Ayr Wellness Reports Fourth Quarter and Full Year 2022 Results

MIAMI, March 09, 2023 (GLOBE NEWSWIRE) --  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 fourth quarter and full year ended December 31, 2022. Unless otherwise noted, all results are presented in U.S. dollars.

David Goubert, President & CEO of Ayr, said, “I’d like to thank our team for pulling together to deliver a strong fourth quarter, growing our adjusted EBITDA by 20% sequentially, and a second straight quarter of generating positive cash flow from operations. In the past few months, our team has begun the process of evaluating every aspect of our business with fresh eyes, conducting a thorough review of our markets, our people, and our processes, all in service seeking to maximize the financial health of our Company and better position Ayr as a retailer of choice and house of brands.”

“Throughout that process, we have implemented cost saving measures, stepped back from certain markets that didn’t align with our core business goals, and invested further into markets and activities that did meet those goals. By better prioritizing our time, our attention, and our capital, we find ourselves better positioned to capture growth opportunities in our existing and future footprint, which we anticipate will help us grow our cash flow profile, our revenue, and adjusted EBITDA margins consistently throughout 2023.”

Fourth Quarter Financial Summary ($ in millions, excl. margin items)

  Q4 2021 Q3 2022 Q4 2022 % Change
Q4/Q4
% Change
Q4/Q3
Revenue $111.8   $119.6   $124.6   11.5 % 4.2 %
Gross Profit $51.2   $49.5   $55.1   7.6 % 11.3 %
Adjusted Gross Profit1 $63.3   $62.9   $70.5   11.3 % 12.1 %
Operating Loss² $(13.9 ) $(20.7 ) $(176.2 ) NA   NA  
Adjusted EBITDA1 $26.1   $21.7   $26.0   -0.5 % 20.1 %
Adjusted EBITDA Margin1   23.4 %   18.1 %   20.9 % -250bps   280bps  

Full Year 2022 Financial Summary ($ in millions, excl. margin items)

  FY 2021 FY 2022 % Change
Y/Y
Revenue $357.6   $465.6   30.2 %
Gross Profit $138.1   $190.4   37.9 %
Adjusted Gross Profit1 $207.3   $248.5   19.9 %
Operating Loss² $(56.0 ) $(243.0 ) NA  
Adjusted EBITDA1 $98.0   $86.8   -11.4 %
Adjusted EBITDA Margin1   27.4 %   18.6 % -880bps  

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.

2Based on the current market conditions, including the impact of price compression, the Company incurred a non-cash goodwill impairment charge of $149M, reducing the carrying value of goodwill across all reporting units.

Fourth Quarter and Recent Highlights

  • Retail Updates
    • Opened two new dispensaries in Florida during the fourth quarter and an additional two stores in the first quarter of 2023, bringing Ayr’s total footprint to 55 dispensaries across the state.
    • Began adult-use sales alongside the Company’s established medical sales at Ayr’s Somerville, Massachusetts retail dispensary.
    • Announced Ayr’s three retail locations in New Jersey, formerly known as Garden State Dispensary, are now operating under the AYR Dispensary brand.
  • Brand/Product Updates
    • Introduced HAZE live resin concentrates and vapes across the Company’s footprint in Florida and Nevada.
    • Expanded Levia water-soluble tinctures to Ayr’s Florida retail menus.
    • Announced plans to rebrand all of the Company’s Florida stores from Liberty Health Sciences to AYR Cannabis Dispensary this summer.
  • Corporate Updates
    • Announced mutual termination of Ayr’s proposed acquisition of the equity interests of Gentle Ventures, LLC d/b/a Dispensary 33, and certain of its affiliates that collectively own and operate two licensed retail dispensaries in Chicago, Illinois.
    • Signed a definitive agreement to sell Blue Camo, LLC which comprises the Company’s Arizona assets, to AZ Goat, LLC, a group consisting primarily of the former owners of Blue Camo.
    • Entered into an option to acquire two Ohio dispensary licenses from Daily Releaf, LLC and Heaven Wellness, LLC, to begin establishing a vertical integrated presence in the state.

Full Year 2022 Highlights

  • Added 14 dispensaries across Ayr’s eight state footprint, bringing its total dispensary count to 80 stores.
  • Launched adult-use retail sales in New Jersey and Massachusetts.
  • Completed acquisitions of Cultivauna, LLC, the owner of Levia-branded cannabis infused beverages, and Herbal Remedies Dispensaries, LLC; Signed a management services agreement with Tahoe Hydroponics, LLC and NV Green, Inc.
  • Won a provisional cultivation license in Connecticut alongside Ayr’s operating partner, which will also provide Ayr with two retail licenses in the state.
  • Completed $114 million of real estate financing transactions at a blended cost of capital at closing of ~8.0% per annum.
  • Completed construction of cultivation facilities in Massachusetts, New Jersey and Ohio.

Financing and Capital Structure

The Company deployed $3.6 million of capital expenditures in Q4 and ended the year with a cash balance of $80.6 million.

As of December 31, 2022, the Company had approximately 70.9 million fully diluted shares outstanding based on a treasury method calculation as of that date.i

Outlook

The Company anticipates its financial results in the first quarter of 2023 to be consistent with industry trends, expecting revenue and adjusted EBITDA in Q1 2023 to be in-line with Q4 2022. Ayr expects to further ramp revenue, adjusted EBITDA and operating cash flow thereafter.

Conference Call

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

Conference Call Date: Thursday, March 9, 2023
Time: 8:30 a.m. ET
Toll-free dial-in number: (800) 319-4610
International dial-in number: (604) 638-5340
Conference ID: 10021221

Please dial into the conference call 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 ir@ayrwellness.com.

The conference 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, March 9, 2023.

Toll-free replay number: (855) 669-9658
International replay number: (412) 317-0088
Replay ID: 9867

Financial Statements

Certain financial information reported in this news release is extracted from Ayr’s Consolidated Financial Statements and MD&A for years December 31, 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 non-core costs, other non-cash items, including depreciation and amortization, and further adjusted to remove non-cash stock-based compensation, impairment expense, the accounting for the incremental costs to acquire cannabis inventory in a business combination, acquisition related costs, and start up costs.

Adjusted Gross Profit

“Adjusted Gross Profit” represents gross profit, as reported, adjusted to exclude 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 twelve months ended December 31, 2022 and 2021.

Forward-Looking Statements

Certain statements in this MD&A are forward-looking statements within the meaning of applicable securities laws, including, but not limited to, those statements relating to the Company and its financial capacity and availability of capital and other statements that are not historical facts. These statements are based upon certain material factors, assumptions, and analyses that were applied in drawing a conclusion or making a forecast or projection, including experience of the Company, as applicable, and perception of historical trends, current conditions, and expected future developments, as well as other factors that are believed to be reasonable in the circumstances. Forward-looking statements are provided for the purpose of presenting information about management’s current expectations and plans relating to the future and readers are cautioned that such statements may not be appropriate for other purposes. These statements may include, without limitation, statements regarding the operations, business, financial condition, expected financial results, performance, prospects, opportunities, priorities, targets, goals, ongoing objectives, strategies, and outlook of the Company. Forward-looking statements are often identified by the words “may”, “would”, “could”, “should”, “will”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “project”, “expect”, “target”, “continue”, “forecast”, “design”, “goal” or negative versions thereof and other similar expressions.

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 year ended December 31, 2022.

Additional Information

For more information about the Company’s Q4 and full year 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 Consolidated Balance Sheets
(Expressed in United States Dollars, in thousands, except share amounts)
    Year Ended
    December 31, 2022 December 31, 2021
ASSETS  
Current    
Cash $ 80,640   $ 154,342  
Accounts receivable, net   8,949     7,413  
Inventory   115,053     93,363  
Prepaid expenses, deposits, and other current assets   8,885     10,949  
Total Current Assets   213,527     266,067  
Non-current    
Property, plant, and equipment, net   326,918     275,222  
Intangible assets, net   938,727     978,915  
Right-of-use assets - operating, net   137,368     88,721  
Right-of-use assets - finance, net   44,762     17,527  
Goodwill   94,108     229,910  
Deposits and other assets   8,470     3,550  
TOTAL ASSETS  $ 1,763,880   $ 1,859,912  
       
LIABILITIES AND SHAREHOLDERS' EQUITY    
Liabilities    
Current    
Trade payables $ 28,533   $ 26,983  
Accrued liabilities   26,238     32,724  
Lease liabilities - operating - current portion   8,176     4,195  
Lease liabilities - finance - current portion   10,049     3,185  
Contingent consideration - current portion   63,429     39,868  
Purchase consideration payable   2,849     812  
Income tax payable   46,006     28,915  
Debts payable - current portion   40,523     8,112  
Accrued interest payable - current portion   3,191     7,542  
Total Current Liabilities   228,994     152,336  
Non-current    
  Deferred tax liabilities, net   68,523     70,081  
  Lease liabilities - operating - non-current portion   134,715     87,767  
  Lease liabilities - finance - non-current portion   24,693     9,406  
  Construction finance liabilities   36,181     -  
  Contingent consideration - non-current portion   26,661     145,654  
  Debts payable - non-current portion   158,820     125,746  
  Senior secured notes, net of debt issuance costs   244,682     245,408  
  Accrued interest payable - non-current portion   4,763     3,451  
  Other long term liabilities   524     -  
TOTAL LIABILITIES    928,556     839,849  
       
Commitments and contingencies    
       
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 - 60,909,492 and 56,337,175 shares, respectively   -     -  
  Exchangeable Shares: no par value, unlimited authorized. Issued and outstanding - 6,044,339 and 7,368,285 shares, respectively   -     -  
  Additional paid-in capital   1,349,713     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   (510,668 )   (265,202 )
  Equity of Ayr Wellness Inc.   833,324     1,020,063  
  Noncontrolling interest   2,000     -  
TOTAL SHAREHOLDERS' EQUITY    835,324     1,020,063  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY  $ 1,763,880   $ 1,859,912  



Ayr Wellness Inc.
Unaudited Consolidated Statements of Operations
(Expressed in United States Dollars, in thousands, except per share amounts)
    Three Months Ended   Year Ended
    December 31, 2022
  December 31, 2021
    December 31, 2022
  December 31, 2021
 
             
Revenues, net of discounts $ 124,623   $ 111,769     $ 465,618   $ 357,608  
             
Cost of goods sold excluding fair value items   69,501     58,079       268,957     175,646  
Incremental costs to acquire cannabis inventory in business combinations    -     2,453       6,216     43,864  
Cost of goods sold   69,501     60,532       275,173     219,510  
             
Gross profit   55,122     51,237       190,445     138,098  
             
Operating expenses          
  Selling, general, and administrative   67,188     47,524       222,092     144,444  
  Impairment of goodwill   148,531     -       148,531     -  
  Depreciation and amortization   14,777     13,734       56,856     40,659  
  Acquisition expense   852     3,837       5,991     9,002  
  Gain on sale of assets   -     -       (8 )   -  
Total operating expenses   231,348     65,095       433,462     194,105  
             
Loss from operations   (176,226 )   (13,858 )     (243,017 )   (56,007 )
             
Other income (expense), net          
  Share of loss on equity investments   -     -       -     (32 )
  Fair value gain on financial liabilities   29,649     52,947       63,088     83,759  
  Interest expense, net   (8,395 )   (5,698 )     (30,575 )   (16,550 )
  Interest income   223     43       275     204  
  Other, net   (74 )   (20 )     120     935  
Total other income, net   21,403     47,272       32,908     68,316  
             
Income (loss) before income taxes and noncontrolling interests   (154,823 )   33,414       (210,109 )   12,309  
             
Income taxes          
  Current tax provision   (13,223 )   (15,834 )     (46,934 )   (45,820 )
  Deferred tax benefit   (570 )   6,206       1,558     16,559  
Total income taxes   (13,793 )   (9,628 )     (45,376 )   (29,261 )
             
Net loss before noncontrolling interest   (168,616 )   23,786       (255,485 )   (16,952 )
  Net loss attributable to noncontrolling interest   (2,210 )   -       (10,019 )   -  
  Net loss attributable to Ayr Wellness Inc. $ (166,406 ) $ 23,786     $ (245,466 ) $ (16,952 )
             
Basic and diluted net loss per share $ (2.40 ) $ 0.35     $ (3.58 ) $ (0.30 )
             
Weighted average number of shares outstanding (basic and diluted)   69,357     67,352       68,635     57,329  



Ayr Wellness Inc.
Unaudited Consolidated Statements of Cash Flows
(Expressed in United States Dollars, in thousands)
  Year Ended
  December 31, 2022
  December 31, 2021
 
Operating activities    
Net loss before noncontrolling interest $ (255,485 ) $ (16,952 )
Adjustments for:    
  Fair value gain on financial liabilities   (63,088 )   (83,759 )
  Stock-based compensation   46,115     27,155  
  Stock-based compensation - related parties   707     -  
  Depreciation and amortization   21,050     8,125  
  Amortization on intangible assets   71,789     50,709  
  Impairment of goodwill   148,531     -  
  Share of loss on equity investments   -     32  
  Gain on disposal of equity investments   -     (178 )
  (Gain) loss on disposal of property, plant, and equipment   (8 )   50  
  Incremental costs to acquire cannabis inventory in a business combination   6,216     43,864  
  Deferred tax benefit   (1,558 )   (16,559 )
  Amortization on financing costs   2,292     1,744  
  Amortization on financing premium   (3,018 )   (402 )
Changes in operating assets and liabilities, net of business combinations:   -    
  Accounts receivable   (989 )   (3,916 )
  Inventory   (18,235 )   (50,956 )
  Prepaid expenses, deposits, and other current assets   1,833     (2,326 )
  Trade payables   (7,087 )   (1,430 )
  Accrued liabilities   92     7,943  
  Accrued interest payable   (2,685 )   1,446  
  Lease liabilities - operating   2,272     1,912  
  Income tax payable   17,091     5,717  
Cash used in operating activities   (34,165 )   (27,781 )
     
Investing activities    
  Purchase of property, plant, and equipment   (62,497 )   (91,630 )
  Capitalized interest   (14,927 )   (8,373 )
  Proceeds from the sale of assets, net of transaction costs   31,433     -  
  Cash paid for business combinations and asset acquisitions, net of cash acquired   (11,546 )   (92,270 )
  Cash paid for business combinations and asset acquisitions, bridge financing   -     (22,750 )
  Cash paid for business combinations and asset acquisitions, working capital   (2,205 )   (4,359 )
  Payments for interests in equity accounted investments   -     (82 )
  Cash received in disposal of equity investment   -     1,000  
  Payments made by related corporation   -     135  
  Purchase of intangible asset   (4,000 )   -  
  Cash received (paid) for bridge financing   70     (1,200 )
  Deposits for business combinations, net of cash on hand   (2,825 )   (100 )
Cash used in investing activities   (66,497 )   (219,629 )
     
Financing activities    
  Proceeds from exercise of warrants   -     55,692  
  Proceeds from exercise of options   300     315  
  Proceeds from financing transaction, net of financing costs   27,600     148,646  
  Proceeds from equity offering, net of expenses   -     118,052  
  Proceeds from issuance of notes payable, net of financing costs   51,713     -  
  Payments of financing costs   -     (2,142 )
  Payment for settlement of contingent consideration   (10,000 )   -  
  Deposits paid for financing lease and note payable   (924 )   -  
  Tax withholding on stock-based compensation awards   (5,258 )   (28,536 )
  Repayments of debts payable   (17,924 )   (8,749 )
  Repayments of lease liabilities - finance (principal portion)   (10,117 )   (6,949 )
  Repurchase of Equity Shares   (8,430 )   (1,815 )
Cash provided by financing activities   26,960     274,514  
     
Net (decrease) increase in cash   (73,702 )   27,104  
Cash, beginning of the period   154,342     127,238  
Cash, end of the period $ 80,640   $ 154,342  
     
Supplemental disclosure of cash flow information:    
Interest paid during the period, net   49,820     14,244  
Income taxes paid during the period   30,915     41,303  
Non-cash investing and financing activities:    
Recognition of right-of-use assets for operating leases   54,396     68,578  
Recognition of right-of-use assets for finance leases   32,444     18,576  
Issuance of promissory note related to business combinations   16,000     -  
Issuance of Equity Shares related to business combinations and asset acquisitions   6,352     576,196  
Issuance of Equity Shares related to equity component of debt   -     7,429  
Issuance of Equity Shares related to settlement of contingent consideration   11,748     -  
Issuance of promissory note related to settlement of contingent consideration   14,934     -  
Repurchase of Equity Shares   -     7,193  
Cancellation of Equity Shares   78     -  
Capital expenditure disbursements for cultivation facility   8,402     -  
     



Ayr Wellness Inc.
Unaudited Consolidated Adjusted EBITDA and Gross Profit Reconciliation
(Expressed in United States Dollars, in thousands)
        Three Months Ended Year Ended
        December 31, 2022   December 31, 2021   December 31, 2022   December 31, 2021  
(In thousands)       $   $   $   $  
Loss from operations (GAAP)       (176,226 ) (13,859 ) (243,017 ) (56,007 )
               
Incremental costs to acquire cannabis inventory in a business combination   -   2,453   6,216   43,864  
Interest (within cost of goods sold "COGS")     1,224   486   4,199   1,408  
Depreciation and amortization (from statement of cash flows)   25,284   21,010   92,839   58,834  
Acquisition costs       852   3,837   5,991   9,002  
Stock-based compensation, non-cash     17,374   6,767   46,822   27,155  
Impairment of goodwill       148,531   -   148,531   -  
Start-up costs1       3,016   3,594   12,457   10,031  
Other2       5,958   1,848   12,794   3,688  
Loss (gain) on sale of assets       -   -   (8 ) -  
        202,239   39,995   329,841   153,982  
               
Adjusted EBITDA (non-GAAP)       26,013   26,136   86,824   97,975  
               
               
               
1 These are set-up costs to prepare a location for its intended use. Start-up costs are expensed as incurred and are not indicative of ongoing operations    
2 Other non-core costs including non-operating adjustments, severance costs and non-cash inventory write-downs      
               
               
        Three Months Ended Year Ended
        December 31, 2022   December 31, 2021   December 31, 2022   December 31, 2021  
(In thousands)       $   $   $   $  
Gross profit (GAAP)       55,122   51,237   190,445   138,098  
               
Incremental costs to acquire cannabis inventory in a business combination   -   2,453   6,216   43,864  
Interest (within COGS)       1,224   486   4,199   1,408  
Depreciation and amortization (within COGS)     10,507   7,276   35,982   18,175  
Start-up costs (within COGS)       747   1,875   3,900   5,709  
Other (within COGS)       2,883   -   7,766   -  
               
Adjusted Gross Profit (non-GAAP)     70,483   63,327   248,508   207,254  
               

i Includes pending M&A and excludes Ayr granted but unvested service-based LTIP shares totaling 5.3 million.


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Source: Ayr Wellness Inc.