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AYR Wellness Inc. (AYRWF), a constituent in the munKNEE American Cannabis MSO Stocks Index, reported financial results for the first quarter (Q1) ended March 31, 2024 today. Unless otherwise noted, all results are presented in U.S. dollars.

Q1 Financial Summary 

• Revenue: UP 2.8% to $118.0M
• Adj. Gross Profit: UP 1.0% to $62.6M
  • as a % of Revenue: DOWN to 53.1% from 54.0%
• Net Profit (Loss): Loss Reduced by 93.5% to $(2.0)M
  • as a % of Revenue: Reduced to (16.9)% from (27.0)%
• Adj. EBITDA: DOWN 2.3% to $29.1M
  • as a % of Revenue: DOWN to 24.7% from 25.9%

Ayr's reported Q1 profit/loss as a percentage of quarterly revenue compared with the other 6 constituents in the munKNEE American Cannabis MSO Stocks Index, was, in descending order, as follows as follows:

1. Green Thumb (GTBIF):
   • Q1 profit as a % of Revenue: 11.3%
2. Cresco Labs (CRLBF):
   • Q1 loss as a % of Revenue: (1.1)%
3. Verano (VRNOF):
   • Q1 loss as a % of Revenue: (2.2)%
4. Trulieve Cannabis (TCNNF):
   • Q1 loss as a % of Revenue: (7.7)%
5. Ayr Wellness (AYRWF):
   • Q1 loss as a % of Revenue: (16.9)%
6. Curaleaf (CURLF):
   • Q1 loss as a % of Revenue: (142.5)%
7. TerrAscend (TSNDF):
   • Q1 loss as a % of Revenue: (184.9)%

Q1 Operational Highlights

• Launched its first line of premium edibles in Florida and Nevada, allowing the brand to break into the growing edibles market.
• Opened a relocated 1,650-square-foot retail outlet in Tallahassee.
• Closed on a $8.4 million upsizing of the Company’s existing mortgage for its Gainesville cultivation facility 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.
• Completed a series of debt restructuring transactions 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.
• Issued 23 million anti-dilutive warrants (CSE: AYR.WT.U). These warrants, exercisable at $2.12 and expiring in February 2026, are currently expected to result in approximately $50M in proceeds for the Company upon exercise.
• Recorded a loss on the extinguishment of $79.2 million of debt.
• Appointed Usec Rho as the Company’s new General Counsel. 
• Deployed $6.8 million of capital expenditures in Q1, in line with the Company’s guidance of approximately $20 million for the full year. 
• Had approximately 137.8 million fully diluted shares outstanding as of March 31st, 2024, 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).

Management Commentary

David Goubert, President & CEO, said,

• “...First quarter results reflect continued progress with modest sequential revenue growth, adjusted EBITDA margins in line with long-term targets of 25%, and positive free cash flow for the period.
• ...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.”

Outlook

• 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.
• Expects Adjusted EBITDA margin to remain at approximately 25% for the year with normal quarterly fluctuations.
• Expects to generate positive cash flow from operations and free cash flow for the calendar year 2024.

Stock Performance

Despite the poor Q1 financial report AYR's stock price is UP 1.6% as of mid-day and UP 12.1 % from last Friday and is now UP  43.1% YTD.

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