Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ayr Wellness Inc (AYRWF, Financial) is optimistic about the potential reclassification of cannabis from Schedule I to Schedule III, which could significantly benefit the industry.
- The company is well-positioned to capitalize on the adult-use cannabis market in Ohio, Florida, and Pennsylvania, with 77 of its 93 dispensaries located in these states.
- Ayr Wellness Inc (AYRWF) has successfully launched adult-use sales in Ohio, marking a historic moment for the company.
- The company is expanding its cultivation capacity in Florida with a new 100,000 square feet facility in Ocala, expected to double its flower production capacity.
- Ayr Wellness Inc (AYRWF) is focused on improving operations, investing in CPG brands, and enhancing customer experience, which are expected to drive future growth.
Negative Points
- Adjusted EBITDA margins did not meet expectations, coming in below target levels due to various factors including consumer spending trends and wholesale price moderation.
- The company experienced a slight decrease in gross profit and adjusted gross margin due to retail price compression and increased competition.
- Ayr Wellness Inc (AYRWF) reported a loss from operations, which increased compared to the prior quarter and year, driven by gross margin pressure and increased SG&A costs.
- The company faced challenges in New Jersey with retail sales declining due to price compression and increased market competition.
- Ayr Wellness Inc (AYRWF) experienced a decrease in cash balance, primarily due to significant interest and tax payments, impacting its financial flexibility.
Q & A Highlights
Q: What were the most prominent headwinds for margins during the quarter, and what are you seeing with respect to consumer behavior?
A: Brad Asher, CFO, explained that margin pressures were due to price compression and cost inflation, but they expect improvements from cultivation in Florida and better utilization in Massachusetts and Ohio. Consumer spending is affected by modest price compression, which has a compounding effect.
Q: Regarding the new facility in Florida, is the Q2 2025 completion timeline for the first planting or first harvest? Also, how do you plan to improve sales per store?
A: David Goubert, CEO, clarified that the timeline is for the first harvest in Q3 2025. The new facility will help close the gap in flower offerings, improving sales per store by providing indoor flower, which is currently lacking.
Q: What are your expectations for wholesale growth in Ohio, New Jersey, and Massachusetts in the second half of the year?
A: David Goubert, CEO, expects significant wholesale growth in Ohio due to adult-use sales, continued growth in Massachusetts with improved production, and stabilization in New Jersey despite increased competition.
Q: Are you still targeting a 25% EBITDA margin for the full year, or is it a run rate target by year-end?
A: Brad Asher, CFO, stated that the company aims to build back towards a 25% EBITDA margin by the end of the year, acknowledging quarterly fluctuations.
Q: Can you provide more details on the expected growth in Q3, particularly the contribution from Ohio and other markets?
A: David Goubert, CEO, highlighted that Ohio's adult-use launch will be a significant growth driver, along with new store openings in Illinois, Connecticut, and Florida. Wholesale growth is expected mainly from Massachusetts and Ohio.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
