Verano Holdings Corp.
10/29/2025 | Press release | Distributed by Public on 10/29/2025 05:12
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This management discussion and analysis (this "MD&A") of the financial condition and results of operations of the Company is for the three and nine months ended September 30, 2025 and September 30, 2024. It is supplemental to, and should be read in conjunction with, the Company's Unaudited Interim Condensed Consolidated Financial Statements and the accompanying notes for the three and nine months ended September 30, 2025 and with the Company's Audited Consolidated Financial Statements and the accompanying notes for the years ended December 31, 2024, 2023 and 2022 included in the Form 10-K. The financial statements referenced in this MD&A are prepared in accordance with GAAP. Financial information presented in this MD&A is presented in United States dollars ("$" or "US$") and expressed in thousands, unless otherwise indicated. This MD&A contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those projected, forecasted, or expected in these forward-looking statements as a result of various factors, including, but not limited to, those discussed in the Form 10-K and this Form 10-Q. See "Cautionary Statement Regarding Forward-Looking Statements" above, "Risk Factors" in Part I, Item 1A above and "Risk Factors" in the Form 10-K and Part II, Item 1A of subsequently filed Form 10-Qs. The Company's management believes the assumptions underlying the Company's financial statements and accompanying notes are reasonable. However, the Company's financial statements and accompanying notes may not be an indication of the Company's financial condition and results of operations in the future.
OVERVIEW OF THE COMPANY
Verano, one of the U.S. cannabis industry's leading companies based on historical revenue, geographical scope and brand performance, is a vertically integrated, multi-state operator embracing a mission of saying Yesto plant progress and the bold exploration of cannabis. An operator of licensed cannabis cultivation, processing, wholesale distribution and retail facilities, our goal is the ongoing development of communal wellness by providing responsible access to regulated medical and adult use cannabis products to discerning customers. As of October 28, 2025, through our subsidiaries and affiliates we operate businesses in 13 states, including 158 retail dispensaries and 15 cultivation and processing facilities with over 1.1 million square feet of cultivation capacity. We produce a wide variety of high-quality cannabis products sold under our portfolio of consumer brands, including Encore™, Avexia™, MÜV™, Savvy™, (the) Essence™, BITS™ and Verano™. We also design, build and operate branded retail environments including Zen Leaf™ and MÜV™ dispensaries that deliver a cannabis shopping experience in both medical and adult use markets.
Notwithstanding the permissive regulatory environment of medical, and in some cases, also adult use (i.e., recreational) cannabis, at the state level, it remains illegal under U.S. federal law to cultivate, manufacture, distribute, sell or possess cannabis in the U.S. Because federal law prohibits transporting any federally restricted substance across state lines, cannabis cannot be transported across state lines. As a result of current federal law prohibitions, the U.S. cannabis industry is conducted on a state-by-state basis. To date, in the U.S. 40 states plus the District of Columbia and the U.S. territories of Puerto Rico, Guam, the Commonwealth of Northern Marina Islands, and the U.S. Virgin Islands have authorized comprehensive medical cannabis programs, 24 states plus the District of Columbia and the U.S. territories of Guam, the Commonwealth of Northern Mariana Islands, and the U.S. Virgin Islands have authorized comprehensive programs for medical and adult use (i.e. recreational) cannabis, and 8 states allow the use of low tetrahydrocannabinol (THC) and high cannabidiol (CBD) products for specified medical uses. Verano operates within states where cannabis use, medical or both medical and adult use, has been approved by state and local regulatory bodies. Strict compliance with state and local laws with respect to cannabis may neither absolve the Company of liability under U.S. federal law, nor may it provide a defense to any federal proceeding which may be brought against the Company or any of its subsidiaries.
Our strategy is to vertically integrate as a single cohesive company in multiple states through the consolidation of seed-to-sale cultivating, manufacturing, distributing, and dispensing cannabis brands and products at scale. Our cultivation, processing and wholesale distribution of cannabis consumer packaged goods are designed to guarantee shelf-space in our national retail dispensary chains, as well as to develop and foster long term wholesale supply relationships with third-party retail operators. Our model includes geographic diversity by establishing a footprint to allow us to adapt to changes in both industry and market conditions.
The United States government has recently adopted new approaches to trade policy and has announced tariffs on certain foreign goods and the possibility of significant additional tariff increases or expansions of tariffs. The timing and scope of such tariffs by the United States and retaliatory tariffs by other countries in response to such tariffs is currently uncertain. Such tariffs could create supply chain disruptions or increased pricing of procured materials, which could impact our current and expansion strategy as well as our business, operating results and financial condition. See "Risk Factors" in Part II, Item 1A in the Form 10-Q filed for the period ended March 31, 2025.
SELECTED RESULTS OF OPERATIONS
The following presents selected financial data derived from the (i) Unaudited Interim Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2025 and 2024 and (ii) the Condensed Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024, and should be read in conjunction with the Unaudited Interim Condensed Consolidated Financial Statements and accompanying notes presented in Item 1 of this Form 10-Q. The selected Unaudited Interim Condensed Consolidated financial information below may not be indicative of the Company's future performance.
Three Months Ended September 30, 2025, as Compared to Three Months Ended September 30, 2024
| For the Three Months Ended September 30, | ||||||||||||||||||||
| ($ in thousands) | 2025 | 2024 | $ Change | |||||||||||||||||
| Revenues, net of discounts | $ | 202,810 | $ | 216,683 | $ | (13,873) | ||||||||||||||
| Gross Profit | 95,237 | 109,097 | (13,860) | |||||||||||||||||
| Net Loss attributable to Verano Holdings Corp. & Subsidiaries | (43,832) | (42,567) | (1,265) | |||||||||||||||||
| Net Loss per share - basic & diluted | (0.12) | (0.12) | 0.00 | |||||||||||||||||
Revenues, net of discounts
Revenues, net of discounts, for the three months ended September 30, 2025 was $202,810, a decrease of $13,873 or 6%, compared to revenue of $216,683 for the three months ended September 30, 2024. The decrease in revenue, net of discounts, was primarily attributable to price compression across several established markets, as well as competition within the cultivation (wholesale) segment. Additionally, declines within the cultivation (wholesale) segment were attributable to the Company's ongoing accounts receivable strategy as the Company continues to prioritize business with credit-worthy customers. Conversely, the retail segment experienced a modest increase driven by product availability in the Florida market. This was largely offset by targeted promotional activities and discounting strategies in retail stores to stimulate traffic and drive sales volumes, when comparing the three months ended September 30, 2025 to the three months ended September 30, 2024. During the three months ended September 30, 2025, the Company opened one new retail store located within the Florida market. Retail revenue for the three months ended September 30, 2025 was approximately 67% of total revenue compared to 64% of total revenue for the three months ended September 30, 2024, in each case, excluding intersegment eliminations. Cultivation (wholesale) revenue for the three months ended September 30, 2025 was approximately 33% of total revenue compared to 36% of total revenue for the three months ended September 30, 2024, in each case, excluding intersegment eliminations.
Gross Profit
Gross profit for the three months ended September 30, 2025 was $95,237, representing a gross profit margin of 47%. This is compared to gross profit for the three months ended September 30, 2024 of $109,097, which represented a gross profit margin of 50%. The decrease was driven by a decline in revenues, net of discounts, attributable to the cultivation (wholesale) segment which experienced third-party price compression partially offset by a slight increase in revenues, net of discounts, attributable to the retail segment which experienced increased targeted promotional activities and discounting strategies in retail stores during the three months ended September 30, 2025 when compared to the three months ended September 30, 2024.
Net Loss
Net loss attributable to the Company for the three months ended September 30, 2025 was $(43,832), an increase of $1,265, compared to a net loss of $(42,567) for the three months ended September 30, 2024. The increase was primarily driven by a decrease in gross profit margin coupled with a loss contingency of $10,000 recorded to other income (expense), net and an impairment charge of $5,400 resulting from a reduction in the carrying value of a cultivation facility in Pennsylvania classified as a held-for-sale asset. This is partially offset by a lower provision for income taxes when comparing the three months ended September 30, 2025 to the three months ended September 30, 2024.
| For the Three Months Ended September 30, | ||||||||||||||||||||
| ($ in thousands) | 2025 | 2024 | $ Change | |||||||||||||||||
| Cost of Goods Sold, net | $ | 107,573 | $ | 107,586 | $ | (13) | ||||||||||||||
| Selling, General, and Administrative Expenses | 80,560 | 92,327 | (11,767) | |||||||||||||||||
| Total Other Income (Expense), net | (24,668) | (13,859) | (10,809) | |||||||||||||||||
| Provision for Income Taxes | (28,441) | (45,478) | 17,037 | |||||||||||||||||
Cost of Goods Sold, net
Cost of goods sold, net includes the costs directly attributable to cultivating and processing cannabis and for retail purchases of finished goods, such as flower, edibles, and concentrates. Cost of goods sold, net for the three months ended September 30, 2025 was $107,573, a decrease of $13 or less than 1%, as compared to the three months ended September 30, 2024. The modest decrease was primarily attributable to a decline in revenues, net of discounts, coupled with third-party price compression for the three months ended September 30, 2025 when compared to the three months ended September 30, 2024.
Selling, General, and Administrative Expenses
Selling, general and administrative expenses ("SG&A") for the three months ended September 30, 2025 were $80,560, a decrease of $11,767 or 13%, compared to SG&A expenses of $92,327 for the three months ended September 30, 2024. SG&A expenses as a percentage of revenue were 40% and 43% for the three months ended September 30, 2025 and September 30, 2024, respectively. The decrease in SG&A expenses was attributable to a decrease in depreciation and amortization expense coupled with a decrease in salaries and benefits when comparing the three months ended September 30, 2025 to the three months ended September 30, 2024.
Total Other Income (Expense), net
Total other income (expense), net for the three months ended September 30, 2025, was $(24,668), an increase of $10,809 as compared to the three months ended September 30, 2024. The total other income (expense), net increase was attributable to a loss contingency of $10,000 coupled with a Loss on Debt Extinguishment of $946 related to the Permitted Partial Optional Prepayment on September 30, 2025, under the 2022 Credit Agreement for the three months ended September 30, 2025, when compared to the three months ended September 30, 2024.
Provision for Income Taxes
Income tax expense is recognized based on the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at year-end. Income tax expense for the three months ended September 30, 2025, was $28,441, a decrease of $17,037 or 37% when compared to the three months ended September 30, 2024, primarily due to a decrease in overall revenues, net of discounts coupled with the forecasted annualized effective tax rates, adjusted for discrete items.
Nine Months Ended September 30, 2025, as Compared to Nine Months Ended September 30, 2024
| For the Nine Months Ended September 30, | ||||||||||||||||||||
| ($ in thousands) | 2025 | 2024 | $ Change | |||||||||||||||||
| Revenues, net of discounts | $ | 614,891 | $ | 660,379 | $ | (45,488) | ||||||||||||||
| Gross Profit | 307,802 | 336,397 | (28,595) | |||||||||||||||||
| Net Loss attributable to Verano Holdings Corp. & Subsidiaries | (74,497) | (69,153) | (5,344) | |||||||||||||||||
| Net Loss per share - basic & diluted | (0.21) | (0.20) | (0.01) | |||||||||||||||||
Revenues, net of discounts
Revenues, net of discounts, for the nine months ended September 30, 2025 was $614,891, a decrease of $45,488 or 7%, compared to revenue of $660,379 for the nine months ended September 30, 2024. The decrease in revenue, net of discounts was driven primarily by the Company's accounts receivable strategy in the cultivation (wholesale) segment, of maintaining a number of accounts on hold for non-payment coupled with third-party price compression in established markets. This was partially offset by an increase in the retail segment driven by product availability in the Florida market. During the nine months ended September 30, 2025, the Company opened six new stores: two in Connecticut, three in Florida and one in Ohio. Retail revenue for the nine months ended September 30, 2025 was approximately 68% of total revenue compared to 65% of total revenue for the nine months ended September 30, 2024, in each case, excluding intersegment eliminations. Cultivation (wholesale) revenue for the nine months ended September 30, 2025 was approximately 32% of total revenue compared to 35% of total revenue for the nine months ended September 30, 2024, in each case, excluding intersegment eliminations.
Gross Profit
Gross profit for the nine months ended September 30, 2025 was $307,802, representing a gross profit margin on the sale of cannabis, cannabis extractions, edibles and related accessories of 50%. This is compared to gross profit for the nine months ended September 30, 2024 of $336,397, which represented a 51% gross profit margin on the sale of cannabis, cannabis extractions, edibles and related accessories. The decrease in gross profit during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024, was primarily driven by increased targeted promotional activities and discounting strategies in retail stores as well as third-party price compression in the cultivation (wholesale) segment.
Net Loss
Net loss attributable to the Company for the nine months ended September 30, 2025 was $(74,497), an increase of $5,344, compared to a net loss of $(69,153) for the nine months ended September 30, 2024. The increase was largely driven by a loss contingency of $10,000 recorded to other income (expense), net and an impairment charge of $5,400 resulting from a reduction in the carrying value of a cultivation facility in Pennsylvania classified as a held-for-sale asset for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. This is partially offset by a lower provision for income taxes when comparing the nine months ended September 30, 2025 to the nine months ended September 30, 2024.
| For the Nine Months Ended September 30, | ||||||||||||||||||||
| ($ in thousands) | 2025 | 2024 | $ Change | |||||||||||||||||
| Cost of Goods Sold, net | $ | 307,089 | $ | 323,982 | $ | (16,893) | ||||||||||||||
| Selling, General, and Administrative Expenses | 251,484 | 269,690 | (18,206) | |||||||||||||||||
| Total Other Income (Expense), net | (44,045) | (48,375) | 4,330 | |||||||||||||||||
| Provision for Income Taxes | (80,942) | (87,485) | 6,543 | |||||||||||||||||
Cost of Goods Sold, net
Cost of goods sold, net, includes the costs directly attributable to cultivating and processing cannabis and for retail purchases of finished goods, such as flower, edibles, and concentrates. Cost of goods sold, net, for the nine months ended September 30, 2025 was $307,089, a decrease of $16,893 or 5%, as compared to the nine months ended September 30, 2024. The decrease was primarily driven by third-party price compression in the cultivation (wholesale) segment.
Selling, General, and Administrative Expenses
SG&A for the nine months ended September 30, 2025 were $251,484, a decrease of $18,206 or 7%, compared to SG&A expenses of $269,690 for the nine months ended September 30, 2024. SG&A expenses as a percentage of revenue was 41% and 41% for the nine months ended September 30, 2025, and September 30, 2024, respectively. The decrease in SG&A expenses was driven by a decrease in depreciation and amortization expense coupled with ongoing efficiencies generated across the business when comparing the nine months ended September 30, 2025 to the six months ended September 30, 2024.
Total Other Income (Expense), net
Total other income (expense), net for the nine months ended September 30, 2025, was $(44,045), a decrease of $4,330 as compared to the nine months ended September 30, 2024. The total other income (expense), net decrease was attributable to the voluntary partial payoff agreement for the CC East Virginia Promissory Note resulting in a Gain on Debt Extinguishment partially offset by a Loss on Debt Extinguishment related to the Permitted Partial Optional Prepayment under the 2022 Credit Agreement and a loss contingency of $10,000 during the nine months ended September 30, 2025. Additionally, the total other income (expense), net decrease was attributable to less interest expense on our debt obligations coupled with a Gain on Deconsolidation relating to our Arkansas operations during January 2025, which no longer met the criteria for consolidation as a result of termination of contracts providing us with control over the applicable entity's operations, when comparing the three months ended September 30, 2025 to the three months ended September 30, 2024.
Provision for Income Taxes
Income tax expense is recognized based on the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at year-end. Income tax expense for the nine months ended September 30, 2025, was $(80,942), a decrease of $6,543 or 7% primarily due to a decrease in overall revenues, net of discounts, coupled with the forecasted annualized effective tax rates, adjusted for discrete items.
Results of Operations by Segment
The Company has two reportable segments: (i) cultivation (wholesale) and (ii) retail. Due to the vertically integrated nature of its business, the Company reviews its revenue at the cultivation (wholesale) and retail levels while reviewing its operating results on a consolidated basis.
The following tables summarize revenues, net of discounts, by segment for the three and nine months ended September 30, 2025 and 2024:
| For the Three Months Ended September 30, | ||||||||||||||||||||||||||
| ($ in thousands) | 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||||
| Revenues, net of discounts | ||||||||||||||||||||||||||
| Cultivation (Wholesale) | $ | 81,951 | $ | 90,451 | $ | (8,500) | (9.4) | % | ||||||||||||||||||
| Retail | 164,462 | 164,288 | 174 | 0.1 | % | |||||||||||||||||||||
| Intersegment Eliminations | (43,603) | (38,056) | (5,547) | 14.6 | % | |||||||||||||||||||||
| Total Revenues, net of discounts | $ | 202,810 | $ | 216,683 | $ | (13,873) | (6.4) | % | ||||||||||||||||||
Revenues, net of discounts, for the cultivation (wholesale) segment were $81,951 for the three months ended September 30, 2025, a decrease of $8,500 or 9%, compared to the three months ended September 30, 2024, in each case, excluding intersegment eliminations. The decrease in cultivation (wholesale) revenues, net of discounts, was driven by the Company's accounts receivable strategy of maintaining a number of accounts on hold for non-payment and competition in certain markets when comparing the three months ended September 30, 2025 to the three months ended September 30, 2024.
Revenues, net of discounts, for the retail segment were $164,462 for the three months ended September 30, 2025, an increase of $174, compared to the three months ended September 30, 2024, in each case, excluding intersegment eliminations. The increase in retail revenues, net of discounts, was primarily driven by a modest increase in product availability in the Florida market. This was largely offset by targeted promotional activities and discounting strategies in retail stores to stimulate traffic and drive sales volumes when comparing the three months ended September 30, 2025 to the three months ended September 30, 2024.
| For the Nine Months Ended September 30, | ||||||||||||||||||||||||||
| ($ in thousands) | 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||||
| Revenues, net of discounts | ||||||||||||||||||||||||||
| Cultivation (Wholesale) | $ | 234,852 | $ | 269,042 | $ | (34,190) | (12.7) | % | ||||||||||||||||||
| Retail | 502,367 | 497,468 | 4,899 | 1.0 | % | |||||||||||||||||||||
| Intersegment Eliminations | (122,328) | (106,131) | (16,197) | 15.3 | % | |||||||||||||||||||||
| Total Revenues, net of discounts | $ | 614,891 | $ | 660,379 | $ | (45,488) | (6.9) | % | ||||||||||||||||||
Revenues, net of discounts, for the cultivation (wholesale) segment were $234,852 for the nine months ended September 30, 2025, a decrease of $34,190 or 13%, compared to the nine months ended September 30, 2024, in each case, excluding intersegment eliminations. The decrease in cultivation (wholesale) revenues, net of discounts, was attributable to the Company's accounts receivable strategy in the cultivation (wholesale) segment, which was to maintain a number of accounts on hold for non-payment coupled with expected third-party price compression in established markets.
Revenues, net of discounts, for the retail segment were $502,367 for the nine months ended September 30, 2025, an increase of $4,899 or 1%, compared to the nine months ended September 30, 2024, in each case, excluding intersegment eliminations. The increase in retail revenues, net of discounts, was driven by product availability in the Florida market when comparing the nine months ended September 30, 2025 to the nine months ended September 30, 2024.
Drivers of Operational Performance
Revenue
The Company derives its revenue from both its cultivation (wholesale) business in which it cultivates, produces and sells cannabis products to third-party retail customers, and its retail business, in which it directly sells cannabis products to retail patients and consumers. For the three months ended September 30, 2025, approximately 33% of the Company's revenue was generated from the cultivation (wholesale) business, excluding intersegment eliminations, and approximately 67% from the retail business, excluding intersegment eliminations. For the nine months ended September 30, 2025, approximately 32% of revenue was generated from the cultivation (wholesale) business, excluding intersegment eliminations and approximately 68% from the retail business, excluding intersegment eliminations.
Gross Profit
Gross profit is revenue less cost of goods sold, net. Cost of goods sold, net includes the costs directly attributable to product sales and includes amounts paid for finished goods, such as flower, edibles, and concentrates, as well as packaging and other supplies, fees for services and processing, rent, utilities, and related costs. Cannabis costs are affected by various state regulations that limit the sourcing and procurement of cannabis product, which may create fluctuations in gross profit over comparative periods as the regulatory environment changes. Gross profit margin measures the Company's gross profit as a percentage of revenue.
The Company's expansion and revenue growth strategy has taken priority and will continue to do so for the foreseeable future as it expands its footprint, by exploring new markets and opening or acquiring new dispensary locations, and scales production within certain markets. In the core markets in which the Company is already operational and, as the state markets mature, the Company anticipates that there will be pressure on margins in the cultivation (wholesale) and retail channels. The Company's current production capacity has not been fully realized and it is expected that price compression at the cultivation (wholesale) level, will be partially offset by operational optimization.
Total Expenses
Total expenses other than the cost of goods sold consist of selling costs to support customer relationships and to deliver product to the Company's retail stores. It also includes a significant investment in the corporate infrastructure required to support ongoing business.
Selling costs generally correlate to revenue. As a percentage of sales, selling costs are expected to increase slightly in currently operational markets as facility and market expansion occurs. The increase is expected to be driven primarily by the growth of the Company's retail and cultivation (wholesale) channels and new retail openings.
SG&A expenses also include costs incurred at the Company's corporate offices, primarily related to back-office personnel costs, including salaries, incentive compensation, benefits, stock-based compensation and professional service costs. SG&A expenses may increase in connection with supporting the business and could experience an increase in expenses related to recruiting and hiring talent, along with legal and professional fees associated with being a public-reporting company and publicly traded in Canada and a public-reporting company in the U.S.
Provision for Income Taxes
The Company is subject to income taxes in the jurisdictions in which it operates and, consequently, income tax expense is a function of the allocation of taxable income by jurisdiction and the various activities that impact the timing of taxable events. As the Company operates in the cannabis industry, it is subject to the limits of Section 280E of the Code under which the Company is only allowed to deduct expenses directly related to the sale of products. This results in permanent differences between ordinary and necessary business expenses deemed non-allowable under Section 280E of the Code and a higher effective tax rate than most industries. The Company has taken a position that it does not owe taxes attributable to the application of Section 280E of the Code.
LIQUIDITY, FINANCING ACTIVITIES AND CAPITAL RESOURCES
As of September 30, 2025 and December 31, 2024, the Company had total current liabilities of $143,411 and $197,968, respectively. As of September 30, 2025 and December 31, 2024, the Company had cash and cash equivalents of $82,623 and $87,796, respectively, to meet its current obligations. The Company had working capital of $242,014 as of September 30, 2025, an increase of working capital of $82,473 as compared to December 31, 2024. This increase in working capital during the nine months ended September 30, 2025 compared to December 31, 2024, was attributable to an increase in inventory driven by higher production volumes and more efficient harvests from expanded cultivation facilities coupled with a lower income tax payable balance due in part to the Company's treatment of Section 280E of the Code which shifted a portion of the short-term liability to a long-term liability on the Company's Condensed Consolidated Balance Sheets.
The Company generates cash from revenues and deploys its capital to acquire and develop assets capable of producing additional revenues and earnings over both the immediate and long term. Capital is primarily being utilized for capital expenditures, facility improvements, strategic investment opportunities, product development and marketing, as well as customer, supplier, and investor and industry relations. The Company takes a cautious approach in allocating its capital to maximize its returns while ensuring appropriate liquidity. Given inflation and the uncertainty of the future economic environment, the Company has taken additional measures in monitoring and deploying its capital to minimize the potentially negative impact on its operations and expansion plans.
Liquidity Requirements
Our short-term liquidity requirements consist primarily of funds necessary to pay for our acquisitions, to repay borrowings, maintain our operations and other general business needs. We believe that internally generated funds and other sources of liquidity discussed below will be sufficient to meet working capital needs, capital expenditures, and other business requirements for at least the next 12 months. We believe we will meet known or reasonably likely future cash requirements through the combination of cash generated from operating activities, available cash balances and available borrowings. If these sources of liquidity need to be augmented, additional cash requirements would likely be financed through the issuance of equity securities or additional borrowings; however, there can be no assurances that we will be able to obtain additional equity financing or debt financing on acceptable terms, or on terms similar to our existing financings, in the future.
Our long-term liquidity requirements consist primarily of completing additional acquisitions, scheduled debt payments and future payments of income tax payables, maintaining and expanding our operations and other general business needs. We expect to meet our long-term liquidity requirements through various sources of capital, which may include future debt or equity issuances, net cash provided by operations and other secured and unsecured borrowings. We believe that the foregoing sources of capital will provide sufficient funds for our operations, anticipated expansion and scheduled debt payments for the long-term. Our ability to fund our operating needs will depend on our future ability to continue to generate positive cash flow from operations and our ability to obtain debt or equity financing on acceptable terms.
Credit Facility
On October 27, 2022, Verano and certain of its subsidiaries and affiliates, as the Borrowers, entered into the 2022 Credit Agreement with Chicago Atlantic, as administrative agent for the Lenders, and the Lenders party thereto, pursuant to which the Lenders advanced the Borrowers a $350,000 senior secured term loan, and which also provides the Borrowers with the right, subject to conditions, to request an additional incremental term loan of up to $100,000; provided that the Lenders elect to fund such incremental term loan. At funding, all the proceeds of the loans made under the 2022 Credit Agreement were used to repay the amounts owing under the Company's previous senior secured term loan credit facility. In connection with such repayment, such previous credit facility was terminated and is no longer in force or effect.
The 2022 Credit Agreement provides the Borrowers with the right, subject to conditions, to request an additional incremental term loan in the aggregate principal amount of up to $100,000; provided that the Lenders elect to fund such incremental term loan. Beginning in October 2023, the loan requires scheduled amortization payments of $350 per month and the remaining principal balance is due in full on October 30, 2026.
The 2022 Credit Agreement also provides the Borrowers with the right to (a) incur up to $120,000 of additional indebtedness from third-party lenders secured by real estate excluded as collateral under the 2022 Credit Agreement, (b) incur additional mortgage financing from third-party lenders secured by real estate acquired after the closing date, and (c) upon the SAFE Banking Act or similar legislation making banking services available to U.S. cannabis companies being passed by the United States Congress, incur up to $50,000 pursuant to a revolving credit facility from third-party lenders that is pari passu or subordinated to the 2022 Credit Agreement obligations, each of which are subject to customary conditions.
The obligations under the 2022 Credit Agreement are secured by substantially all of the assets of the Borrowers, excluding vehicles, specified parcels of real estate and other customary exclusions.
The 2022 Credit Agreement provides for a floating annual interest rate equal to the prime rate then in effect plus 6.50%, which rate may be increased by 3.00% upon an event of default that is not a material event of default or 6.00% upon a material event of default as provided in the 2022 Credit Agreement.
At any time, the Company may voluntarily prepay up to $100,000 of the principal balance, subject to a one-time $1,000 prepayment premium upon the first prepayment, and may prepay the remaining outstanding principal balance for a prepayment premium at varying rates based on the timing of any subsequent prepayments. The Borrowers may not voluntarily prepay more than $100,000 of the principal balance without prepaying the entire outstanding principal balance of the loan.
On April 30, 2024, the Company made a Permitted Partial Optional Prepayment (as defined in the 2022 Credit Agreement) in the amount of $50,000 pursuant to the 2022 Credit Agreement and paid a $1,000 prepayment premium in connection therewith. In connection with such Permitted Partial Optional Prepayment, Chicago Atlantic and certain Lenders agreed to (a) release certain Borrowers from their obligations under, and as parties to, the 2022 Credit Agreement and related agreements and (b) release all liens over such Borrowers' property, including real estate, held by Chicago Atlantic for the benefit of the Lenders, in each case, pursuant to a limited consent and waiver, dated as of April 29, 2024, by and among Borrowers, certain of the lenders party thereto and Chicago Atlantic.
On September 30, 2025, the Company made a Permitted Partial Optional Prepayment (as defined in the 2022 Credit Agreement) in the amount of $50,000 pursuant to the 2022 Credit Agreement, without any penalty or premium.
The 2022 Credit Agreement includes customary representations, warranties, covenants and customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to material indebtedness, and events of bankruptcy and insolvency.
The 2022 Credit Agreement also includes customary negative covenants limiting the Borrowers' ability to incur additional indebtedness and grant liens that are not otherwise permitted, and the ability to enter into or consummate acquisitions or dispositions that are not otherwise permitted, among others. Additionally, the 2022 Credit Agreement requires the Borrowers to meet certain financial tests regarding minimum cash balances, minimum levels of Adjusted EBITDA (as defined in the 2022 Credit Agreement) and a minimum fixed charge coverage ratio.
As of September 30, 2025, the Company was in compliance with such covenants.
George Archos, the Chairman and Chief Executive Officer of the Company, participated in the 2022 Credit Agreement as a lender funding $1,000 of the $350,000 principal amount. Mr. Archos is excluded from certain approval rights of the lenders and any penalties and fees due to Mr. Archos under the 2022 Credit Agreement are immaterial to the Company.
Revolver
On September 30, 2025, the Company entered into the Revolver, by and among the Company, as a guarantor, the Real Estate Subsidiaries, lenders from time-to-time party thereto, and Chicago Atlantic, as administrative agent for the lenders.
The Revolver provides for a $75,000 revolving loan facility, $50,000 of which was drawn on September 30, 2025 and used to prepay, without any penalty or premium, $50,000 of outstanding obligations due under the 2022 Credit Agreement. Amounts drawn under the Revolver do not require amortization payments and all outstanding amounts are due in full on September 29, 2028. The Revolver provides for a floating annual interest rate on amounts drawn equal to one-month Term SOFR (subject to a minimum 4% SOFR floor) plus 6%, which rate may be increased by 3% upon an event of default or 6% upon a material event of default as provided in the Revolver. The Company incurred debt issuance costs of $2,210 in connection with the establishment of the Revolver. In accordance with ASC 835-30, these costs are presented on the Condensed Consolidated Balance Sheet as a direct deduction from the carrying amount of the related debt liability. The debt issuance costs are amortized over the contractual term of the Revolver using the effective interest method. Amortization expense related to these costs is included in Interest Expense in the accompanying Unaudited Interim Condensed Consolidated Statements of Operations.
The Revolver may be drawn in $2,500 increments upon ten business days prior notice and any outstanding amount under the Revolver may be voluntarily prepaid in $2,500 increments upon five business days prior notice without any penalty or premium, unless such prepayment occurs within six months of the applicable advance, in which case, such prepayment shall be subject to a six-month interest make whole. Any amounts prepaid may be redrawn subject to the same requirements set forth above. The Revolver is subject to a borrowing base which requires the outstanding principal balance under the Revolver to be equal to or less than 60% of the appraised value, net of certain indebtedness, of the owned real estate serving as collateral for the Revolver from time to time.
The obligations under the Revolver are secured by substantially all of the assets of the Real Estate Subsidiaries, which primarily consistent of owned real estate, and are guaranteed by the Company on an unsecured basis. Additionally, the Revolver allows for the proportionate release of certain Real Estate Subsidiaries upon request of the Company so long as the outstanding principal balance under the Revolver does not exceed 60% of the appraised value, net of certain indebtedness, of the owned real estate serving as collateral after giving effect to such release.
The Revolver includes customary representations, warranties, and covenants and customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to material indebtedness, and events of bankruptcy and insolvency.
The Revolver also includes customary negative covenants, including, without limitation, limiting the Real Estate Subsidiaries' ability to (a) incur additional indebtedness, make guarantees and grant liens that are otherwise not permitted and (b) enter into or consummate acquisitions or dispositions that are not otherwise permitted, among others.
Columbia Care Eastern Virginia LLC
On July 29, 2024, the Company entered into the Virginia EPA to purchase all of the issued and outstanding equity interests of CC East Virginia. The transaction closed on August 21, 2024. Pursuant to the Virginia EPA, the Company issued the CC East Virginia Promissory Note in the amount of $26,700, which was amended to $27,852 on May 27, 2025 in connection with a purchase price adjustment. The CC East Virginia Promissory Note has an estimated fair value of $26,068, and bears interest at a rate of 7% per annum beginning on the closing date, through maturity on the two-year anniversary of the closing date. Subsequently, on May 27, 2025, the Company entered into a waiver and partial payoff agreement related to a portion of the CC East Virginia Promissory Note. During the nine months ended September 30, 2025, the Company partially extinguished the CC East Virginia Promissory Note.
Mortgage
On March 14, 2025, the Company entered into a loan with Rainbow Realty Group IV, LLC to borrow a principal amount of $12,000 secured by real estate in Coolidge, Arizona and North Las Vegas, Nevada. The loan bears an interest rate of 11% per annum and matures in March 2030.
Tax Liabilities
The Company has U.S. income tax payable liabilities. These income tax payable liabilities will require payment from our liquidity sources, and we believe we have sufficient liquidity for both short-term and long-term payments of our income tax payable liabilities in addition to our other obligations. The Company expects to retain additional cash from operations, due in part to the Company's treatment of Section 280E of the Code as not applying to limit its deduction of ordinary and necessary business expenses.
Sources and Uses of Cash
Net Cash Provided by (Used in) Operating Activities, Investing and Financing Activities
Net cash provided by (used in) operating, investing, and financing activities for the nine months ended September 30, 2025 and 2024 were as follows:
| Nine Months Ended September 30, | |||||||||||||||||
| 2025 | 2024 | $ Change | |||||||||||||||
| Net Cash Provided by Operating Activities | $ | 39,040 | $ | 68,694 | $ | (29,654) | |||||||||||
| Net Cash Used in Investing Activities | (22,634) | (120,852) | 98,218 | ||||||||||||||
| Net Cash Used in Financing Activities | (21,577) | (57,635) | 36,058 | ||||||||||||||
Cash Flows from Operating Activities. Cash flow generated from operating activities provides us with a source of liquidity. Our cash flows from operating activities result from cash received from our customers, offset by cash payments we make for products and services, operational costs, and income taxes. During the nine months ended September 30, 2025 and 2024, the Company had net cash inflows of $39,040 and $68,694, respectively. The $29,654 decrease was largely driven by an increase in inventory driven by higher production volumes and more efficient harvests from expanded cultivation facilities coupled with income tax payments made when comparing the nine months ended September 30, 2025 to the nine months ended September 30, 2024.
Cash Flows from Investing Activities. During the nine months ended September 30, 2025 and 2024, the Company had net cash outflows of $(22,634) and $(120,852), respectively. The $98,218 decrease in net cash outflows during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 was primarily driven by lower purchases of property, plant and equipment of $(31,792) during the nine months ended September 30, 2025, compared to purchases of property, plant and equipment of $(84,803) and during the nine months ended September 30, 2024 as well as acquisition activity during the third quarter of 2024.
Cash Flows from Financing Activities.During the nine months ended September 30, 2025 and 2024, the Company had net cash outflows of $(21,577) and $(57,635), respectively. The $36,058 decrease in net cash outflows during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 was attributable to proceeds from debt related to the loan with Rainbow Realty Group IV, LLC, which was offset by principal repayments of debt during the nine months ended September 30, 2025. During the nine months ended September 30, 2024, the main financing activity outflow is attributable to the Company's Permitted Partial Optional Prepayment (as defined in the 2022 Credit Agreement) pursuant to the 2022 Credit Agreement.
Changes in or Adoption of Accounting Practices
Refer to the discussion of recently issued accounting standards under Part I, Item 1, Notes to Unaudited Interim Condensed Consolidated Financial Statements, Note 1 - Overview and Basis of Presentation.
Critical Accounting Policies and Significant Judgments and Estimates
There were no material changes to our critical accounting policies and estimates from the information provided in "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in the Form 10-K.
Verano Holdings Corp. published this content on October 29, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on October 29, 2025 at 11:12 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]