Tough Q3 For Cannabis Co. Vext Science, But Ohio Rec Market Launch Holds Promise

Vext Science, Inc. VEXT VEXTF reported on Tuesday its third quarter financial results for the three months ended Sept. 30, 2023, revealing an 11.8% sequential drop in revenue to $8 million.

Eric Offenberger, CEO of Vext – a company with vertical cannabis operations in Arizona and Ohio – said the third quarter was “challenging” for cannabis retailers nationwide.

“In an already seasonally slow period for Arizona, the consumer remained stretched, which led to continued pressure on retail price points and smaller baskets year-over-year,” he said.

Earlier this month Vext closed the sale of its cannabis cultivation facility located in Prescott Valley, Arizona, to affiliates of Elevate Cannabis Co. for $6.5 million in cash. In October, the company reached an agreement with Big Perm's Dispensary Ohio, to acquire two cannabis dispensaries in Ohio.

That move would bring the company’s retail footprint in the Buckey State to four dispensaries. It would “position us both to capture significant growth as Ohio launches and to sustain that growth as the market matures,” Offenberger explained.

While bipartisan efforts to modify Ohio's recently approved marijuana legalization law before its main provisions take effect next month are underway, Offenberger praised the policy change.

"We are particularly pleased with recent developments in the Ohio market,” he said. “As one of the top ten states in the U.S. by population, it is expected to become a $4 billion market within the next four years.”

Q3 2023 Financial Results

• Revenue increased 5.5% year-over-year.
• Gross profit totaled $2.8 million, down from $4.9 million in the prior year’s period, representing a year-over-year decrease of 42.4%.
• Gross margin before the impact of biological assets was 39%, compared to 60% in the prior year’s period.
• Net loss (after taxes) was $1.8 million, compared to the net income of $423,532 for the three months ended Sept. 30, 2022.
• Adjusted EBITDA came in positive at $1.1 million compared to a positive adjusted EBITDA of $2.3 million in the same quarter of last year. That’s the 14th consecutive quarter of positive adjusted EBITDA.
• Total operating expenses were $4.5 million, up from $3.6 million in the corresponding quarter of 2022.

Recorded cash flow from operations of $3.8 million year-to-date, marking 13 out of 14 consecutive quarters of positive cash flow from operations

“Through 2024, our team will remain focused on building significant shareholder value through continued growth in market share and profitability in Arizona, while capturing a meaningful share of the large Ohio market as it transitions to adult use in the new year," Offenberger added.

VEXTF Price Action

Vext’s shares traded 3.3537% lower at $0.2291 per share after the market close on Monday afternoon.

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Photo: Courtesy of geralt and Kindel Media by Pixabay