Ascend Wellness Sales Decline From Third Quarter

Ascend Wellness Holdings, Inc. (CSE: AAWH.U) (OTCQX: AAWH) reported its financial results for the fourth quarter and full year ended December 31, 2021. In the fourth quarter, net revenue, which excludes intercompany sales of wholesale products, decreased 6.2% quarter-over-quarter to $88.5 million. The sequential revenue decline was driven by lower realized wholesale price per unit in Illinois and lower wholesale volumes sold in Illinois and Massachusetts, partially offset by higher wholesale volumes sold in Michigan and New Jersey and increased retail traffic.

Ascend said that despite the sequential decline, net revenue increased 63% year-over-year due to the addition of eight new dispensaries in the year, increased traffic at existing dispensaries, and an increased volume of products sold in the wholesale business, enabled by 100,000 square feet of canopy expansions throughout 2021.

The fourth quarter net loss was $16.5 million during the quarter representing a sequential decline. This was primarily driven by a decline in gross profit sequentially and an increase in stock-based compensation to support hires required to help scale the business, partially offset by reduced tax and interest expense.

Abner Kurtin, CEO and Founder of AWH said, “2021 was a year marked by record sales and the achievement of many significant milestones. I am proud of the team for everything we have accomplished throughout the year. We pursued an aggressive expansion plan, opening six stores, acquiring two stores, and adding 100,000 square feet of canopy, which enabled us to achieve annual revenue growth of more than 130%. Although competitive conditions arose in the fourth quarter, I remain confident in the longer term potential of the industry. Q4 2021 through the first half of 2022 represent a bit of a pause for Ascend as we bring new assets online. As we enter 2022, we are working to optimize our asset base, improve our market positioning, and prepare for the highly-anticipated New Jersey adult-use market.”

Full Year 2021 Financial Overview

Net revenue, which excludes intercompany sale of wholesale products, increased 131.3% year-over-year to $332.4 million, driven by the addition of eight new dispensaries throughout the year, increased traffic at existing dispensaries, and an increased volume of products in the wholesale business.

Net loss attributable to AWH for 2021 was $122.7 million, primarily driven by a $32.0 million non-cash interest expense related to the Company’s IPO completed in May 2021. This non-cash interest expense largely consisted of a $27.4 million charge related to the beneficial conversion feature of the historical Real Estate Preferred Units that converted in the IPO. Additionally, the net loss was driven by elevated interest expense related to one-time prepayments of legacy loans, write-offs of unamortized deferred financing costs related to the debt refinancing, and $41.7 million of tax expense, compared to $18.7 million in 2020.

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Master's degree in Business Journalism from New York University.

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