AWH Announces Q3 2021 Financial Results – Net Revenue Increased 13.2% Quarter-over-Quarter to $94.4 million

Q3 2021 Net Revenue Increased 13.2% Quarter-over-Quarter to $94.4 million

Q3 2021 Adjusted EBITDA Increased 15.9% Quarter-over-Quarter to $23.5 million

Company Ended Q3 with $204.5 million of Cash and Cash Equivalents 

Announces Plans to Expand NJ Canopy to 150,000 sq.ft by Year End 2023 

Ascend Wellness Holdings, Inc. (“AWH” or the “Company”) (CSE: AAWH.U) (OTCQX: AAWH), a vertically integrated multi-state cannabis operator focused on bettering lives through cannabis, today reported its financial results for Q3 2021,¬†which ended September¬†30, 2021. Financial results are reported in accordance with U.S. generally accepted accounting principles (“GAAP”) and all currency is in U.S. dollars.¬†

Q3 2021 Financial Highlights

  • Gross Revenue: Total revenue of $105.0 million increased 7.7% quarter-over-quarter and 131.4% year-over-year. 
  • Net Revenue: Net revenue, which excludes intercompany sale of wholesale products, increased 13.2% quarter-over-quarter to $94.4 million. Net revenue for the first nine months of 2021 alone was $243.9 million, a 69.7% increase over the Company’s full year 2020 net revenue of $143.7 million. 
  • Net Loss: Net loss of $13.0 million during the quarter, was primarily driven by elevated interest expense due to one-time prepayments of legacy loans and write-offs of unamortized deferred financing costs. 
  • Adjusted EBITDA1: Adjusted EBITDA of $23.5 million represented a 15.9% increase quarter-over-quarter. Adjusted EBITDA Margin of 24.9% represented a 58 basis point increase compared to the prior quarter. 
  • Balance Sheet: As of September 30, 2021, cash and cash equivalents were $204.5 million, and net debt2 was $51.1 million. 
____________________
1Adjusted Gross Profit, Adjusted Gross Margin, Adjusted EBITDA and Adjusted EBITDA Margin are a non-GAAP financial measures. Please see the “Supplemental Information (Unaudited) Regarding Non-GAAP Financial Measures” at the end of this press release for a reconciliation of non-GAAP to GAAP measures. 
2Total debt less cash and cash equivalents less unamortized deferred financing costs. 

Q3 2021 Business Highlights

  • During Q3, the Company signed a definitive agreement to acquire a dispensary in Coshocton, Ohio. Subsequent to the quarter close, the Company closed on the acquisition of a dispensary in Carroll, Ohio. 
  • During the quarter, the Company closed on a $210 million Senior Secured Term Loan bearing a 9.5% interest rate, lowering the rate of the Company’s outstanding debt and providing incremental funding for additional investment. 
  • Subsequent to the quarter, the Company acquired the property adjacent to its cultivation facility in Franklin, NJ. The Company intends to expand the existing NJ facility to 150,000 sq.ft of total canopy by YE 2023. At the end of Q3, the Company had approximately 118,000 sq.ft of total canopy across its cultivation facilities in Illinois, Massachusetts, Michigan, New Jersey, and Ohio. 

Management Commentary

“I am pleased with the Company’s performance during the quarter as we delivered solid sequential revenue growth and substantial improvements in our Adjusted EBITDA margins,” said Abner Kurtin, Founder and CEO of AWH.  “Our focus continues to be scaling our asset-base of premier retail locations and state-of-the art cultivation facilities in top limited license markets. With both our total canopy and number of retail dispensaries poised to meaningfully expand, we remain encouraged about the growth potential of our existing portfolio.” 

Full Year 2021 Revenue Guidance

The Company expects to more than double full year 2020 net revenue and meet the low-end of the full year 2021 guidance range announced during the prior quarter; however, it anticipates a sequential quarterly decline in revenue in Q4 2021 due to delays in scaling the wholesale business and softening retail cannabis trends resulting from the expiration of government stimulus and a normalization of consumer spending. Despite near-term challenges, the Company remains encouraged about the earnings power the current portfolio of assets can deliver in the medium and long-term.   

(in millions)2020 Actual2021 Guidance
Revenue, net$144$330 – $350

Q3 2021 Financial Overview

Net revenue, which excludes intercompany sale of wholesale products, increased 13.2% quarter-over-quarter to $94.4 million. Sequential revenue growth was driven by an increased number of wholesale units sold and the full quarter benefit of prior quarter store openings in the retail business.  

Total retail revenue increased to $63.5 million for the third quarter of 2021, representing an increase of 9.4% quarter-over-quarter. The growth was driven by increases in transactions at existing stores, the ramp of traffic in the Bostondispensary, expanded store hours in four dispensaries in the Chicago area, and the full quarter benefit of the three stores opened in the prior quarter.  

Gross wholesale revenue increased to $41.5 million, representing an increase of 5.2% quarter-over-quarter. Net wholesale revenue, after intercompany sales, increased to $30.9 million, representing an increase of 21.9% quarter-over-quarter, which was driven by an increased number of wholesale units sold. 

Q3 2021 gross profit was $41.0 million, or 43.4% of revenue, as compared to $34.5 million, or 41.4% of revenue, for the prior quarter. 

Q3 2021 Adjusted Gross Profit was $43.7 million, or 46.3% of revenue, as compared to $39.6 million, or 47.5% of revenue, for the prior quarter. Adjusted Gross Profit excludes depreciation and amortization included in cost of goods sold, equity-based compensation included in cost of goods sold, and non-cash inventory adjustments. Adjusted Gross Profit1dollars increased 10.3% quarter-over-quarter driven by wholesale production and yield efficiencies, partially offset by lower realized pricing at the Company’s Massachusetts and Michigan cultivation facilities. While Retail Gross Profit and Wholesale Gross Profit both increased sequentially, Adjusted Gross Profit1 margin consolidated decreased 122 basis points quarter-over-quarter to 46.3%, primarily driven by lower intercompany sales as a percentage of wholesale sales in the quarter. 

Total general and administrative expenses for Q3 2021 were $29.3 million, or 31.1% of revenue, as compared to $30.6 million, or 36.7% of revenue, for the prior quarter as the Company leveraged overhead and shared resources. 

Net loss attributable to AWH for the third quarter of 2021 was $13.0 million, or a loss of $0.08 per basic and diluted common share. This was primarily driven by total other expense of $12.3 million, which was elevated due to one-time prepayments of legacy loans and write-offs of unamortized deferred financing costs.  

Adjusted EBITDA1, which adjusts for tax, interest, depreciation, amortization, equity-based compensation, and other items deemed one-time in nature, was $23.5 million in Q3 2021. This represents a 15.9% increase quarter-over-quarter. Adjusted EBITDA Margin1 of 24.9% represented a 58 basis point increase compared to the prior quarter.  This was driven by increases in the number of transactions, production and yield efficiencies, and incremental leveraging of overhead and shares resources. 

Non-GAAP Financial Information

This press release includes certain non-GAAP financial measures as defined by the U.S. Securities and Exchange Commission (“SEC”).  Reconciliations of these non-GAAP financial measures to the most directly comparable financial measure calculated and presented in accordance with GAAP are included in the financial schedules attached to this press release. This information should be considered as supplemental in nature and not as a substitute for, or superior to, any measure of performance prepared in accordance with GAAP. 

Conference Call and Webcast

AWH will host a conference call on November 11, 2021 at 5:00 p.m. ET to discuss its financial results for the quarter ended September 30, 2021.  The conference call may be accessed by dialing (888) 390-0605 with conference ID 67116805.  A live audio webcast of the call will also be available on the Investor Relations section of AWH’s website at https://awholdings.com/investors/ and will be archived for replay.

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