By Michael Kim
READ THE FULL VREOF RESEARCH REPORT
Pre-market open on 8/13/25, Vireo Growth (OTC:VREOF) reported 2Q25 earnings results. For the quarter, VREOF reported a net loss of $14.9 million, or ($0.03) per share, compared to our ($0.01) estimate. While apples-to-apples comparisons were challenging given intra-quarter acquisition closings, the “miss” mostly reflected higher operating expenses (particularly SG&A, transaction-related, and stock-based compensation), partially offset by more favorable revenues (inclusive of partial quarter contributions from Wholesome, Proper, and Deep Roots Harvest).
Focusing on the top line, VREOF generated $48.1 million of revenue in 2Q25, or well ahead of our $25.0 million forecast, and up considerably from $25.1 million for the year-ago quarter. Performance for the quarter reflected strong growth in New York, reflecting accelerating adult-use sales from the company’s indoor facility, combined with partial quarter contributions from recently acquired operations in Missouri, Nevada, and Utah. Revenues in Maryland and Minnesota were flat to slightly down on a sequential quarter basis. After factoring in cost of sales of $27.6 million, gross profit totaled $20.4 million for 2Q25, representing a gross margin of 42.5%. That said, excluding a $4.2 million fair value adjustment as well as a $0.2 million termination fee, VREOF’s adjusted gross margin came in at 51.6%, up 100 bps on a sequential quarter basis.
In aggregate, VREOF’s operating expenses totaled $22.4 million in 2Q25, up from $7.8 million in 2Q24, and came in well above our $8.8 million forecast. Much of the unfavorable variance related to higher selling, general & administrative and stock-based compensation expenses (largely related to intra-quarter acquisition closings). Furthermore, the most recent quarter included $4.7 million of transaction-related costs, which we expect to wind down shortly. Excluding non-cash stock-based compensation costs, other income, and inventory adjustments, as well as non-recurring transaction-related, termination, and severance expenses, Adjusted EBITDA came in at $13.3 million (27.6% margin) for 2Q25, up from $6.6 million (26.3% margin) in the year-ago quarter.
Our updated model calls for a favorable inflection in VREOF’s profitability in 3Q25, reversing a trend of ongoing net losses. More specifically, we forecast EPS of ($0.01) for 2025, representing a material improvement from a net loss of ($0.16) per share in 2024 and ($0.19) per share in 2023. Looking ahead, we project EPS to hit $0.04 in 2026 (compared to our previous $0.05 forecast), reflecting full-year accretion from recent acquisitions, with further growth expected in 2027 and beyond as the business continues to scale. Our slightly lower 2026 outlook primarily reflects a slightly flatter revenue growth trajectory, greater clarity on operating expense run-rates following the closing of the transactions, and higher diluted share counts given the stock’s recent run-up, partially offset by lower interest expenses.
Turning to valuation, no change to $1.50 DCF-derived price target, representing meaningful upside potential from current levels. Our view is that as uncertainty related to the integration of recent acquisitions continues to fade, VREOF’s improving fundamental story will increasingly resonate with investors, thereby driving a material upward revaluation for the stock. Moreover, a more favorable regulatory backdrop (particularly as it relates to federal rescheduling or incremental state legalizations) and/or further acquisitions of strategically complementary assets at attractive valuations likely represent powerful catalysts for VREOF.
We highlight the following key takeaways from 2Q25 results:
1. Plenty of growth drivers: At a high level, revenues across the U.S. cannabis industry projected to continue to trend higher driven by further legalization at the state level, rising consumer demand, and a step up in the number of users reflecting growing adoption of cannabis to treat a wider array of medical conditions, as well as building acceptance/support for legalization efforts. Concentrating on Vireo, we see a number of powerful growth drivers. First, following the transformational acquisitions, we believe Vireo has reached critical mass, with market shares continuing to roll up to scale-enabled MSOs. Second, we look for accelerating sales in Minnesota and New York, where management remains focused on building out cultivation/production capacity to meet building adult-use demand. Third, we expect senior officials to remain active on the M&A front once the recent acquisitions are fully integrated. Management’s M&A approach centers on opportunistically acquiring distressed assets in mature-market states, with minimal geographic overlap.
2. Strategic partnership to further enhance the product portfolio: Vireo recently announced a licensing agreement with Curio Wellness to manufacture the company’s full portfolio of cannabis products for distribution across VREOF’s existing infrastructure in New York. Curio’s “Best Self Collection” includes functional cannabis pre-rolls, vapes, tablets, and chews. Related sales are expected to commence in 4Q25.
3. Further strengthening the balance sheet: As well telegraphed, management recently refinanced existing senior secured debt (inclusive of all recently assumed debt related to the merger transactions) through the closing of a $120 million term loan, resulting in $10+ million of interest expense savings on an annualized basis. In addition, senior officials expanded the company’s credit facility by $33 million (with more favorable terms). As a result, VREOF maintains a strong balance sheet (cash totaled $106 million as of June 30, 2025), with ample capacity to fund organic growth initiatives including incremental capital expenditures related to the launch of adult-use sales in Minnesota, as well as ongoing investments to further build out the company’s indoor growth facility in New York. Moreover, the company remains well positioned to increasingly capitalize on incremental M&A deals at attractive valuation levels.
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