By Michael Kim
READ THE FULL VREOF RESEARCH REPORT
Pre-market open on 11/12/25, Vireo Growth (OTC:VREOF) reported 3Q25 earnings results. For the quarter, VREOF reported a net loss of $26.3 million, or ($0.04) per share, compared to our $0.01 estimate. While apples-to-apples comparisons were challenging given recent acquisitions and related “noise,” the “miss” mostly reflected non-cash inventory adjustments, higher operating expenses (particularly SG&A), a non-operating loss on the disposal of assets previously held for sale, and higher taxes (Exhibit 1).
Focusing on the top line, VREOF generated $91.7 million of revenue in 3Q25, a bit shy of our $94.8 million forecast, but up considerably from $25.2 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 full-quarter contributions from recently acquired operations in Missouri, Nevada, and Utah. After factoring in cost of sales of $54.3 million, gross profit totaled $37.4 million for 3Q25, representing a gross margin of 40.8%. That said, excluding a $13.4 million fair value adjustment, VREOF’s adjusted gross margin came in at 55.4%, up 500 bps on a year-over-year basis.
In aggregate, VREOF’s operating expenses totaled $36.6 million in 3Q25, up from $8.5 million in 3Q24, and came in ahead our $33.3 million forecast. Much of the unfavorable variance related to higher selling, general & administrative costs (largely related to recent acquisitions), partially offset by lower stock-based compensation expenses. Furthermore, the most recent quarter included $0.8 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 $25.4 million (27.7% margin) for 3Q25, up from $6.4 million (25.3% margin) in the year-ago quarter.
Our updated model calls for EPS of ($0.06) 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 $0.03 in 2026 (compared to our previous $0.04 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 a modestly higher diluted share count given the 114.8 million shares issued as part of the Schwazze transactions.
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 3Q25 results:
1. Growth outlook remains favorable: Revenues across the U.S. cannabis industry are projected to continue to grow, reflecting incremental 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. Focusing on Vireo, market shares continue to roll up to scale-enabled MSOs (the company will maintain operations across eight states pro forma the Schwazze transaction). Furthermore, we expect sales in Minnesota and New York to ramp up given building cultivation/production capacity to meet rising adult-use demand. Finally, we expect senior officials to remain active on the M&A front, with a focus on accretive transactions that extend the company’s geographic footprint to states with outsized revenue potential and attractive margins. While financing remains accessible, management continues to maintain financial discipline.
2. Step up in earnings power: While we prefer to wait for further clarity on expense synergies related to recent acquisitions, as well as accretion from the pending Schwazze transactions (likely to be provided in conjunction with 4Q25 earnings results), we believe the acquisitions will provide material lifts to VREOF’s revenue and earnings profiles. The integrations of Proper, Deep Roots, and Wholesome have largely been completed (including consolidating accounting, finance, human resources, insurance, and procurement operations), with related synergies likely to be fully realized in 4Q25/early 2026, thereby driving incremental margin tailwinds. Turning to SHWZ, while the company has not filed financial reports for 2024 due to a change in the company’s independent public accountant and subsequent re-auditing of prior period statements, revenues and Adjusted EBITDA approximated $42 million and $11 million, respectively, for 3Q24 according to a press release issued in November 2024.
3. Staying active on the M&A front: In October, Vireo Growth announced the closing of the acquisition of ~$91 million of 13% senior secured convertible notes due 12/7/26 issued by Medicine Man Technologies/Schwazze (OTC:SHWZ) in exchange for 114.8 million subordinate voting shares of VREOF at $0.54 (~$62 million in aggregate). The acquired securities represent approximately 86% of SHWZ’s total outstanding senior secured convertible notes. In conjunction with the transaction, the companies entered into a Restructuring Support Agreement (RSA) that contemplates the sale of select Schwazze assets to a NewCo (majority-owned by Vireo), as well as the liquidation/wind down of Schwazze’s remaining operations. In addition, Vireo has secured financing commitments for up to $62 million for refinancing/working capital needs.
Stepping back, Schwazze is a vertically-integrated Multi-State Operator (MSO) based in Denver, Colorado, with 46 retail dispensaries and two manufacturing facilities across Colorado and New Mexico. On a pro forma basis, Vireo Growth will operate 80+ dispensaries across eight states. Focusing on Colorado, Schwazze remains the largest cannabis operator in the state, though market shares remain fragmented. That said, the state seems primed for ongoing consolidation following a more challenging industry backdrop – boding well for scale-enabled, profitable MSOs with access to financing, including VREOF.
SUBSCRIBE TO ZACKS SMALL CAP RESEARCH to receive our articles and reports emailed directly to you each morning. Please visit our website for additional information on Zacks SCR.
DISCLOSURE: Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks SCR provides and Zacks SCR receives payments totaling a maximum fee of up to $50,000 annually for these services provided to or regarding the issuer. Full Disclaimer HERE.
