Ayr Wellness Reports Fourth Quarter and Full Year 2022 Results | MarketScreener

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 Q4/Q4% Change Q4/Q3Revenue$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 Y/YRevenue$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 Outlook 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, 2021ASSETS Current 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 Non-current 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 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Current 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 Non-current 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 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,763,880 $1,859,912 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.