AYR Wellness Reports $118M in Revenue for Q1 2024 Results

• Q1 revenue increased 3% quarter-over-quarter to $118 million, excluding discontinued operations.
• Q1 GAAP loss from operations improved to $2 million, excluding discontinued operations.
• Q1 adjusted EBITDA increased more than 10% year-over-year to $29.1 million, with an adjusted EBITDA margin of 25%.
• The company generated free cash flow for the quarter and expects to for fiscal year 2024.
  

MIAMI, May 15, 2024 – PRESS RELEASE – AYR Wellness Inc., a leading vertically integrated multistate cannabis operator, reported financial results for the first quarter ended March 31, 2024. Unless otherwise noted, all results are presented in U.S. dollars.

David Goubert, president and CEO of AYR, said, “2024 continues to be about execution for AYR, furthering the progress we made in 2023 by focusing on improving product quality and consistency, building a loyal retail customer base, rebuilding our CPG brand platform, and continuing to prioritize cost controls. I want to thank our team for their continued effort against these goals. First quarter results reflect continued progress with modest sequential revenue growth, adjusted EBITDA margins in line with long-term targets of 25 percent and positive free cash flow for the period.

“Meanwhile, the U.S. Department of Justice's groundbreaking decision in April to recommend the reclassification of cannabis from Schedule I to Schedule III represents a significant moment for our industry that brings us one step closer to federal reform. This expected policy shift validates AYR’s commitment to building a sustainable business that will win in the long-term, and while we await next steps on implementation of this new policy, AYR intends to continue to improve and refine its operations to position for accelerated profitable growth.

“Our team is also acutely focused on positioning AYR for success ahead of the key state-level catalysts on the horizon in Ohio, where we anticipate converting to adult-use over the summer, and Florida and Pennsylvania, where we hope to see adult-use pass later this year. With only 15 of AYR’s 91 dispensaries operating in adult-use markets, we are poised to take advantage of the significant growth opportunity that the transition to adult-use presents across the majority of our footprint, without materially increasing our fixed cost base. With a strong asset base and tailwinds for the regulatory environment, we look forward to generating meaningful, sustainable, and profitable financial growth for years to come.”

First Quarter and Recent Highlights

• The company’s flagship cannabis brand, kynd, launched its first line of premium edibles in Florida and Nevada, allowing the brand to break into the growing edibles market.
• Opened the relocated 1,650-square-foot AYR cannabis dispensary in Tallahassee, conveniently located in the heart of the state capital.
• Closed on an $8.4 million upsizing of the company’s existing mortgage for its Gainesville cultivation facility, increasing the principal amount of the mortgage to $48.4 million. Proceeds will be used to invest further in the company’s Florida business, as well as for general working capital purposes.
• In February 2024, the company completed a series of debt restructuring transactions contemplated by the support agreement entered into in November 2023, which retired or deferred the maturity of all of the company’s senior notes due 2024 and certain other debt totaling nearly $400 million by two years to 2026, raised approximately $40 million of gross proceeds in new capital through the issuance of $50 million of additional senior notes maturing in December 2026, issued 35 million new shares and backstop shares to existing noteholders, and issued 23 million anti-dilutive warrants. These warrants, exercisable at $2.12 and expiring in February 2026, are currently expected to result in approximately $50 million in proceeds for the company upon exercise. The company recorded a loss on the extinguishment of $79.2 million of debt.

• Appointed Usec Rho as the company’s new general counsel. Rho brings deep experience practicing law in highly regulated and emerging industries.

Financing and Capital Structure

The company deployed $6.8 million of capital expenditures in Q1, in-line with the company’s guidance of approximately $20 million for the full year. AYR ended Q1 with a cash, cash equivalents, and restricted cash balance of $71.2 million.

As of March 31, 2024, the company had approximately 137.8 million fully diluted shares outstanding based on a treasury method calculation as of that date (excluding the 2.9 million out of the money warrants expiring in May 2024 and 645,298 treasury shares).

Outlook

The company anticipates revenue in Q2 2024 to be flat to modestly up compared to Q1 2024, before generating stronger growth in the second half of 2024, replacing our previous guidance on the full year 2024 outlook. The company also continues to expect adjusted EBITDA margin to remain at approximately 25% for the year with normal quarterly fluctuations, and to generate positive cash flow from operations and free cash flow for the calendar year 2024.

The company’s line-by-line balance sheet is available here.