Revenue up 5% Y/Y to $114.4 Million, Excluding Discontinued Operations
GAAP Loss from Operations Improved 92% Y/Y to ($1.5) Million, Excluding Discontinued Operations
Generated over $20 Million of Operating Cash Flow in the Third Quarter
Adjusted EBITDA1 up 52% Y/Y to $28.4 Million, with Adjusted EBITDA Margin of 25%
MIAMI, Nov. 16, 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 third quarter ended September 30, 2023. Unless otherwise noted, all results are presented in U.S. dollars.
The following financial measures are reported as results from continuing operations due to the sale of the Company’s business in Arizona in March 2023, which are reported as discontinued operations. All historical comparisons have been restated accordingly.
David Goubert, President & CEO of AYR, said, “We continued to execute on our optimization initiatives during the quarter, as reflected by another strong period of year-over-year adjusted EBITDA growth and cash flow generation. We also continued to lay the foundation for AYR’s long-term revenue growth and profitability, bolstered by our recent work to reach agreements with our creditors, which, when fully consummated, will result in the extension of maturities of nearly $400 million of debt in the aggregate by two years. Upon closing of the transactions, AYR will have no meaningful debt maturities until 2026 and an additional $40 million of cash proceeds, providing a clear runway to execute our optimization initiatives and generate consistent, long-term growth.
“As only 15 of the 88 dispensaries across our footprint are fully ramped adult-use stores, AYR is well-positioned to take advantage of legislative catalysts in states like Ohio, which voted just last week to legalize adult-use cannabis, as well as Florida and Pennsylvania in the near future. The conversion of these stores would reflect a 6x increase in our adult-use retail footprint.
“During the quarter, retail transactions were up 18% year-over-year on a same-store basis, largely driven by our initiatives to increase customer acquisition and loyalty. This increase was offset by continued pricing pressure in select markets, as well as temporary cultivation challenges in Florida over the summer, leading to lower inventory levels at the end of the quarter, which will further impact sales in the fourth quarter. We anticipate Florida inventory levels normalizing by mid-December.
“As we close out the year and look to 2024, we will continue to execute our optimization plan and lay the foundation for future revenue growth. I’m proud of the work the team has done to dramatically improve the financial health of AYR and we will remain focused on our liquidity and working capital as we further optimize inventory levels and align production with demand across our markets. We expect the execution of our objectives to position us for revenue growth, adjusted EBITDA margin expansion and free cash flow generation in 2024.”
Third Quarter Financial Summary (excludes results from AZ for all periods)($ in millions, excl. margin items)
|Q3 2022||Q2 2023||Q3 2023||% Change|
|Adjusted Gross Profit1||$57.5||$69.1||$60.5||5.2%||-12.4%|
|Adjusted EBITDA Margin1||17.2%||25.2%||24.9%||768bps||-37bps|
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 tables appended to this release.
Third Quarter Highlights
- Announced agreement to acquire third Ohio dispensary license.
- Reported Q3 retail transactions up 21% year-over-year on same-store basis.
- Added Michael Warren to the Company’s Board of Directors.
- Announced three-year exclusive licensing and retail agreement to bring Kiva Confections to AYR’s 62+ Florida dispensaries.
- Changed expense allocation methodology resulting in an expense reclassification from SG&A to COGS that resulted in a 300bps reduction in adjusted gross margin in Q3.
- Announced appointment of George DeNardo as new Chief Operating Officer.
- Opened 10 Florida stores thus far in 2023, bringing its Florida store total to 62 open locations to date. The Company plans to exit 2023 with a total of 64 Florida stores, compared to 52 to start the year.
- Opened two retail locations in Ohio in Woodmere and Goshen. AYR has the future rights to ownership of both dispensaries, subject to regulatory approval.
- Last week, Ohio voters passed a ballot initiative to allow adult-use sales. AYR’s 58,000 square foot Ohio cultivation facility is operational and equipped to produce over 40 thousand pounds of biomass to meet future adult-use demand in the state.
Financing and Capital Structure
- The Company deployed $7 million of capital expenditures in the third quarter and ended the quarter with a cash balance of $72.8 million.
- The Company has approximately 76.7 million fully diluted shares outstanding based on a treasury method calculation.i
- Subsequent to the quarter end, the Company announced that it had entered into agreements to extend the maturity date of its 12.5% senior notes and LivFree Wellness Promissory notes by two years and receive $40 million of new money debt financing. Additional terms and details of the transaction can be found in the Company’s press releaseannouncing the transactions, dated November 1, 2023.
- Upon completion of recently announced transactions in 2023, AYR will have retired or extended the maturity of nearly $400 million in debt in the aggregate by two years.
[i] Excludes AYR granted but unvested service-based LTIP shares totaling 5.0 million.
The Company remains committed to further improving its financial health and positioning itself for sustainable, profitable growth across its footprint. Due to the modest sequential revenue decline in the third quarter, coupled with the temporary cultivation setback in Florida that will impact fourth quarter revenue by approximately $4-6 million, the Company no longer anticipates growth for the second half of 2023 over first half levels. The Company now expects revenue to be essentially flat in the fourth quarter compared to the third quarter, and to maintain an adjusted EBITDA margin of 25% in the fourth quarter.
AYR’s expectations for future results are based on the assumptions and risks detailed in its Management’s Discussion and Analysis (“MD&A”) for the period ended September 30, 2023, as filed on SEDAR+ and with the U.S. Securities and Exchange Commission (“SEC”).
AYR management will host a conference call today, followed by a question-and-answer period.
Date: Thursday, November 16, 2023
Time: 8:30 a.m. ET
Toll-free dial-in number: (800) 319-4610
International dial-in number: (604) 638-5340
Conference ID: 10022572
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 email@example.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, December 16, 2023.
AyToll-free replay number: (855) 669-9658
International replay number: (412) 317-0088
Replay ID: 0479