 million in Q4 2024 due to the wind down of its Oklahoma joint venture and the Happy Travel's joint operation in California.
- Vext Science Inc (VEXTF) anticipates continued pricing pressure in Arizona due to excess cultivation capacity and a saturated brand landscape.
- The company is facing regulatory uncertainties in Ohio, with pending adult-use regulations that could impact future operations and market dynamics.
Q & A Highlights
Q: Can you expand on the pricing pressures in Arizona and how they might change in the future?
A: Eric Offenberger, CEO, explained that the primary issue in Arizona is oversupply due to excessive cultivation. This has led to pricing pressures, compounded by a significant black-market presence. While Arizona's fundamentals are strong, with population growth and economic activity, the oversupply issue needs resolution for pricing to stabilize. Vext's strategy focuses on matching supply with demand to avoid wholesale market pressures.
Q: How does Vext plan to balance free cash flow and capital requirements for Ohio expansion?
A: Eric Offenberger, CEO, stated that Vext is well-positioned financially, with plans to remain free cash flow positive while expanding in Ohio. Trevor Smith, CFO, added that maintenance CapEx is expected to stay under $2 million annually, with additional self-funded CapEx for Ohio retail build-outs.
Q: What is the expected impact on margins as Ohio becomes a larger part of Vext's revenue?
A: Trevor Smith, CFO, indicated that margins are expected to improve as Ohio operations expand. The focus is on achieving 100% vertical sell-through across eight stores, which will enhance margins compared to wholesale market sales.
Q: What are the anticipated changes in Ohio's adult-use cannabis regulations, and how might they impact Vext?
A: Eric Offenberger, CEO, noted that the timing and specifics of Ohio's adult-use regulations remain uncertain. Key areas of interest include potential changes in tax rates and advertising restrictions. The ability to advertise and introduce new products like pre-rolls could significantly impact market dynamics and consumer awareness.
Q: Can you provide more details on Vext's wholesale strategy in Ohio and its future outlook?
A: Eric Offenberger, CEO, explained that while wholesale is currently a part of Vext's strategy in Ohio, the goal is to reduce reliance on it as retail operations expand. Trevor Smith, CFO, added that wholesale accounted for about 30% of Ohio's product mix in 2024, but this is expected to decline as more retail locations open.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
