Vireo Growth outlines $153M refinancing and expanded state presence following mergers

Earnings Call Insights: Vireo Growth Inc. (VREOF) Q2 2025

MANAGEMENT VIEW

* CEO John Michael Mazarakis highlighted that "Vireo's legacy markets are performing in line with our expectations and reflected a continuation of the trends that we discussed during the first quarter." He emphasized the significance of closing all three merger transactions in the quarter, which "significantly improved the profitability and cash generation profile of the business and expanded our portfolio of operations to 6 states." Mazarakis also noted progress in integration and cost reductions, stating, "We remain pleased with our post-closing integration processes and are continuing to drive operational efficiencies and cost reductions."
* Mazarakis announced a $153 million refinancing event completed after quarter-end, consisting of a $120 million syndicated term loan at 8.3% and a $33 million second-lien term loan with a $50 million accordion feature, which "lowered annual interest expenses by approximately $10 million and positioned us with over $100 million in cash on our balance sheet."
* CFO J. Tyson Macdonald reported, "Second quarter GAAP revenue of $48.1 million increased 91.4% year-over-year, driven by the partial quarters of contributions from the 3 merger transactions that we closed during the second quarter." He added, "GAAP gross margin was impacted by termination fees related to our prior agreement with Grown Rogue. Excluding this impact and fair value accounting adjustments related to our closed transactions, gross margin was 51.6%."
* Macdonald further stated, "SG&A expenses excluding severance were $12.2 million or 25.4% of sales, an improvement of 480 basis points compared to Q2 of last year."

OUTLOOK

* The company stated it is "hopeful that M&A will come into fruition in the next 12 to 24 months," but is not relying on this, and is focusing on organic growth, especially in Minnesota. Management said, "Positive free cash flow at the unit level is our main focus."
* Mazarakis addressed expansion in Minnesota, saying, "We're making -- we're continuing to make a small investment in Minnesota, finishing our second grow."
* On delivery, the company is "still working on deploying the Arches delivery platform. Currently, we have delivery in all the states that we can have delivery."

FINANCIAL RESULTS

* Revenue for the quarter was $48.1 million, with adjusted EBITDA of $23.2 million and an adjusted EBITDA margin of approximately 25%. GAAP gross margin, excluding one-time impacts, stood at 51.6%, a reduction of 260 basis points from the prior year quarter. Adjusted operating income was $11.3 million or 23.5% of sales.
* The company ended the quarter with $106.2 million in cash on hand and total current assets (excluding New York assets held for sale and income taxes receivable) of $186.2 million. Current liabilities (excluding certain items) were $51.8 million.
* Corporate, selling, general and administrative costs (excluding transaction costs) were $1.8 million, down from $2.9 million in the prior year quarter.
* Shares outstanding at quarter end were 1,058,617,377 on a treasury method basis at a share price of $0.52.

Q&A

* Sung-Chul Kim, Zacks Small-Cap Research: Asked about the Curio licensing agreement, distribution potential, and New York asset sales. Mazarakis replied, "We don't think that this partnership affects the divestiture of the New York assets...we're very bullish on this relationship."
* Kim: Inquired about capital management priorities and future M&A. Mazarakis answered, "We're trying to be part of every conversation with respect to M&A...We're not banking on M&A; we believe in organic growth...Positive free cash flow at the unit level is our main focus."
* Kim: Asked about the Arches platform. Mazarakis said, "We're still working on deploying the Arches delivery platform...we'll continue to invest in that form of service."
* Pablo Ernesto Zuanic, Zuanic & Associates: Questioned Minnesota rec market preparations and timing. Mazarakis explained, "We think that there will be no product...in the absence of Vireo and GTI being adult-use approved, there can't really be a rollout of the adult-use program...I'm hopeful that within the second half of this year, we will be selling adult-use in Minnesota."
* Zuanic: Sought clarity on New York partnerships and asset divestiture. Mazarakis responded, "We will leverage this network...to become the largest supplier of indoor flower in the state of New York."
* Zuanic: Asked about macro conditions in Nevada and Missouri. Mazarakis asserted, "Our focus is to be the largest operator within the state...we will continue to capture market share."
* Zuanic: Queried status of Florida talks. Mazarakis stated, "The conversations are on ice...we're going to stay disciplined, that the market can count on."

SENTIMENT ANALYSIS

* Analysts expressed curiosity about new partnerships, asset sales, and growth avenues, with a neutral to slightly positive tone, seeking clarification rather than challenging management.
* Management maintained a confident and constructive tone, emphasizing operational discipline, growth, and the benefits of recent transactions. Direct quotes such as "We're very bullish on this relationship" and "I'm hopeful that within the second half of this year, we will be selling adult-use in Minnesota" reflected cautious optimism.
* Compared to the previous quarter, management continued to convey confidence, now with increased emphasis on integration and enhanced scale, while analysts remained consistent in tone, focusing on execution and expansion.

QUARTER-OVER-QUARTER COMPARISON

* The current quarter saw the completion of three merger transactions, a transformative refinancing, and a significant increase in scale and cash position compared to Q1, where the focus was on closing pending mergers and maintaining operational performance.
* Revenue grew substantially quarter-over-quarter, with integration and cost synergies now featured versus the prior quarter's anticipation of closing deals.
* Guidance language shifted from expectation of closing mergers to focusing on platform scale and operational improvement post-close.
* Analysts' questions this quarter delved deeper into partnerships, market-specific strategies, and capital deployment, compared to prior focus on deal progress and general integration concerns.
* Management's confidence remained steady, now underscored by tangible results from completed transactions and a strengthened balance sheet.

RISKS AND CONCERNS

* Management cited regulatory approval delays in New York as a factor holding up asset divestiture but affirmed, "We're not looking for a buyer. We've been committed to the same buyer for months now. It's just we're waiting for regulatory approval."
* Macdonald mentioned gross margin pressure in Minnesota, and Mazarakis pointed to market price compression in Florida as a reason for disciplined M&A, noting "that type of compression is a little bit scary with respect to future EBITDA."
* Analysts highlighted concerns about product supply for Minnesota adult-use rollout, macroeconomic pressures in Nevada and Missouri, and the impact of market competition and pricing.

FINAL TAKEAWAY

Vireo Growth Inc. underscored a quarter of transformation, marked by the successful completion of three mergers, a $153 million refinancing, and expansion into six states. Management emphasized ongoing operational efficiencies, a strong cash position, and disciplined evaluation of M&A and organic growth opportunities, while regulatory timing in New York and market dynamics in several states remain key watchpoints for the future.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/vreof/earnings/transcripts]

MORE ON VIREO GROWTH

* Vireo Growth Inc. (VREOF) Q2 2025 Earnings Call Transcript [https://seekingalpha.com/article/4813115-vireo-growth-inc-vreof-q2-2025-earnings-call-transcript]
* Historical earnings data for Vireo Growth [https://seekingalpha.com/symbol/VREOF/earnings]
* Financial information for Vireo Growth [https://seekingalpha.com/symbol/VREOF/income-statement]