NEW YORK – Ascend Wellness Holdings Inc., a vertically integrated multi-state cannabis operator focused on bettering lives through cannabis, reported its financial results for the three months ended June 30, 2024 (Q2 2024). Financial results are reported in accordance with U.S. generally accepted accounting principles (GAAP) and all currency is in U.S. dollars.
Q2 2024 Financial Highlights
- Gross revenue increased 14.3% year-over-year and decreased 0.9% quarter-over-quarter to $172.7 million.
- Net revenue, which excludes intercompany sales of wholesale products, increased 15.1% year-over-year and decreased 0.6% quarter-over-quarter to $141.5 million.
- Retail revenue increased 3.6% year-over-year and decreased 2.2% quarter-over-quarter to $93.1 million.
- Gross wholesale revenue increased 30.1% year-over-year and 0.8% quarter-over-quarter to $79.6 million. Wholesale revenue, net of intercompany sales, increased 46.2% year-over-year and 2.7% quarter-over-quarter to $48.5 million.
- Net loss of $21.8 million during the quarter compared to net income of $0.8 million in Q2 2023.
- Adjusted EBITDA was $28.3 million, representing a 20.0% margin. Adjusted EBITDA1 increased 32.9% and Adjusted EBITDA Margin1 improved 269 basis points year-over-year. Adjusted EBITDA declined 12.7% quarter-over-quarter and Adjusted EBITDA Margin1 was down 278 basis points sequentially.
- As of June 30, 2024, cash and cash equivalents were $83.7 million and net debt was $225.6 million.
- Generated approximately $32 million of cash flows from operations, representing the sixth consecutive quarter of positive operating cash flow. Excluding approximately $18 million in state and federal tax refunds, cash flow from operations was approximately $14 million.
- Generated approximately $27 million of free cash flow, or $9 million excluding state and federal tax refunds.
Business Highlights
- Successfully refinanced $215 million of the existing term loan with a new, oversubscribed Senior Secured Note facility.
- Opened two dispensaries in Q2 2024, including Cranberry, Pennsylvania and Wharton, New Jersey (a relocation from Montclair, New Jersey).
- Two partner stores were opened in the Greater Chicago area, bringing total number of consolidated and operating dispensaries to 38.
- Began selling AWH brands of products in Maryland, produced by our production partner.
- Enhanced governance practices with the appointment of Julie Francis as a new Independent Director.
- Subsequent to the quarter, AWH received dual-use certificates of operation for the stores that AWH operates in Ohio, enabling the start of non-medical customer sales.
Management Commentary
“As I reflect on the quarter, I am grateful to our stakeholders, including our valued patients and customers, our dedicated employees, and our supportive lenders and investors. In Q2, we achieved robust year-over-year growth for several of our key metrics, including a 15% increase in revenue and a 33% rise in Adjusted EBITDA1,” said John Hartmann, Chief Executive Officer. “This growth was led by an impressive increase in the number of wholesale customers, the opening of seven retail dispensaries4, and the acquisition of four dispensaries in Maryland which later began selling adult-use. In addition to the growth compared to last year, the team delivered in generating positive cash flow from operations for the sixth consecutive quarter and the successful refinancing of our term loan, which transaction included securing the option to refinance the remaining $60 million. While I am proud of the team for delivering these achievements, we must focus on driving continuous improvement across the business,” continued Hartmann.
“Although we delivered solid growth compared to last year, our performance this quarter did not meet our expectations. Consequently, we are actively managing costs and optimizing business functions to address this shortfall. In light of increased retail competition in select markets and the recent profitability trends of our wholesale business, we are revising our full-year guidance. We now anticipate net revenue to increase between 11 and 13% and Adjusted EBITDA to increase between 5 and 10% for the full year 2024 compared to the prior year. Additionally, we now anticipate Cash from Operations to be above $40 million, excluding the benefit of tax refunds. Despite recent challenges, we believe that with our strong asset base, combined with the commencement of non-medical sales in Ohio, our planned additional dispensaries, and purposeful cost actions we can achieve these significant year-over-year growth figures,” said Mark Cassebaum, Chief Financial Officer.
Q2 2024 Financial Overview
Net revenue increased 15.1% year-over-year and decreased 0.6% quarter-over-quarter. Sequential declines were driven by retail headwinds in Illinois, New Jersey, and Massachusetts, partially offset by retail growth in Pennsylvania and Maryland, and wholesale sales improvements in New Jersey, Pennsylvania, and Massachusetts.
Total retail revenue in the second quarter of 2024 was $93.1 million, representing a 3.6% increase compared to Q2 2023 driven by the opening of seven new stores, the acquisition of four dispensaries in Maryland which began adult-use sales in July 2023, and the addition of two partner stores. This represents a 2.2% decrease in retail revenue compared to the prior quarter driven by declines in Illinois, New Jersey, and Massachusetts, which were partially offset by new store additions and sales improvements in Pennsylvania and sales improvements in Maryland and Ohio.
Gross wholesale revenue was $79.6 million, a 0.8% sequential increase, driven by an increase in third-party sales in Massachusetts and New Jersey and intercompany sales in Pennsylvania, partially offset by declines in intercompany sales in Michigan. Net wholesale revenue, excluding intercompany sales, increased 2.7% sequentially to $48.5 million, driven by increases in third-party wholesale sales in Massachusetts and New Jersey.
Q2 2024 gross profit was $41.6 million, or 29.4% of revenue, compared to $52.0 million, or 36.5% of revenue, in the prior quarter. Q2 2024 Adjusted Gross Profit was $53.0 million, or 37.5% of revenue, compared to $62.4 million, or 43.8% of revenue, in the prior quarter. Adjusted Gross Profit excludes depreciation and amortization included in cost of goods sold, equity-based compensation included in cost of goods sold, and non-cash inventory adjustments. Adjusted Gross Profit Margin decreased 635 basis points sequentially, primarily driven by declines in wholesale profitability in Massachusetts and Illinois, followed by declines in retail profitability in Massachusetts, Illinois, and New Jersey.
Total Q2 2024 general and administrative (“G&A”) expenses were $43.1 million, compared to $49.5 million in the prior quarter. Total G&A expenses as a percentage of revenue improved from 34.7% of revenue in the prior quarter to 30.4% of revenue. The prior quarter’s expenses included several one-time cost items that did not recur. Additionally, this quarter’s G&A was further reduced by a decrease in labor and related expenses.
Net loss for the second quarter of 2024 was $21.8 million compared to net income of $0.8 million in Q2 2023. Q2 2023 benefited from the recognition of a one time Employee Retention Tax Credit.
Adjusted EBITDA, which adjusts for tax, interest, depreciation, amortization, equity-based compensation, and other items deemed one-time or non-recurring in nature, was $28.3 million in Q2 2024. This represents a 32.9% increase year-over-year and a 12.7% decrease quarter-over-quarter. The declines were driven by the aforementioned gross profit decreases being partially offset by a reduction in labor expenses. Adjusted EBITDA Margin of 20.0% improved 269 basis points compared to prior year, but decreased 278 basis points compared to the prior quarter. The sequential decline was driven by the aforementioned gross profit headwinds, which were partially offset by a reduction in labor and related expenses.
Non-GAAP Financial Information
This press release includes certain non-GAAP financial measures as defined by the United States Securities and Exchange Commission, including Adjusted Gross Profit, Adjusted Gross Margin, Adjusted EBITDA, and Adjusted EBITDA Margin. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measure calculated and presented in accordance with GAAP are included in the financial schedules attached to this press release. This information should be considered as supplemental in nature and not as a substitute for, or superior to, any measure of performance prepared in accordance with GAAP.
About Ascend Wellness Holdings Inc.
AWH is a vertically integrated operator with assets in Illinois, Maryland, Massachusetts, Michigan, Ohio, New Jersey, and Pennsylvania. AWH owns and operates state-of-the-art cultivation facilities, growing award-winning strains and producing a curated selection of products for retail and wholesale customers. AWH produces and distributes its in-house Common Goods, Simply Herb, Ozone, Ozone Reserve, and Royale branded products.
Additional information relating to the Company’s second quarter 2024 results is available on the Investor Relations section of AWH’s website, the SEC’s Electronic Data Gathering, Analysis and Retrieval system (EDGAR) and Canada’s System for Electronic Document Analysis and Retrieval + (SEDAR+).
