This article first appeared on GuruFocus .
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Revenue:$12.1 million, down about 10% year-over-year but essentially flat versus the first quarter.
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Gross Profit:$6.7 million, up from $4.9 million a year ago.
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Gross Margin:55%, compared to 36% last year; adjusted gross margin improved to 44% from about 39%.
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Adjusted EBITDA:$3.4 million, up 22% from $2.8 million in the first quarter, with margins improving to 28% from 23%.
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Net Loss:Narrowed to $0.3 million from $1.5 million a year ago, a nearly 80% improvement.
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Operating Cash Flow:$1.2 million generated, representing about a 10% cash flow margin.
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Wholesale Revenue:Declined from $2.6 million to $1.4 million due to the Arizona cultivation wind down.
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Working Capital:Improved from negative $11.7 million at year-end to approximately negative $0.9 million in Q2.
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Cash Position:Ended the quarter with about $4.5 million in cash.
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Store Count:Opened sixth dispensary in Fairfield, Ohio in June; seventh dispensary in Columbus anticipated to open in the first quarter of 2027.
Release Date: August 20, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Adjusted EBITDA grew for a second consecutive quarter, reaching $3.4 million with a margin improvement to 28% from 23%.
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Gross margin improved significantly to 55% from 36% year-over-year, driven by a higher retail sales mix and improved cultivation yields.
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Cultivation yields in Ohio surpassed 100 grams per plant for the first time, a 68% increase over the past 2.5 years, reducing cost of goods.
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The Arizona repositioning is progressing well, with Central Phoenix traffic in June at its strongest since October 2023, and the Eloy property is classified as held-for-sale with proceeds earmarked for debt reduction.
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The company completed a $17 million financing with Wright-Patt Credit Union, refinancing existing debt, acquiring the Jackson, Ohio facility, and funding Ohio expansion.
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Net working capital improved dramatically from negative $11.7 million at year-end to approximately negative $0.9 million in Q2, excluding the noncash uncertain tax position.
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Ohio market remains a growth engine, with statewide sales up 28% in the first half of the year and the new Fairfield store ramping nicely.
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The company corrected its adjusted EBITDA reconciliation, providing more accurate financial reporting without affecting cash metrics.
Negative Points
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Revenue declined 10% year-over-year to $12.1 million, primarily due to the planned reduction in Arizona wholesale activity.
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Arizona wholesale flower prices hit record lows, making cultivation unprofitable and forcing the wind-down of the Eloy facility.
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The company made a pricing misstep in Ohio, setting retail flower prices too high, which temporarily cost volume and customer traffic.
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The Fairfield store underperformed initial expectations due to indirect traffic flow, requiring additional signage and adjustments.
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Operating cash flow was only $1.2 million, below adjusted EBITDA, due to a deliberate $2 million inventory build and $1 million in assumed payables.
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The uncertain tax position increased to $11.7 million from $8.1 million at year-end, though potential 280E relief could reduce it.
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The company faces ongoing competitive pressures in Ohio as new dispensaries open, potentially impacting per-store sales.
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The Columbus store opening is delayed to Q1 2027, and the company expects to provide more CapEx details in Q3.
Q & A Highlights
Q: Can you provide a broader overview of the Ohio market, specifically whether the strong growth is due to the hemp ban and restrictions on derivatives or the regulatory changes implemented last September? Also, why has the medical market remained strong despite the launch of recreational sales? A: Eric Offenberger (CEO) explained that the recent pricing fluctuations are largely tied to the state's new packaging and product authorization process, which created a backlog that is now clearing. He noted that as more stores come online, per-store sales will naturally decrease, but Vext's philosophy is to focus on converting existing demand rather than stimulating new demand. Regarding the medical versus recreational split, he acknowledged uncertainty about how the market will evolve but confirmed Vext services both segments and is adapting packaging sizes to align with universal standards, with further adjustments dependent on federal rescheduling outcomes.
Q: Where does the Fairfield store rank relative to your other five stores, and which locations still have significant room to grow? A: Eric Offenberger (CEO) declined to provide per-store sales figures but admitted that Fairfield, located on the Jungle Jim's property, has not ramped as quickly as anticipated due to indirect traffic flow. He stated it has the most growth potential and that signage improvements are being implemented. He also noted that the Jackson store performs well, Jeffersonville is gaining share, and Columbus has recovered strongly after pricing corrections. He highlighted that anonymous purchasing in Ohio makes customer tracking challenging, so the company relies on foot traffic and headcount metrics.
Q: In Arizona, can you provide a ballpark variance between your all-in cost per pound to produce at Eloy versus what you can buy on the open market today? A: Trevor Smith (CFO) stated that on a cash basis, production costs were likely sub-$300 per pound, but on a fully absorbed basis (including depreciation and interest), it was tough to go below $700. Since product can be sourced for sub-$400, and in some distressed cases $250 or less, there is no reason to take on the 4.5-month agricultural cycle risk when purchasing offers net-30 terms.
Q: Considering the margin step-up in Arizona is a key part of the forward narrative, when will you sell the last of the Eloy inventory, and when is the specific flip to third-party sourced wholesale inventory? A: Trevor Smith (CFO) confirmed that the last Eloy inventory sell-through occurred in Q3, with the IFRS inventory capitalization noise ending in Q3 as well. Q4 will be the first clean quarter, and Arizona is expected to no longer be a laggard on cash flow or adjusted EBITDA margin, becoming more in line with a capital-light retail-oriented business, though not as strong as Ohio.
Q: Can you update us on your pre-roll category strategy in Ohio? Is it a primary focus? A: Eric Offenberger (CEO) stated that pre-rolls are a growing category and present a significant opportunity, especially given improved yields and capacity. Vext views pre-rolls as a value-add in the wholesale market and has invested in automation to control costs. He emphasized the company's focus on cost control to maintain margins in a commodity business, which was a key factor in the Arizona decision.
Q: How much surplus wholesale capacity exists at your 25,000 square foot facility in Ohio beyond what is needed to service your own stores? Do you still see an opportunity to expand the facility? A: Trevor Smith (CFO) indicated that facility expansion is now seen as an opportunity for 2027 rather than a necessity for 2026. This shift is due to the significant step-up in yields and delays in opening new stores, which have pushed the need for additional capacity out. The company is being strategic about CapEx and the timing of major mechanical purchases.
Q: Can you bookend the biggest upside surprise and the biggest challenge in the Ohio market versus your expectations? A: Eric Offenberger (CEO) admitted that Fairfield did not perform as well as expected initially, but he has learned from that experience for future openings. On the positive side, he was pleasantly surprised by the quality of execution and low staff turnover in both Ohio and Arizona. He also highlighted the company's ability to merchandise each store individually, tailoring strategies to local markets like Athens for student returns.
Q: What kind of inventory level should we expect once all eight stores are open and at steady state? And what is the remaining CapEx spend for the rest of 2026 in Ohio? A: Trevor Smith (CFO) explained that the inventory build was about $2 million in excess at Q2, driven by a 68% increase in yield per plant over the last 2.5 years and state compliance label approval delays. This inventory is already converting to cash in Q3. He expects to land at year-end with a similar level, with Arizona turning inventory very fast. On CapEx, he noted the company has more options than initially expected due to yield improvements, and while actively constructing the seventh location, further capacity expansion is being strategically timed, with more news expected in Q3.
Q: Are larger vertically integrated retail networks in Arizona, like Curaleaf, able to gain a strong price advantage over Vext? A: Trevor Smith (CFO) and Eric Offenberger (CEO) argued that this is unlikely because Arizona's cultivation market has no supply-side constraintsthere is an overcapacity of cultivation licenses with no physiological limits on size. They noted that normalization on the supply side has not occurred, meaning there is no major cost advantage to producing versus purchasing. Eric added that Vext measures costs on a fully absorbed basis, including return on assets, which justified the decision to exit cultivation.
Q: Are you seeing more M&A activity in the industry, and is the thesis of increased deal-making playing out? A: Eric Offenberger (CEO) stated that there is a lot of "tire kicking" and inbound interest, but few completed deals. He noted that many companies are still grappling with their debt structures and underperforming assets. He mentioned seeing some private consolidation deals, likely involving vendor carrybacks and earn-outs, but overall, the market remains cautious. Vext is evaluating opportunities from both expansion and inbound perspectives, with a focus on shareholder responsibility.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
