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Ayr Wellness Reports Fourth Quarter and Full Year 2022 Results

2023-03-09 07:00 ET - News Release

MIAMI, March 09, 2023 (GLOBE NEWSWIRE) --  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 fourth quarter and full year ended December 31, 2022. Unless otherwise noted, all results are presented in U.S. dollars.

David Goubert, President & CEO of Ayr, said, “I’d like to thank our team for pulling together to deliver a strong fourth quarter, growing our adjusted EBITDA by 20% sequentially, and a second straight quarter of generating positive cash flow from operations. In the past few months, our team has begun the process of evaluating every aspect of our business with fresh eyes, conducting a thorough review of our markets, our people, and our processes, all in service seeking to maximize the financial health of our Company and better position Ayr as a retailer of choice and house of brands.”

“Throughout that process, we have implemented cost saving measures, stepped back from certain markets that didn’t align with our core business goals, and invested further into markets and activities that did meet those goals. By better prioritizing our time, our attention, and our capital, we find ourselves better positioned to capture growth opportunities in our existing and future footprint, which we anticipate will help us grow our cash flow profile, our revenue, and adjusted EBITDA margins consistently throughout 2023.”

Fourth Quarter Financial Summary ($ in millions, excl. margin items)

 Q4 2021Q3 2022Q4 2022% Change
% Change
Revenue$111.8 $119.6 $124.6 11.5%4.2%
Gross Profit$51.2 $49.5 $55.1 7.6%11.3%
Adjusted Gross Profit1$63.3 $62.9 $70.5 11.3%12.1%
Operating Loss²$(13.9)$(20.7)$(176.2)NA NA 
Adjusted EBITDA1$26.1 $21.7 $26.0 -0.5%20.1%
Adjusted EBITDA Margin1 23.4% 18.1% 20.9%-250bps 280bps 

Full Year 2022 Financial Summary ($ in millions, excl. margin items)

 FY 2021FY 2022% Change
Revenue$357.6 $465.6 30.2%
Gross Profit$138.1 $190.4 37.9%
Adjusted Gross Profit1$207.3 $248.5 19.9%
Operating Loss²$(56.0)$(243.0)NA 
Adjusted EBITDA1$98.0 $86.8 -11.4%
Adjusted EBITDA Margin1 27.4% 18.6%-880bps 

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.

2Based on the current market conditions, including the impact of price compression, the Company incurred a non-cash goodwill impairment charge of $149M, reducing the carrying value of goodwill across all reporting units.

Fourth Quarter and Recent Highlights

  • Retail Updates
    • Opened two new dispensaries in Florida during the fourth quarter and an additional two stores in the first quarter of 2023, bringing Ayr’s total footprint to 55 dispensaries across the state.
    • Began adult-use sales alongside the Company’s established medical sales at Ayr’s Somerville, Massachusetts retail dispensary.
    • Announced Ayr’s three retail locations in New Jersey, formerly known as Garden State Dispensary, are now operating under the AYR Dispensary brand.
  • Brand/Product Updates
    • Introduced HAZE live resin concentrates and vapes across the Company’s footprint in Florida and Nevada.
    • Expanded Levia water-soluble tinctures to Ayr’s Florida retail menus.
    • Announced plans to rebrand all of the Company’s Florida stores from Liberty Health Sciences to AYR Cannabis Dispensary this summer.
  • Corporate Updates
    • Announced mutual termination of Ayr’s proposed acquisition of the equity interests of Gentle Ventures, LLC d/b/a Dispensary 33, and certain of its affiliates that collectively own and operate two licensed retail dispensaries in Chicago, Illinois.
    • Signed a definitive agreement to sell Blue Camo, LLC which comprises the Company’s Arizona assets, to AZ Goat, LLC, a group consisting primarily of the former owners of Blue Camo.
    • Entered into an option to acquire two Ohio dispensary licenses from Daily Releaf, LLC and Heaven Wellness, LLC, to begin establishing a vertical integrated presence in the state.

Full Year 2022 Highlights

  • Added 14 dispensaries across Ayr’s eight state footprint, bringing its total dispensary count to 80 stores.
  • Launched adult-use retail sales in New Jersey and Massachusetts.
  • Completed acquisitions of Cultivauna, LLC, the owner of Levia-branded cannabis infused beverages, and Herbal Remedies Dispensaries, LLC; Signed a management services agreement with Tahoe Hydroponics, LLC and NV Green, Inc.
  • Won a provisional cultivation license in Connecticut alongside Ayr’s operating partner, which will also provide Ayr with two retail licenses in the state.
  • Completed $114 million of real estate financing transactions at a blended cost of capital at closing of ~8.0% per annum.
  • Completed construction of cultivation facilities in Massachusetts, New Jersey and Ohio.

Financing and Capital Structure

The Company deployed $3.6 million of capital expenditures in Q4 and ended the year with a cash balance of $80.6 million.

As of December 31, 2022, the Company had approximately 70.9 million fully diluted shares outstanding based on a treasury method calculation as of that date.i


The Company anticipates its financial results in the first quarter of 2023 to be consistent with industry trends, expecting revenue and adjusted EBITDA in Q1 2023 to be in-line with Q4 2022. Ayr expects to further ramp revenue, adjusted EBITDA and operating cash flow thereafter.

Conference Call

Ayr management will host a conference call, followed by a question-and-answer period.

Conference Call Date: Thursday, March 9, 2023
Time: 8:30 a.m. ET
Toll-free dial-in number: (800) 319-4610
International dial-in number: (604) 638-5340
Conference ID: 10021221

Please dial into the conference call 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 ir@ayrwellness.com.

The conference 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, March 9, 2023.

Toll-free replay number: (855) 669-9658
International replay number: (412) 317-0088
Replay ID: 9867

Financial Statements

Certain financial information reported in this news release is extracted from Ayr’s Consolidated Financial Statements and MD&A for years December 31, 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) income 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, impairment expense, the accounting for the incremental costs to acquire cannabis inventory in a business combination, acquisition related costs, and start up costs.

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 twelve months ended December 31, 2022 and 2021.

Forward-Looking Statements

Certain statements in this MD&A are forward-looking statements within the meaning of applicable securities laws, including, but not limited to, those statements relating to the Company and its financial capacity and availability of capital and other statements that are not historical facts. These statements are based upon certain material factors, assumptions, and analyses that were applied in drawing a conclusion or making a forecast or projection, including experience of the Company, as applicable, and perception of historical trends, current conditions, and expected future developments, as well as other factors that are believed to be reasonable in the circumstances. Forward-looking statements are provided for the purpose of presenting information about management’s current expectations and plans relating to the future and readers are cautioned that such statements may not be appropriate for other purposes. These statements may include, without limitation, statements regarding the operations, business, financial condition, expected financial results, performance, prospects, opportunities, priorities, targets, goals, ongoing objectives, strategies, and outlook of the Company. Forward-looking statements are often identified by the words “may”, “would”, “could”, “should”, “will”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “project”, “expect”, “target”, “continue”, “forecast”, “design”, “goal” or negative versions thereof and other similar expressions.

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 year ended December 31, 2022.

Additional Information

For more information about the Company’s Q4 and full year 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
T: (786) 885-0397
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 Consolidated Balance Sheets
(Expressed in United States Dollars, in thousands, except share amounts)
  Year Ended
  December 31, 2022December 31, 2021
Cash$80,640 $154,342 
Accounts receivable, net 8,949  7,413 
Inventory 115,053  93,363 
Prepaid expenses, deposits, and other current assets 8,885  10,949 
Total Current Assets 213,527  266,067 
Property, plant, and equipment, net 326,918  275,222 
Intangible assets, net 938,727  978,915 
Right-of-use assets - operating, net 137,368  88,721 
Right-of-use assets - finance, net 44,762  17,527 
Goodwill 94,108  229,910 
Deposits and other assets 8,470  3,550 
TOTAL ASSETS $1,763,880 $1,859,912 
Trade payables$28,533 $26,983 
Accrued liabilities 26,238  32,724 
Lease liabilities - operating - current portion 8,176  4,195 
Lease liabilities - finance - current portion 10,049  3,185 
Contingent consideration - current portion 63,429  39,868 
Purchase consideration payable 2,849  812 
Income tax payable 46,006  28,915 
Debts payable - current portion 40,523  8,112 
Accrued interest payable - current portion 3,191  7,542 
Total Current Liabilities 228,994  152,336 
 Deferred tax liabilities, net 68,523  70,081 
 Lease liabilities - operating - non-current portion 134,715  87,767 
 Lease liabilities - finance - non-current portion 24,693  9,406 
 Construction finance liabilities 36,181  - 
 Contingent consideration - non-current portion 26,661  145,654 
 Debts payable - non-current portion 158,820  125,746 
 Senior secured notes, net of debt issuance costs 244,682  245,408 
 Accrued interest payable - non-current portion 4,763  3,451 
 Other long term liabilities 524  - 
TOTAL LIABILITIES  928,556  839,849 
Commitments and contingencies  
Shareholders' equity  
 Multiple Voting Shares - no par value, unlimited authorized. Issued and outstanding - 3,696,486 shares -  - 
 Subordinate, Restricted, and Limited Voting Shares - no par value, unlimited authorized. Issued and outstanding - 60,909,492 and 56,337,175 shares, respectively -  - 
 Exchangeable Shares: no par value, unlimited authorized. Issued and outstanding - 6,044,339 and 7,368,285 shares, respectively -  - 
 Additional paid-in capital 1,349,713  1,289,827 
 Treasury stock - 645,300 and 568,300 shares, respectively (8,987) (7,828)
 Accumulated other comprehensive income 3,266  3,266 
 Accumulated deficit (510,668) (265,202)
 Equity of Ayr Wellness Inc. 833,324  1,020,063 
 Noncontrolling interest 2,000  - 
TOTAL SHAREHOLDERS' EQUITY  835,324  1,020,063 

Ayr Wellness Inc.
Unaudited Consolidated Statements of Operations
(Expressed in United States Dollars, in thousands, except per share amounts)
  Three Months Ended Year Ended
  December 31, 2022
 December 31, 2021
  December 31, 2022
 December 31, 2021
Revenues, net of discounts$124,623 $111,769  $465,618 $357,608 
Cost of goods sold excluding fair value items 69,501  58,079   268,957  175,646 
Incremental costs to acquire cannabis inventory in business combinations  -  2,453   6,216  43,864 
Cost of goods sold 69,501  60,532   275,173  219,510 
Gross profit 55,122  51,237   190,445  138,098 
Operating expenses     
 Selling, general, and administrative 67,188  47,524   222,092  144,444 
 Impairment of goodwill 148,531  -   148,531  - 
 Depreciation and amortization 14,777  13,734   56,856  40,659 
 Acquisition expense 852  3,837   5,991  9,002 
 Gain on sale of assets -  -   (8) - 
Total operating expenses 231,348  65,095   433,462  194,105 
Loss from operations (176,226) (13,858)  (243,017) (56,007)
Other income (expense), net     
 Share of loss on equity investments -  -   -  (32)
 Fair value gain on financial liabilities 29,649  52,947   63,088  83,759 
 Interest expense, net (8,395) (5,698)  (30,575) (16,550)
 Interest income 223  43   275  204 
 Other, net (74) (20)  120  935 
Total other income, net 21,403  47,272   32,908  68,316 
Income (loss) before income taxes and noncontrolling interests (154,823) 33,414   (210,109) 12,309 
Income taxes     
 Current tax provision (13,223) (15,834)  (46,934) (45,820)
 Deferred tax benefit (570) 6,206   1,558  16,559 
Total income taxes (13,793) (9,628)  (45,376) (29,261)
Net loss before noncontrolling interest (168,616) 23,786   (255,485) (16,952)
 Net loss attributable to noncontrolling interest (2,210) -   (10,019) - 
 Net loss attributable to Ayr Wellness Inc.$(166,406)$23,786  $(245,466)$(16,952)
Basic and diluted net loss per share$(2.40)$0.35  $(3.58)$(0.30)
Weighted average number of shares outstanding (basic and diluted) 69,357  67,352   68,635  57,329 

Ayr Wellness Inc.
Unaudited Consolidated Statements of Cash Flows
(Expressed in United States Dollars, in thousands)
 Year Ended
 December 31, 2022
 December 31, 2021
Operating activities  
Net loss before noncontrolling interest$(255,485)$(16,952)
Adjustments for:  
  Fair value gain on financial liabilities (63,088) (83,759)
  Stock-based compensation 46,115  27,155 
  Stock-based compensation - related parties 707  - 
  Depreciation and amortization 21,050  8,125 
  Amortization on intangible assets 71,789  50,709 
  Impairment of goodwill 148,531  - 
  Share of loss on equity investments -  32 
  Gain on disposal of equity investments -  (178)
  (Gain) loss on disposal of property, plant, and equipment (8) 50 
  Incremental costs to acquire cannabis inventory in a business combination 6,216  43,864 
  Deferred tax benefit (1,558) (16,559)
  Amortization on financing costs 2,292  1,744 
  Amortization on financing premium (3,018) (402)
Changes in operating assets and liabilities, net of business combinations: -  
  Accounts receivable (989) (3,916)
  Inventory (18,235) (50,956)
  Prepaid expenses, deposits, and other current assets 1,833  (2,326)
  Trade payables (7,087) (1,430)
  Accrued liabilities 92  7,943 
  Accrued interest payable (2,685) 1,446 
  Lease liabilities - operating 2,272  1,912 
  Income tax payable 17,091  5,717 
Cash used in operating activities (34,165) (27,781)
Investing activities  
  Purchase of property, plant, and equipment (62,497) (91,630)
  Capitalized interest (14,927) (8,373)
  Proceeds from the sale of assets, net of transaction costs 31,433  - 
  Cash paid for business combinations and asset acquisitions, net of cash acquired (11,546) (92,270)
  Cash paid for business combinations and asset acquisitions, bridge financing -  (22,750)
  Cash paid for business combinations and asset acquisitions, working capital (2,205) (4,359)
  Payments for interests in equity accounted investments -  (82)
  Cash received in disposal of equity investment -  1,000 
  Payments made by related corporation -  135 
  Purchase of intangible asset (4,000) - 
  Cash received (paid) for bridge financing 70  (1,200)
  Deposits for business combinations, net of cash on hand (2,825) (100)
Cash used in investing activities (66,497) (219,629)
Financing activities  
  Proceeds from exercise of warrants -  55,692 
  Proceeds from exercise of options 300  315 
  Proceeds from financing transaction, net of financing costs 27,600  148,646 
  Proceeds from equity offering, net of expenses -  118,052 
  Proceeds from issuance of notes payable, net of financing costs 51,713  - 
  Payments of financing costs -  (2,142)
  Payment for settlement of contingent consideration (10,000) - 
  Deposits paid for financing lease and note payable (924) - 
  Tax withholding on stock-based compensation awards (5,258) (28,536)
  Repayments of debts payable (17,924) (8,749)
  Repayments of lease liabilities - finance (principal portion) (10,117) (6,949)
  Repurchase of Equity Shares (8,430) (1,815)
Cash provided by financing activities 26,960  274,514 
Net (decrease) increase in cash (73,702) 27,104 
Cash, beginning of the period 154,342  127,238 
Cash, end of the period$80,640 $154,342 
Supplemental disclosure of cash flow information:  
Interest paid during the period, net 49,820  14,244 
Income taxes paid during the period 30,915  41,303 
Non-cash investing and financing activities:  
Recognition of right-of-use assets for operating leases 54,396  68,578 
Recognition of right-of-use assets for finance leases 32,444  18,576 
Issuance of promissory note related to business combinations 16,000  - 
Issuance of Equity Shares related to business combinations and asset acquisitions 6,352  576,196 
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  - 
Repurchase of Equity Shares -  7,193 
Cancellation of Equity Shares 78  - 
Capital expenditure disbursements for cultivation facility 8,402  - 

Ayr Wellness Inc.
Unaudited Consolidated Adjusted EBITDA and Gross Profit Reconciliation
(Expressed in United States Dollars, in thousands)
    Three Months EndedYear Ended
    December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 
(In thousands)   $ $ $ $ 
Loss from operations (GAAP)   (176,226)(13,859)(243,017)(56,007)
Incremental costs to acquire cannabis inventory in a business combination - 2,453 6,216 43,864 
Interest (within cost of goods sold "COGS")  1,224 486 4,199 1,408 
Depreciation and amortization (from statement of cash flows) 25,284 21,010 92,839 58,834 
Acquisition costs   852 3,837 5,991 9,002 
Stock-based compensation, non-cash  17,374 6,767 46,822 27,155 
Impairment of goodwill   148,531 - 148,531 - 
Start-up costs1   3,016 3,594 12,457 10,031 
Other2   5,958 1,848 12,794 3,688 
Loss (gain) on sale of assets   - - (8)- 
    202,239 39,995 329,841 153,982 
Adjusted EBITDA (non-GAAP)   26,013 26,136 86,824 97,975 
1 These are set-up costs to prepare a location for its intended use. Start-up costs are expensed as incurred and are not indicative of ongoing operations  
2 Other non-core costs including non-operating adjustments, severance costs and non-cash inventory write-downs   
    Three Months EndedYear Ended
    December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 
(In thousands)   $ $ $ $ 
Gross profit (GAAP)   55,122 51,237 190,445 138,098 
Incremental costs to acquire cannabis inventory in a business combination - 2,453 6,216 43,864 
Interest (within COGS)   1,224 486 4,199 1,408 
Depreciation and amortization (within COGS)  10,507 7,276 35,982 18,175 
Start-up costs (within COGS)   747 1,875 3,900 5,709 
Other (within COGS)   2,883 - 7,766 - 
Adjusted Gross Profit (non-GAAP)  70,483 63,327 248,508 207,254 

i Includes pending M&A and excludes Ayr granted but unvested service-based LTIP shares totaling 5.3 million.

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