AYR Wellness Reports Second Quarter 2024 Results

MIAMI, Aug. 07, 2024 (GLOBE NEWSWIRE) -- AYR Wellness Inc. (CSE: AYR.A, OTCQX: AYRWF) (“AYR” or the “Company”), a leading vertically integrated U.S. multi-state cannabis operator, is reporting financial results for the second quarter ended June 30, 2024. Unless otherwise noted, all results are presented in U.S. dollars.

David Goubert, President & CEO of AYR, said, “Our team remains acutely focused on laying the groundwork for AYR’s next phase of growth. This includes advancing the progress made over the last 18 months to improve operations across our markets, continuing to invest in our CPG brands and retail experience, and ensuring that AYR is best positioned to capitalize on the anticipated transition to adult-use in three of our core markets: Ohio, Florida, and Pennsylvania. We continue to believe AYR has more upside from these three markets than any other company in our industry.

“We are also encouraged by the progress made towards the reclassification of cannabis from Schedule I to Schedule III, a change which would eliminate the onerous and unjust 280E tax penalty. The recent closure of the comment period was an important step forward for our industry and represented overwhelming support for rescheduling cannabis. This positive momentum underscores the growing acceptance of cannabis in a mainstream sense.

“While we are encouraged by the progress we’ve made in our operations, the second quarter presented challenges due to both internal and external factors including wholesale pricing pressure, tightening consumer wallets from persistent inflation, and margin pressure in select markets where we have recently increased our cultivation and production, but which are not yet optimized. Despite these near-term setbacks, we are well positioned for growth and margin expansion in the second half of 2024 as our adult-use growth catalysts materialize in Ohio along with improved operations in these recently scaled markets.

“Looking beyond 2024, we will continue to focus on enhancing the overall health of the business to seek to ensure that AYR is poised for sustainable and profitable financial growth. We are pleased with the work we have done but remain focused on delivering further progress. By staying committed to our strategic initiatives, focusing on operational excellence, and leveraging our differentiated market position, we believe that AYR will emerge stronger and more resilient as we enter this next phase of accelerated growth in the years ahead.”

Second Quarter Financial Summary

  Q2 2023 Q1 2024 Q2 2024 % Change
Q2/Q2
% Change
Q2/Q1
Revenue
$116.7 $118.0 $117.3 0.5%
-0.6%
Gross Profit $56.6 $50.7 $47.2 -16.6%
-6.9%
Adjusted Gross Profit1 $69.1 $62.6 $60.7 -12.2%
-3.0%
Operating Loss
$(4.6) $(2.0)
$(7.7) NA NA
Adjusted EBITDA1 $29.4 $29.1 $25.7 -12.6%
-11.7%
Adjusted EBITDA Margin1 25.2%  24.7%
21.9 % -330bps -280bps

1 Adjusted 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 tables appended to this release.

Second Quarter and Recent Highlights

  • Launched adult-use sales in Ohio across the first tranche of stores approved by the state, with three affiliated AYR stores included. AYR has the future right to ownership of all three dispensaries, subject to regulatory approval.

  • Entered into option agreement that provides AYR with the future ability to acquire 100% of Good Day Dispensary, LLC (“Good Day”), a fourth Ohio dispensary license.

  • Opened its third retail store in Illinois in June with AYR Cannabis Dispensary Hometown, located near Chicago Midway International Airport, and its fourth Illinois retail store in July with AYR Cannabis Dispensary Normal.

  • Secured real estate financing for indoor cultivation in Florida, with plans to redevelop a 98,000 square foot building within the property to serve as a regulated cannabis cultivation facility. The financing was completed with Innovative Industrial Properties (IIP); IIP committed to funding AYR up to $30 million for the construction.

  • In July 2024, appointed Louis Karger as Chairman of the Board following the resignation of prior Executive Chairman Jonathan Sandelman.

Financing and Capital Structure

The Company deployed $3.6 million of capital expenditures in Q2 and remains on target with the Company’s guidance of approximately $20 million for the full year. AYR ended Q2 with aggregate cash, cash equivalents, and a restricted cash balance of $47.5 million.

As of June 30, 2024, the Company had approximately 114.1 million fully diluted shares outstanding based on a treasury method calculation as of that date (excluding 23 million warrants expiring in February 2026 with an exercise price of USD $2.12).

Outlook

For the third quarter, AYR expects revenue growth to be up low to mid-single digits from Q2 based on the timing and ramping of the Ohio Adult Use rollout. AYR also expects to improve Adjusted EBITDA margins from current levels in the second half of 2024 as the Company rebuilds toward its 25% Adjusted EBITDA margin target.

AYR also continues to expect positive GAAP cash flow from operations for calendar 2024, as well as positive free cash flow for calendar 2024 assuming the elimination of 280E tax liabilities.

Conference Call

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

Date: Wednesday, August 7, 2024
Time: 8:00 a.m. ET
Toll-free dial-in number: (844) 763-8274
International dial-in number: (647) 484-8814
Conference ID: 10190621
Webcast: https://event.choruscall.com/mediaframe/webcast.html?webcastid=bRdrPVJ3

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 until end of day Saturday, September 7, 2024.

Toll-free replay number: (877) 344-7529
International replay number: (412) 317-0088
Replay ID: 1160951

Financial Statements

Certain financial information reported in this news release is extracted from AYR’s Consolidated Financial Statements and MD&A for the quarter ended June 30, 2024. 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 continuing 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 incremental costs to acquire cannabis inventory in a business combination (when applicable; none of which was incurred for any of the periods presented), acquisition and transaction related costs, and start-up costs.

Adjusted Gross Profit

“Adjusted Gross Profit” represents gross profit, as reported under GAAP, adjusted to exclude the incremental costs to acquire cannabis inventory in a business combination (when applicable; none of which was incurred for any of the periods presented), interest, depreciation and amortization, start-up costs and other non-core 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 months ended June 30, 2024.

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 quarter ended June 30, 2024.

Additional Information

For more information about the Company’s Q2 2024 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 Wellness is a vertically integrated, U.S. multi-state cannabis business. The Company operates simultaneously as a retailer with 90+ licensed dispensaries and a house of cannabis CPG brands.

AYR is committed to delivering high-quality cannabis products to its patients and customers while acting as a Force for Good for its team members and the communities that the Company serves. For more information, please visit www.ayrwellness.com.

Company/Media Contact:

Robert Vanisko
VP, Public Engagement
T: (786) 885-0397
Email: comms@ayrwellness.com

Company Contact:

Jon DeCourcey
Head of Investor Relations
T: (786) 885-0397
Email: ir@ayrwellness.com

Investor Relations Contact:

Sean Mansouri, CFA
Elevate IR
T: (786) 885-0397
Email: ir@ayrwellness.com


Ayr Wellness Inc.
Unaudited Interim Condensed Consolidated Balance Sheets
(Expressed in United States Dollars, in thousands, except share amounts)
    As of
    June 30, 2024 December 31, 2023
ASSETS    
Current      
Cash, cash equivalents and restricted cash   $ 47,483   $ 50,766  
Accounts receivable, net     14,377     13,491  
Inventory     116,875     106,363  
Prepaid expenses, deposits, and other current assets     10,244     22,600  
Total Current Assets     188,979     193,220  
Non-current      
Property, plant, and equipment, net     280,961     310,615  
Intangible assets, net     659,376     687,988  
Right-of-use assets - operating, net     167,449     127,024  
Right-of-use assets - finance, net     37,908     40,671  
Goodwill     94,108     94,108  
Deposits and other assets     7,586     6,229  
TOTAL ASSETS   $ 1,436,367   $ 1,459,855  
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
Liabilities      
Current      
Trade payables     30,441     24,786  
Accrued liabilities     30,961     40,918  
Lease liabilities - operating - current portion     11,187     9,776  
Lease liabilities - finance - current portion     7,809     9,789  
Income tax payable     11,128     90,074  
Debts payable - current portion     15,247     23,152  
Accrued interest payable - current portion     1,254     1,983  
Total Current Liabilities     108,027     200,478  
Non-current      
Deferred tax liabilities, net     64,965     64,965  
Uncertain tax position liabilities     97,649     -  
Lease liabilities - operating - non-current portion     167,042     125,739  
Lease liabilities - finance - non-current portion     15,811     18,007  
Construction finance liabilities     -     38,205  
Debts payable - non-current portion     167,573     167,351  
Senior secured notes, net of debt issuance costs     216,278     243,955  
Accrued interest payable - non-current portion     5,632     5,530  
Other long-term liabilities     22,383     24,973  
TOTAL LIABILITIES     865,360     889,203  
       
Commitments and contingencies      
       
Shareholders' equity      
Multiple Voting Shares - no par value, unlimited authorized. Issued and outstanding - nil and 3,696,486 shares, respectively     -     -  
Subordinate, Restricted, and Limited Voting Shares - no par value, unlimited authorized. Issued and outstanding - 104,723,808 and 64,574,077 shares, respectively     -     -  
Exchangeable Shares: no par value, unlimited authorized. Issued and outstanding - 9,433,723 and 9,645,016 shares, respectively     -     -  
Additional paid-in capital     1,509,610     1,370,600  
Treasury stock - nil and 645,300 shares, respectively     -     (8,987 )
Accumulated other comprehensive income     3,266     3,266  
Accumulated deficit     (927,934 )   (783,101 )
Equity of Ayr Wellness Inc.     584,942     581,778  
Noncontrolling interest     (13,935 )   (11,126 )
TOTAL SHAREHOLDERS' EQUITY     571,007     570,652  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 1,436,367   $ 1,459,855  
               
       



Ayr Wellness Inc.
Unaudited Interim Condensed Consolidated Statements of Operations
(Expressed in United States Dollars, in thousands, except per share amounts)
      Three Months Ended   Six Month Ended
      June 30, 2024 June 30, 2023   June 30, 2024 June 30, 2023
               
Revenues, net of discounts $ 117,308   $ 116,737     $ 235,348   $ 234,402  
Cost of goods sold   70,149     60,090       137,527     129,473  
Gross profit   47,159     56,647       97,821     104,929  
               
Operating expenses          
  Selling, general, and administrative     41,779     46,929       81,011     98,980  
  Depreciation and amortization     12,010     11,867       24,084     27,481  
  Acquisition and transaction costs     1,041     2,402       2,364     4,642  
Total operating expenses   54,830     61,198       107,459     131,103  
               
Loss from continuing operations   (7,671 )   (4,551 )     (9,638 )   (26,174 )
               
Other income (expense), net          
  Fair value gain (loss) on financial liabilities     -     (3,866 )     -     23,731  
  Loss on the extinguishment of debt     -     -       (79,172 )   -  
  Gain (loss) on sale of assets     2,823     12       2,828     (47 )
  Interest expense, net     (20,327 )   (10,496 )     (37,947 )   (18,061 )
  Interest income     92     233       194     399  
  Other income, net     604     352       2,405     631  
Total other (expense) income, net   (16,808 )   (13,765 )     (111,692 )   6,653  
               
Loss from continuing operations before income taxes and noncontrolling interest   (24,479 )   (18,316 )     (121,330 )   (19,521 )
               
Income taxes          
  Current tax provision     (14,827 )   (12,887 )     (26,312 )   (24,065 )
Total income taxes   (14,827 )   (12,887 )     (26,312 )   (24,065 )
               
Net loss from continuing operations   (39,306 )   (31,203 )     (147,642 )   (43,586 )
               
Discontinued operations          
  Gain (loss) from discontinued operations, net of taxes (including loss on disposal of $180,194 for the six months ended June 30, 2023)     -     559       -     (184,686 )
Loss from discontinued operations   -     559       -     (184,686 )
               
Net loss   (39,306 )   (30,644 )     (147,642 )   (228,272 )
  Net loss attributable to noncontrolling interest     (548 )   (711 )     (2,809 )   (3,736 )
  Net loss attributable to Ayr Wellness Inc.   $ (38,758 ) $ (29,933 )   $ (144,833 ) $ (224,536 )
               
Basic and diluted net loss per share          
  Continuing operations   $ (0.34 ) $ (0.42 )   $ (1.37 ) $ (0.56 )
  Discontinued operations     -     0.01       -     (2.59 )
  Total (basic and diluted) net loss per share   $ (0.34 ) $ (0.41 )   $ (1.37 ) $ (3.15 )
               
Weighted average number of shares outstanding (basic and diluted)   114,140     72,756       106,012     71,390  
               


Ayr Wellness Inc.
Unaudited Interim Condensed Consolidated Statements of Cash Flows
(Expressed in United States Dollars, in thousands)
  Six Months Ended
  June 30, 2024 June 30, 2023
Operating activities    
Consolidated net loss   (147,642 ) $ (228,272 )
Less: Loss from discontinued operations   -     (4,492 )
Net loss from continuing operations before noncontrolling interest   (147,642 )   (223,780 )
Adjustments for:    
Fair value gain on financial liabilities   -     (23,731 )
Stock-based compensation   6,902     10,008  
Depreciation and amortization   14,395     17,783  
Amortization of intangible assets   29,462     29,010  
Amortization of financing costs   9,609     1,145  
Amortization of financing discount   3,498     -  
Amortization of financing premium   (52 )   (1,509 )
Provision for credit losses   897     -  
Employee retention credits recorded in other income   (318 )   -  
(Gain) loss on sale of assets   (2,828 )   47  
Loss on the extinguishment of debt   79,172     -  
Loss on the disposal of Arizona business   -     180,194  
Changes in operating assets and liabilities:    
Accounts receivable   (1,783 )   (1,254 )
Inventory   (10,511 )   736  
Prepaid expenses, deposits, and other current assets   2,147     1,550  
Trade payables   2,718     (8,770 )
Accrued liabilities   (3,306 )   (1,215 )
Accrued interest payable, current and non-current portions   (628 )   (2,044 )
Lease liabilities - operating   2,289     1,219  
Income tax payable   (78,946 )   23,416  
Uncertain tax position liabilities   97,649     -  
Cash provided by continuing operations   2,724     2,805  
Cash provided by discontinued operations   -     2,180  
Cash provided by operating activities   2,724     4,985  
     
Investing activities    
Purchase of property, plant, and equipment   (10,422 )   (13,939 )
Capitalized interest   (3,094 )   (5,464 )
Proceeds from the sale of assets   41     -  
Cash paid for business combinations and asset acquisitions, net of cash acquired   -     (1,500 )
Cash paid for business combinations and asset acquisitions, working capital   -     (2,600 )
Cash paid for bridge financing   -     (73 )
Purchase of intangible asset   -     (1,500 )
Cash used in investing activities from continuing operations   (13,475 )   (25,076 )
Proceeds from sale of Arizona business - discontinued operation   -     18,084  
Cash received for working capital - discontinued operations   -     840  
Cash used in investing activities of discontinued operations   -     (44 )
Cash used in investing activities   (13,475 )   (6,196 )
     
Financing activities    
Proceeds from exercise of warrants   27     -  
Proceeds from notes payable   40,000     10,000  
Proceeds from financing transaction, net of financing costs   8,309     -  
Debt issuance costs paid   (9,096 )   -  
Payment for settlement of contingent consideration   (10,094 )   (10,000 )
Tax withholding on stock-based compensation awards   (283 )   (321 )
Repayments of debts payable   (16,278 )   (13,778 )
Repayments of lease liabilities - finance (principal portion)   (5,117 )   (5,177 )
Cash provided by (used in) financing activities by continuing operations   7,468     (19,276 )
Cash used in financing activities from discontinued operations   -     (123 )
Cash provided by (used in) financing activities   7,468     (19,399 )
     
Net decrease in cash and cash equivalents and restricted cash   (3,283 )   (20,610 )
Cash, cash equivalents and restricted cash at beginning of the period   50,766     76,827  
Cash included in assets held-for-sale   -     3,813  
Cash, cash equivalents and restricted cash at end of the period $ 47,483   $ 60,030  
     
Supplemental disclosure of cash flow information:    
Interest paid during the period, net $ 29,158   $ 23,110  
Income taxes paid during the period   7,608     959  
Non-cash investing and financing activities:    
Recognition of right-of-use assets for operating leases   47,892     3,134  
Recognition of right-of-use assets for finance leases   1,985     3,858  
Issuance of promissory note related to business combinations   -     1,580  
Conversion of convertible note related to business combination   -     2,800  
Issuance of Equity Shares related to business combinations and asset acquisitions   -     115  
Issuance of Equity Shares related to settlement of contingent consideration   -     4,647  
Issuance of promissory note related to settlement of contingent consideration   -     14,000  
Settlement of contingent consideration   -     37,713  
Capital expenditure disbursements for cultivation facility   1,394     241  
Extinguishment of construction finance liabilities for lease reclassification of cultivation facility   39,176     -  
Extinguishment of note payable related to sale of Arizona business   -     22,505  
Extinguishment of accrued interest payable related to sale of Arizona business   -     1,165  
Reduction of lease liabilities related to sale of Arizona business   -     16,734  
Reduction of right-of-use assets related to sale of Arizona business   -     16,739  
Retirement of Treasury Shares   8,987     -  
Issuance of warrants in connection with debt extinguishment   47,049     -  
Issuance of Equity Shares in connection with debt extinguishment   94,302     -  
     
     



Ayr Wellness Inc.
Unaudited Interim Consolidated Adjusted EBITDA and Gross Profit Reconciliation
(Expressed in United States Dollars, in thousands)
        Three Months Ended Six Months Ended
        June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023
        $ $ $ $
Loss from continuing operations (GAAP)     (7,671 ) (4,551 ) (9,638 ) (26,174 )
               
Interest (within cost of goods sold "COGS")     624   763   1,295   1,514  
Depreciation and amortization (from statement of cash flows)     21,694   21,756   43,857   46,793  
Acquisition and transaction costs       1,041   2,402   2,364   4,642  
Stock-based compensation, non-cash     3,438   4,424   6,902   10,008  
Start-up costs1       3,501   2,235   5,876   5,962  
Other2       3,075   2,417   4,136   13,037  
        33,373   33,997   64,430   81,956  
               
Adjusted EBITDA from continuing operations (non-GAAP)   25,702   29,446   54,792   55,782  
               
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 Six Months Ended
        June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023
        $ $ $ $
Gross profit (GAAP)       47,159   56,647   97,821   104,929  
               
Interest (within COGS)       624   763   1,295   1,514  
Depreciation and amortization (within COGS)     9,684   9,889   19,773   19,313  
Start-up costs (within COGS)       2,056   748   3,156   3,010  
Other (within COGS)       1,226   1,013   1,319   5,577  
               
Adjusted Gross Profit from continuing operations (non-GAAP)   60,749   69,060   123,364   134,343  
               



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Source: Ayr Wellness Inc.