Ayr Wellness Archives - Green Market Report

StaffOctober 12, 2022
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The Daily Hit is a recap of cannabis business news for Oct. 12, 2022.

ON THE SITE

SNDL Agrees to $7 Million IPO Settlement

A settlement has been reached in the case of cannabis company Sundial Growers, which now calls itself SNDL (OTC: SNDL). The $7 million settlement is the result of a class action suit that was led by David Draiman, singer for the heavy metal band Disturbed, which accused SNDL of not disclosing a product mold issue ahead of its $143 million initial public offering. Read more here.

Cannabis Rescheduling Discussion Moves Behind Closed Doors

President Joe Biden’s surprise order last week that two of his biggest federal agencies “expeditiously” undertake a review of marijuana’s illegality as a Schedule 1 controlled substance provided more questions than answers for many in the cannabis trade. Green Market Report spoke with the Brookings Institution’s John Hudak to learn more about what Biden’s legal options are for rescheduling – or descheduling – cannabis. Read more here.

TerrAscend Closes $45.5 Million in Debt Financing

TerrAscend Corp. (CSE: TER) (OTCQX: TRSSF), along with its subsidiaries in New Jersey and Maryland, closed a $45.5 million debt financing agreement with commercial real estate lender Pelorus Equity Group. Proceeds from the loan will support TerrAscend’s ongoing growth initiatives. Read more here.

IN OTHER NEWS

Ayr Wellness

Ayr Wellness (CSE: AYR.A) (OTC: AYRWF), a vertically integrated U.S. multistate cannabis operator, has named consumer packaged goods and retail industry veteran David Goubert to serve as president to oversee the company’s operational and commercial functions, including production, supply chain, retail, wholesale, and marketing. Read more here.

California crackdown on illicit cannabis farms

California eradicated nearly one million illegally cultivated cannabis plants and the seizure of more than 200,000 pounds of illegally processed cannabis as part of the California Department of Justice’s annual Campaign Against Marijuana Planting program. Read more here.


Adam JacksonAugust 18, 2022
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Ayr Wellness Inc. (OTCQX: AYRWF) hiked its outlook for the year on Thursday despite posting results that missed expectations — as sales slip and losses rise. The multi-state operator reported financial results for the first quarter ending June 30, 2022

Ayr reported approximately $110.1 million in revenue during the period, up 20.6% versus the same period last year; and a loss of 1% sequentially — below the Yahoo Finance Average analyst estimate for revenues of $114.81 million.

The company also reported a second-quarter net loss of $40.25 million, up 77% sequentially; versus a net loss of $37.4 million in the same period last year. The earnings were a loss of $0.56 per share versus a loss of $0.11 cents per share in the previous quarter.

“Our second half growth will be slower than previously expected, but the earnings power of the business remains outstanding,” said CEO Jonathan Sandelman. “We continue to make investments in people and processes, while remaining prudent through these turbulent economic times.”

Ayr reported a gross profit of $40.3 million, versus a gross profit of $45.5 million in the first quarter. Adjusted EBITDA was $19.6 million, down 28.5% from $27.4 million in the same period last year.

The company ended the quarter with a cash balance of $116.7 million and closed $81.5 million of real estate financing transactions, bringing the year-to-date total to $108 million with an annualized blended cost of capital of 7.8%.

East of the Mississippi

In May, the New Jersey Cannabis Regulatory Commission approved Ayr for adult-use cannabis sales for all three of its retail locations there — the maximum amount of dispensaries permitted under current state law.

The company since then has seen new revenue stream from both New Jersey and Boston; after Ayr received the green light to sell adult-use cannabis in Boston’s Back Bay, the company’s first adult-use dispensary in the neighborhood.

To the South, Ayr added two more Florida dispensaries to their 50 stores across the state.

Based on the second quarter results, “coupled with an uncertain macroeconomic backdrop,” Ayr also updated their guidance for the rest of the year; expecting revenue, adjusted EBITDA and operating income to grow around 10% sequentially by the third quarter, followed by “an acceleration in the pace of sequential growth in Q4 2022.”

“With our core operating footprint in place, the vast majority of our capex behind us, and a strong, $117 million cash position on our balance sheet,” Sandelman said, “we believe that we are well-placed to weather this economic environment and emerge stronger on the other side.”


Debra BorchardtJuly 28, 2022
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Get ready for some cannabis companies to report boosted earnings as revenues got juiced from New Jersey adult-use sales. Cantor Fitzgerald analyst Pablo Zuanic thinks that the addition of this market could drive growth in second-quarter sales for several companies in a report he issued on Thursday. While there hasn’t been any official data from New Jersey on the number of sales, which began April 21, Zuanic thinks it could be as high as $60 million in the second quarter. 

The first month was reported to be $24 million and since that time the store count has grown from 12 to 17. The SKUs at the stores have jumped from  283 to 1,322 as more products get added. Looking at the landscape the companies poised to benefit the most are TerrAscend (OTC: TRSSF) with three dispensaries in NJ selling recreational cannabis as does Ayr Wellness (OTC: AYRWF). Next with two stores under their belts are Verano (OTC: VRNOF), Acreage Holdings (OTC: ACRHF), Columbia Care (OTC: CCHWF), Curaleaf (CURLF), and  Green Thumb Industries (OTC: GTBIF). Ascend Wellness (OTC: AAWH) taps in at one store, but its Montclair dispensary was been approved to start rec sales, however, Montclair won’t allow recreational sales. 

Apothocarium stores are owned by TerrAscend

Brick & Mortar Wins

In order to make his sales estimates, the analyst calculated the number of days during the second quarter that these companies could open their stores for business. Then he looked at the hours the stores were open and the market share that the operators had. He reviewed the online menus to determine SKU counts for the stores and further drilled down to in-store brands.

“If we define market share based on opening hours (prorated for when stores began rec sales), in 2Q22 Green Thumb and Verano would have had 19% share, TerrAscend 18%, Acreage 15%, Curaleaf 11% (its second rec store opened 5/24), Ascend Wellness 8%, Columbia Care 6% (extended rec opening hours from early June), and AYR 5% (its stores opened for rec on 6/14),” wrote the analyst. “If we define it based on SKU count, Green Thumb would have had 24%, Verano 23%, Ascend 17%, TerrAscend 11%, Curaleaf 9%, Columbia Care 3%, and AYR 2%.”

However, the geography and cannabis market in the state splits into three zones – North, Central, and South.  He wrote in his report, “There are more stores in the northeastern part of NJ while the Curaleaf store in Bellmawr initially had minimal competition and benefited from incoming Philly traffic. We should also factor in location (next to a high-traffic road/ highway) and parking availability. Although this report is not a 2Q preview, we would estimate that Green Thumb and Verano had ~18% share in 2Q; Curaleaf, Acreage, and Ascend 15%; TerrAscend (parking is an issue) 10%; and Columbia Care and AYR the rest (9% combined).”

The analyst then got out his calculator and wrote, “On the base of 1Q22 reported sales (all else equal; again, we are not forecasting total 2Q sales here), this would mean +4.4% for Green Thumb (18% x $60Mn, on a 1Q22 sales base of $242.6Mn); Verano +5.3% ($10.8Mn/$202.2Mn); Acreage +15.8% ($9Mn/$56.9Mn); Curaleaf +2.9% ($9Mn/$313.4Mn); Ascend +10.6% ($9Mn/ $85.1Mn); TerrAscend +12.1% ($6Mn on $49.7Mn); AYR +2.4% ($2.7Mn/$111.2Mn), Columbia Care +2.2% ($2.7Mn/$123.1Mn).”

Brand Power

The analyst went a little further and found that the top five brands in the adult use market accounted for 80% of the total SKUs available. Verano was the winner here with 376 SKUs or 28% of the market share. It was followed by Curaleaf with 321 SKUs and a 24% share, then TerrAscend’s Kind Tree brand came in at 215 SKUs and 16% share. Green Thumb’s Rhythm brand had 6%, and Ascend Wellness’s Ozone brand had 5%.

Vapes had the most SKU’s with Verano leading the pack, while flower came in second  and Curaleaf led that category. Curaleaf led the day for pre-rolls, while Verano mopped up with the edible category. 

In Closing

Most cannabis companies have been complaining about how challenging the cannabis industry has become. Mature markets are flattening out in sales and costs are going up, while prices come down. Consumers are being hit with inflation pressures and there are recession worries on the horizon. The addition of a new market and one that is looking to be a strong one is great news for these companies. Welcome to the Garden State.


Debra BorchardtJune 24, 2022
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Cannabis deal tracker Viridian Capital Advisors is looking at the second half of the year to see what’s in store for the industry. Director of Equity Research Jonathan DeCourcey wrote, “The outlook is bearish for investor returns in the near term as the key catalyst on everyone’s mind, federal legislation, is unlikely to come, and thus valuations will remain depressed for the remainder of the year with further stock declines likely in connection with broader market weakness.” With that said, DeCourcey thinks investors will have to wait until next year for a return to a positive market in the sector. For now, though he has come up with five predictions for cannabis for the back half of 2022. 

Viridian’s Five Predictions are as follows:

  • Federal legislation won’t happen
  • Stock prices will remain depressed
  • Companies may beat earnings estimates
  • California consolidation will continue
  • Smaller companies will outperform larger ones

Despite hopes for a banking bill, it is unlikely that anything will happen in 2022. DeCourcey wrote, “There is insufficient bi-partisan support for Chuck Schumer’s full legislative proposal to pass (requiring 10 Republican votes and full Democrat support) and, as we have said before, the timing is too tight for a stand-alone SAFE Act to be possible this year given the Democrats will first await the Schumer proposal to make the rounds.” Schumer’s proposal is expected to come in August, but that doesn’t give it much time before the midterm elections. 

New legislation could have been the catalyst to jump-start stock valuations. Take that off the table and there isn’t anything really big to move the needle. The overall broader market has been beset with recession fears and interest rate hikes. That also doesn’t help stock prices. However, depressed stock prices could combine next year with strong company earnings and that could lead to a recovery, but those hopes are pushed into 2023. 

Companies struggled with revenues and earnings at the beginning of 2022. Lingering Covid issues, wholesale price declines, and integration issues for newly combined companies caused some strong headwinds. DeCourcey thinks that these challenges are winding down, but cautions that there could be lingering inflation pressures. Still, expectations have been reset and if the New York market actually opens in 2023 then next year could see some strong growth. Plus, companies are going to be able to start reporting New Jersey sales figures, which are looking very good. Those New Jersey numbers could spark some earnings beats and that would be welcome news. 

“The proposed elimination of the California cultivation tax, which we expect to take effect next month, is a game-changer for California cannabis companies reducing the cost of production on outdoor growers by as much as 50%,” said the report. DeCourcey thinks the additional cash will lead to more transactions and motivation for M&A. The improving tax situation could also entice larger MSO’s to come to the market. “For investors, we expect the easier operating conditions and looming consolidation will result in outperforming returns for California-centric stocks in the second half and into next year.”

Finally, the report noted that scale does not necessarily equate to winning. Large companies get the attention, but the smaller and mid-size companies could have better growth potential with the likelihood of getting acquired. Smaller company stocks also outperformed the larger ones by declining by a smaller percentage. Dropping 47% on average versus 55% declines for larger companies. “Our top picks for 2H investment fall within the category of smaller and medium-sized companies. These names include Ascend (OTC: AAWH), AYR Wellness (OTC: AYRWF), Cansortium (CNTMF), Lowell Farms (LOWLF) and Schwazze.”


Debra BorchardtJune 7, 2022
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With just 12 dispensaries open in the state, New Jersey still managed to ring up $24 million in sales in the first month. That’s roughly $5 million a week. According to the New Jersey Cannabis Regulatory Commission, “On the first day of adult-use sales in New Jersey, 12 participating dispensaries sold cannabis and cannabis products to 12,438 recreational cannabis customers for a total gross sale of nearly $1.9 million.” BDSA expects New Jersey to be the third-largest contributor to overall US sales growth by 2026 and is forecast to generate annual revenue of $2.3 billion in total legal cannabis sales.

“We expected sales to be substantial and the data shows that the market is effectively serving both adult-use consumers and patients,” said Jeff Brown, executive director of the New Jersey Cannabis Regulatory Commission. “We continue to monitor inventory and access for patients and are prepared to take enforcement action against any ATC that does not meet the requirements for patient access and supply.” The CRC has approved 102 conditional licenses to date.

Columbia Care

This is sparking the existing operators to keep ramping up as licenses expand. Columbia Care Inc. (NEO: CCHW) (CSE: CCHW) (OTCQX: CCHWF)  said it has started operations in its new, approximately 270,000-square-foot cultivation and production facility in New Jersey. Col-Care has also begun using post-harvest automation equipment and expanded its adult-use shopping hours at both of its Cannabist locations in Deptford and Vineland to the maximum number of hours allotted by the New Jersey Cannabis Regulatory Commission (CRC). The company said it received approval from the New Jersey CRC to do so on May 25, 2022, along with the approval to begin using post-harvest automation equipment. Col-Care said the introduction of this equipment will reduce the “harvest to shelf” time for products, making it easier to meet the rapidly-growing patient and customer demand.

“After ten years of navigating the ever-evolving cannabis industry in various markets, we have so many lessons learned and have been able to bring those to bear in how we approach New Jersey, knowing how it will serve as a model for those east coast states transitioning to adult use in the near term. We are proud of how we managed to scale alongside the demand in the last month and are thrilled to be able to serve more patients, customers, and wholesale partners with our newest cultivation facility and equipment,” said Nicholas Vita, CEO, of Columbia Care. “As always, we owe a debt of gratitude to the CRC as well as local officials and our communities for their support in our efforts to make New Jersey one of the strongest cannabis markets in the world and a beacon for the industry.”
In addition to the new 270,000-square-foot cultivation, manufacturing, and processing facility, Col-Care also operates a 50,000-square-foot facility, located in Vineland. The company has a third retail location in development in New Jersey, which is expected to open later in 2022.

Green Thumb Industries

Green Thumb Industries (OTC: GTBIF) CFO Anthony Georgiadis said on the company’s recent earnings conference call, “New Jersey adult sales kicked off on 4/21 and early results look yearly similar to Illinois circa, January 2020. We just completed a wholesale facility expansion in Paterson. We have a new facility that’s about to break ground. So, long-term, we’re confident in our prospects of being a big player within the wholesale side of the New Jersey market.” The company did acknowledge the lack of products on the adult-use side of the store versus the medical side, but that is due to the state regulators’ preference to remain focused on the medical patients. CEO Ben Kovlar said on the same call, “There’s a lot of demand for this product. If there wasn’t, there would not be people lined up around the corner at these stores in New Jersey. So that’s what gives us a lot of conviction. There ends up being a lot of upside.”

Curaleaf

Curaleaf Holdings, Inc. (OTCQX: CURLF) is another New Jersey company enjoying its expansion efforts. Curaleaf began new adult-use sales at its Edgewater Park on May 25. It’s the company’s second location to sell adult-use cannabis in the Garden State and the 13th adult-use store to be added in the state. “After a successful adult-use launch in April, we are thrilled to expand our adult-use footprint allowing us to serve even more New Jersey consumers,” said Matt Darin, CEO of Curaleaf. “I’d like to thank the Town of Edgewater Park for their partnership and for so graciously welcoming us into the community. Curaleaf is committed to ensuring patients and consumers receive quality products and service as they embark on their cannabis journey.”

Ayr Wellness

Last month, medical operator Ayr Wellness (OTC: AYRWF) got its green light to begin adult-use sales. “We are thrilled to be approved for adult-use sales in New Jersey and to have all three dispensaries cleared simultaneously to open for adult-use,” said Jonathan Sandelman, Founder, Chairman and CEO of Ayr. “To date, Central Jersey has the lowest number of dispensaries per capita, leaving its population under-served compared with the rest of the state. New Jersey is expected to become a highly influential state for the U.S. cannabis industry, and we are honored to help shape the market landscape from its early stages.”  The company is working on opening its first adult-use store.

Debra BorchardtMay 26, 2022
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Ayr Wellness Inc. (OTCQX: AYRWF) reported financial results for the first quarter ending March 31, 2022 with revenue rising 90% to $111.2 million over last year’s $58 million. Sales did slip a tiny bit from the fourth quarter’s revenue of $111.8 million. Ayr is forecasting an annualized run-rate of $250 million of Adjusted EBITDA,$250 million of Adjusted EBITDA, $100 million of operating income, and $800 million of revenue for the fourth quarter of 2022.

The company also trimmed its net losses from $16 million for the first quarter of last year to $9 million. During the first quarter, Ayr said it  deployed $33.2 million of capital expenditures and anticipates an additional $37 million of capital expenditures for the remainder of 2022. The company ended the quarter with a cash balance of $78.7 million.

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.”

Expansion

Earlier this week, the New Jersey Cannabis Regulatory Commission approved Ayr for adult-use cannabis sales for all three of its retail locations, which is the maximum allowable dispensaries under current state law. 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.

Sandelman added, “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.”
During the first quarter, Ayr 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 a 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%.

“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.”


StaffMay 25, 2022
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Ayr Wellness Inc. (CSE: AYR.A)(OTCQX: AYRWF) announced that the New Jersey Cannabis Regulatory Commission approved the Company for adult-use cannabis sales in the Garden State.

“We are thrilled to be approved for adult-use sales in New Jersey and to have all three dispensaries cleared simultaneously to open for adult-use,” said Jonathan Sandelman, Founder, Chairman and CEO of Ayr. “To date, Central Jersey has the lowest number of dispensaries per capita, leaving its population under-served compared with the rest of the state. New Jersey is expected to become a highly influential state for the U.S. cannabis industry, and we are honored to help shape the market landscape from its early stages.”

Ayr currently operates medical dispensaries in Woodbridge, Union, and Eatontown, all located in Central New Jersey, a region of 3.4 million people which until now only had access to two adult-use dispensaries. The Company’s three retail locations are the maximum allowable dispensaries under current state law.

“We are thrilled to be approved for adult-use sales in New Jersey and to have all three dispensaries cleared simultaneously to open for adult-use,” said Jonathan Sandelman, Founder, Chairman and CEO of Ayr. “To date, Central Jersey has the lowest number of dispensaries per capita, leaving its population under-served compared with the rest of the state. New Jersey is expected to become a highly influential state for the U.S. cannabis industry, and we are honored to help shape the market landscape from its early stages.”

“This is a significant milestone for Ayr, and I am so proud of our team for making it a reality,” said Julie Winter, Ayr’s Vice President of Retail Operations in New Jersey. “We look forward to opening our doors to adult-use customers, while continuing to provide excellent service, quality, and choice to our medical patients.”

Adult-use sales in New Jersey officially began five weeks ago. BDSA expects New Jersey to be the third largest contributor to overall US sales growth by 2026, projected to generate an annual revenue of $2.3 billion in total legal cannabis sales.


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