Ayr Wellness (AYR-A) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue was $117.3 million, essentially flat year-over-year and sequentially, with margin pressure from wholesale pricing, inflation, and operational investments.

• Adjusted EBITDA margin declined to 21.9% due to price compression, cost pressures, and operational investments, with management targeting margin recovery in H2 2024.

• Growth catalysts include the launch of adult-use sales in Ohio, anticipated adult-use transitions in Florida and Pennsylvania, and new store openings in Connecticut and Illinois.

• Board leadership transitioned with the resignation of the Executive Chairman and appointment of Louis Karger as Chairman in July 2024.

• Operational focus remains on optimizing cultivation, retail, and CPG brands.

Financial highlights

• Q2 sales: $117.3 million, up 0.5% year-over-year, down 0.6% sequentially.

• Q2 gross profit: $47.2 million, down 7% sequentially and 17% year-over-year; adjusted gross margin at 51.8%.

• Adjusted EBITDA: $25.7 million, down 12.6% year-over-year and 11.7% sequentially; margin at 21.9%.

• Loss from operations: $7.7 million, increased from prior periods.

• Net loss attributable to Ayr Wellness Inc. was $38.8 million for Q2 2024, or $0.34 per share.

• Cash, cash equivalents, and restricted cash at quarter-end totaled $47.5 million.

Outlook and guidance

• Q3 2024 revenue expected to grow low to mid-single digits sequentially, driven by Ohio adult-use rollout and new store openings.

• Adjusted EBITDA margin targeted to rebuild toward 25% by year-end.

• Positive GAAP operating cash flow and free cash flow expected for 2024, assuming elimination of 280E tax liabilities.

• Anticipated completion of new Florida cultivation facility in Q2 2025, with first harvest in Q3 2025.