Vext Science (CSE: VEXT) (OTCQX: VEXTF) reported mixed financial results for the third quarter ended Sept. 30, with declining sales as the company turns its attention away from Arizona and toward Ohio.
The company’s revenue for the period was $8.1 million, an 11.8% fall from the previous quarter. The sequential decline was attributed to a downturn in the Arizona wholesale market and increased competition in the Ohio retail sector.
Vext’s total revenue saw a 5.6% rise versus the same period in 2022, largely due to the addition of a new dispensary in Ohio. The wholesale and manufacturing segments, however, showed a decline, pointing to a potential need for strategic adjustment.
Net loss for the quarter was $1.8 million, versus profit of $535,000 reported in the previous quarter. The change was partly due to a one-time tax credit received in the prior quarter and increased depreciation expenses from Ohio cultivation assets.
The company recorded net income of $423,532 in the third quarter of 2022.
Gross profit for the third quarter was $2.8 million, down from $4.87 million in the same period in 2022. The company attributed this decline to aggressive inventory management strategies in response to market oversupply and seasonal declines.
In Arizona, Vext experienced a 17.4% year-over-year decline in sales over the past nine months. The company attributed the slump to seasonal factors and an exceptionally hot quarter, which impacted retail sales.
“We anticipate that Arizona sales will continue at their current levels, as we do not expect significant improvements in macroeconomic conditions in the fourth quarter of 2023; they are likely to remain stable,” the company wrote in regulatory filings.
“Arizona historically slows down in the second and third quarter of the year due to the exit of winter visitors, vacations, and people avoiding the rising temperatures. Arizona experienced a record of prolonged heat in Q3 2023, which had further downward impact on retail sales.”
Despite the overall downturn, Vext’s retail operations in Arizona managed to perform slightly better than the state’s average decline in cannabis sales.
The company’s Ohio operations faced challenges as well, with a 17.5% fall in sales compared to the previous quarter, due to the entrance of additional retail locations in the market. However, the recent legalization of adult-use cannabis in Ohio presents growth opportunities for the company.
“Despite these ongoing challenges, our team translated effective promotions into solid growth in traffic, and transactions,” CEO Eric Offenberger said in a statement Tuesday. “This enabled our stores to perform better than the market, and we estimate the additional share will position us well as consumer discretionary spending improves.”
Vext’s latest moves include the sale of an Arizona cultivation facility for $6.5 million and the acquisition of two Ohio dispensaries.
As of Sept. 30, Vext reported having sufficient working capital ($27 million) and retained earnings ($32 million).
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