Exhibit 99.1

 

 

 

Ayr Wellness Reports Third Quarter 2022 Results

 

- Revenue up 24% Y/Y to $119.6 million, up 9% sequentially -

 

- Adjusted EBITDA up 10% sequentially to $21.7 million -

 

- Operating Loss improved 17% sequentially -

 

MIAMI, November 10, 2022 – Ayr Wellness Inc. (CSE: AYR.A, OTCQX: AYRWF) (“Ayr” or the “Company”), a leading vertically integrated U.S. multi-state cannabis operator (“MSO”), is reporting financial results for the third quarter ended September 30, 2022. Unless otherwise noted, all results are presented in U.S. dollars.

 

Jonathan Sandelman, Founder and CEO of Ayr, said, “Ayr executed on its growth and profitability objectives during the third quarter, with our financial results largely in line with expectations. We grew retail market share in 6 of the 7 states where we operate, and while economic headwinds and inflationary pressures continued to impact the consumer wallet throughout the quarter, we maintained strong unit volumes across nearly all of our markets, demonstrating the defensibility of cannabis as a consumer staple.

 

“Talent remains a focus point for Ayr as we continue to optimize our existing foundation, as reflected in our hiring of David Goubert as Ayr’s first President. David brings decades of retail, customer experience, and supply chain expertise to our team. We’re also happy to announce that the Board of Directors has named Joyce Johnson-Miller as the Company’s Lead Independent Director, further strengthening our corporate governance.

 

“Looking ahead, we anticipate further growth from the optimization and ramping of our existing asset base, as well as a number of new catalysts that we expect to begin contributing by early next year. The closing of our acquisition of two Dispensary 33 retail locations in Illinois, the opening of 15+ new Florida stores, the commencement of sales from our state-of-the-art cultivation facility in Ohio, and the continued phased openings of our Massachusetts cultivation expansion will be key growth and profitability drivers in 2023. With these optimizations and catalysts, we believe we are well positioned to realize further earnings potential in our business in the coming year.”

 

Third Quarter Financial Highlights ($ in millions, excl. margin items)

 

   Q3 2021   Q2 2022   Q3 2022  

% Change

Q3/Q3

  

% Change

Q3/Q2

 
Revenue  $96.2   $110.1   $119.6    24.4%   8.6%
Gross Profit  $40.1   $40.3   $49.5    23.5%   22.9%
Adjusted Gross Profit1  $56.6   $57.2   $62.9    11.0%   9.9%
Operating Loss  $(8.9)  $(24.8)  $(20.7)   NA    NA 
Adjusted EBITDA1  $26.0   $19.6   $21.7    -16.7%   10.3%
Adjusted EBITDA Margin1   27.0%   17.8%   18.1%   -890bps   30bps

 

1Adjusted EBITDA, Adjusted Gross Profit and Adjusted EBITDA Margin are non-GAAP measures, and accordingly are not standardized measures and may not be comparable to similar measures used by other companies. See Definition and Reconciliation of Non-GAAP Measures below. For a reconciliation of Operating Loss to Adjusted EBITDA as well as Gross Profit to Adjusted Gross Profit, see the reconciliation table appended to this release.

 

 

 

 

Third Quarter and Recent Highlights

 

·Retail Updates
oOpened two Greater Boston adult-use dispensaries in the heart of Boston’s Back Bay and Watertown.
oOpened two new dispensaries in Florida during the third quarter and an additional two stores in November, bringing Ayr’s total footprint to 52 dispensaries across the state.
·Brand/Product Updates
oIntroduced Lost in Translation (LIT), an award-winning cannabis brand known for sought after genetics and terpene profiles, in Massachusetts, Florida, Pennsylvania, New Jersey and Arizona.
oIntroduced HAZE live resin concentrates and vapes across the Company’s footprint in Florida and Nevada.
oLaunched Levia water-soluble tinctures in Arizona and Nevada in August, representing the first expansion of Levia outside of Massachusetts.
oIntroduced Secret Orchard vapes in Nevada.
·Regulatory Updates
oReceived state regulatory approval to convert Ayr’s Somerville, Massachusetts medical dispensary to adult use, pending local approvals.
oReceived state regulatory approval to begin phased production at Ayr’s new cultivation expansion in Massachusetts.
oConnecticut Cultivation Solutions, an entity co-owned by Tiana Hercules Esq., a Hartford City Councilwoman, and Ayr, was awarded a provisional Disproportionately Impacted Area (“DIA”) cultivator license in Connecticut.

 

Financing and Capital Structure

 

The Company deployed $7.9 million of capital expenditures in Q3 and ended the quarter with a cash balance of $100.8 million.

 

As of September 30, 2022, the Company had approximately 71.3 million fully diluted shares outstanding based on a treasury method calculation as of that date.i

 

Outlook

 

Based on the results to date coupled with an uncertain macroeconomic backdrop, management is updating their assumptions underlying its previously issued guidance. Consistent with prior quarter sequential growth trends, the Company expects Adjusted EBITDA and Operating Income to grow approximately 10% sequentially from Q3 2022 to Q4 2022 and expects further growth in 2023 as future milestones come online. This guidance assumes further price compression in the wholesale and retail market. Ayr’s expectations for future results are based on the assumptions and risks detailed in its MD&A for the period ended September 30, 2022 as filed on SEDAR and with the SEC.

 

 

i Includes pending M&A and excludes Ayr granted but unvested service-based LTIP shares totaling 6.0 million.

 

 

 

 

Conference Call

 

Ayr management will host a conference call, followed by a question-and-answer period.

 

Conference Call Date: Thursday, November 10, 2022

Time: 8:30 a.m. Eastern time

Toll-free dial-in number: (800) 319-4610

International dial-in number: (604) 638-5340

Conference ID: 10020429

 

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact the Company’s investor relations team at AYR@elevate-ir.com.

 

The conference call will be broadcast live and available for replay here.

 

A telephonic replay of the conference call will also be available for one month beginning at 11:30 a.m. ET on Thursday, November 10, 2022.

 

Toll-free replay number: (855) 669-9658

International replay number: (412) 317-0088

Replay ID: 9502

 

Financial Statements

 

Certain financial information reported in this news release is extracted from Ayr’s Unaudited Interim Condensed Consolidated Financial Statements and MD&A for the three and nine months ended September 30, 2022 and 2021. Ayr files its financial statements and MD&A on SEDAR and with the SEC. All financial information contained in this news release is qualified in its entirety by reference to such financial statements and MD&A.

 

Definition and Reconciliation of Non-GAAP Measures

 

The Company reports certain non-GAAP measures that are used to evaluate the performance of its businesses and the performance of their respective segments, as well as to manage their capital structures. As non-GAAP measures generally do not have a standardized meaning, they may not be comparable to similar measures presented by other issuers. Securities regulators require such measures to be clearly defined and reconciled with their most comparable GAAP measures.

 

Rather, these are provided as additional information to complement those GAAP measures by providing further understanding of the results of the operations of the Company from management’s perspective. Accordingly, these measures should not be considered in isolation, nor as a substitute for analysis of the Company’s financial information reported under GAAP. Non-GAAP measures used to analyze the performance of the Company’s businesses include “Adjusted EBITDA” and “Adjusted Gross Profit.”

 

The Company believes that these non-GAAP financial measures provide meaningful supplemental information regarding the Company’s performances and may be useful to investors because they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making. These financial measures are intended to provide investors with supplemental measures of the Company’s operating performances and thus highlight trends in the Company’s core businesses that may not otherwise be apparent when solely relying on the GAAP measures.

 

 

 

 

Adjusted EBITDA

 

“Adjusted EBITDA” represents (loss) income from operations, as reported under GAAP, before interest and tax, adjusted to exclude other adjustments associated with non-core costs, other non-cash items, including depreciation and amortization, and further adjusted to remove non-cash stock-based compensation, the accounting for the incremental costs to acquire cannabis inventory in a business combination, acquisition related costs, start-up costs and the gain (loss) on the sale of assets.

 

Adjusted Gross Profit

 

“Adjusted Gross Profit” represents gross profit, as reported, adjusted to exclude other adjustments associated with non-core costs, the accounting for the incremental costs to acquire cannabis inventory in a business combination, interest, depreciation and amortization and start-up costs.

 

A reconciliation of how Ayr calculates Adjusted EBITDA and Adjusted Gross Profit is provided in the tables appended below. Additional reconciliations of Adjusted EBITDA, Adjusted Gross Profit and other disclosures concerning non-GAAP measures are provided in our MD&A for the three and nine months ended September 30, 2022 and 2021.

 

Forward-Looking Statements

 

Certain information contained in this news release may be forward-looking statements within the meaning of applicable securities laws. Forward-looking statements are often, but not always, identified by the use of words such as “target”, “expect”, “anticipate”, “believe”, “foresee”, “could”, “would”, “estimate”, “goal”, “outlook”, “intend”, “plan”, “seek”, “will”, “may”, “tracking”, “pacing” and “should” and similar expressions or words suggesting future outcomes. This news release includes forward-looking information and statements pertaining to, among other things, Ayr’s future growth plans. Numerous risks and uncertainties could cause the actual events and results to differ materially from the estimates, beliefs and assumptions expressed or implied in the forward-looking statements, including, but not limited to: anticipated strategic, operational and competitive benefits may not be realized; events or series of events, including in connection with COVID-19, may cause business interruptions; required regulatory approvals may not be obtained in a timely manner or at all; inflationary pressures may increase input costs; supply chain issues may hamper production and distribution; and Ayr may not be able to raise additional debt or equity capital if required. Among other things, Ayr has assumed that its businesses will operate as anticipated and that all required regulatory approvals will be obtained on satisfactory terms and within expected time frames.

 

Forward-looking estimates and assumptions involve known and unknown risks and uncertainties that may cause actual results to differ materially. While Ayr believes there is a reasonable basis for these assumptions, such estimates may not be met. These estimates represent forward-looking information. Actual results may vary and differ materially from the estimates.

 

Assumptions and Risks

 

Forward-looking information in this release is subject to the assumptions and risks as described in our MD&A for the three and nine months ended September 30, 2022.

 

Additional Information

 

For more information about the Company’s Q3 2022 operations and outlook, please view Ayr’s corporate presentation posted in the Investors section of the Company’s website at www.ayrwellness.com.

 

 

 

 

About Ayr Wellness Inc.

 

Ayr is an expanding vertically integrated, U.S. multi-state cannabis operator. Based on the belief that everything starts with the quality of the plant, the Company’s mission is to cultivate the finest quality cannabis at scale and deliver remarkable experiences to its customers every day.

 

Ayr’s leadership team brings proven expertise in growing successful businesses through disciplined operational and financial management, and is committed to driving positive impact for customers, employees and the communities they serve. For more information, please visit www.ayrwellness.com.

 

Company/Media Contact:

 

Robert Vanisko

VP, Corporate Communications

T: (786) 885-0397

Email: robert.vanisko@ayrwellness.com

 

Investor Relations Contact:

 

Sean Mansouri, CFA
Elevate IR
T: (720) 330-2829
Email: IR@ayrwellness.com

 

 

 

 

Ayr Wellness Inc.

Unaudited Interim Condensed Consolidated Balance Sheets

(Expressed in United States Dollars, in thousands, except share amounts)

 

    September 30, 2022     December 31, 2021  
ASSETS            
Current            
Cash   $ 100,762     $ 154,342  
Accounts receivable, net     9,087       7,413  
Inventory     113,069       93,363  
Prepaid expenses, deposits, and other current assets     8,635       10,949  
Total Current Assets     231,553       266,067  
Non-current                
Property, plant, and equipment, net     315,381       275,222  
Intangible assets, net     956,855       978,915  
Right-of-use assets - operating, net     138,653       88,721  
Right-of-use assets - finance, net     45,166       17,527  
Goodwill     242,579       229,910  
Deposits and other assets     8,557       3,550  
TOTAL ASSETS   $ 1,938,744     $ 1,859,912  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY                
Liabilities                
Current                
Trade payables   $ 21,784     $ 26,983  
Accrued liabilities     24,221       32,724  
Lease liabilities - operating - current portion     7,921       4,195  
Lease liabilities - finance - current portion     9,583       3,185  
Contingent consideration - current portion     90,861       39,868  
Purchase consideration payable     2,166       812  
Income tax payable     32,777       28,915  
Debts payable - current portion     34,213       8,112  
Accrued interest payable - current portion     10,109       7,542  
Total Current Liabilities     233,635       152,336  
Non-current                
Deferred tax liabilities, net     67,954       70,081  
Lease liabilities - operating - non-current portion     136,046       87,767  
Lease liabilities - finance - non-current portion     26,060       9,406  
Construction finance liabilities     35,616       -  
Contingent consideration - non-current portion     28,699       145,654  
Debts payable - non-current portion     174,443       125,746  
Senior secured notes, net of debt issuance costs     244,864       245,408  
Accrued interest payable - non-current portion     4,430       3,451  
TOTAL LIABILITIES     951,747       839,849  
                 
Shareholders' equity                
Multiple Voting Shares - no par value, unlimited authorized. Issued and outstanding - 3,696,486 shares     -       -  
Subordinate, Restricted, and Limited Voting Shares - no par value, unlimited authorized. Issued and outstanding - 59,023,822 and 56,337,175 shares, respectively     -       -  
Exchangeable Shares: no par value, unlimited authorized. Issued and outstanding - 7,068,270 and 7,368,285 shares, respectively     -       -  
Additional paid-in capital     1,332,770       1,289,827  
Treasury stock - 645,300 and 568,300 shares, respectively     (8,987 )     (7,828 )
Accumulated other comprehensive income     3,266       3,266  
Accumulated deficit     (347,253 )     (265,202 )
Equity of Ayr Wellness Inc.     979,796       1,020,063  
Noncontrolling interest     7,201       -  
TOTAL SHAREHOLDERS' EQUITY     986,997       1,020,063  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 1,938,744     $ 1,859,912  

 

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

 

 

 

 

Ayr Wellness Inc.

Unaudited Interim Condensed Consolidated Statements of Operations

(Expressed in United States Dollars, in thousands, except per share amounts)

 

   Three Months Ended   Nine Months Ended 
   September 30, 2022   September 30, 2021   September 30, 2022   September 30, 2021 
Revenues, net of discounts  $119,639   $96,189   $340,996   $245,839 
                     
Cost of goods sold excluding fair value items   69,642    47,084    199,455   117,567 
Incremental costs to acquire cannabis inventory in a business combination   486    9,022    6,216   41,411 
Cost of goods sold   70,128    56,106    205,671    158,978 
                     
Gross profit   49,511    40,083    135,325    86,861 
                     
Operating expenses                    
Selling, general, and administrative   52,981    37,297    154,907   96,922 
Depreciation and amortization   14,440    10,943    42,078    26,925 
Acquisition expense   965    743    5,139    5,164 
Loss (gain) on sale of assets   1,810    -    (190)   - 
Total operating expenses   70,196    48,983    201,934    129,011 
                     
Loss from operations   (20,685)   (8,900)   (66,609)   (42,150)
                     
Other income (expense), net                    
Share of loss on equity investments   -    (13)   -    (32)
Fair value gain on financial liabilities   1,658    19,267    33,438    30,812 
Interest expense, net   (7,838)   (4,281)   (22,179)   (10,852)
Interest income   12    37    52    160 
Other, net   13    517    13    955 
Total other income (expense), net   (6,155)   15,527    11,324    21,043 
                     
Income (loss) before income taxes and noncontrolling interests   (26,840)   6,627    (55,285)   (21,107)
                     
Income taxes                    
Current tax provision   (12,020)   (14,167)   (33,712)   (29,986)
Deferred tax benefit   1,433    4,161    2,128    10,353 
Total income taxes   (10,587)   (10,006)   (31,584)   (19,633)
                     
Net loss before noncontrolling interest   (37,427)   (3,379)   (86,869)   (40,740)
Net loss attributable to noncontrolling interest   (1,310)   -    (4,818)   - 
Net loss attributable to Ayr Wellness Inc.  $(36,117)  $(3,379)  $(82,051)  $(40,740)
                     
Basic and diluted loss per share  $(0.52)  $(0.06)  $(1.20)  $(0.76)
                     
Weighted average number of shares outstanding (basic and diluted)   69,087    59,566    68,391    53,952 

 

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

 

 

 

 

Ayr Wellness Inc.

Unaudited Interim Condensed Consolidated Statements of Cash Flows

(Expressed in United States Dollars, in thousands)

 

   Nine Months Ended 
   September 30, 2022   September 30, 2021 
Operating activities          
Net loss before noncontrolling interest  $(86,869)  $(40,740)
Adjustments for:          
Fair value gain on financial liabilities   (33,438)   (30,812)
Stock-based compensation   28,652    20,388 
Stock-based compensation - related parties   707    - 
Depreciation and amortization   13,894    5,296 
Amortization on intangible assets   53,660    32,528 
Share of loss on equity investments   -    32 
Gain on disposal of equity investments   -    (1,000)
Gain (loss) on disposal of property, plant, and equipment   (190)   51 
Incremental costs to acquire cannabis inventory in a business combination   6,216    41,411 
Deferred tax benefit   (2,128)   (10,353)
Amortization on financing costs   1,719    1,229 
Amortization on financing premium   (2,263)   - 
Changes in operating assets and liabilities, net of business combinations:          
Accounts receivable   (1,127)   (5,750)
Inventory   (16,267)   (37,743)
Prepaid expenses, deposits, and other current assets   1,200    14 
Trade payables   (5,036)   2,377 
Accrued liabilities   (2,729)   2,780 
Interest accrued   3,547    3,927 
Lease liabilities - operating   1,887    1,294 
Income tax payable   3,862    (7,115)
Cash used in operating activities   (34,703)   (22,186)
           
Investing activities          
Purchase of property, plant, and equipment   (58,848)   (53,062)
Capitalized interest   (10,858)   (5,570)
Proceeds from the sale of assets, net of transaction costs   31,433    - 
Cash paid for business combinations and asset acquisitions, net of cash acquired   (11,469)   (59,972)
Cash paid for business combinations and asset acquisitions, bridge financing   -    (22,750)
Cash paid for business combinations and asset acquisitions, working capital   (2,812)   (4,025)
Payments for interests in equity accounted investments   -    (47)
Cash received in disposal of equity investment   -    1,000 
Advances to related corporation   -    135 
Purchase of intangible asset   (4,000)   - 
Cash received (paid) for bridge financing   1,070    (1,200)
Deposits for business combinations, net of cash on hand   (2,825)   (572)
Cash used in investing activities   (58,309)   (146,063)
           
Financing activities          
Proceeds from exercise of warrants   -    56,034 
Proceeds from exercise of options   300    305 
Proceeds from financing transaction, net of financing costs   27,599    - 
Proceeds from equity offering, net of expenses   -    118,053 
Proceeds from issuance of notes payable, net of financing costs   51,713    - 
Payments of financing costs   -    (136)
Payment for settlement of contingent consideration   (10,000)   - 
Deposits paid for financing lease and note payable   (924)   - 
Tax withholding on stock-based compensation awards   (4,738)   (28,511)
Repayments of debts payable   (8,257)   (6,280)
Repayments of lease liabilities - finance (principal portion)   (7,831)   (3,741)
Repurchase of equity shares   (8,430)   (311)
Cash provided by financing activities   39,432    135,413 
           
Net decrease in cash   (53,580)   (32,836)
Cash, beginning of the period   154,342    127,238 
Cash, end of the period  $100,762   $94,402 
           
Supplemental disclosure of cash flow information:          
Interest paid during the period   30,747    12,187 
Income taxes paid during the period   29,248    37,999 
Non-cash investing and financing activities:          
Recognition of right-of-use assets for operating leases   52,296    61,629 
Recognition of right-of-use assets for finance leases   30,812    13,365 
Issuance of promissory note related to business combinations   16,000    - 
Issuance of Equity Shares related to business combinations and asset acquisitions   6,352    556,720 
Issuance of Equity Shares related to equity component of debt   -    7,430 
Issuance of Equity Shares related to settlement of contingent consideration   11,748    - 
Issuance of promissory note related to settlement of contingent consideration   14,934    - 
Cancellation of Equity Shares   78    - 
Capital expenditure disbursements for cultivation facility   7,837    - 

 

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

 

 

 

 

Ayr Wellness Inc.
Unaudited Interim Consolidated Adjusted EBITDA and Gross Profit Reconciliation
(Expressed in United States Dollars, in thousands)

 

   Three Months Ended   Nine Months Ended 
   September 30, 2022   September 30, 2021   September 30, 2022   September 30, 2021 
    $    $    $    $ 
Loss from operations (GAAP)   (20,685)   (8,900)   (66,609)   (42,150)
                     
Incremental costs to acquire cannabis inventory in a business combination   486    9,022    6,216    41,411 
Interest (within cost of goods sold "COGS")   1,723    464    2,975    921 
Depreciation and amortization (from statement of cash flows)   23,743    15,761    67,554    37,825 
Acquisition costs   965    743    5,139    5,164 
Stock-based compensation, non-cash   9,359    5,013    29,448    20,388 
Start-up costs1   2,930    3,464    9,442    6,437 
Other2   1,337    433    6,835    1,841 
Loss (gain) on sale of assets   1,810    -    (190)   - 
    42,353    34,900    127,419    113,987 
                     
Adjusted EBITDA (non-GAAP)   21,668    26,000    60,810    71,837 

 

1 Costs to prepare a location for its intended use, including facilities not yet operating at scale. Start-up costs are expensed as incurred and are not indicative of ongoing operations.

2 Other non-core costs including non-operating adjustments and non-cash inventory write-downs    

 

   Three Months Ended   Nine Months Ended 
   September 30, 2022   September 30, 2021   September 30, 2022   September 30, 2021 
    $    $    $    $ 
Gross profit (GAAP)   49,511    40,083    135,325    86,861 
                     
Incremental costs to acquire cannabis inventory in a business combination   486    9,022    6,216    41,411 
Interest (within COGS)   1,723    464    2,975    921 
Depreciation and amortization (within COGS)   9,303    4,818    25,475    10,900 
Start-up costs (within COGS)   1,020    2,250    3,153    3,834 
Other (within COGS)   830    -    4,883    - 
                     
Adjusted Gross Profit (non-GAAP)   62,873    56,637    178,027    143,927