Verano Hldgs Corp

Good day and thank you for standing by. Welcome to Verano's fourth quarter and full year 2025 earnings conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message device and your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that this conference is being recorded. I would now like to turn the conference over to your speaker today. Steve Mazzecco, please go ahead.

Thank you and good morning, everyone. Welcome to Verano's fourth quarter and full year 2025 earnings conference call. I am joined today by George Arcos, founder and chief executive officer, Rich Trapchak, chief financial officer, and Aaron Miles, chief investment officer. During this call, we will discuss our business outlook and make forward-looking statements within the meaning of applicable U.S. and Canadian securities laws, which are based on management's current assumptions and expectations. Such forward-looking statements involve known and unknown risks. uncertainties, and other factors that may cause the actual results, performance, and achievements of the business or developments in the company's industry to differ materially from those implied by such forward-looking statements. Actual events or results could differ considerably due to risk and uncertainties mentioned in our filings on Edgar and Cedar, including our financial statements for the year and quarter ended December 31st, 2025. In addition, throughout today's discussion, we will refer to non-GAAP financial measures that do not have any standardized meaning prescribed by GAAP. Management believes non-GAAP results are useful to enhance the understanding of the company's ongoing performance, but these are supplemental to and should not be considered an isolation from or the substitute for GAAP financial measures. These non-GAAP measures are defined in our earnings press release and available on our website at investors.verano.com, which also includes the reconciliation of these measures to their respective most directly comparable GAAP financial measures. Comparative market share brand performance industry data that is mentioned during this call

derived from bdsa data unless otherwise noted lastly all currency is in u.s dollars i'll now pass it over to george thank you and good morning everyone i am proud of the progress we've made advancing key priorities for the business throughout 2025 including a strong finish to the year with sequential revenue and margin improvement in the fourth quarter within guidance before i cover our results and recap a pivotal year for verano and the industry I wanted to highlight the $195 million senior secure term loan we announced this morning, led by Needham Bank, with participation by Chicago Atlantic and myself. The funds from the term loan, combined with cash on our balance sheet and the remaining $50 million we drew under our existing revolving credit facility, were used to repay amounts owed under our previous 2022 credit agreement. We believe our new credit facility provides Verano some of the best beneficial terms in the industry relative to peers that have announced similar agreements, including a favorable current interest rate of 9.5%, along with maturity date and prepayment flexibility. When compared to our 2022 facility, we anticipate our 2026 credit agreement will provide us with significant savings in the eight-digit range. We're thrilled to complete this agreement on terms that we believe are beneficial for Verano, our employees, and our shareholders, enabling us to focus on strategic growth initiatives moving forward. Reflecting on 2025, there are plenty of significant accomplishments across the business I would like to highlight. We improved our operational procedures and R&D capabilities, which unlocked efficiencies and SG&A savings. and increase output across our CPG operations after implementing automation and technology upgrades. We inked new partnerships with top quality operators and brands and launched new product innovation that solidified our number three national market share position for our total Verano portfolio at the end of 2025. We strategically expanded our footprint by opening seven new dispensaries in four states and enhanced our retail presence through targeted store relocations and refreshes. Additionally, we positioned the company ahead of future growth by redomiciling in Nevada, reached a very favorable settlement to the litigation with Vireo, and won a conditional vertical license in Texas as the state prepares to significantly expand its medical cannabis program. Looking ahead at potential catalysts as we await federal action on rescheduling and closing the hemp loophole, we're also uniquely positioned as the only operator with current and planned operations across four key markets primed for expansion, Texas, Virginia, Pennsylvania, and Florida. We hit $822 million in full-year 2025 revenue and had a strong finish to the year in the fourth quarter. We generated $207 million in revenue in the fourth quarter, an increase of $4 million versus the prior quarter, driven primarily by retail gains during the holiday season. Retail revenue was $170 million, an increase of $6 million sequentially following successful new product launches, seasonality in Arizona and Florida, and strong holiday retail performance during the quarter. In Florida, per OMMU data, we maintained a solid moat around our number two position based on retail footprint and volume throughout 2025. We also launched a variety of new products and formats in the Florida market that contributed to a more than 15% sales gain in the fourth quarter, compared to both the third quarter and prior year period. Also, after converting a majority of our Arizona dispensaries to bodega style grab and go formats, the stores outperformed the rest of the market in sales on a sequential and annual basis, and we delivered solid fourth quarter results in Maryland and Pennsylvania, offsetting competition and price compression in other states. On the wholesale side, excluding intersegment eliminations, revenue was $84 million in the fourth quarter. We increased vertical wholesale sales following successful new product launches, which was offset by lower third-party sales versus the prior quarter. Despite lingering industry-wide payment and credit issues, we've improved our accounts receivable position by reinstating accounts and lowered our receivables balance by $9 million a year end 2025 versus year end 2024. We generated gross profit of $106 million or 51% of revenue and adjusted EBITDA of $56 million or 27% of revenue within our Q4 guidance. SG&A increased 7% sequentially primarily due to strategic marketing investments we executed during the busy fourth quarter holiday season and other expenses. However, on an annual basis, we reduced SG&A spending by $16 million in 2025 versus 2024, reflecting the success of our overall cost-saving initiatives. Throughout 2025, we were laser-focused on strengthening our stable of powerhouse brands through new product formats and genetics and launching breakthrough innovation particularly in the industry's fastest-growing categories. We introduced a variety of pre-rolls, all-in-one and large-format vapes across our Savvy, Verano, and Essence lines, rolled out a number of line extensions, and launched our pioneering hyphen vape pod system late last year. Our performance was also boosted by new partnerships we secured with award-winning brands including Grow Sciences, Raw Garden, and Edie Parker, to launch products across our largest markets, including Illinois, New Jersey, and Florida. After executing our strategy for the year, we ended 2025 as a top three player in every category we compete in. We increased vape market share year over year, grew market share in Florida by more than 4% from November to December, and recently regained the number one position in New Jersey. I'm proud of our teams for executing an exceptional game plan in 2025 and look forward to driving continued brand momentum this year. We've already hit the ground running in 2026 with the launch of SwiftLifts as a standalone national pre-roll brand and plan to introduce more exciting new product innovation throughout the year. We're driving ongoing CPG improvements to increase yields, scale automation and technology, and activate additional capacity in our Illinois, Florida, Maryland, Virginia, and Ohio facilities to meet increased demand. And on the retail side, we anticipate opening approximately 5 to 10 new dispensaries in 2026, primarily in Florida, and introducing additional dispensary enhancements across our footprint. We're also elevating our digital presence, including launching a brand new Zenleaf website and expanding our e-commerce platform that is now deployed across a majority of our markets. Additionally, following its members-only debut several years ago, we are excited to expand the scope of Cabbage Club, which we reintroduced as our national customer loyalty program in 2026. Following the completion of these enhancements, we've increased our loyalty membership to nearly 1.1 million customers and counting nationwide. I'll now pass it over to Rich to go over the financial results in more detail.