Jonathan Sandelman, founder, chairman and CEO of Ayr, said, “We have made excellent progress this year to complete major capex projects and receive regulatory approvals across our footprint. We will now unlock the revenue streams from these various assets going forward – including the start of adult use sales in New Jersey and Boston next month. We invested heavily in these assets ahead of the revenue benefits which has temporarily reduced our operating margins, however we expect these investments to put our forward earnings power in a much stronger position and anticipate improvements to both our top and bottom line in the second half of 2022 as these assets come online and begin to ramp.
“It has been well-telegraphed by our peers that Q1 was a challenging period for the industry. However, we have maintained or even increased retail market share across most of our footprint despite this challenging backdrop, while also increasing wholesale revenue.
“The foundation for our business is set, and the investments we have made into our people, our customers, our technology infrastructure, and our retail and cultivation processes are now set to bear fruit. It has been a long journey that has required incredible patience, but as our assets turn on and ramp in Q3 and Q4, we believe we are at the inflection point we’ve been planning for the past 18 months.”
First Quarter Financial Highlights ($ in millions, excl. margin items)
| Q1 2021 | Q4 2021 | Q1 2022 | % Change Q1/Q1 | % Change Q1/Q4 | |
| Revenue | $58.4 | $111.8 | $111.2 | 90.4% | -0.5% |
| Adjusted Gross Profit1 | $34.2 | $63.3 | $57.9 | 69.3% | -8.5% |
| Operating Loss | $(8.4) | $(13.9) | $(21.1) | NA | NA |
| Adjusted EBITDA1 | $18.4 | $26.1 | $19.5 | 6.0% | -25.3% |
| Adjusted EBITDA Margin1 | 31.5% | 23.3% | 17.5% | -1,400bps | -580bps |
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 reconciliation table appended to this release.
First Quarter and Recent Highlights
Northeast On May 12, Ayr received its final license to sell adult-use cannabis in the heart of Boston’s Back Bay, the company’s first adult-use dispensary in Greater Boston. Ayr expects the dispensary to open in June.Earlier this week, the New Jersey Cannabis Regulatory Commission approved the company for adult-use cannabis sales for all three of its retail locations, which is the maximum allowable dispensaries under current state law.Southwest On May 18, Ayr completed the first sale from its new 80,000 square foot Phoenix cultivation facility. Concurrently, the Company announced the launch of its national pre-roll brand, STiX Pre-Roll Co. in Arizona.Ayr’s flower brand, Kynd, maintained its #1 market position in Nevada per BDSA.Florida The company opened two new dispensaries during the first quarter and an additional two stores in April and May, bringing Ayr’s total footprint to 47 dispensaries across the state.Launched Entourage vapes, one of the company’s 10 national brands, Kynd premium flower, and STiX in all 47 Florida dispensaries.M&A Highlights
Closed acquisition of Cultivauna, LLC, the owner of Levia branded cannabis infused seltzers and water-soluble tinctures, on Feb. 15, 2022.Signed a consolidating management services agreement with Tahoe Hydroponics, one of Nevada’s top cultivators of high-quality cannabis flower, and NV Green, Inc., producers of leading concentrates, on February 1, 2022, pursuant to the previously announced definitive agreement signed in July 2021.Closed acquisition of Herbal Remedies Dispensaries, LLC, an operator of two licensed dispensaries in Illinois, on May 25, 2022.Financing and Capital Structure
The company ended the quarter with a cash balance of $78.7 million.At March 31, 2022, there were approximately 70.0 million fully diluted shares outstanding based on a treasury method calculation as of that date.iDuring the first quarter, the company deployed $33.2 million of capital expenditures and anticipates an additional $37 million of capital expenditures for the remainder of 2022.During the first quarter, the company secured a $26.2 million mortgage loan at a 4.625% interest rate. This loan represents the first monetization of Ayr’s $180 million real estate portfolio. Subsequent to quarter-end, Ayr closed on a second real estate backed financing, with principal of $25.8 million and a 5.5% interest rate. These financings combined have unlocked $52 million of capital for the company with an industry leading blended interest rate of 5.06%._________________
i Excludes Ayr granted but unvested LTIP shares totaling 7.7 million.
Outlook
To date in 2022, the company has made progress with respect to the milestones that underpin its Q4 2022 expectations. As such, Ayr continues to anticipate an annualized run-rate of $250 million of Adjusted EBITDA, $100 million of operating income and $800 million of revenue for Q4 2022.
The company’s expectations for future results are based on the assumptions and risks detailed in its MD&A for the period ended March 31, 2022 as filed on SEDAR.
Conference Call
Ayr CEO Jonathan Sandelman, Co-COO Jennifer Drake, and CFO Brad Asher will host the conference call, followed by a question-and-answer period.
Conference Call Date: Thursday, May 26, 2022
Time: 8:30 a.m. Eastern time
Toll-free dial-in number: (800) 319-4610
International dial-in number: (604) 638-5340
Conference ID: 10018928
Please call the conference telephone number 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 [email protected].
The conference call 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, May 26, 2022.
Toll-free replay number: (855) 669-9658
International replay number: (412) 317-0088
Replay ID: 8845
Financial Statements
Certain financial information reported in this news release is extracted from Ayr’s Unaudited Interim Condensed Consolidated Financial Statements and MD&A for the three months ended March 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 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, 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, Adjust Gross Profit and other disclosures concerning non-GAAP measures are provided in our MD&A for the three months ended March 31, 2022 and 2021.
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