Vireo Health International, Inc. (OTCQX: VREOF) reported that it generated revenue including contributions from discontinued operations, of $12.2 million. This was an increase of 70% over $7.2 million in the second quarter of 2019. Vireo reported revenue, excluding discontinued operations, increased 59% to $10.8 million, over $6.7 million in the 2019 second-quarter. The second-quarter net loss grew to $8.9 million, versus a net loss of $1.8 million in the 2019 second-quarter.
“Our second-quarter results were in-line with our expectations both in terms of revenue growth and operating expenses,” said Founder & Chief Executive Officer, Kyle Kingsley, M.D. “Furthermore, with the recent closing of the sale of our Pennsylvania manufacturing and processing subsidiary, we are well-positioned with a strong balance sheet to execute a strategy that should begin to generate positive cash flow next year as we continue increasing scale in our core markets of Arizona, Maryland, Minnesota, New Mexico, and New York.”
Vireo said that retail revenue was approximately $9.2 million in the quarter, an increase of 46% compared to $6.3 million in 2019. The increase in retail revenue was attributed to greater patient enrollment and average revenue per patient in Minnesota and New Mexico, as well as contributions from new retail dispensaries in Pennsylvania. Wholesale revenue of $1.6 million increased by $1.1 million or 256%, as compared to $444,023 in 2019. The increase in wholesale revenue was primarily due to the growth of wholesale operations in Maryland, New York, and Ohio.
The company reported that its total operating expenses in the second quarter rose to $15.4 million, versus $5.4 million in the second quarter of 2019, with the increase primarily attributable to increased salaries and wages, as well as an adjustment to share-based compensation related to the vesting of out-of-the-money warrants issued to a former executive upon termination from the company. Excluding depreciation and share-based compensation, operating expenses in the second quarter of 2020 were $6.0 million, or 55 percent of sales, as compared to $5.0 million or 74 percent of sales in the second quarter of 2019, and $6.2 million or 59 percent of sales in the first quarter of 2020.
Total other expenses were $3.4 million during Q2 2020, compared to $1.8 million in Q2 2019. The increase in other expense was primarily attributable to the issuance of warrants in conjunction with the private placement completed in March of 2020, as well as increased interest expense.
On June 22, 2020, the company announced the planned divestiture of its Pennsylvania manufacturing and processing operations to a subsidiary of Jushi Holdings, Inc. for a total consideration of $37 million, including $13.8 million in cash upon closing. The transaction closed on August 11, 2020, and as a result, the company had total cash on hand of approximately $21.1 million.
Dr. Kingsley continued, “We believe there is significant potential for Vireo to improve revenue growth and profitability in our core markets, and we’ll be investing in each of these markets through the balance of fiscal year 2020 to increase production capacity and retail store count. We expect the benefits of these investments to begin materializing late this year, and continue to believe that each of these markets has the potential to enact adult-use legislation over the short- to medium-term future, which would present additional opportunity for revenue growth, margin expansion, and value creation for shareholders.”
Dr. Kingsley concluded, “As we enter the second half of fiscal year 2020, we plan to leverage the strength of our balance sheet to make several strategic growth investments in our markets in Arizona, Maryland, Minnesota, and New Mexico. We expect to invest approximately $8.0 to $9.0 million in these projects and that they will be completed by the end of the first quarter of fiscal year 2021. Once complete, these investments should help drive stronger revenue growth and profitability, which gives confidence in our ability to begin producing positive cash flow around the mid-point of fiscal year 2021.”