Ayr Wellness Inc. (CSE: AYR.A, OTCQX: AYRWF) (“Ayr” or the “Company”), a vertically-integrated cannabis multi-state operator (MSO), is reporting financial results for the three months ended March 31, 2021. Unless otherwise noted, all results are presented in U.S. dollars. As of first quarter 2021, the Company is now reporting in US GAAP.

“Q1 2021 represents the early innings of our 2021 strategic transformation, as we successfully closed on our announced acquisitions as scheduled, starting with the February 25th closing of our acquisition of Liberty Health Sciences, adding the fourth largest retail footprint in Florida,” said Jonathan Sandelman, CEO of Ayr Wellness. “We then closed on our Arizona acquisition at the end of March, adding three dispensaries and a large cultivation expansion in the latest adult-use market to ramp-up in the West. Then we quickly followed that by closing our acquisitions in Ohio, and harvesting our first flower in Pennsylvania, which hit the shelves in our stores earlier this month.   We also opened our sixth store in Nevada, the closest dispensary to the Las Vegas airport, just in time for the return of tourism to the state.”

“The results of our successful execution thus far can be seen in our April monthly revenues, which have nearly doubled since January. We expect step function growth across Q2, Q3 and especially Q4 2021, with further milestones reached when additional cultivation projects come on-line and we close our New Jersey acquisition later this summer,” Mr. Sandelman continued.

“We have always invested in building strong foundations for our business. As we expand in seven states, that means 2021 will be a year of investment in our brands. Especially in adult-use markets where merchandising, quality and selection drive consumer behavior, we are putting important resources into elevating and evolving the Ayr Wellness brand. We have partnered with a premier branding company to build the foundations for our national branding strategy – to be cultivators of wellness and creators of wonder with the highest quality flower and a reimagined dispensary design and consumer experience. These investments are expected to drive additional revenue growth in the second half of 2021 and into 2022 and beyond,” Mr. Sandelman concluded.

First Quarter Financial Highlights ($ in millions, excl. margin items; in US GAAP)

 Q1 20201Q4 20201Q1 2021% Change
% Change
Adjusted Gross Profit$16.7$27.5$31.488.4%14.2%
Operating Income/(Loss)$(8.6)$6.7$(8.4)NMNM
Adj. EBITDA$7.8$18.6$18.4136.0%(1.1%)
AEBITDA Margin23.2%38.9%31.5%829 bps-740 bps

1For comparison purposes, Q1 2020 and Q4 2020 have been restated to be consistent with US GAAP. Adjusted EBITDA and Adjusted Gross Profit are non-GAAP measures. See Definition and Reconciliation of Non-GAAP Measures below. For a reconciliation of Operating Loss to Adjusted EBITDA, see reconciliation table appended to this release.

Based on the results to date, management is expecting 2Q21 revenue of approximately $90 million, which reflects growth of over 54% quarter-over-quarter and 218% year-over-year. The Adjusted EBITDA margin on a US GAAP basis is expected to remain in the 30% range in Q2, reflecting the investment in new markets and growth projects that are expected to generate more meaningful revenue in the second half of 2021 and in 2022.

The Company is reiterating its target for 2022 revenue of at least $725 million. On a US GAAP-adjusted basis, it is also reiterating its guidance for 2022 Adjusted EBITDA of $300 million, which is comparable to $325 million on an IFRS basisi.

The Company’s expectations for 2Q21 and 2022 are based on US GAAP reporting and the assumptions detailed in the press release dated March 12, 2021 and attached here for reference.

Ayr Wellness Footprint (Pro-forma)

Population6.9 M9.2 M12.7 M11.7 M21.5 M7.4 M3.1 M72.5 M
Adult Use or MedicalAUAUMedMedMedAUAU4 AU/ 3 Med
Est. 2021 Market Size4$1 B$1 B$1 B$400 M$1.5 B$1 B$800 M$6.7 B
Current → YE 2021
2 → 4132 → 635 → 4223651 → 64
Key Retail MarketsGreater
Central NJPittsburgh
PhoenixLas Vegas
Current → YE 2022 Sq Ft
50K → 140K30K → 105K83K → 253K9K → 67K300K10K → 96K72K554K → 1,033K
Planned 2021-2022 Cap Exp$38 M$15 M$24 M$25 M$24 M$10 M<$1M$136 M

1Includes two co-located AU/Med dispensaries (Somerville and Watertown), one AU-only dispensary in Boston and one Med-only dispensary in Needham
235 currently open, three complete and pending OMMU approval; four are currently under construction
3Source: Arcview, MJBiz Daily, Company estimates

First Quarter Operational Highlights

Nevada Resultsii

  • Average daily retail revenues were over $306,000 in the first quarter; daily transaction volumes of 4,944, with an average ticket of $62 per transaction
  • Retail sales increased 24% year-over-year, driven by a ~26% increase in transaction volumes and ~2% decrease in average ticket
  • Opened sixth dispensary in Nevada, the closest dispensary to the Las Vegas airport
  • Noticeable increase in volume in Nevada market as tourism has begun to return to the state
  • Near completion on 20,000 ft2 processing facility expansion outside of Las Vegas, increasing capacity for manufactured products such as edibles, concentrates and vapes

Massachusetts Results

  • Average daily retail revenues (medical only) increased to nearly $64,000 in the first quarter; daily transaction volumes of ~405, with an average ticket of $157 per transaction
  • Retail sales increased 77% year-over-year, driven by a ~65% increase in transactions and ~7% increase in average ticket
  • Selling to 93 of the state’s 128 adult-use dispensaries, and Ayr remains a leading wholesaler in the state with a #2 share at retail under its Sira Naturals brand according to BDSA
  • Wholesale revenues ramped to $13.8 million in the quarter, growth of 88% year-over-year reflecting the increase in capacity brought on in May 2020
  • Construction underway on 100,000 ft2 new cultivation and production facility in Milford, MA that will add 75,000 ft2 of new canopy to bring Ayr to the maximum capacity allowed under its state license

Pennsylvania Update

  • Ayr successfully completed its first harvest in Pennsylvania and in May began selling Revel branded flower
  • Volume at the two recently opened Ayr Wellness dispensaries continues to ramp, reaching over $700,000 in monthly sales in April; average ticket is $135
  • Three additional dispensaries are scheduled to open later this summer, with a fourth additional dispensary slated to open by year end bringing the total to six

Arizona Update

  • Ayr closed on the acquisition of its Arizona assets on March 23, 2021
  • Construction on the new 80,000 ft2 indoor cultivation facility continues to progress toward year-end completion

Florida Update

  • Ayr closed on the acquisition of Liberty Health Sciences on February 25, 2021
  • Since closing, the Company has opened three additional retail locations, bringing total store count to 35, the fourth largest retail footprint in Florida
  • An additional seven stores are expected to open by the end of the year, bringing total to at least 42
  • Modifications and improvements to the 300,000 ft2 greenhouse facility are underway; cultivation yield has improved 60% in the flower rooms already converted
  • The Company has begun construction of 10 acres of outdoor cultivation, expected to be completed in the third quarter 2021

i Under US GAAP, the majority of leases are considered operating leases and expensed as rent through G&A or capitalized as part of COGS. Under IFRS, all capitalized leases were considered financing leases and expensed as Depreciation and Interest. In 2022, the Company estimates this lease adjustment will be approximately $25 million.
ii Ayr provides operational services to licensed Nevada establishments under Services and Operations Agreements  

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: Wednesday, May 26, 2021
Time: 5:00 p.m. Eastern time
Toll-free dial-in number: (800) 319-4610
International dial-in number: (604) 638-5340

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 MATTIO Investor Relations at IR@mattio.com.

The conference call will be broadcast live and available for replay here.

A telephonic replay of the conference call will also be available after 8:00 p.m. Eastern time on the same day through June 26, 2021.

Toll-free replay number: (855) 669-9658
International replay number: (412) 317-0088
Replay ID: 6971

Financial Statements
Certain financial information reported in this news release is extracted from Ayr’s Consolidated Financial Statements for the quarter ended March 31, 2021 and 2020. Ayr files its annual financial statements on SEDAR and with the SEC. All such financial information contained in this news release is qualified in its entirety by reference to such financial statements.

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 measure.

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, before interest and tax, adjusted to exclude non-recurring items, 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 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 will be provided in our MD&A for the three months ended March 31, 2021.

Forward-Looking Statements

Certain information contained in this news release may be forward-looking statements within the meaning of applicable securities laws. Forward-looking statements are often, but not always, identified by the use of words such as “target”, “expect”, “anticipate”, “believe”, “foresee”, “could”, “would”, “estimate”, “goal”, “outlook”, “intend”, “plan”, “seek”, “will”, “may”, “tracking”, “pacing” and “should” and similar expressions or words suggesting future outcomes. This news release includes forward-looking information and statements pertaining to, among other things, Ayr’s future growth plans. Numerous risks and uncertainties could cause the actual events and results to differ materially from the estimates, beliefs and assumptions expressed or implied in the forward-looking statements, including, but not limited to: anticipated strategic, operational and competitive benefits may not be realized; events or series of events, including in connection with COVID-19, may cause business interruptions; required regulatory approvals may not be obtained; acquisitions may not be able to be completed on satisfactory terms or at all; and Ayr may not be able to raise additional debt or equity capital. Among other things, Ayr has assumed that its businesses will operate as anticipated, that it will be able to complete acquisitions on reasonable terms, and that all required regulatory approvals will be obtained on satisfactory terms and within expected time frames. In particular, there can be no assurance that we will complete the pending acquisitions in or enter into agreements with respect to other acquisitions.

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.