Vireo Growth Inc. (VREOF) Q3 2026 Earnings Call Transcript

Transactions are progressing through their respective regulatory approval processes. Each of these transactions serves a specific purpose, to deepen our presence in existing markets, establish scale and attractive new markets, or add capabilities that strengthen our platform. And while our pace has been significant, our focus remains on what happens after these transactions close and become part of Vireo. Lastly, given the high number of acquisitions over the year and the timing uncertainty that it introduces, we have not been in a position previously to provide guidance. We do, however, feel it is important to share with investors how we're looking at the business. Therefore, we're providing a forward-looking outlook for revenue and adjusted EBITDA as a measure of profitability. As we look at the remainder of the year and the transition into the next year, we're providing target ranges for Q4 of 26 and Q1 of 27 that reflect our disciplined cost management and our expanding platform. For the fourth quarter of 2026, based on current expectations and information available to the company today, including an expected sequential decline in seasonality in our non-cannabis business, we project revenue to be in the range of $250 million to $265 million, and adjusted EBITDA to be in the range of $45 million to $48 million. This outlook excludes pending acquisitions that have not yet closed. Had they closed prior to the start of the quarter, the company estimates they could have contributed an additional $45 million to $55 million of revenue and $5 million to $6 million of adjusted EBITDA in the quarter. For the first quarter of 2027, the company expects revenue to be in the range of $280 million to $300 million, and adjusted EBITDA to be in the range of $53 million to $56 million. Again, this is excluding pending acquisitions. If the pending acquisitions were to close prior to the start of the quarter, those acquisitions could contribute an additional $50 million to $60 million of revenue and $7 million to $8 million of adjusted EBITDA. I'll note our fourth quarter 2026 and first quarter 2027 guidance includes the addition of fluent financials beginning November 9th. At this point in time, if we remain on a similar path of acquisitions, our policy will be to provide formal guidance on a sequential quarterly basis, and we will not provide full year targets. This will allow us to remain agile and focus on immediate operational horizons where we have higher visibility. As we move through the fourth quarter and look toward 2027, our priorities remain clear. Continue building leading businesses in our core markets and improving operating performance. With that, I'll hand the call over to Tyson to review our financial results.

Thank you, John, and thanks to everyone for joining us. I'll run through a quick summary of key highlights for the quarter. Third quarter gap revenue of $253.7 million increased to 177% year-over-year on a reported basis, giving effect to the acquisition of certain PharmCan Colorado assets, C-21, and the Cannabis Colorado assets under MSA as if they were completed on July 1, 2026. Third quarter pro forma revenue was $277 million. This proforma number does not include Fluent, the remaining cannabis assets, Planet 13, or the Ohio transactions. For our cannabis segment specifically, we show proforma year-over-year retail revenue growth of 4%. Adjusted EBITDA was approximately $42.7 million, reflecting an improvement of $17.3 million, or 68.1% over the same period last year. Operating income, a key indicator of underlying profitability, improved by $13.9 million sequentially during the quarter. Moving to the balance sheet, we ended the quarter with cash and cash equivalents of $106.8 million and long-term debt of $293 million, excluding $23.4 million in convertible debt and cash. Net debt was $196.2 million. We continue to manage our cash position and debt obligations with a focus on maintaining financial flexibility, supporting our existing operations, and funding discipline growth opportunities. In August, we announced an NCIB program, and during the third quarter, we repurchased 216,200 subordinate voting shares for approximately $2.5 million. Subsequent to quarter end, we announced a $60 million real estate term loan with a C. West commercial bank at a fixed rate of 8.5% secured by our cultivation and production facilities in New York and Florida. Across our platform, we own approximately a dozen cultivation and production other facilities, limiting our exposure to long-term lease obligations. I'll now hand the call back to John.

Thank you, Tyson. Before we open the call for questions, I'd like to leave you with a few thoughts. In a relatively short period, we built Vireo into a business with an annualized GAAP revenue run rate exceeding $1 billion, supported by an exceptional group of operating teams across the country. That scale alone has never been our objective. What's important is how we leverage that scale to drive financial performance, improving the business we've acquired, strengthening their competitive position, and building a platform that is more valuable than the sum of its parts. We continue to believe we're well-positioned to bring those opportunities into Vireo's platform through discipline, capital-efficient transactions, and are excited about where we're going. Thank you for joining us today.

We appreciate your continued support. Operator? We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Pablo Swanick with Swanage & Associates. Your line is now open. Please go ahead.

Good morning, everyone. Look, just the first question has to do at the state level. I'm looking at the Minnesota and Florida numbers. I mean, Florida up 34 percent quarter on quarter. Very good. Minnesota is down 10 percent in a market that's actually growing. Can you give maybe some color in terms of what's driving the increase in Florida and the decline in Minnesota? And I'm talking about the retail numbers. Thanks. Hi, sorry. Did you hear my question, John? I don't know if there was something wrong with the line.

Your question. I just want to make sure everyone can hear me. So the issue with Minnesota is that, yes, your question is a retail in nature. However, the Minnesota growth and the retail numbers are subject to the supply provided by our grow. We are one of two grows. There is no flower in the market, and our grow actually had a couple issues as we're opening our second facility. And we ran out of product. So when you run out of product in Minnesota, you have declining revenues. We expect that, you know, the issue is resolved already. So, I'm sorry.

No, go on. Go on, John. Go on.

The issue is resolved already, and we're going into the fourth quarter strong as we're opening our second facility, and, you know, we will have the largest footprint in Minnesota.

And in terms of the question about Florida, I mean, very strong 34% growth. I know we have the OMU data, so that was pointing to your operation there, Green Dragon, but maybe more color in terms of what's driving that.

Great performance on the supply side. Again, this is another vertically integrated business, so retail depends heavily on the performance at the supply level. I think we're properly scaled in Florida and you should expect that similar growth across the board for the quarters to come.

Right. Thank you. Look, and then obviously Colorado now in the quarter, about 25% of your retail revenues. California, I think close to 10%. So, I know we've talked about this before. Most of the other MSOs talk about wanting to focus mostly on what they call license-restricted state. And you have made the argument that in the case of this more mature market, like Colorado, California, can be very attractive for your economics longer term. But can you give more color or any evidence that your thesis in Colorado and California is playing out in terms of this pretty much becoming like almost an annuity in terms of a bit of growth in the future? Thank you.

Well, EBITDA margins are going to be lower in those states. As we know, those are competitive states. And we believe now for the better part of the last two years that if a company doesn't win in those states, it cannot win long term. And for us, long term is five to 10 years. So we see it as imperative to win in Colorado, California, Michigan, and other competitive states. In terms of the actual numbers and what you should expect, I think it's, you know, it's kind of sitting on the page from my perspective. We bought four declining businesses, and you see what we've done with them. This is just the beginning. We love Colorado. We love California. And we love the retail angle. We love the fact that we are very asset light in those states. We don't have cultivation. We're not planning on bringing on cultivation for the time being. If we did bring on cultivation, it would have to be a nationally competitive cultivator with the lowest cost, proven lowest cost product. So, we don't have any plans for any of that. I just want everyone to know how we're thinking. We're thinking long-term. So, I don't want to say I'm not surprised by the numbers, but we're hoping that Burial will demonstrate in the months and years to come that we can buy a business and we can turn it around very fast and we can produce meaningful EBITDA margins.

Okay, thank you. That's very helpful. John, I apologize. I'm going to add one more question. Can you talk about ETH, not so much in terms of the retail assets they own, but in terms of the distribution business? How is that being used? I think that deal closed in Florida already, so you can talk about it, I guess, and of course California. But just talk about how that business is doing and, you know, any things in their toolkit that you can implement in other states. Thank you. That's it.

You know, I don't have the numbers to prove this, but, you know, I'm pretty certain that we're the largest delivery platform in the U.S., so it's a little bit speculative, and I apologize, but between the revenue that we're doing in California, Utah, Nevada, and other states, I think we're kind of I'm trying to become experts in that field. It comes down to single trip delivery economics, which we've been studying across the board, both in limited license states like Utah and in very competitive markets like California. I think there's an argument here that this can be, you know, an added value. My background has been in retail and B2C delivery, so I've done that for 15 years, and I believe in delivery. I think convenience will rule the future of cannabis, and either we will seize the moment now where there is no competition or deal with the fact that third-party delivery will enter the space. We're trying to be one step ahead of that transition, and I don't want to say we're investing heavily in delivery, but we're thinking about delivery every day.

Thank you.

Your next question comes from the line of Linda Bolton Weiser with Water Tower Research. Your line is now open. Please go ahead.

Yes, hi. Hi, how are you? You mentioned in your commentary that your strategy involves buying businesses that could be declining, and you turn them around. So when you think about your M&A objectives, is there anything in particular you would steer clear of in terms of an acquisition?

Yes, good morning, Linda. Thank you for the question. Great question. Absolutely, we would steer away from heavily indebted businesses. I think we have. When we've negotiated with certain lending groups, it was imperative that we right-size the business for the EBITDA that the business generates. And typically, our long-term goal is to stay consistently under 1x EBITDA leverage. I think that the conversation in the cannabis industry has changed in the sense that the industry is becoming a cash-generating industry now, and we want to be very cognizant of the balance sheet, because that can be a hindrance to future growth. And debt can be positive if it's normal debt, but if it's double-digit debt, we just don't believe in it.

Okay, thank you. And then I think you've mentioned in your commentary that you kind of have a decentralized operating model, but are there any scale benefits that you do accrue as you get bigger and bigger? Is there anything at all you can point to that is beneficial as you continue to grow?

Yes, the way we see Vireo, there are three pillars. There's the pillar that is ultra local. And that is, you know, the retail side of the business where, you know, you have to have friendly service, you have to have fast service, you have to have fresh product, and, you know, king stores, and so on and so forth. And then you have, and that helps, you know, it sounds pretty simple, but it's hard to do. You know, my... My analogy is always, you know, simple sounds easy, but, you know, until you have to boil a million eggs a day, then it becomes probably the equivalent of landing on the moon. So at scale, doing that consistently and providing a consistent customer experience is our mission, and that is a local mission, and that is common between every market. In the middle, you have the, you know, the shared services, as we like to say it, and those are, you know, business analytics, finance, HR, the mission of the company, both at the individual level and at the corporate level, and then the vision of the company. And then the last pillar is our supply chain, which we hope to perfect in the next five years, which is cross-border. And, you know, we've mapped out everything that is non-THC. We're focused on delivery. I think we have an incredible distribution team that has, you know, combined 200 years. Of distribution experience, counting pennies. And that is a pretty tough business. As you can see, the margins are below 10%. But it's a business, again, you know, that I've owned in the past. And, you know, I strongly believe in supply chain as the industry matures. So I think, to answer your question directly, there are enormous synergies at the state level. I said at the beginning two years ago that we want to be $100 million in each state. There are enormous synergies there. Now we want to be $200 million in every state. And then you have the middle, which is shared services across both the cannabis or THC touching and the non-cannabis. And then the synergies that you're referring to that are national are distribution and non-THC products, which we're streamlining as we're speaking.

Okay, that makes sense. Thanks. And then my final question just has to do with regulatory. Are there any particular regulatory developments you're monitoring carefully that would either impact your strategy positively or negatively?

Yes, I, you know, I think that's sort of like a crystal ball question. And agreeing to be in this space means that you're agreeing to deal with the adversity that comes with uncertainty and on the regulatory side that could change as we can, you know, as we've experienced many times. With no notice. And, you know, that's to be expected for an ASIN industry. I mean, it's not just us trying to figure it out. It's also the regulator. And now we have an added layer. The federal government will add its own touch. We're seeing this with the DA. For me, it's normal. My focus, again, going back to the previous question, my focus is building the best team. Understanding that our mission is clear and then we need to be agile. And willing to pivot as the regulatory environment changes. Let's not forget that the regulatory changes are also barriers to entry for others that want to enter the space. So I think we have to focus on the negatives, but also see the positives in the industry. We're still above $1,000 a pound, and we have serious barriers to entry. So this is... This is a good setup, from my perspective, with the scale that we've built to compete in the space.

Okay, that makes sense. Thanks very much for taking my questions.

Thank you. Your next question comes from the line of Tom Kerr with Zach's FCR. Your line is now open. Please go ahead.

Good morning, guys. Question on the same-store growth of 4%. Is that kind of where you want to be, or is that a strong number? Can you do better than that, or just some more color on that 4% organic growth number?

I think for retail, it's a good number. Now, it's not great when inflation is like 3.7%, but it is kind of good. If we are considering the decline in pricing that is occurring in cannabis, which I think is broadly, you know, mid-single digits. So depending on whether or not you want to compare us to normal retail, which is experiencing, you know, inflation, or you want to compare us to cannabis, which is experiencing deflation, I think, let's just put it this way, Tom, I'm happy with this number for this quarter. I think, you know, again, being a little bit speculative, I think that will go up and then down. I can't tell you, you know, for how long it will go up and when it will actually go down. But there are long-term equilibrium points that I think mirror the broader retail market. And I do think that, you know, 4% in cannabis today is, especially in the markets that we're competing. It's a good number. It's not A+, I think it's B+, and I think that, you know, we should be mindful of the long-term equilibrium that, to me, comes from the likes of McDonald's and, you know, the big retailers, but that would be my focus in the future.

Got it. And a quick financial question on the transaction integration expenses of $12.4 million. Is there anything unusual in that, or is that sort of an average number for the amount of transactions you guys have done in the quarter?

Sorry, can you repeat that question? Because you went in and out for me.

Oh, sorry. The transaction expenses of $12.4 million in the quarter. Is there anything unusual in that, or is that kind of the normal rate of transactions? No, it's transactions.

We closed a lot of transactions this year, and most of them were tied to the third and fourth quarter, as you know.

Okay, so nothing extraordinary in there. Okay, last question on the, going back to the acquisition question, any changes in sort of Industry multiples, you know, you're still trying to get to four times EBITDA. Is it getting more competitive in terms of acquisitions or less competitive, or you're still seeing plenty of opportunities at the good price, at the right price?

I think there's a ton of opportunity. And You know, we would never buy something even for four times their EBITDA if we're trading, you know, three times our EBITDA. So that's the only thing that has changed, which is a little bit head-scratching for me. But, you know, the deals going forward will be very similar in nature to deals we've done in the past, where regardless of where the stock is trading, We know what we're worth, and that would be our stock price. And the acquisition multiple will have to be much lower than ours and in the range that you described.

Got it. That's all the questions I have for today. Thank you.

Thank you, Tom. Your next question comes from the line of Josh Felker with CB1 Capital. Your line is now open. Please go ahead.

Hey, good morning, John Tyson. Thank you for taking the question. Thank you for the guidance, and thank you to Zach for setting up my question. Within the context of guidance and evaluation, as Zach just mentioned, I'm interested in how you rank your different opportunities to deploy capital. And where you rank share buybacks specifically against those other opportunities to the play capital. Thank you.

Buy back is by far my first choice. If I could buy back more stock, I would do it. Unfortunately, as you know, buying back stock is not easy. And, you know, you can't just lead and buy back your own shares. But the price that, you know, we are buying back our stock, like I'm trying to max out on the program. And I'm trying to do it in a very responsible way. We certainly have the cash. So that would be my first option. And then buying an unknown business that we think we have a vision for is my second choice.

Super. Really appreciate that. As a follow-up, could you give us an idea on how you view priority ranking on your other opportunities to deploy capital within the business from a CapEx point of view?

I don't. So I have a big sign in my office, just a reminder for me, that says we don't build cultivation. And I don't, looking forward, I think there's enough. There's enough capex deployed in the industry right now that we can take advantage of. So in other words, you don't need to build, I think, more retail. You don't need to build more cultivation. Maybe you need to refresh it a little bit. But until there is interstate commerce, there's no need for major investment. We also don't like greenfield states. You'll never hear us say, hey, we're going to go to Texas and we're going to build 200 stores. We don't have the cash, and that's just not an interesting proposition. We don't want to compete with Trulief. They're great at what they do. And, you know, you won't hear us run and buy something in Georgia because it's a, you know, it's a new opportunity. It's just not how we think. We're value investors. And, you know, long term, we're thinking that, you know, our apex will be very much in line with what you see today. And CapEx will be just. replacement CapEx, not, not new CapEx. I don't think the industry needs new CapEx, unless you're going on, you know, unless you're taking big bets in big states like Texas, which they're certainly worth it. It's just not, it's not what You know, I don't have the stomach for that. It's just way too big right now, and there's a lot of opportunity to buy things in a more responsible way when you're generating the cash that we're generating. Super.

Really appreciate the answers, Matt. Yes. There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.