Mr. George Archos reports

VERANO ANNOUNCES THIRD QUARTER 2023 FINANCIAL RESULTS

Verano Holdings Corp. has released its financial results for the third quarter ended Sept. 30, 2023, which were prepared in accordance with United States generally accepted accounting principles (GAAP).

Management commentary

"I am tremendously proud of the strong results we delivered in the third quarter, highlighted by raising and tightening our free cash flow guidance range, and generating record revenue, and the recent strategic elevation of our capital markets strategy by uplisting to Cboe Canada," said George Archos, Verano founder, chairman and chief executive officer. "Our strong performance resulted from key drivers that include another seamless adult-use transition in Maryland, the continued expansion of our wholesale business and market-leading positions in Connecticut and New Jersey, successful new product launches and line extensions across our growing brand portfolio, and the addition of new dispensaries to bolster our expanding retail footprint in key states."

Mr. Archos continued: "While we never run our business based on legislative assumptions, we are encouraged by the multifaceted federal reform efforts surrounding cannabis, and although we remain confident in our ability to continue growing our business in the current environment, we will continue to position ourselves to capitalize on growth opportunities should any federal reforms materialize. I am grateful to our Verano team for their continued efforts to disrupt, innovate and differentiate Verano at every level of our business, and remain excited and confident for our growth prospects in the future."

Highlights:

• Revenue of $240-million increased 5 per cent year-over-year and increased 3 per cent versus the prior quarter;
• Introducing state-level revenue to be reported on a recurring basis;
• Gross profit of $133-million, or 55 per cent of revenue;
• SG&A (selling, general and administrative) expense of $86-million, or 36 per cent of revenue;
• Net loss of $18-million;
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $89-million, or 37 per cent of revenue;
• Net cash provided by operating activities of $37-million;
• Capital expenditures of $10-million;
• Free cash flow of $27-million.

Third quarter 2023 financial overview

Revenue for the third quarter 2023 was $240-million, up 5 per cent from $228-million for the third quarter 2022, and up 3 per cent from $234-million for the second quarter 2023. The increase in revenue for the third quarter 2023 compared with the third quarter 2022 was driven primarily by strength from wholesale adult-use sales in Connecticut and Maryland, which began adult-use sales in January, 2023, and July, 2023, respectively.

Gross profit for the third quarter 2023 was $133-million, or 55 per cent of revenue, up from $123-million, or 54 per cent of revenue, for the third quarter 2022, and up from $115-million, or 49 per cent of revenue, for the second quarter 2023. The increase in gross profit for the third quarter 2023 compared with the third quarter 2022 was driven primarily by increased vertical sell through and revenue growth.

SG&A expense for the third quarter 2023 was $86-million, or 36 per cent of revenue, flat with $86-million, or 38 per cent of revenue, for the third quarter 2022, and up from $85-million, or 36 per cent of revenue, for the second quarter 2023.

Net loss for the third quarter 2023 was $18-million, versus a loss of $43-million in the third quarter 2022, and a loss of $13-million for the second quarter 2023. The decrease in net loss for the third quarter 2023 compared with the third quarter 2022 was driven by higher operating income and lower tax provision.

Adjusted EBITDA for the third quarter 2023 was $89-million, or 37 per cent of revenue, up from $82-million, or 36 per cent of revenue, for the third quarter 2022, and up from $72-million, or 31 per cent of revenue, for the second quarter 2023.

Net cash provided by operating activities for the nine months ended Sept. 30, 2023, was $77-million, up from $65-million in the prior-year period.

Capital expenditures for the nine months ended Sept. 30, 2023, were $27-million, down from $110-million in the prior-year period.

Free cash flow for the nine months ended Sept. 30, 2023, was $51-million, up from negative $44-million in the prior-year period.

Two thousand twenty-three guidance:

• The company raises its free cash flow guidance for the year to $72-million to $76-million, up from $65-million to $75-million, and lowers its capital expenditures guidance to $30-million to $37-million, down from $35-million to $50-million.

Third quarter 2023 and subsequent operational highlights:

• Welcomed cannabis customers at the company's four Maryland Zen Leaf retail locations to commemorate the state's historic launch of adult-use sales on July 1.
• Appointed John Tipton and Charles Mueller to the company's board of directors.
• Expanded the company's retail footprint across key markets by opening the following new stores:
  • MUV dispensary locations in Apopka, Fort Pierce and Satellite Beach, Fla., raising the company's total Florida retail footprint to 72 storefronts statewide;
  • Zen Leaf social equity joint venture dispensaries in Norwich and Newington, raising the company's Connecticut retail footprint to four locations.
• Commenced trading on Cboe Canada, elevating the company's capital markets strategy and presence on a senior exchange with a global platform that spans 26 markets.
• Introduced Savvy Threads, a non-plant-touching e-commerce extension of the company's Savvy brand, featuring limited-edition, artist-driven street wear available for sale and delivery to all 50 states.
• Relaunched national philanthropic donation campaigns benefiting the Lynn Sage Breast Cancer Foundation and The Weldon Project's Mission Green.
• Leading coalition of industry stakeholders as a plaintiff challenging the legality of the federal government's intervention in legal intrastate cannabis commerce under the Commerce Clause and Controlled Substances Act.
• Current operations span 13 states, composed of 135 dispensaries and 14 production facilities, with more than one million square feet of cultivation capacity.

Balance sheet and liquidity

As of Sept. 30, 2023, the company's current assets were $355-million, including cash and cash equivalents of $130-million. The company had working capital of $3-million and total debt, net of issuance costs, of $422-million.

The company's total Class A subordinate voting shares outstanding were 343,529,456 as of Sept. 30, 2023.

Conference call and webcast

A conference call and webcast with analysts and investors is scheduled for Nov. 8, 2023, at 8:30 a.m. ET/7:30 a.m. CT to discuss the results, and answer investor and participant questions:

• Investors and participants can register in advance for the call on-line.
• After registering, instructions will be shared on how to join the call for those who wish to dial in.
• On Nov. 8, 2023, the live webcast can be accessed on-line.
• The live and archived webcast will be available on the events and presentations page of the company's investor relations website.

About Verano Holdings Corp.

Verano Holdings, one of the U.S. cannabis industry's leading companies based on historical revenue, geographic scope and brand performance, is a vertically integrated, multistate operator embracing a mission of saying yes to plant progress and the bold exploration of cannabis. Verano offers a superior cannabis shopping experience in medical and adult-use markets under the Zen Leaf and MUV dispensary banners and produces a comprehensive suite of high-quality, regulated cannabis products sold under its diverse portfolio of trusted consumer brands including Verano, MUV, Savvy, Bits, Encore and Avexi. Verano's active operations span 13 U.S. states, comprising 14 production facilities with over one million square feet of cultivation capacity.

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