AYR Wellness Reports First Quarter 2024 Results


Q1 Revenue up 3% Q/Q to $118.0 Million, Excluding Discontinued Operations

Q1 GAAP Loss from Operations Improved to $2.0 Million, Excluding Discontinued Operations

Q1 Adjusted EBITDA1 up over 10% Y/Y to $29.1 Million, with Adjusted EBITDA Margin of 25%

Company generated free cash flow for the quarter and expects to for FY2024

MIAMI, May 15, 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 first quarter ended March 31, 2024. Unless otherwise noted, all results are presented in U.S. dollars.

David Goubert, President & CEO of AYR, said, “2024 continues to be about execution for AYR, furthering the progress we made in 2023 by focusing on improving product quality and consistency, building a loyal retail customer base, rebuilding our CPG brand platform, and continuing to prioritize cost controls. I want to thank our team for their continued effort against these goals. First quarter results reflect continued progress with modest sequential revenue growth, adjusted EBITDA margins in line with long-term targets of 25% and positive free cash flow for the period.

“Meanwhile, the U.S. Department of Justice's groundbreaking decision in April to recommend the reclassification of cannabis from Schedule I to Schedule III represents a significant moment for our industry that brings us one step closer to federal reform. This expected policy shift validates AYR’s commitment to building a sustainable business that will win in the long-term, and while we await next steps on implementation of this new policy, AYR intends to continue to improve and refine its operations to position for accelerated profitable growth.

“Our team is also acutely focused on positioning AYR for success ahead of the key state-level catalysts on the horizon in Ohio, where we anticipate converting to adult-use over the summer, and Florida and Pennsylvania, where we hope to see adult-use pass later this year. With only 15 of AYR’s 91 dispensaries operating in adult-use markets, we are poised to take advantage of the significant growth opportunity that the transition to adult-use presents across the majority of our footprint, without materially increasing our fixed cost base. With a strong asset base and tailwinds for the regulatory environment, we look forward to generating meaningful, sustainable, and profitable financial growth for years to come.”

First Quarter Financial Summary (excludes results from AZ for all periods) ($ in millions, excl. margin items)

 Q1 2023Q4 2023Q1 2024% Change
Q1/Q1
% Change
Q1/Q4
Revenue$117.7$114.8$118.00.3%2.8%
Gross Profit$48.3$49.4$50.75.0%2.6%
Adjusted Gross Profit1$65.3$62.0$62.6-4.1%1.0%
Operating Loss$(21.7)$(9.5)$(2.0)NANA
Adjusted EBITDA1$26.3$29.8$29.110.6%-2.3%
Adjusted EBITDA Margin122.4%25.9%24.7220bps-130bps


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.

First Quarter and Recent Highlights

  • The Company’s flagship cannabis brand, kynd, launched its first line of premium edibles in Florida and Nevada, allowing the brand to break into the growing edibles market.
  • Opened the relocated 1,650 square foot AYR Cannabis Dispensary Tallahassee, conveniently located in the heart of the state capital.
  • Closed on a $8.4 million upsizing of the Company’s existing mortgage for its Gainesville cultivation facility, increasing the principal amount of the mortgage to $48.4 million. Proceeds will be used to invest further in the Company’s Florida business, as well as for general working capital purposes.
  • In February 2024, the Company completed a series of debt restructuring transactions contemplated by the Support Agreement entered into in November 2023, which retired or deferred the maturity of all of the Company’s Senior Notes due 2024 and certain other debt totaling nearly $400 million by two years to 2026, raised approximately $40 million of gross proceeds in new capital through the issuance of $50 million of additional Senior Notes maturing in December 2026, issued 35 million New Shares and Backstop shares to existing Noteholders, and issued 23 million anti-dilutive warrants (CSE: AYR.WT.U). These warrants, exercisable at $2.12 and expiring in February 2026, are currently expected to result in approximately $50M in proceeds for the Company upon exercise. The Company recorded a loss on the extinguishment of $79.2 million of debt.
  • Appointed Usec Rho as the Company’s new General Counsel. Mr. Rho brings deep experience practicing law in highly regulated and emerging industries.

Financing and Capital Structure

The Company deployed $6.8 million of capital expenditures in Q1, in-line with the Company’s guidance of approximately $20 million for the full year. AYR ended Q1 with a cash, cash equivalents, and restricted cash balance of $71.2 million.

As of March 31, 2024, the Company had approximately 137.8 million fully diluted shares outstanding based on a treasury method calculation as of that date (excluding the 2.9 million out of the money warrants expiring in May 2024 and 645,298 treasury shares).i

Outlook

The Company anticipates revenue in Q2 2024 to be flat to modestly up compared to Q1 2024, before generating stronger growth in the second half of 2024, replacing our previous guidance on the full year 2024 outlook. The Company also continues to expect Adjusted EBITDA margin to remain at approximately 25% for the year with normal quarterly fluctuations, and to generate positive cash flow from operations and free cash flow for the calendar year 2024.

Conference Call

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

Date: Wednesday, May 15, 2024
Time: 8:30 a.m. ET
Toll-free dial-in number: (844) 763-8274
International dial-in number: (647) 484-8814
Conference ID: 10023271
Webcast: https://services.choruscall.ca/links/ayrwellness2024q1.html

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, June 15, 2024.

Toll-free replay number: (855) 669-9658
International replay number: (412) 317-0088
Replay ID: 0806

i Includes pending M&A and excludes Ayr granted but unvested LTIP shares totaling 5.2 million.

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 March 31, 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 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 months ended March 31, 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 March 31, 2024.

Additional Information

For more information about the Company’s Q1 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 Contact:

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

Company/ Media Contact:

Robert Vanisko
VP, Public Engagement
T: (786) 885-0397
Email: comms@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
  March 31, 2024
 December 31, 2023
 
ASSETS 
Current  
 Cash, cash equivalents and restricted cash$71,199 $50,766 
 Accounts receivable, net 14,671  13,491 
 Inventory 113,518  106,363 
 Prepaid expenses, deposits, and other current assets 14,493  22,600 
 Total Current Assets 213,881  193,220 
Non-current  
 Property, plant, and equipment, net 313,871  310,615 
 Intangible assets, net 673,229  687,988 
 Right-of-use assets - operating, net 131,911  127,024 
 Right-of-use assets - finance, net 39,895  40,671 
 Goodwill 94,108  94,108 
 Deposits and other assets 6,313  6,229 
TOTAL ASSETS$1,473,208 $1,459,855 
    
LIABILITIES AND SHAREHOLDERS' EQUITY  
Liabilities  
Current  
 Trade payables 25,331  24,786 
 Accrued liabilities 29,305  40,918 
 Lease liabilities - operating - current portion 10,210  9,776 
 Lease liabilities - finance - current portion 9,190  9,789 
 Income tax payable 13,419  90,074 
 Debts payable - current portion 20,189  23,152 
 Accrued interest payable - current portion 7,585  1,983 
 Total Current Liabilities 115,229  200,478 
Non-current  
 Deferred tax liabilities, net 64,965  64,965 
 Uncertain tax position liabilities 87,653  - 
 Lease liabilities - operating - non-current portion 130,581  125,739 
 Lease liabilities - finance - non-current portion 17,049  18,007 
 Construction finance liabilities 39,177  38,205 
 Debts payable - non-current portion 172,499  167,351 
 Senior secured notes, net of debt issuance costs 208,581  243,955 
 Accrued interest payable - non-current portion 5,632  5,530 
 Other long-term liabilities 24,971  24,973 
TOTAL LIABILITIES 866,337  889,203 
    
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 - 101,468,851 and 64,574,077 shares, respectively -  - 
 Exchangeable Shares: no par value, unlimited authorized. Issued and outstanding - 9,525,789 and 9,645,016 shares, respectively -  - 
 Additional paid-in capital 1,515,155  1,370,600 
 Treasury stock - 645,298 and 645,300 shares, respectively (8,987) (8,987)
 Accumulated other comprehensive income 3,266  3,266 
 Accumulated deficit (889,176) (783,101)
 Equity of Ayr Wellness Inc. 620,258  581,778 
 Noncontrolling interest (13,387) (11,126)
TOTAL SHAREHOLDERS' EQUITY 606,871  570,652 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$1,473,208 $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
  March 31, 2024
 March 31, 2023
 
    
Revenues, net of discounts$118,040 $117,665 
Cost of goods sold 67,377  69,383 
Gross profit 50,663  48,282 
    
Operating expenses  
 Selling, general, and administrative 39,232  52,050 
 Depreciation and amortization 12,074  15,614 
 Acquisition and transaction costs 1,324  2,241 
 (Gain) loss on sale of assets (4) 58 
Total operating expenses 52,626  69,963 
    
Loss from continuing operations (1,963) (21,681)
    
Other income (expense), net  
 Fair value gain on financial liabilities -  27,597 
 Loss on the extinguishment of debt (79,172) 
 Interest expense, net (17,620) (7,565)
 Interest income 103  165 
 Other income, net 1,800  279 
Total other (expense) income, net (94,889) 20,476 
    
Loss from continuing operations before income taxes and noncontrolling interest (96,852) (1,205)
    
Income taxes  
 Current tax provision (11,484) (11,178)
Total income taxes (11,484) (11,178)
    
Net loss from continuing operations (108,336) (12,383)
    
Discontinued operations  
 Loss from discontinued operations, net of taxes (including loss on disposal of $180,753 for the three months ended March 31, 2023) -  (185,245)
Loss from discontinued operations -  (185,245)
    
Net loss (108,336) (197,628)
 Net loss attributable to noncontrolling interests (2,261) (3,025)
 Net loss attributable to Ayr Wellness Inc.$(106,075)$(194,603)
    
Basic and diluted net loss per share  
 Continuing operations$(1.08)$(0.13)
 Discontinued operations -  (2.65)
 Total (basic and diluted) net loss per share$(1.08)$(2.78)
    
Weighted average number of shares outstanding (basic and diluted) 97,884  70,008 
    


Ayr Wellness Inc.
Unaudited Interim Condensed Consolidated Statements of Cash Flows
(Expressed in United States Dollars, in thousands)
 Three Months Ended
 March 31, 2024
 March 31, 2023
 
Operating activities  
Consolidated net loss$(108,336)$(197,628)
Less: Loss from discontinued operations -  (4,492)
Net loss from continuing operations before noncontrolling interest (108,336) (193,136)
Adjustments for:  
Fair value gain on financial liabilities -  (27,597)
Stock-based compensation 3,465  5,584 
Depreciation and amortization 7,345  10,701 
Amortization of intangible assets 14,818  14,336 
Amortization of financing costs 3,948  573 
Amortization of financing discount 1,399  - 
Amortization of financing premium (152) (754)
Provision for credit losses 259  - 
(Gain) loss on sale of assets (4) 58 
Loss on the extinguishment of debt 79,172  - 
Loss on the disposal of Arizona business -  180,753 
Changes in operating assets and liabilities:  
Accounts receivable (1,438) (2,087)
Inventory (7,156) 3,257 
Prepaid expenses, deposits, and other current assets (1,145) 1,204 
Trade payables 938  (6,171)
Accrued liabilities (1,522) 5,640 
Accrued interest payable 5,703  5,053 
Lease liabilities - operating 388  640 
Income tax payable (76,655) 10,581 
Uncertain tax position liabilities 87,653  - 
Cash provided by continuing operations 8,680  8,635 
Cash provided by discontinued operations -  1,621 
Cash provided by operating activities 8,680  10,256 
   
Investing activities  
Purchase of property, plant, and equipment (6,822) (7,187)
Capitalized interest (1,461) (3,589)
Proceeds from the sale of assets 40  - 
Cash paid for business combinations and asset acquisitions, working capital -  (2,600)
Cash used in investing activities from continuing operations (8,243) (13,376)
Proceeds from sale of Arizona - discontinued operation -  18,084 
Cash used in investing activities of discontinued operations -  (44)
Cash (used in) provided by investing activities (8,243) 4,664 
   
Financing activities  
Proceeds from exercise of warrants 22  - 
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) - 
Tax withholding on stock-based compensation awards (283) (29)
Repayments of debts payable (6,247) (6,546)
Repayments of lease liabilities - finance (principal portion) (2,615) (2,378)
Cash provided by financing activities by continuing operations 19,996  1,047 
Cash used in financing activities from discontinued operations -  (123)
Cash provided by financing activities 19,996  924 
   
Net increase in cash and cash equivalents and restricted cash 20,433  15,844 
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$71,199 $96,484 
   
Supplemental disclosure of cash flow information:  
Interest paid during the period, net$8,096 $5,311 
Income taxes paid during the period 486  908 
Non-cash investing and financing activities:  
Recognition of right-of-use assets for operating leases 8,195  1,358 
Recognition of right-of-use assets for finance leases 1,502  468 
Capital expenditure disbursements for cultivation facility 972  241 
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 
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
  March 31, 2024 March 31, 2023 December 31, 2023 
  $ $ $ 
Loss from continuing operations (GAAP) (1,963)(21,681)(9,544)
     
Interest (within cost of goods sold "COGS") 671 751 727 
Depreciation and amortization (from statement of cash flows) 22,163 25,037 22,137 
Acquisition and transaction costs 1,324 2,241 619 
Stock-based compensation, non-cash 3,465 5,584 3,074 
Impairment of goodwill and other assets - - 6,320 
Start-up costs1 2,375 3,727 2,915 
(Gain) loss on sale of assets (4)58 25 
Other2 1,061 10,620 3,489 
  31,055 48,018 39,306 
     
Adjusted EBITDA from continuing operations (non-GAAP) 29,092 26,337 29,762 
     
     
     
1These 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
2Other non-core costs including non-operating adjustments, severance costs and non-cash inventory write-downs
     
     
     
  Three Months Ended
  March 31, 2024 March 31, 2023 December 31, 2023 
  $ $ $ 
Gross profit (GAAP) 50,663 48,282 49,382 
     
Interest (within COGS) 671 751 727 
Depreciation and amortization (within COGS) 10,089 9,424 10,163 
Start-up costs (within COGS) 1,100 2,262 1,164 
Other (within COGS) 93 4,564 565 
     
Adjusted Gross Profit from continuing operations (non-GAAP) 62,616 65,283 62,001