Ayr Wellness Reports Q3 Operating Loss Reduced By 67% But A Negative Outlook For Q4

Ayr Wellness Inc. (CSE: AYR.A, OTCQX: AYRWF), a vertically integrated U.S. multi-state cannabis operator (MSO) constituent in the rebalanced munKNEE American Cannabis MSO Index, reported its Q3 financial report for the period ended September 30, 2023, last Thursday and the results are presented below in U.S. dollars with Q3 being compared to Q2.
 Q3 Financial Summary ($ in millions, excl. margin items)

    Q2 2023 Q3 2023   % Change
Q3/Q2 Revenue     $116.7   $114.4       -2.0%   Gross Profit     $56.6   $48.1       -15.0%   Adjusted Gross Profit     $69.1   $60.5       -12.6%   Operating Loss     $(4.5)   $(1.5)       +66.7%   Adjusted EBITDA     $29.5   $28.4       -3.7%   Adjusted EBITDA Margin         25.2%     24.9%       -37bps  

Cash on Hand: $72.8M

Management Commentary
David Goubert, President & CEO, said:

  • “We continued to execute on our optimization initiatives during the quarter….[and] 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…
    • [W]e 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.”
  • Q3 Operational Highlights

  • Retail Updates

    • Reported Q3 retail transactions up 21% year-over-year on same-store basis.
    • Announced agreement to acquire third Ohio dispensary license.
  • Brand/Product Updates

    • Announced three-year exclusive licensing and retail agreement to bring Kiva Confections to AYR’s 62+ Florida dispensaries.
  • Corporate Updates

    • Added Michael Warren to the Company’s Board of Directors.
    • 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.
  • Outlook

  • 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.

  • Stock Performance
    Ayr’s stock price:

  • went UP 166.3% during the Q3 period (July, August, September),
  • went DOWN 6.1% between the end of Q3 and the release of the Q3 financial report last Thursday,
  • has gone DOWN 4.7% since the release of the Q3 financial report but
  • is UP 59.2% YTD. 
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