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Ayr Wellness Reports Third Quarter 2022 Results

  •  Revenue up 24% Y/Y to $119.6 million, up 9% sequentially 
  •  Adjusted EBITDA up 10% sequentially to $21.7 million 
  •  Operating Loss improved 17% sequentially 

MIAMI, Nov. 10, 2022 (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, 2022. Unless otherwise noted, all results are presented in U.S. dollars.  

Jonathan Sandelman, Founder and CEO of Ayr, said, “Ayr executed on its growth and profitability objectives during the third quarter, with our financial results largely in line with expectations. We grew retail market share in 6 of the 7 states where we operate, and while economic headwinds and inflationary pressures continued to impact the consumer wallet throughout the quarter, we maintained strong unit volumes across nearly all of our markets, demonstrating the defensibility of cannabis as a consumer staple.

“Talent remains a focus point for Ayr as we continue to optimize our existing foundation, as reflected in our hiring of David Goubert as Ayr’s first President. David brings decades of retail, customer experience, and supply chain expertise to our team. We’re also happy to announce that the Board of Directors has named Joyce Johnson-Miller as the Company’s Lead Independent Director, further strengthening our corporate governance.

“Looking ahead, we anticipate further growth from the optimization and ramping of our existing asset base, as well as a number of new catalysts that we expect to begin contributing by early next year. The closing of our acquisition of two Dispensary 33 retail locations in Illinois, the opening of 15+ new Florida stores, the commencement of sales from our state-of-the-art cultivation facility in Ohio, and the continued phased openings of our Massachusetts cultivation expansion will be key growth and profitability drivers in 2023. With these optimizations and catalysts, we believe we are well positioned to realize further earnings potential in our business in the coming year.”

Third Quarter Financial Highlights ($ in millions, excl. margin items)

 Q3 2021Q2 2022Q3 2022% Change
Q3/Q3
% Change
Q3/Q2
Revenue$96.2 $110.1 $119.6 24.4%8.6%
Gross Profit$40.1 $40.3 $49.5 23.5%22.9%
Adjusted Gross Profit1$56.6 $57.2 $62.9 11.0%9.9%
Operating Loss$(8.9)$(24.8)$(20.7)NA NA 
Adjusted EBITDA1$26.0 $19.6 $21.7 -16.7%10.3%
Adjusted EBITDA Margin1 27.0% 17.8% 18.1%-890bps 30bps 

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 table appended to this release.

Third Quarter and Recent Highlights

  • Retail Updates
    • Opened two Greater Boston adult-use dispensaries in the heart of Boston’s Back Bay and Watertown.
    • Opened two new dispensaries in Florida during the third quarter and an additional two stores in November, bringing Ayr’s total footprint to 52 dispensaries across the state.
  • Brand/Product Updates
    • Introduced Lost in Translation (LIT), an award-winning cannabis brand known for sought after genetics and terpene profiles, in Massachusetts, Florida, Pennsylvania, New Jersey and Arizona.
    • Introduced HAZE live resin concentrates and vapes across the Company’s footprint in Florida and Nevada.
    • Launched Levia water-soluble tinctures in Arizona and Nevada in August, representing the first expansion of Levia outside of Massachusetts.
    • Introduced Secret Orchard vapes in Nevada.
  • Regulatory Updates
    • Received state regulatory approval to convert Ayr’s Somerville, Massachusetts medical dispensary to adult use, pending local approvals.
    • Received state regulatory approval to begin phased production at Ayr’s new cultivation expansion in Massachusetts.
    • Connecticut Cultivation Solutions, an entity co-owned by Tiana Hercules Esq., a Hartford City Councilwoman, and Ayr, was awarded a provisional Disproportionately Impacted Area (“DIA”) cultivator license in Connecticut.

Financing and Capital Structure

The Company deployed $7.9 million of capital expenditures in Q3 and ended the quarter with a cash balance of $100.8 million.

As of September 30, 2022, the Company had approximately 71.3 million fully diluted shares outstanding based on a treasury method calculation as of that date.i

Outlook

Based on the results to date coupled with an uncertain macroeconomic backdrop, management is updating their assumptions underlying its previously issued guidance. Consistent with prior quarter sequential growth trends, the Company expects Adjusted EBITDA and Operating Income to grow approximately 10% sequentially from Q3 2022 to Q4 2022 and expects further growth in 2023 as future milestones come online. This guidance assumes further price compression in the wholesale and retail market. Ayr’s expectations for future results are based on the assumptions and risks detailed in its MD&A for the period ended September 30, 2022 as filed on SEDAR and with the SEC.

i Includes pending M&A and excludes Ayr granted but unvested service-based LTIP shares totaling 6.0 million.

Conference Call

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

Conference Call Date: Thursday, November 10, 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: 10020429

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, November 10, 2022.

Toll-free replay number: (855) 669-9658
International replay number: (412) 317-0088
Replay ID: 9502

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 and nine months ended September 30, 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) income from operations, as reported under GAAP, before interest and tax, adjusted to exclude other adjustments associated with 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, start-up costs and the gain (loss) on the sale of assets.

Adjusted Gross Profit

“Adjusted Gross Profit” represents gross profit, as reported, adjusted to exclude other adjustments associated with non-core costs, 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 and nine months ended September 30, 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; and Ayr may not be able to raise additional debt or equity capital if required. Among other things, Ayr has assumed that its businesses will operate as anticipated and that all required regulatory approvals will be obtained on satisfactory terms and within expected time frames.

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 and nine months ended September 30, 2022.

Additional Information

For more information about the Company’s Q3 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
T: (786) 885-0397
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, in thousands, except share amounts)
    
  September 30, 2022
 December 31, 2021
 
ASSETS 
Current  
 Cash$100,762 $154,342 
 Accounts receivable, net 9,087  7,413 
 Inventory 113,069  93,363 
 Prepaid expenses, deposits, and other current assets 8,635  10,949 
 Total Current Assets 231,553  266,067 
Non-current  
 Property, plant, and equipment, net 315,381  275,222 
 Intangible assets, net 956,855  978,915 
 Right-of-use assets - operating, net 138,653  88,721 
 Right-of-use assets - finance, net 45,166  17,527 
 Goodwill 242,579  229,910 
 Deposits and other assets 8,557  3,550 
TOTAL ASSETS$1,938,744 $1,859,912 
    
LIABILITIES AND SHAREHOLDERS' EQUITY  
Liabilities  
Current  
 Trade payables$21,784 $26,983 
 Accrued liabilities 24,221  32,724 
 Lease liabilities - operating - current portion 7,921  4,195 
 Lease liabilities - finance - current portion 9,583  3,185 
 Contingent consideration - current portion 90,861  39,868 
 Purchase consideration payable 2,166  812 
 Income tax payable 32,777  28,915 
 Debts payable - current portion 34,213  8,112 
 Accrued interest payable - current portion 10,109  7,542 
 Total Current Liabilities 233,635  152,336 
Non-current  
 Deferred tax liabilities, net 67,954  70,081 
 Lease liabilities - operating - non-current portion 136,046  87,767 
 Lease liabilities - finance - non-current portion 26,060  9,406 
 Construction finance liabilities 35,616  - 
 Contingent consideration - non-current portion 28,699  145,654 
 Debts payable - non-current portion 174,443  125,746 
 Senior secured notes, net of debt issuance costs 244,864  245,408 
 Accrued interest payable - non-current portion 4,430  3,451 
TOTAL LIABILITIES 951,747  839,849 
    
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 - 59,023,822 and 56,337,175 shares, respectively -  - 
 Exchangeable Shares: no par value, unlimited authorized. Issued and outstanding - 7,068,270 and 7,368,285 shares, respectively -  - 
 Additional paid-in capital 1,332,770  1,289,827 
 Treasury stock - 645,300 and 568,300 shares, respectively (8,987) (7,828)
 Accumulated other comprehensive income 3,266  3,266 
 Accumulated Deficit (347,253) (265,202)
 Equity of Ayr Wellness Inc. 979,796  1,020,063 
 Noncontrolling interest 7,201  - 
TOTAL SHAREHOLDERS' EQUITY 986,997  1,020,063 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$1,938,744 $1,859,912 
    


Ayr Wellness Inc.
Unaudited Interim Condensed Consolidated Statements of Operations
(Expressed in United States Dollars, in thousands, except per share amounts)
 
        
  Three Months Ended Nine Months Ended 
  September 30, 2022
 September 30, 2021
  September 30, 2022
 September 30, 2021
  
        
Revenues, net of discounts$119,639 $96,189  $340,996 $245,839  
        
Cost of goods sold excluding fair value items 69,642  47,084   199,455 $117,567  
Incremental costs to acquire cannabis inventory in a business combination 486  9,022   6,216 $41,411  
Cost of goods sold 70,128  56,106   205,671  158,978  
        
Gross profit 49,511  40,083   135,325  86,861  
        
Operating expenses      
 Selling, general, and administrative 52,981  37,297   154,907 $96,922  
 Depreciation and amortization 14,440  10,943   42,078  26,925  
 Acquisition expense 965  743   5,139  5,164  
 Loss (gain) on sale of assets 1,810  -   (190) -  
Total operating expenses 70,196  48,983   201,934  129,011  
        
Loss from operations (20,685) (8,900)  (66,609) (42,150) 
        
Other income (expense), net      
 Share of loss on equity investments -  (13)  -  (32) 
 Fair value gain on financial liabilities 1,658  19,267   33,438  30,812  
 Interest expense, net (7,838) (4,281)  (22,179) (10,852) 
 Interest income 12  37   52  160  
 Other, net 13  517   13  955  
Total other income (expense), net (6,155) 15,527   11,324  21,043  
        
Income (loss) before income taxes and noncontrolling interests (26,840) 6,627   (55,285) (21,107) 
        
Income Taxes      
 Current tax provision (12,020) (14,167)  (33,712) (29,986) 
 Deferred tax benefit 1,433  4,161   2,128  10,353  
Total income taxes (10,587) (10,006)  (31,584) (19,633) 
        
Net loss before noncontrolling interest      
 Net loss attributable to noncontrolling interest (37,427) (3,379)  (86,869) (40,740) 
 Net loss attributable to Ayr Wellness Inc. (1,310) -   (4,818) -  
  $(36,117)$(3,379) $(82,051)$(40,740) 
        
Basic and diluted loss per share$(0.52)$(0.06) $(1.2)$(0.76) 
Weighted average number of shares outstanding (basic and diluted) 69,087  59,566   68,391  53,952  
        

 

Ayr Wellness Inc.
Unaudited Interim Condensed Consolidated Statements of Cash Flows
(Expressed in United States Dollars, in thousands)
 
    
 Nine Months Ended 
 September 30, 2022
 September 30, 2021
  
Operating activities   
Net loss before noncontrolling interest (86,869) (40,740) 
Adjustments for:   
Fair value gain on financial liabilities (33,438) (30,812) 
Stock-based compensation 28,652  20,388  
Stock-based compensation - related parties 707  -  
Depreciation and amortization 13,894  5,296  
Amortization on intangible assets 53,660  32,528  
Share of loss on equity investments -  32  
Gain on disposal of equity investments -  (1,000) 
Gain (loss) on disposal of property, plant, and equipment (190) 51  
Incremental costs to acquire cannabis inventory in a business combination 6,216  41,411  
Deferred tax benefit (2,128) (10,353) 
Amortization on financing costs 1,719  1,229  
Amortization on financing premium (2,263) -  
Changes in operating assets and liabilities, net of business combinations:   
Accounts receivable (1,127) (5,750) 
Inventory (16,267) (37,743) 
Prepaid expenses, deposits, and other current assets 1,200  14  
Trade payables (5,036) 2,377  
Accrued liabilities (2,729) 2,780  
Interest accrued 3,547  3,927  
Lease liabilities - operating 1,887  1,294  
Income tax payable 3,862  (7,116) 
Cash used in operating activities (34,703) (22,186) 
    
Investing activities   
Purchase of property, plant, and equipment (58,848) (53,062) 
Capitalized interest (10,858) (5,570) 
Proceeds from the sale of assets, net of transaction costs 31,433  -  
Cash paid for business combinations and asset acquisitions, net of cash acquired (11,469) (59,972) 
Cash paid for business combinations and asset acquisitions, bridge financing -  (22,750) 
Cash paid for business combinations and asset acquisitions, working capital (2,812) (4,025) 
Payments for interests in equity accounted investments -  (47) 
Cash received in disposal of equity investment -  1,000  
Advances to related corporation -  135  
Purchase of intangible asset (4,000) -  
Cash received (paid) for bridge financing 1,070  (1,200) 
Deposits for business combinations, net of cash on hand (2,826) (572) 
Cash used in investing activities (58,309) (146,063) 
    
Financing activities   
Proceeds from exercise of warrants -  56,034  
Proceeds from exercise of options 300  305  
Proceeds from financing transaction, net of financing costs 27,599  -  
Proceeds from equity offering, net of expenses -  118,053  
Proceeds from issuance of notes payable, net of financing costs 51,713  -  
Payments of financing costs -  (136) 
Payment for settlement of contingent consideration (10,000) -  
Deposits paid for financing lease and note payable (924) -  
Tax withholding on stock-based compensation awards (4,738) (28,511) 
Repayments of debts payable (8,257) (6,280) 
Repayments of lease liabilities - finance (principal portion) (7,830) (3,741) 
Repurchase of equity shares (8,430) (311) 
Cash provided by financing activities 39,432  135,413  
    
Net decrease in cash (53,580) (32,836) 
Cash, beginning of the period 154,342  127,238  
Cash, end of the period$100,762 $94,402  
    
Supplemental disclosure of cash flow information:   
Interest paid during the period 30,747  12,187  
Income taxes paid during the period 29,248  37,999  
Non-cash investing and financing activities:   
Recognition of right-of-use assets for operating leases 52,296  61,629  
Recognition of right-of-use assets for finance leases 30,812  13,365  
Issuance of promissory note related to business combinations 16,000  -  
Issuance of Equity Shares related to business combinations and asset acquisitions 6,352  556,720  
Issuance of Equity Shares related to equity component of debt -  7,430  
Issuance of Equity Shares related to settlement of contingent consideration 11,748  -  
Issuance of promissory note related to settlement of contingent consideration 14,934  -  
Cancellation of Equity Shares 78  -  
Capital expenditure disbursement for cultivation facility 7,837  -  
    


Ayr Wellness Inc. Unaudited Interim Consolidated Adjusted EBITDA and Gross Profit Reconciliation(Expressed in United States Dollars, in thousands)
     
 Three Months EndedNine Months Ended
 September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021 
 $ $ $ $ 
Loss from operations (GAAP)(20,685)(8,900)(66,609)(42,150)
     
Incremental costs to acquire cannabis inventory in a business combination486 9,022 6,216 41,411 
Interest (within cost of goods sold "COGS")1,723 464 2,975 921 
Depreciation and amortization (from statement of cash flows)23,743 15,761 67,554 37,825 
Acquisition costs965 743 5,139 5,164 
Stock-based compensation, non-cash9,359 5,013 29,448 20,388 
Start-up costs12,930 3,464 9,442 6,437 
Other21,337 433 6,835 1,841 
Loss (gain) on sale of assets1,810 - (190)- 
 42,353 34,900 127,419 113,987 
     
Adjusted EBITDA (non-GAAP)21,668 26,000 60,810 71,837 
     
     
1Costs to prepare a location for its intended use, including facilities not yet operating at scale. Start-up costs are expensed as incurred and are not indicative of ongoing operations.
2Other non-core costs including non-operating adjustments and non-cash inventory write-downs   
     
     
 Three Months EndedNine Months Ended
 September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021 
 $ $ $ $ 
Gross profit (GAAP)49,511 40,083 135,325 86,861 
     
Incremental costs to acquire cannabis inventory in a business combination486 9,022 6,216 41,411 
Interest (within COGS)1,723 464 2,975 921 
Depreciation and amortization (within COGS)9,303 4,818 25,475 10,900 
Start-up costs (within COGS)1,020 2,250 3,153 3,834 
Other (within COGS)830 - 4,883 - 
     
Adjusted Gross Profit (non-GAAP)62,873 56,637 178,027 143,927 

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