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 three months ended March 31, 2022. Unless otherwise noted, all results are presented in U.S. dollars.
Jonathan Sandelman, Founder, Chairman and CEO of Ayr, said, “We have made excellent progress this year to complete major capex projects and receive regulatory approvals across our footprint. We will now unlock the revenue streams from these various assets going forward – including the start of adult use sales in New Jersey and Boston next month. We invested heavily in these assets ahead of the revenue benefits which has temporarily reduced our operating margins, however we expect these investments to put our forward earnings power in a much stronger position and anticipate improvements to both our top and bottom line in the second half of 2022 as these assets come online and begin to ramp.”
“It has been well-telegraphed by our peers that Q1 was a challenging period for the industry. However, we have maintained or even increased retail market share across most of our footprint despite this challenging backdrop, while also increasing wholesale revenue.”
“The foundation for our business is set, and the investments we have made into our people, our customers, our technology infrastructure, and our retail and cultivation processes are now set to bear fruit. It has been a long journey that has required incredible patience, but as our assets turn on and ramp in Q3 and Q4, we believe we are at the inflection point we’ve been planning for the past 18 months.”
First Quarter Financial Highlights ($ in millions, excl. margin items)
| Q1 2021 | Q4 2021 | Q1 2022 | % Change Q1/Q1 | % Change Q1/Q4 | |||||||||
| Revenue | $58.4 | $111.8 | $111.2 | 90.4% | -0.5% | ||||||||
| Adjusted Gross Profit1 | $34.2 | $63.3 | $57.9 | 69.3% | -8.5% | ||||||||
| Operating Loss | $(8.4) | $(13.9) | $(21.1) | NA | NA | ||||||||
| Adjusted EBITDA1 | $18.4 | $26.1 | $19.5 | 6.0% | -25.3% | ||||||||
| Adjusted EBITDA Margin1 | 31.5% | 23.3% | 17.5% | -1,400bps | -580bps | ||||||||
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 reconciliation table appended to this release.
First Quarter and Recent Highlights
M&A Highlights
Financing and Capital Structure
_________________
i Excludes Ayr granted but unvested LTIP shares totaling 7.7 million.
Outlook
To date in 2022, the Company has made progress with respect to the milestones that underpin its Q4 2022 expectations. As such, Ayr continues to anticipate an annualized run-rate of $250 million of Adjusted EBITDA, $100 million of operating income and $800 million of revenue for Q4 2022.
The Company’s expectations for future results are based on the assumptions and risks detailed in its MD&A for the period ended March 31, 2022 as filed on SEDAR.
Conference Call
Ayr CEO Jonathan Sandelman, Co-COO Jennifer Drake, and CFO Brad Asher will host the conference call, followed by a question-and-answer period.
Conference Call Date: Thursday, May 26, 2022
Time: 8:30 a.m. Eastern time
Toll-free dial-in number: (800) 319-4610
International dial-in number: (604) 638-5340
Conference ID: 10018928
Please call the conference telephone number 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 This email address is being protected from spambots. You need JavaScript enabled to view it..
The conference call 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, May 26, 2022.
Toll-free replay number: (855) 669-9658
International replay number: (412) 317-0088
Replay ID: 8845
Financial Statements
Certain financial information reported in this news release is extracted from Ayr’s Unaudited Interim Condensed Consolidated Financial Statements and MD&A for the three months ended March 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 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, 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, Adjust Gross Profit and other disclosures concerning non-GAAP measures are provided in our MD&A for the three months ended March 31, 2022 and 2021.
Forward-Looking Statements
Certain information contained in this news release may be forward-looking statements within the meaning of applicable securities laws. Forward-looking statements are often, but not always, identified by the use of words such as “target”, “expect”, “anticipate”, “believe”, “foresee”, “could”, “would”, “estimate”, “goal”, “outlook”, “intend”, “plan”, “seek”, “will”, “may”, “tracking”, “pacing” and “should” and similar expressions or words suggesting future outcomes. This news release includes forward-looking information and statements pertaining to, among other things, Ayr’s future growth plans. Numerous risks and uncertainties could cause the actual events and results to differ materially from the estimates, beliefs and assumptions expressed or implied in the forward-looking statements, including, but not limited to: anticipated strategic, operational and competitive benefits may not be realized; events or series of events, including in connection with COVID-19, may cause business interruptions; required regulatory approvals may not be obtained in a timely manner or at all; inflationary pressures may increase input costs; supply chain issues may hamper production and distribution; acquisitions may not be able to be completed on satisfactory terms or at all; and Ayr may not be able to raise additional debt or equity capital. Among other things, Ayr has assumed that its businesses will operate as anticipated, that it will be able to complete acquisitions on reasonable terms, and that all required regulatory approvals will be obtained on satisfactory terms and within expected time frames. In particular, there can be no assurance that we will complete the pending acquisitions in or enter into agreements with respect to other acquisitions.
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 three months ended March 31, 2022.
Additional Information
For more information about the Company’s Q1 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
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.
Investor Relations Contact:
Sean Mansouri, CFA
Elevate IR
T: (720) 330-2829
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.
Ayr Wellness Inc.
Unaudited Interim Consolidated Balance Sheets
(Expressed in United States Dollars, Except Number of Shares)
| As of | |||||||
| March 31, 2022 | December 31, 2021 | ||||||
| ASSETS | |||||||
| Current | |||||||
| Cash | $ | 78,660,131 | $ | 154,342,201 | |||
| Accounts receivable, net | 7,792,261 | 7,412,906 | |||||
| Inventory | 101,148,443 | 93,362,985 | |||||
| Prepaid expenses, deposits, & other current assets | 22,206,636 | 10,949,349 | |||||
| 209,807,471 | 266,067,441 | ||||||
| Non-current | |||||||
| Property, plant, & equipment, net | 304,921,240 | 275,222,166 | |||||
| Intangible assets, net | 973,166,700 | 978,915,457 | |||||
| Right-of-use assets - operating | 99,638,719 | 88,720,082 | |||||
| Right-of-use assets - finance, net | 22,192,404 | 17,527,126 | |||||
| Goodwill | 240,792,038 | 229,909,562 | |||||
| Deposits & other assets | 3,305,996 | 3,550,039 | |||||
| Total assets | $ | 1,853,824,568 | $ | 1,859,911,873 | |||
| LIABILITIES & SHAREHOLDERS' EQUITY | |||||||
| Liabilities | |||||||
| Current | |||||||
| Trade payables | $ | 22,117,052 | $ | 26,983,181 | |||
| Accrued liabilities | 17,945,566 | 32,723,734 | |||||
| Lease liabilities - operating - current portion | 6,285,353 | 4,195,672 | |||||
| Lease liabilities - finance - current portion | 5,557,294 | 3,185,460 | |||||
| Contingent consideration - current portion | 4,568,482 | 39,868,080 | |||||
| Purchase consideration payable | 5,523,670 | 811,586 | |||||
| Income tax payable | 17,189,686 | 28,914,949 | |||||
| Debts payable - current portion | 7,900,591 | 8,111,723 | |||||
| Accrued interest payable - current portion | 9,601,904 | 7,541,634 | |||||
| 96,689,598 | 152,336,019 | ||||||
| Non-current | |||||||
| Deferred tax liabilities | 70,475,056 | 70,081,319 | |||||
| Lease liabilities - operating - non-current portion | 97,337,430 | 87,767,033 | |||||
| Lease liabilities - finance - non-current portion | 10,250,973 | 9,406,202 | |||||
| Contingent consideration - non-current portion | 120,304,162 | 145,653,870 | |||||
| Debts payable - non-current portion | 165,090,187 | 125,745,888 | |||||
| Senior secured notes, net of debt issuance costs - non-current portion | 245,226,208 | 245,407,822 | |||||
| Accrued interest payable - non-current portion | 3,798,834 | 3,451,016 | |||||
| Total liabilities | $ | 809,172,448 | $ | 839,849,169 | |||
| Commitments and contingencies | |||||||
| Shareholders' equity | |||||||
| Multiple Voting Shares: no par value, unlimited authorized. Issued & outstanding - 3,696,486 shares | - | - | |||||
| Subordinate, Restricted, & Limited Voting Shares: no par value, unlimited authorized. Issued & outstanding - 57,736,723 & 56,337,175 shares, respectively | - | - | |||||
| Exchangeable Shares: no par value, unlimited authorized. Issued & outstanding - 7,697,000 & 7,368,285 shares, respectively | - | - | |||||
| Additional paid-in capital | 1,312,748,924 | 1,289,827,092 | |||||
| Treasury stock - 645,300 & 568,300 shares, respectively | (8,987,022 | ) | (7,828,037 | ) | |||
| Accumulated other comprehensive income | 3,265,610 | 3,265,610 | |||||
| Accumulated Deficit | (272,777,933 | ) | (265,201,961 | ) | |||
| Equity of Ayr Wellness Inc. | 1,034,249,579 | 1,020,062,704 | |||||
| Noncontrolling interest | 10,402,541 | - | |||||
| Total shareholders' equity | 1,044,652,120 | 1,020,062,704 | |||||
| Total liabilities & shareholders' equity | $ | 1,853,824,568 | $ | 1,859,911,873 | |||
Ayr Wellness Inc.
Unaudited Interim Consolidated Statements of Operations
(Expressed in United States Dollars, Except Number of Shares)
| Three Months Ended | ||||||
| March 31, 2022 | March 31, 2021 | |||||
| Revenues, net of discounts | $ | 111,225,221 | $ | 58,398,323 | ||
| Cost of goods sold excluding fair value items | 63,188,067 | 28,140,614 | ||||
| Incremental costs to acquire cannabis inventory in a business combination | 2,518,636 | 5,792,389 | ||||
| Cost of goods sold | $ | 65,706,703 | $ | 33,933,003 | ||
| Gross profit | $ | 45,518,518 | $ | 24,465,320 | ||
| Operating expenses | ||||||
| General and administrative | 49,733,392 | 24,036,071 | ||||
| Sales and marketing | 1,817,722 | 743,558 | ||||
| Depreciation and amortization | 858,371 | 284,940 | ||||
| Amortization on intangible assets | 12,784,164 | 4,631,942 | ||||
| Acquisition expense | 1,450,969 | 3,136,976 | ||||
| Total operating expenses | $ | 66,644,618 | $ | 32,833,487 | ||
| Loss from operations | $ | (21,126,100 | ) | $ | (8,368,167 | ) |
| Other income (expense) | ||||||
| Share of loss on equity investments | - | (13,071 | ) | |||
| Fair value gain (loss) on financial liabilities | 30,078,954 | (546,010 | ) | |||
| Interest expense, net | (6,867,753 | ) | (2,752,497 | ) | ||
| Interest income | 29,198 | 59,400 | ||||
| Other, net | 39 | (19,691 | ) | |||
| Total other income (expense) | $ | 23,240,438 | $ | (3,271,869 | ) | |
| Income (Loss) before taxes | $ | 2,114,338 | $ | (11,640,036 | ) | |
| Income Taxes | ||||||
| Current tax provision | (10,913,380 | ) | (7,052,052 | ) | ||
| Deferred tax (provision) benefit | (393,737 | ) | 2,070,452 | |||
| Total income taxes | $ | (11,307,117 | ) | $ | (4,981,600 | ) |
| Net loss before non-controlling interest | $ | (9,192,779 | ) | $ | (16,621,636 | ) |
| Net loss attributable to non-controlling interest | (1,616,807 | ) | - | |||
| Net loss attributable to Ayr | (7,575,972 | ) | (16,621,636 | ) | ||
| Basic and diluted loss per share | $ | (0.11 | ) | $ | (0.38 | ) |
| Weighted average number of shares outstanding (basic and diluted) | 67,585,343 | 43,989,461 | ||||
Ayr Wellness Inc.
Unaudited Interim Consolidated Statements of Cash Flows
(Expressed in United States Dollars, Except Number of Shares)
| Three Months Ended | ||||||
| March 31, 2022 | March 31, 2021 | |||||
| Operating activities | ||||||
| Net loss before noncontrolling interest | $ | (9,192,779 | ) | $ | (16,621,636 | ) |
| Adjustments for: | ||||||
| Fair value (gain) loss on financial liabilities | (30,078,953 | ) | 546,010 | |||
| Stock-based compensation | 9,653,700 | 8,223,545 | ||||
| Stock-based compensation - related parties | 707,129 | - | ||||
| Depreciation and amortization | 3,591,374 | 1,338,462 | ||||
| Amortization on intangible assets | 17,648,757 | 6,137,644 | ||||
| Share of loss on equity investments | - | 13,071 | ||||
| Incremental costs to acquire cannabis inventory in a business combination | 2,518,636 | 5,792,389 | ||||
| Deferred tax expense (benefit) | 393,737 | (2,070,452 | ) | |||
| Amortization on financing costs | 572,842 | 405,059 | ||||
| Amortization on financing premium | (754,456 | ) | - | |||
| Changes in operating assets and liabilities, net of business combinations: | ||||||
| Accounts receivable | 167,988 | (1,525,907 | ) | |||
| Inventory | (1,522,818 | ) | (8,281,309 | ) | ||
| Prepaid expenses and other current assets | 1,121,978 | 2,759,690 | ||||
| Trade payables | 431,291 | (673,733 | ) | |||
| Accrued liabilities | (7,884,485 | ) | (4,946,187 | ) | ||
| Interest accrued | 2,408,088 | 3,778,173 | ||||
| Lease liabilities - operating | 741,438 | 23,405 | ||||
| Income tax payable | (11,725,261 | ) | (14,842,706 | ) | ||
| Cash used in operating activities | (21,201,794 | ) | (19,944,482 | ) | ||
| Investing activities | ||||||
| Purchase of property, plant, and equipment | (33,174,357 | ) | (12,994,107 | ) | ||
| Cash paid for business combinations and asset acquisitions, net of cash acquired | (9,101,168 | ) | (12,684,196 | ) | ||
| Cash paid for business combinations and asset acquisitions, working capital | (811,586 | ) | (3,790,894 | ) | ||
| Payments for interests in equity accounted investments | - | (109,700 | ) | |||
| Advances to related corporation | - | (4,759 | ) | |||
| Deposits for business combinations, net of cash on hand | (2,825,114 | ) | (1,450,000 | ) | ||
| Cash used in investing activities | (45,912,225 | ) | (31,033,656 | ) | ||
| Financing activities | ||||||
| Proceeds from exercise of Warrants | - | 4,291,891 | ||||
| Proceeds from exercise of options | 299,848 | - | ||||
| Proceeds from equity offering, net of expenses | - | 118,052,400 | ||||
| Proceeds from issuance of notes payable, net of financing costs | 25,913,362 | - | ||||
| Payments of financing costs | - | (43,067 | ) | |||
| Payment for settlement of contingent consideration | (10,000,020 | ) | - | |||
| Deposits paid for financing lease and note payable | (8,353,100 | ) | - | |||
| Tax withholding on stock-based compensation awards | (3,890,770 | ) | - | |||
| Repayments of debts payable | (2,080,862 | ) | (2,536,003 | ) | ||
| Repayments of lease liabilities - finance (principal portion) | (2,026,386 | ) | (375,909 | ) | ||
| Repurchase of Equity Shares | (8,430,123 | ) | - | |||
| Cash (used in) provided by financing activities | (8,568,051 | ) | 119,389,312 | |||
| Net (decrease) increase in cash | (75,682,070 | ) | 68,411,174 | |||
| Cash, beginning of the period | 154,342,201 | 127,238,165 | ||||
| Cash, end of the period | 78,660,131 | 195,649,339 | ||||
| Supplemental disclosure of cash flow information: | ||||||
| Interest paid during the period | 8,050,450 | 904,304 | ||||
| Income taxes paid during the period | 23,469,340 | 21,892,395 | ||||
| Non-cash investing and financing activities: | ||||||
| Recognition of right-of-use assets for operating leases | 12,193,213 | 41,344,344 | ||||
| Recognition of right-of-use assets for finance leases | 8,057,487 | 1,533,165 | ||||
| Issuance of Equity Shares related to business combinations and asset acquisitions | 4,482,103 | 524,686,435 | ||||
| Issuance of Equity Shares related to equity component of debt | - | 2,442,691 | ||||
| Issuance of Equity Shares related to settlement of contingent consideration | 11,747,805 | - | ||||
| Issuance of promissory note related to settlement of contingent consideration | 14,934,040 | - | ||||
| Cancellation of Equity Shares | 77,983 | - | ||||
Ayr Wellness Inc.
Unaudited Interim Consolidated Adjusted EBITDA Reconciliation
(Expressed in United States Dollars)
| Three Months Ended | ||||||
| March 31, 2022 | March 31, 2021 | |||||
| (Loss) income from operations (GAAP) | $ | (21,126,100 | ) | $ | (8,368,167 | ) |
| Non-cash items accounting for inventory | ||||||
| Incremental costs to acquire cannabis inventory in business combination | 2,518,636 | 5,792,389 | ||||
| Interest (within cost of goods sold "COGS") | 480,006 | 244,286 | ||||
| Depreciation and amortization (from statement of cash flows) | 21,240,131 | 7,476,106 | ||||
| Acquisition costs | 1,450,969 | 3,136,976 | ||||
| Stock-based compensation, non-cash | 10,360,830 | 8,223,545 | ||||
| Start-up costs1 | 2,649,438 | 1,622,959 | ||||
| Other2 | 1,922,818 | 285,955 | ||||
| 38,104,192 | 20,989,827 | |||||
| Adjusted EBITDA (non-GAAP) | 19,496,728 | 18,414,049 | ||||
| 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-operating adjustments associated with non-core costs | ||||||
| Three Months Ended | ||||||
| March 31, 2022 | March 31, 2021 | |||||
| Gross Profit (GAAP) | $ | 45,518,518 | $ | 24,465,320 | ||
| Incremental costs to acquire cannabis inventory in business combination | 2,518,636 | 5,792,389 | ||||
| Interest (within COGS) | 480,006 | 244,286 | ||||
| Depreciation and amortization (within COGS) | 7,597,596 | 2,516,045 | ||||
| Start-up costs (within COGS) | 978,699 | 1,180,166 | ||||
| Other (within COGS) | 836,792 | - | ||||
| Adjusted Gross Profit (non-GAAP) | 57,930,247 | 34,198,206 | ||||
| Last Trade: | US$0.72 |
| Daily Volume: | 14,311 |
| Market Cap: | US$75.400M |
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