Verano Holdings Corp., a major player in the US cannabis market, has just released its first quarter 2024 earnings transcript. While the news of the DEA's recommendation to reschedule cannabis stole the headlines, a closer look at the transcript reveals a fascinating and potentially overlooked narrative – a strategic "shadow play" in Florida that could position Verano for explosive growth if adult-use legalization prevails in the state.

Analysts have been quick to dissect the implications of rescheduling, dissecting the potential benefits for Verano: tax savings, improved credit terms, safer working environments, a wider vendor pool, and even the potential for a US listing. Yet, lurking beneath the surface of the DEA news is a calculated strategy unfolding in the Sunshine State, one with the potential to dwarf even the most optimistic rescheduling outcomes.

Verano, already a dominant force in Florida's medical cannabis market, holds the second-largest footprint in the state with 74 dispensaries and a vertically integrated system fueled by high-quality indoor cultivation. While the transcript explicitly states their anticipation of adding new Muv branded dispensaries and significantly increasing cultivation capacity, the precise details are shrouded in strategic ambiguity.

This calculated reticence raises a crucial question: Is Verano quietly building a Florida powerhouse, poised to unleash its full potential the moment adult-use legalization takes hold? Consider the following:

Florida's Revenue Potential: In 2023, Verano generated $222 million in revenue from Florida's medical market. The transcript conservatively estimates a 2.5 to 3 times increase in revenue with adult-use, translating to an additional $300 to $450 million annually. This estimate, however, may be significantly understated. Reference: Q1 2024 Earnings Transcript

The Tourism Factor: The transcript acknowledges Florida's massive tourism industry, with over 135 million visitors annually, but fails to quantify its impact. This influx could significantly boost the revenue multiplier, potentially pushing it well beyond the conservative 2.5-3x range. Reference: Q1 2024 Earnings Transcript

Strategic Expansion Plans: The transcript mentions temporary cultivation shutdowns for capacity expansion, a move with intriguing timing. This proactive approach, combined with their stated goal of being "one step ahead of growth," suggests a level of expansion that goes beyond merely meeting current medical demand. Reference: Q1 2024 Earnings Transcript

The "Shadow Play": Verano's refusal to provide specific expansion figures adds another layer of intrigue. Are they deliberately downplaying their expansion plans, keeping their cards close to their chest to avoid alerting competitors to the scale of their ambitions? Reference: Q1 2024 Earnings Transcript

Let's delve into a hypothetical scenario. Assuming a conservative 2.5x revenue increase with adult-use, Verano's Florida revenue could reach $555 million annually. But if we factor in the tourism boost, a more aggressive 4x multiplier doesn't seem unreasonable, potentially pushing their Florida revenue to a staggering $888 million per year.

This "shadow play" strategy, if accurate, is brilliant in its simplicity. Verano builds its Florida infrastructure under the radar, leveraging the existing medical market as a cover. When adult-use legalization arrives, they are perfectly positioned to capitalize on the explosive demand, potentially eclipsing competitors caught off guard by the rapid market expansion.

Revenue Projections for Florida

Source: Q1 2024 Earnings Transcript and author's estimates

Wholesale vs. Retail Revenue in New Jersey

Note that this chart uses hypothetical data to illustrate the trend discussed in the transcript, as specific revenue figures for wholesale and retail segments were not disclosed.

Of course, this remains a hypothesis. Only time will tell if Verano's cautious pronouncements mask a far bolder strategy. However, the potential rewards of such a strategy are undeniable. If Florida goes green in November, Verano may very well be holding the winning hand, ready to emerge as the undisputed king of the Sunshine State's cannabis market.

"Fun Fact: Florida's medical cannabis market is already one of the largest in the US, with over 800,000 registered patients. This strong foundation suggests a massive potential for expansion if adult-use legalization is approved. Reference: Q1 2024 Earnings Transcript"

Verano Holdings Corp. Q1 2024 Earnings Conference Call Transcript

The full transcript of the earnings call can be found here: Seeking Alpha