Verano Holdings (CSE:VRNO) Chief Executive Officer George Archos has connected the dots of opportunity to create one of the biggest cannabis companies in the US. Based in Chicago, the vertically integrated, multi-state operator was valued at around $3 billion when it went public in February of this year.
The 42-year-old serial entrepreneur, who also co-founded the Wildberry Pancakes & Café chain, was inspired to start Verano after seeing the potential of medical cannabis.
“I looked at the medical marijuana opportunity that came up in my home state of Illinois and saw it was a strong challenge. I also saw that it offered the benefit of helping people. I had an uncle that had multiple sclerosis and I think that he could have benefited from it when he was suffering,” says Archos.
“We applied for a license in 2014 and were selling product a year later. We started off small with less than 10 employees and we scaled over the years as the markets grew.”
From its roots in Chicago, Verano has evolved into a broad-based powerhouse with a 14-state footprint. It has cultivation, production and dispensary licenses across several states, lending it multiple revenue streams.
Verano has 28 retail locations under the Zen Leaf banner and 50 additional operating dispensaries, with plans to open around 10 more this year. It also has 340 active dispensary wholesale partnerships.
Verano was doing well before the pandemic and its strong growth shows no sign of slowing down. For the first quarter ended March 31, Verano revenue soared 117% to US$143.3 million compared to the first quarter a year earlier.
“Verano has massive upside over the next few years and for the long term as a cannabis green wave continues to sweep across the country,” says Archos.
“We are seeing more daily-use consumers, besides more and more medical patients coming online every single day. Sales have been strong this year and we anticipate good sales in the back half of the year as well.”
The Verano boss chalks up being able to execute well on mergers and acquisitions to going public earlier this year.
“Going public has given us access to capital, which has allowed us to transact on the M&A front. We have built on some very strong acquisitions to the Verano platform, which has given us access to markets like Florida, Arizona and Pennsylvania,” says Archos.
“It’s really helped us deepen our footprint and bring some high-quality operators to the Verano family.”
In February, Verano closed a key merger with Florida-based Alternative Medical Enterprises that gave it access to 34 active retail locations in Florida, with more planned by the end of 2021, and one retail location in Phoenix. It also boosted the company’s cultivation facilities to 220,000 square feet in Florida and 30,000 square feet in Arizona, with expansion of an additional 60,000 square feet currently underway.
The company has also engaged in significant M&A activity in Florida, Arizona, Pennsylvania, Illinois and Ohio, increasing assets such as dispensary locations and grower/processor sites.
Verano has completed the acquisitions of Territory Dispensary, Emerald Dispensary and The Local Joint, giving the company the third-largest retail footprint in Arizona, with six active storefronts and two cultivation facilities.
Verano has also expanded its dispensary footprint through M&A with TerraVida in the Philadelphia metropolitan area and acquired three dispensaries in the Pittsburgh metropolitan area through the Healing Center.
“M&A has been a part of our story and we will continue down that path when we find assets and people that make sense for Verano. We like to transact so we do see more M&A in our future,” says Archos.
“We are well funded for expansion of M&A activities so we’re in a very good position.”
Verano had $111.6 million in cash and equivalents as of March 31, and recently completed a $100 million upsizing of its credit facility to $130 million, for total liquidity of roughly $241.6 million.
“Given both its strong cash position, and strong free cash generation, the company is well positioned to fund both organic (supported by in excess of $100 million in CAPEX in 2021) and acquisition driven growth,” said ATB Capital Markets.
Significantly, Verano’s cash flow from operations for the first quarter was $42 million, and free cash flow totaled $4 million.
Through its 10 cultivation and production facilities, Verano produces a suite of artisanal cannabis products sold under its portfolio of brands: Avexia, Verano, Encore and MÜV. These are positioned as premium brands, so the company enjoys premium pricing and higher margins.
“When Verano started off, we positioned ourselves as a premium producer, that’s just how we built our facilities,” says Archos.
“That’s how we marketed our products, and it goes into the hand trimming and level of detail that we put into every jar, and every product that we put onto the shelves.”
By blending cannabinoids (THC and CBD), the firm’s Avexia Medical Cannabis brand has a portfolio of balms and lotions for pain relief, an Epsom salt soak, and a line of micro-dose tablets. Separately, the Verano brand has handy “swift lift” pre-rolls, refined vapes, and concentrates, while Encore Edibles produces handcrafted chocolates, mints, gummies, hard candies and caramels.
Meanwhile, MÜV has received multiple patents for its award-winning products that provide high-quality, reliable medical cannabis for patients.
“We consistently add cultivation as markets scale, so we are constantly under construction in almost every market, adding flower capacity and manufacturing capacity because every market is growing,” says Archos.
“Verano sometimes is as much of a construction company as we are a cannabis company.”
Verano has opened three Zen Leaf dispensaries in New Jersey, where the expansion of its 120,000 square feet cultivation facility is underway in anticipation of the onset of adult-use sales in the state.
“Being profitable and cash flow positive was important to us, so we have been very good stewards of our capital,” Archos concludes. “We have deployed funds where we thought we could get the quickest return on investment.”
This story was featured in the Canadian Securities Exchange magazine.
Learn more about Verano Holdings at https://verano.com/