Ayr Wellness Reports Second Quarter 2022 Results

Ayr Wellness Reports Second Quarter 2022 Results 

MIAMI, August 18, 2022 – 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 June 30, 2022. Unless otherwise noted, all results are presented in U.S. dollars.  

Jonathan Sandelman, Founder and CEO of Ayr, said, “Over the past few months, we have achieved many of the key transformational milestones to operationalize Ayr’s core footprint, and we are now moving to optimize this footprint for substantial growth. We’re doing this in the face of macro headwinds from the broader economy, but it’s never been clearer that cannabis is a consumer staple that is here to stay.”

“Q2 2022 results were in line with our expectations, and we now look ahead to the second half of 2022. Our second half growth will be slower than previously expected, but the earnings power of the business remains outstanding. We continue to make investments in people and processes, while remaining prudent through these turbulent economic times. With our core operating footprint in place, the vast majority of our capex behind us, and a strong, $117 million cash position on our balance sheet, we believe that we are well-placed to weather this economic environment and emerge stronger on the other side.”

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

Q2 2021

Q1 2022

Q2 2022

% Change

Q2/Q2

% Change

Q2/Q1

Revenue

$91.3

$111.2

$110.1

20.6%

-1.0%

Gross Profit

$22.3

$45.5

$40.3

80.6%

-11.5%

Adjusted Gross Profit1

$53.1

$57.9

$57.2

7.7%

-1.2%

Operating Loss 

$(24.9)

$(21.1)

$(24.8)

NA

NA

Adjusted EBITDA1 

$27.4

$19.5

$19.6

-28.5%

0.5%

Adjusted EBITDA Margin1

30.0%

17.5%

17.8%

-1,220bps

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.

Second Quarter and Recent Highlights

  • Northeast 
    • Began serving adult-use customers at three New Jersey dispensaries in Woodbridge, Union and Eatontown. 
    • Completed the first harvest from second New Jersey cultivation facility in August.
    • Opened first adult-use dispensaries, one in Boston’s Back Bay and one in Watertown, in July.
    • Received state regulatory approval to convert Somerville, Massachusetts dispensary to adult use, pending local approvals.
    • Received state regulatory approval to begin phased production at new cultivation expansion in Massachusetts.
    • Launched the award-winning flower brand, LIT, for wholesale as well as retail purchase in four Ayr Greater Boston locations.
    • Announced the opening of ninth affiliated medical dispensary in Pennsylvania, AYR Indiana, in July. 
  • Southwest 
    • Completed the first sale from new 80,000 square foot cultivation facility in Phoenix, Arizona. 
    • Launched Levia water-soluble tinctures in Arizona and Nevada, representing the first expansion of Levia outside of Massachusetts, in August.
    • Ayr’s Kynd flower continues to be the #1 selling flower brand in Nevada.
  • Florida
    • Opened three new dispensaries during the second quarter and an additional two stores in July and August, bringing Ayr’s total footprint to 50 dispensaries across the state.
    • Biomass yields up 125% during the first half of 2022 when compared to the same period of 2021.
    • 37 unique strains being grown at Gainesville cultivation campus, with each store averaging ~16 strains available.

M&A Highlights

  • Closed acquisition of Herbal Remedies Dispensaries, LLC, an operator of two licensed retail dispensaries in Quincy, Illinois on May 25, 2022.

Financing and Capital Structure

  • Ended the quarter with a cash balance of $116.7 million. 
  • Closed $81.5 million of real estate financing transactions during the quarter, bringing the YTD total to $108 million with an annualized blended cost of capital of 7.8%.
  • Approximately 68.9 million fully diluted shares outstanding based on a treasury method calculation, as of June 30, 2022.
  • Deployed $17.9 million of capital expenditures in Q2. 

Outlook 

Based on the results to date coupled with an uncertain macroeconomic backdrop, Ayr is updating its previously issued guidance regarding 2022 financial results.  

The Company expects Revenue, Adjusted EBITDA and Operating Income to grow approximately 10% sequentially from Q2 2022 to Q3 2022, and an acceleration in the pace of sequential growth in 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 June 30, 2022 as filed on SEDAR.

Conference Call

Ayr CEO Jonathan Sandelman, Co-COO Jennifer Drake, and CFO Brad Asher will host a conference call tomorrow, followed by a question-and-answer period.

Conference Call Date: Thursday, August 18, 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: 10019872

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 AYR@elevate-ir.com.

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, August 18, 2022.

Toll-free replay number: (855) 669-9658 

International replay number: (412) 317-0088

Replay ID: 9258

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 six months ended June 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 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, start-up costs and the gain on sale of assets.

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 and six months ended June 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 six months ended June 30, 2022. 

Additional Information

For more information about the Company’s Q2 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: robert.vanisko@ayrwellness.com 

Investor Relations Contact:

Sean Mansouri, CFA
Elevate IR
T: (720) 330-2829
Email: IR@ayrwellness.com

Ayr Wellness Inc.

Unaudited Interim Consolidated Balance Sheets

(Expressed in United States Dollars, in Thousands, Except Share Amounts)

June 30, 2022

December 31, 2021

ASSETS

Current

 

Cash

 $                   116,743

 $                       154,342

 

Accounts receivable, net

6,974

7,413

 

Inventory

                      106,471

93,363

 

Prepaid expenses, deposits, & other current assets

8,744

10,949

 

Total Current Assets

238,932

266,067

Non-current

 

Property, plant, & equipment, net

301,861

275,222

 

Intangible assets, net

971,948

978,915

 

Right-of-use assets – operating

133,756

88,721

 

Right-of-use assets – finance, net

39,296

17,527

 

Goodwill

241,972

229,910

 

Deposits & other assets

7,947

3,550

TOTAL ASSETS

 $                1,935,712

 $                    1,859,912

 

LIABILITIES & SHAREHOLDERS’ EQUITY

 

Liabilities

 

Current

 

 

Trade payables 

 $                     24,520

 $                         26,983

 

Accrued liabilities

21,451

32,724

 

Lease liabilities – operating – current portion

7,275

4,195

 

Lease liabilities – finance – current portion

7,968

3,185

 

Contingent consideration – current portion

4,779

39,868

 

Purchase consideration payable

2,183

812

 

Income tax payable

20,758

28,915

 

Debts payable – current portion

17,063

8,112

 

Accrued interest payable – current portion

2,970

7,542

 

Total Current Liabilities

108,967

152,336

Non-current

 

Deferred tax liabilities

69,385

70,081

 

Lease liabilities – operating – non-current portion

131,051

87,767

 

Lease liabilities – finance – non-current portion

23,365

9,406

 

Construction finance liabilities – non-current portion

27,779

                                      

 

Contingent consideration – non-current portion

116,628

145,654

 

Debts payable – non-current portion

193,448

125,746

 

Senior secured notes, net of debt issuance costs – non-current portion

245,045

245,408

 

Accrued interest payable – non-current portion

4,149

3,451

TOTAL LIABILITIES

919,817

839,849

 

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 – 58,647,169 & 56,337,175 shares, respectively

                                 

                                      

 

Exchangeable Shares: no par value, unlimited authorized.
Issued & outstanding – 7,141,614 & 7,368,285 shares, respectively

                                 

                                      

 

Additional paid-in capital

1,324,241

1,289,827

 

Treasury stock – 645,300 & 568,300 shares, respectively

(8,987)

(7,828)

 

Accumulated other comprehensive income

3,266

3,266

 

Accumulated Deficit

(311,136)

(265,202)

 

Equity of Ayr Wellness Inc.

1,007,384

1,020,063

 

Noncontrolling interest

8,511

                                      

TOTAL SHAREHOLDERS’ EQUITY

1,015,895

1,020,063

TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY

 $         1,935,712

 $           1,859,912

Ayr Wellness Inc.

Unaudited Interim Consolidated Statements of Operations

(Expressed in United States Dollars, in Thousands, Except Share Amounts)

 

 

 Three Months Ended 

 Six Months Ended 

 

 

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

 

 

Revenues, net of discounts

 $             110,131

 $          91,251

 $        221,356

 $        149,650

 

Cost of goods sold excluding fair value items

66,624

42,342

129,812

70,483

Incremental costs to acquire cannabis inventory in a business combination

3,212

26,596

5,731

32,388

Cost of goods sold

69,836

68,938

135,543

102,871

Gross profit

40,295

22,313

85,813

46,779

Operating expenses

Selling, general, and administrative

50,375

34,844

101,925

59,624

Depreciation and amortization

13,995

11,065

27,638

15,982

 

Acquisition expense

2,722

1,285

4,173

4,422

 

Gain on sale of assets 

(2,000)

                                

(2,000)

                                

Total operating expenses

65,092

47,194

131,736

80,028

 

 

 

Loss from operations

(24,797)

(24,881)

(45,923)

(33,249)

 

Other income (expense)

 

Share of loss on equity investments

                                    

(6)

                                 

(19)

 

Fair value gain (loss) on financial liabilities

1,701

12,091

31,780

11,545

 

Interest expense, net

(7,474)

(3,818)

(14,342)

(6,571)

 

Interest income

11

65

40

124

 

Other, net

                                    

457

                                 

437

Total other income (expense)

(5,762)

8,789

17,478

5,516

 

Income (Loss) before taxes & noncontrolling interests

(30,559)

(16,092)

(28,445)

(27,733)

 

Income Taxes

 

Current tax provision

(10,779)

(8,767)

(21,693)

(15,819)

 

Deferred tax benefit

1,089

4,121

696

6,192

Total income taxes

(9,690)

(4,646)

(20,997)

(9,627)

 

Net loss before noncontrolling interest

(40,249)

(20,738)

(49,442)

(37,360)

 

Net loss attributable to noncontrolling interest

(1,892)

                                

(3,508)

                                

 

Net loss attributable to Ayr Wellness Inc.

 $            (38,357)

 $        (20,738)

 $       (45,934)

 $       (37,360)

 

Basic and diluted loss per share

 $                (0.56)

 $            (0.36)

 $           (0.67)

 $           (0.73)

Weighted average number of shares outstanding (basic and diluted)

68,625

58,115

68,108

51,091

Ayr Wellness Inc.

Unaudited Interim Consolidated Statements of Cash Flows

(Expressed in United States Dollars, in Thousands)

 

 Six Months Ended 

 

June 30, 2022

June 30, 2021

Operating activities

Net loss before noncontrolling interest

(49,442)

(37,360)

Adjustments for:

  Fair value (gain) loss on financial liabilities

(31,780)

(11,545)

  Stock-based compensation

19,381

15,376

  Stock-based compensation – related parties

707

    

  Depreciation and amortization

8,243

2,887

  Amortization on intangible assets

35,567

19,177

  Share of loss on equity investments

    

19

  Gain on disposal of equity investments

    

(500)

  Gain on disposal of property, plant, and equipment

(2,000)

    

  Incremental costs to acquire cannabis inventory in a business combination

5,731

32,388

  Deferred tax (benefit)

(696)

(6,192)

  Amortization on financing costs

1,146

817

  Amortization on financing premium

(1,509)

    

Changes in operating assets and liabilities, net of business combinations:

  Accounts receivable

986

(3,048)

  Inventory

(8,577)

(21,618)

  Prepaid expenses, deposits, and other current assets 

1,513

(508)

  Trade payables 

1,886

3,260

  Accrued liabilities

(5,486)

(1,880)

  Interest accrued

(3,714)

560

  Lease liabilities – operating

1,329

713

  Income tax payable

(8,157)

(14,961)

Cash used in operating activities

(34,872)

(22,415)

 

Investing activities

  Purchase of property, plant, and equipment 

(50,972)

(27,748)

  Loss on disposal of property, plant, and equipment

    

(57)

  Capitalized interest

(7,366)

    

  Proceeds from the sale of assets, net of transaction costs

27,591

(3,851)

  Cash paid for business combinations and asset acquisitions, net of cash acquired

(11,465)

(17,777)

  Cash paid for business combinations and asset acquisitions, working capital

(2,812)

(3,275)

  Payments for interests in equity accounted investments

    

(46)

  Cash received in disposal of equity investment

    

500

  Advances to related corporation

    

(42)

  Purchase of intangible asset

(1,000)

    

  Cash received (paid) for bridge financing

1,258

(15,810)

  Deposits for business combinations, net of cash on hand

(2,825)

(1,700)

Cash used in investing activities

(47,591)

(69,806)

 

Financing activities

  Proceeds from exercise of Warrants

    

5,346

  Proceeds from exercise of options

300

86

  Proceeds from financing transaction, net of financing costs

27,599

    

  Proceeds from issuance of notes payable, net of financing costs

51,713

118,052

  Payments of financing costs

    

(136)

  Payment for settlement of contingent consideration

(10,000)

    

  Deposits received (paid) for financing lease and note payable

(924)

    

  Tax withholding on stock-based compensation awards

(3,996)

(28,421)

  Repayments of debts payable

(6,563)

(4,300)

  Repayments of lease liabilities – finance (principal portion)

(4,835)

(1,807)

  Repurchase of Equity Shares

(8,430)

    

Cash provided by financing activities

44,864

88,820

 

Net (decrease) increase in cash

(37,599)

(3,401)

Cash, beginning of the period

154,342

127,237

Cash, end of the period

116,743

123,836

 

Supplemental disclosure of cash flow information:

Interest paid during the period

26,049

9,501

Income taxes paid during the period

30,680

29,780

Non-cash investing and financing activities:

Recognition of right-of-use assets for operating leases

23,002

52,047

Recognition of right-of-use assets for finance leases

23,342

4,356

Issuance of Promissory Note related to business combinations 

16,000

    

Issuance of Equity Shares related to business combinations and asset acquisitions

6,352

526,976

Issuance of Equity Shares related to equity component of debt

    

7,429

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

    

Ayr Wellness Inc.

Unaudited Interim Consolidated Adjusted EBITDA and Gross Profit Reconciliation

(Expressed in United States Dollars, in Thousands)

Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

 

$

$

$

$

Loss from operations (GAAP)

(24,797)

(24,881)

(45,923)

(33,249)

Non-cash items accounting for inventory

Incremental costs to acquire cannabis inventory in a business combination

3,212

26,596

5,731

32,388

Interest (within cost of goods sold “COGS”)

772

213

1,252

457

Depreciation and amortization (from statement of cash flows)

22,570

14,587

43,810

22,064

Acquisition costs

2,722

1,284

4,173

4,422

Stock-based compensation, non-cash

9,727

7,152

20,088

15,376

Start-up costs1

3,862

1,350

6,511

2,973

Other2

3,576

1,122

5,499

1,408

Gain on sale of assets 

(2,000)

    

(2,000)

    

41,229

25,708

79,333

46,700

Adjusted EBITDA (non-GAAP)

19,644

27,423

39,141

45,839

 

 

 

 

 

 

 

 

 

 

1 Costs 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.

 

2 Other non-core costs including non-operating adjustments and non-cash inventory write-downs 

Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

 

$

$

$

$

Gross profit (GAAP)

40,295

22,313

85,813

46,779

Incremental costs to acquire cannabis inventory in a business combination 

3,212

26,596

5,731

32,388

Interest (within COGS)

772

212

1,252

457

Depreciation and amortization (within COGS)

8,574

3,600

16,172

6,100

Start-up costs (within COGS)

1,154

400

2,133

1,600

Other (within COGS)

3,215

    

4,052

    

Adjusted Gross Profit (non-GAAP)

57,222

53,121

115,153

87,324

 

 

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