Ascend Increases Q2 Revenue by 15% Sequentially to $97.5 Million

AWH Announces Q2 2022 Financial Results
  • Record Revenue Since Company Inception
  • Q2 2022 Net Revenue Increased 14.6% Compared to Prior Quarter
  • Adjusted EBITDA Margin Expanded Approximately 220 Basis Points Compared to Prior Quarter

NEW YORK, Aug. 15, 2022 /PRNewswire/ – Ascend Wellness Holdings, Inc. (“AWH” or the “Company”) (CSE: AAWH.U) (OTCQX: AAWH), a vertically integrated multi-state cannabis operator focused on bettering lives through cannabis, today reported its financial results for the three months ended June 30, 2022 (“Q2 2022”). Financial results are reported in accordance with U.S. generally accepted accounting principles (“GAAP”) and all currency is in U.S. dollars.

Q2 2022 Financial Highlights

  • Gross Revenue increased 16.2% quarter-over-quarter and increased 20.7% year-over-year, to $117.7 million.
  • Net revenue, which excludes intercompany sale of wholesale products, increased 14.6% quarter-over-quarter and 17.0% year-over-year, to $97.5 million.
  • Retail revenue grew 19.4% quarter-over-quarter to $75.6 million. Gross wholesale revenue grew 11.0% quarter-over-quarter to $42.1 million and wholesale, net of intercompany sales, grew 0.7% to $21.9 million.
  • Net loss decreased to $21.2 million during the quarter, compared to a net loss of $27.8 million in Q1 2022.
  • Adjusted EBITDA1 was $20.9 million, representing a 21.4% margin, a ~220 basis point margin expansion quarter-over-quarter.
  • As of June 30, 2022, cash and cash equivalents were $140.6 million, and net debt2 was $152.7 million.

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1 Adjusted EBITDA/margin and Adjusted Gross Profit/margin are a non-GAAP financial measures. Please see the “GAAP Reconciliations” at the end of this release.

2 Total debt less cash and cash equivalents less unamortized deferred financing costs.

Business Highlights

  • The Company started adult-use sales at its Rochelle Park, New Jersey dispensary on April 21st, with store sales reaching as high as $1.25 million in a single week. Subsequent to quarter end, the Company opened its Fort Lee, New Jersey dispensary for medical sales. The Company expects to begin selling adult-use cannabis at its Montclair, New Jersey store on August 19th, pending approval by the township, followed by adult-use sales in Fort Lee this fall. The Company added 4,000 square feet of canopy in New Jersey for a total of 20,000 square feet of canopy in the state and 217,000 square feet overall.
  • In Q2 2022, AWH opened its East Lansing, Michigan dispensary, which, combined with Fort Lee, New Jersey brings the Company’s current total to 22 operating dispensaries.
  • The Company began construction at its cultivation facility in Smithfield, Pennsylvania. During the remainder of the year, AWH will build out the facility and begin constructing its six planned dispensaries in Pennsylvania.
  • AWH closed on $65 million of the remaining funding available under the accordion feature of its existing Senior Secured Term Loan (the “Loan”), bringing the total debt financing from the Loan to $275 million. This capital will support the Company’s growth and expansion initiatives in PennsylvaniaOhio, and other states.
  • Subsequent to quarter end, the Company announced that it entered into a definitive agreement providing AWH the option to acquire 100% of the equity of Ohio Patient Access (“OPA”), which owns and operates three Ohio dispensaries that are in the process of being built in CincinnatiPiqua, and Sandusky. The addition of OPA’s three dispensaries will increase AWH’s Ohio footprint to five dispensaries, the maximum permitted by the State. The Company also signed two agreements to acquire two dispensary licenses in Illinois from separate sellers. Once closed, the Company would have ten dispensaries in Illinois, which would maximize scale and bring the Company to the state-imposed cap of ten.

Management Commentary

“We are pleased with our financial performance for the quarter, with upwards of 15% revenue growth and operating leverage which drove a 220 basis point increase in Adjusted EBITDA margins,” said Abner Kurtin CEO and Co-Founder.

The key driver of these results was the commencement of adult-use sales at our Rochelle Park, New Jersey dispensary, one of the top performing stores in the state. Ascend is extremely well positioned to benefit from adult-use sales in New Jersey, because of our attractive collection of assets combined with high operating leverage given our focused portfolio.

Abner Kurtin CEO and Co-Founder

Outside of New Jersey, the rest of the business across the portfolio also exceeded expectations. Furthermore, we were pleased to announce important acquisitions in Ohio and Illinois, which bring us to the retail cap in both states, positioning us to be a leader in the Midwest. This growth is supported by one of the top balance sheets in the industry with $141 million of cash and no near term maturities.

Q2 2022 Financial Overview

Net revenue, which excludes intercompany sale of wholesale products, was $97.5 million, representing a 17.0% year-over year increase, primarily driven by new retail stores and higher wholesale volumes sold. Net revenue increased 14.6% quarter-over-quarter, primarily driven by the start of adult-use sales in New Jersey and increases in wholesale volumes and realized pricing in New Jersey and Michigan.

Total retail revenue in the second quarter of 2022 was $75.6 million, which represents a 19.4% increase compared to the prior quarter and was driven by the start of adult-use sales at the Rochelle Park, New Jersey dispensary.

Gross wholesale revenue increased to $42.1 million, an 11.0% sequential increase, driven by growth in intercompany wholesale sales.  Net wholesale revenue increased 0.7% sequentially to $21.9 million, driven by increased pricing and volumes sold in New Jersey and Michigan, partially offset by lower pricing in Illinois and lower volume sold in Massachusetts.

Q2 2022 gross profit was $33.0 million, or 33.8% of revenue, compared to $23.4 million, or 27.6% of revenue, in the prior quarter. The sequential increase was driven by adult use sales in New Jersey; reductions in startup costs as a percentage of revenue; sequential improvements in standalone retail and wholesale gross margins; and an increase in AWH manufactured products sold at AWH retail locations.

Q2 2022 Adjusted Gross Profitwas $44.4 million, or 45.6% of revenue, compared to $36.5 million, or 42.9% of revenue, in the prior quarter. Adjusted Gross Profit1 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 Profit1 margin increased 268 basis points driven by increased pricing in New Jersey, higher wholesale volume throughput in Michigan, and higher intercompany sales as a percentage of wholesale sales.

Total Q2 2022 general and administrative (“G&A”) expenses were $33.6 million, compared to $33.2 million in the prior quarter (excluding litigation settlement). Total G&A expenses as a percentage of revenue decreased from 39.0% of revenue in the prior quarter to 34.4% of revenue as more assets came online.

Net loss attributable to AWH in the second quarter of 2022 was $21.2 million, or a loss of $0.11 per basic and diluted common share, which was primarily driven by operating costs and tax expenses.

Adjusted EBITDA1, which adjusts for tax, interest, depreciation, amortization, equity-based compensation, and other items deemed one-time in nature, was $20.9 million in Q2 2022. This represents a 27.6% increase quarter-over-quarter. Adjusted EBITDA Margin1 of 21.4% represented a 220 basis point increase compared to the prior quarter driven by improved operating leverage as more assets came online.

Non-GAAP Financial Information

This press release includes certain non-GAAP financial measures as defined by the United States Securities and Exchange Commission (“SEC”), 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.

Conference Call and Webcast

AWH will host a conference call on August 15, 2022 at 5:00 p.m. ET to discuss its financial results for the quarter ended June 30, 2022. The conference call may be accessed by dialing (888) 390-0605 with conference ID 06364687. A live audio webcast of the call will also be available on the Investor Relations section of AWH’s website at https://www.awholdings.com/investors and will be archived for replay.

About Ascend Wellness Holdings, Inc.

AWH is a vertically integrated multi-state cannabis operator with licenses and assets in Illinois, Michigan, Ohio, Massachusetts, 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 Simply Herb, Ozone, and Ozone Reserve branded products. For more information, visit www.awholdings.com.

Additional information relating to the Company’s second quarter 2022 results is available on the Investor Relations section of AWH’s website at https://awholdings.com/investors/, the SEC’s website at www.sec.gov and Canada’s System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com.

ASCEND WELLNESS HOLDINGS, INC.

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (UNAUDITED)

We define “Adjusted Gross Profit” as gross profit excluding non-cash inventory costs, which include depreciation and amortization included in cost of goods sold, equity-based compensation included in cost of goods sold, start-up costs included in cost of goods sold, and other non-cash inventory adjustments. We define “Adjusted Gross Margin” as Adjusted Gross Profit as a percentage of net revenue. Our “Adjusted EBITDA” is a non-GAAP measure used by management that is not defined by U.S. GAAP and may not be comparable to similar measures presented by other companies. We define “Adjusted EBITDA Margin” as Adjusted EBITDA as a percentage of net revenue. Management calculates Adjusted EBITDA as the reported net loss, adjusted to exclude: income tax expense; other (income) expense; interest expense, depreciation and amortization; depreciation and amortization included in cost of goods sold; non-cash inventory adjustments; equity-based compensation; equity-based compensation included in cost of goods sold; start-up costs; start-up costs included in cost of goods sold; transaction-related and other non-recurring expenses; litigation settlement; and loss on sale of assets. Accordingly, management believes that Adjusted EBITDA provides meaningful and useful financial information, as this measure demonstrates the operating performance of the business. Non-GAAP financial measures may be considered in addition to the results prepared in accordance with U.S. GAAP, but they should not be considered a substitute for, or superior to, U.S. GAAP results.

The following table presents Adjusted Gross Profit for the three and six months ended June 30, 2022 and 2021:

The following table presents Adjusted EBITDA for the three and six months ended June 30, 2022 and 2021:

Original press release

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