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AYR Wellness Inc. (AYRWF), a constituent in the munKNEE American Cannabis MSO Stocks Index, reported financial results for the second quarter (Q2) ended June 30th, 2024 today. Unless otherwise noted, all results are presented in U.S. dollars and in comparison to the previous quarter.

Q2 Financial Summary 

• Revenue: DOWN 0.6% to $117.3M
• Adj. Gross Profit: DOWN 3.0% to $60.7M
  • (Gross Profit Margin is the profit remaining after subtracting the cost of goods sold from revenue. A high gross profit margin indicates that a company is successfully producing profit over and above its costs.)
  • as a % of Revenue: DOWN to 51.7% from 53.1%
• Selling, General & Admin Exp.: INCREASED 6.5% to $41.8M
  • (SG&A expenses are the costs a company incurs to run its business, which include salaries, marketing, rent, utilities, and office supplies and the SG&A margin is the percentage of revenue consumed by these expenses and shows how much revenue is being absorbed by overhead costs. A lower margin reflects how efficiently a company manages its operating expenses.)
  • as a % of Revenue: UP to 35.6% from 33.2%
• Net Profit (Loss): Loss INCREASED by 285% to $(7.7)M
  • (Net profit margin, or simply net margin, measures how much net income or profit a company generates as a percentage of its revenue. The net profit margin illustrates how much of each dollar in revenue collected by a company translates into profit. A higher margin reflects the cash profit generated by the company's operations.)
  • as a % of Revenue: DOWN to (6.6)% from (1.7)%
• Adj. EBITDA: DOWN 11.7% to $25.7M
  • (Adjusted EBITDA, or Earnings Before Interest, Taxes, Depreciation, and Amortization, represents the cash profit generated by the company's operations excluding non-recurring, irregular, and one-time items such as unrealized gains or losses; non-cash expenses such as depreciation and amortization; litigation expenses; gains or losses on foreign exchange; goodwill impairments; non-operating income; and share-based compensation. A higher margin reflects the cash profit generated by the company's operations.)
  • as a % of Revenue: DOWN to 21.9% from 24.7%

Q2 Operational Highlights

• Launched adult-use sales in Ohio across the first tranche of stores approved by the state in 3 AYR-affiliated dispensaries of which AYR has the right to future ownership, subject to regulatory approval.
• Entered into an option agreement that provides AYR with the future ability to acquire 100% of Good Day Dispensary, LLC, a fourth Ohio dispensary license.
• Opened its third retail store in Illinois in June.
• Secured real estate financing for indoor cultivation in Florida, with plans to redevelop a 98,000 square foot building within the property to serve as a regulated cannabis cultivation facility. 

Management Commentary

David Goubert, President & CEO, said,

• “Our team remains...focused on...ensuring that AYR is...[well] positioned to capitalize on the anticipated transition to adult-use in three of our core markets: Ohio, Florida, and Pennsylvania...[where we believe the Company] has more upside... than any other company in our industry....
• The second quarter presented challenges due to both internal and external factors including:
  • wholesale pricing pressure,
  • tightening consumer wallets from persistent inflation, and
  • margin pressure in select markets where we have recently increased our cultivation and production, but which are not yet optimized...
• Looking beyond 2024, we will continue to focus on enhancing the overall health of the business...to ensure that AYR is poised for sustainable and profitable financial growth...[and] believe that AYR will emerge stronger and more resilient as we enter this next phase of accelerated growth in the years ahead.”

Outlook

• AYR expects:
  • Q3 revenue growth to be up by low to mid-single digits from Q2 based on the timing and ramping of the Ohio Adult Use rollout;
  • to improve Adjusted EBITDA margins from current levels in the second half of 2024 as the Company rebuilds toward its 25% Adjusted EBITDA margin target; and
  • positive GAAP cash flow from operations for calendar 2024 as well as positive free cash flow for calendar 2024 assuming the elimination of 280E tax liabilities.

Stock Performance

AYR's stock price was DOWN 23.4% in Q2 (i.e. from April 1st to June 30th), was DOWN a further 6.4% between then and yesterday, has gone DOWN +5% so far today. and, as such, its stock price is now unchanged YTD.

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