Ayr Wellness (AYRWF)

Jonathan Sandelman President & Chief Executive Officer
Brad Asher Chief Financial Officer
Jennifer Drake Co-Chief Operating Officer
Matthew McGinley Needham & Company
Scott Fortune ROTH Capital Partners
Andrew Semple Echelon Capital Markets
Matt Bottomley Canaccord Genuity
Russell Stanley Beacon Securities Limited
Owen Bennett Jefferies
Call transcript
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Welcome to the Ayr Wellness Fourth Quarter 2021 Earnings Call.

Joining us today are Ayr's CEO, Jonathan Sandelman; the company's CFO, Brad Asher; and the company's Co-Chief Operating Officer, Jennifer Drake. The company will discuss forward-looking matters on this call, including targets and revenues and adjusted EBITDA. This forward-looking information is subject to the assumptions and risks as described in the company's management discussion and analysis for the quarter ended December 31, 2021.

As well, we remind you that adjusted EBITDA is a non-GAAP measure. ended the non-GAAP GAAP management measures analysis the to other and discussion you for concerning XXXX. disclosure contained quarter refer reconciliation measures to the and We XX, December in Ayr's will Sandelman. turn CEO, call to over I Ayr's now Jonathan the ahead. go Please

Jonathan Sandelman

challenging. build-out, transactions, in morning, X culture, organization. phase engaged joining XXXX United all it $XXX pandemic market fully year the and are added later global are XX% dispensaries, scale our to transformational million power, we have you there cultivation regulatory but footprint, contributing we talented will welcomed of be Thankfully, was X,XXX our and chain processes XX% adjusted that largest We for our XXX% the conditions. transformation number was of closed footprint, build-out We over for added last over the earning Building undergoing, constructed. year grew million When added expected. will X areas year our the current primary XX facilities become transformative M&A of $XX of is we high-quality that than to XXXX risk, with complete, In cycle to the for revenue to nearly Ayr's and of CapEx States. and our talent from and our in come facilities X prior thank crisis cannabis we $XXX people cultivator EBITDA a scale supply states as $XXX $XX and million a to CapEx, Good us. year deployed million. to well prior million. from in of year as in mission grew alone, X

risk build-out took longer regulatory currently stage. second We risk ourselves the are have it past bucket, in we the than phase. the find While essentially liked, would we

them. essentially for Our approval waiting open facilities built, are to and we're now

our impact we a setting local conduct approvals the recognize cushion we XXXX beyond of assumptions had made and ability that in-person how the the Looking back 'XX we for. were which significant guidance, wrong on in line the to when time inspections, COVID accounted has lengthened at long take. regulators state about we would

For approval example, Jersey Illinois, open. all our which square facility, are to And process. New for retail, producing we foot facility approval Arizona already are XX,XXX waiting to inspection Massachusetts later adult-use adult-use cultivation our retail due square slow foot open new our cultivation to revenue In and in New expected months than to forecasted us a now for close. for regulatory acquisitions XX,XXX waiting be Jersey

We Massachusetts believe we may which that in And The operators Pennsylvania, see We expected of a to resulted that temporary ride area. longer. and and build will have of doubt currently risk when. last just of of consumer share for and capacity and wallet. It imbalance demand come. demand cultivation of a is no makes sense bucket supply see matter It's market ahead as approvals Pennsylvania, these Ayr combination conditions, caused compression. stores online We imbalance has But persist as this the supply capacity imbalance finally which like demand, itself states adult-use in in will Massachusetts, a in in Boston in open this growth. has some coming price particular. other

less cannabis, share continues on has more in This impactful industry, our designed has the we though pricing market been pressure products the we market to credit which money leads inflation, to change grow that last on seen we or the believe reintroduced retail consumer occur. financing because money especially consumer declines has is flat to why spend recently to the remain ongoing either to the been cannabis situation is value. that size. that there's our mentioned could in previously which, banking Looking in addition other clear market span if portfolio necessities, industry consumers no to in quarter due wallet, it at need to to the that operate. it's In Though were brand CPG market the with where or updated the to states passage available cards state declining, of our spend premium

are their wherever customers ready We in journey. to are meet they our cannabis

the earning as confident be delayed power ever, that will are We the now that to the discussed. Chief on Asher factors Financial our although Officer, as turn will strong call I over we Brad Ayr's

Brad Asher

XXX% $XXX of good Thanks, increase the and Full million of million prior everyone. or from year morning, sales $XXX million. year represents an Jon, of $XXX

and increased representing loss X% increase Fourth with EBITDA markets primarily increasing sold year is year-over-year, PA markets sequentially represents adjusted our revenue, million amount expanding offset quarter partly through by of data. for of and $XX original $XX The million X/X of prior million Natural line $XXX experienced, adjusted from during XX% the of $XX efficiency our and across the the sequential operational $XX by which third-party down of including up has the or respectively. from Same-store the products was we quarter. increase industry $XX mitigated our year. of and been wholesale increase. our an a tightening ebbs the Jersey in acquisitions X million GAAP structure operations states. million. XX% and quarter of stores. Massachusetts was cost and the fourth EBITDA million Our total sequentially driven of And prior growth M&A, $XXX flows have headcount full Nevada making year, and hyper-focused year, million $XX by Full or of optimizing X remaining internal including counter increased lower on we from $XX million and metrics, was million board. pricing according for by of U.S. XX% fourth during To quarter sales driven increased M&A states million from the available The retail approximately balance to operations $XX quarter New the to to growth GSD sales

result As of as year and of such finished adult-use this XX.X% to to increases with We margins anticipate 'XX, Jersey. which EBITDA to increased still to result Massachusetts XXXX we the of represents the margin a any an on and growth, prior correlated certain linked significant markets. profit line and U.S. SG&A $XXX over year fluctuation were adjusted with sales XXX% in slight throughout in highly to or the this decrease the the $XXX effort, future quarter be adjusted is closely GAAP XXX% of Adjusted respectively. Full grow a milestones quarter be year. anticipated gross $XXX for production with was expansion profit biomass fourth anticipate of of for year-over-year. XX% pricing year XX% $XX New million million pace with trends gross XX% margins year year, in for from in prior and of the from gross million. $XX increase million year. The for and full was million

Moving balance with sheet We cash quarter $XXX on of hand. to our and ended million cash on flow. the

During the continue cash $XX invested CapEx, cash flow consideration financing including $XXX invested inventory for we over million course the inventory million $XX Ahead build growth we the bridge opportunities, with of for upcoming of to operating year, the and M&A. year. in of million of

In will in the received events the milestone investment financing, the alongside cash driver capital monetize half the was company our Our further ability second through of $XXX this the for fourth year. flow million growth increasing position. the be of to quarter, debt operating positive

both our to not But Additionally, as will the $XX invested transformation with by only The closed industry-leading real momentum of in in $XXX subsequent unlike with estate identity existing on an and an shape comes Massachusetts The real and this we Jersey. catalyst financing rate. continue adult-use to New 'XX X.XXX% set states our comparable of paired organization. is partly as year-end, footprint only of is growth. M&A. interest million level with million with this backed in 'XX, this our 'XX 'XX annual 'XX transformation year the online, occur driven CapEx for but

of our ready Drake. it Co-COO, next capitalize growth. is With Our Jen on the that, to for poised challenge, hand this to team over I'll stage Ayr's

Jennifer Drake

Thanks, Brad.

our discuss operations power. in existing earnings and growth key of now Let's drivers our

Some In But in picking and X brand we quarters to that market generally been closed, according And the resulted of for that since now can expect retail top-selling BDSA. relatively has business. has and state that be flat due has shrunk September now Kynd flower have you our the Nevada months flower a factors. sales sourcing which up in COVID Arizona, Nevada share. acquisition straight Hydro our market. to in wholesale us in flat business aware the the strong, larger may is internal potential for seasonal been been more our Tahoe very in recent has

in expected is and December was drive in Our stores. our to cultivation generating product better in where expansion wholesale construction begin availability revenue QX finished to

and Our a Pennsylvania X new more today, total stores market business still purchased fairly are of consists we last ramping stores established, are stores year. that X in constrained and which X medical that

Our these has stores ramped. retail Pennsylvania market share grown have in newer as

X because online on high business because timing and medical have from additional earlier come plenty Massachusetts, we to have of in growth in is has the ahead Pennsylvania pause has in market the align call this in people decided wholesale our And most capacity more with This we pricing know, Pennsylvania As stores at today demand. expected plans In a slowed the of adult-use is business. XXXX. expansion place today, to our of still cultivation has capacity closely levels declined saw wholesale we adult-use.

X regulatory and Massachusetts which comes stores the the take in we will that X our adult-use performed in While come starting regulatory our QX. well, approval expansion have and in Also, driver real can stores open stores medical some opening are are cultivation time. demand them stores our the our increased approval process, adult-use to the open growth currently Boston the of Greater from final from the other wholesale area. of finally process, very that hope is to adult-use starting

in to quarter. So the as any In the we in to good New Jersey, in sales and position to as X in can stores, operator adult-use maximum have are begin add of expect other hopeful this fourth be to Jersey. New of expansion as from use facility our ready any in Massachusetts sales stores QX, begin cultivation adult to we're operator we today, number a

a said that open anniversary started in square the possibly Liberty our regulators potential, of only variety of product where XX% cultivation limited a ago, increased put opened count strain waiting XX To store facility from open on to to that no year improvements, failure the with Sciences. our and Switching stores, A context has new we very XX,XXX continuing irregular we've product in to to bringing expansion. we've are that of reach potential passed almost to great the store stores, Liberty, order supply flower, stores. XXXX open in pace rate foot number our with last had we day in year, variety and to and built. testing We best just Liberty XX% facility, closing cultivation namely of a we've increase edibles, we Health we business stores XX similar XX, XXXX. X Florida. limited needs anticipate of on ever work a acquisition diversity, current Additionally, Since X-year

all has know, so want and locations. will Florida only prime our we secured many As municipalities dispensaries team

Big health. our terms and have Orchard Pete's in product of available about at fruit-forward major concentrates and Sciences introducing has become under on product dispensary. expanding major Gainesville Today, focused are emphasis we've is have half across vapes, we a increased variety, expanded impact Florida has made campus, big In a edibles Secret improvement, vapes, especially a still edibles, start, Health draw to XX The initiatives of on Extracts, Liberty and our which Cookies. our Sun though. cultivation genetics plant of stores Fruit team today. Gems To Origyn an refreshed, cultivation unique increased our yields. strains area Flower our juice on for placed variety, selection These

in coming While a in pounds. about X,XXX enough Today, was QX XXXX at typical still harvest flower. double is harvest not pounds. that a But this nearly is typical XXX

power power and We where getting year, quadruple our To revenues capacity we're power Florida to XX% we're more still it future part but produce obviously This sites, at cultivation to lower year of margin, wholesale better capacity facility. to have with regulator within our looking but We monthly mind. to in use time which our our be. flower, to sales nearly from our to more is to do bringing recently the demonstrates cultivation doubled ability in Florida needs the this cultivation time. a more in will that and Florida stores, our drive next has added allow over from had power past come adult purchases, the to while you

houses, to on QX. harvest strategy last nearly work start production replant fluctuations have hoop the new year. still that real on by acres our we With this as and all said, XX progress. over also to will to make a to increased have a local do where to and to cultivation gains We a environment, houses continue season. the the suited We've we've lot led of temperature in In have into XXXX, we taken and results fall XXX% a team hoop XXXX better that that's and begun with

process, than concrete more done. revenue is proven And and time earnings That our power New when, to approval more point but expected. discussed, and market adjusted we anticipated. it's are received regulatory an these earnings We'd Jon resilient slower when with and the has get sales initial particular, is growth. of a is QX, regulatory what the $XXX to matter delayed And EBITDA expansions regulatory there given enough run half. XXXX. lines, annualized if. of regulatory and the in we rate delayed power In Jersey. once is it to with believe million adult-use expectations in-place a of in Massachusetts assets assuming XX% ever But even uncertainty earnings of power have process you these online. like compared million cultivation we've But we early transformation the during for regulatory the As build-out both approvals it's times operational prudent of of to the for not we $XXX once in line expectations build-out The approval year business give began approvals ago, our we our this assets in for the and second been

line results financial expect to with industry We be in first XXXX in flat, of half the trends. relatively

a QX, of QX. the rate step the discussed expect business We run in with function growth online the in to we beginning earnings subject of power timing

Jonathan Sandelman

know us place all to will being Thank we and to potential Ayr or the be. to journey of because company. building come of us long enable time. about of and pricing, continue a Jen. still we that for in build to the next, work a put always Thank positive what's earnings decides We've the power of you, Ayr. us. done, period first you There's We the all be lot way but believe on customer the at market quality a that short remain aspect has throw online facilities. Ayr spoke have of systems But we've company is The attracted Regardless building one we talent a put box lot we that whatever focus to the to today bringing delays and just the we operating win a in out. on inside on will this with inflation,

take We now questions. will


Instructions]. [Operator

Matt Our McGinley first Needham. from question of comes

Matthew McGinley

expecting relatively more flat, So front in guidance be Illinois, stores half Florida. revenue assets you'll you’re with that having come your in to have online

offset Levia, You by half trends? overall being the year dispensaries decline just overall assets? that seeing in My existing with broadly the assets are Arizona is in these in have market the will conservative in there, guide, given be revenue are question the operational first seeing what you cultivation, new your the a new Massachusetts. you're of Or you more in

Jennifer Drake

Jen. It’s Matt. Hey,

do come conservative we very are expect far of to half. the the high-level we throughout timing flat has to reported But trends those think first somewhat the think half so additional be echoed mostly first have been assets is who looking QX. I be to reflecting everyone and We of indication again, for conservative industry uncertain, the online guidance. is, has that looking I answer in


Our Scott next Fortune from question of ROTH Partners. Capital comes

Scott Fortune

Florida on improvements the made you've production congratulations and side. on morning in Good the

and to the on you're think where time far improve kind that Obviously, to the -- of along continuing of XXXX at period look of coming you those board you bit on changes standpoint? that a here you can how that there how production Just that should improvements? from we from side, in making little wanted are level pack

Jennifer Drake

productivity pleased those We extremely our open improve really to to with hard in our stores. we're -- stores team the Yes, extremely Florida. in worked hard the to in productivity has and site cultivation feed the order

grams of we're sure but XX, of -- incredibly with at XX closer doubling to per we us cycle far and yield and per basis, in That to square productivity, we absolutely strong the When how but foot. recent -- square So We've we growth keep a are not really foot will more nearly throughout our we it's of vertical the to can cultivation make along at most we sort feel has of, point for great were do. we terms there's be integration been took that's the which XXXX, your question, harvest on is in result which over like a an plenty to our want result, business we? Florida. going in number that self-sustaining one proud of looking


Semple Andrew from comes of question next Capital Echelon Markets. Our

Andrew Semple

Hi, fourth the and quarter congrats my And on thanks for results. there. questions, taking

improving in along There was driver the a with delivered, for prepared which the remarks a gross a comment. Just in biomass comment on 'XX. business margins clear is being

touch to to are on refresh states and New Arizona? on timing Massachusetts, your delay, summary Jersey Florida Just you could getting in given a updated for could as and where the the as get namely new capacity if products markets, supply-constrained, timing a comments on we you well cultivation

Jennifer Drake

margin margin, think, bit a why discussion. Sure. gross and about Brad, -- of little you don't talk with -- I Why gross don't I'll our we start

Brad Asher


margin, in of a the second definitely generating biomass gross that's year improvements QX. in terms story, primarily half of So

A I saw of a quarter prices it's that seen think full in bit a see in we dip actually in settle that in the what lower you'll out, a QX, now margins. was those In but of gross compression we've QX of is kind lot of QX. QX.

you might margins. adjusted in be we So gross through in quarters have will bit probably QX, X some until consistent gross a there, see margin. next of north that dip still upside And of the biomass a XX%


Our next Bottomley Genuity. question comes Matt Canaccord from of

Matt Bottomley

rates for provided year. back to run for of this going Just end the the outlook

Just curious would the previous margin be of it range provided you end on to EBITDA a in range your a high at where outlook, closer XX%.

the here of range basis sticking with So the low end XX%. rate at a on run

Just leads or curious where mentioned sort your towards expected wholesale generating color of And positive wondering then continuation that, the a into if is free margin there's than is if pressures on there's more any any changed, the on note it any today be cash as as specifically into in flow to to pricing what whether as follow-up to progression. other higher trends considerations that other has XXXX? Just going just profile overall how that outlook you've your quick that margin? it's to

Jennifer Drake

and start I'll let the talk our general then flow. with Brad I'll free guidance, bit cash a little about

those numbers we In first that those -- that million, make of are very the XXX that terms are that we we've the reflected to over foremost, conservative. much price are numbers want quarters total of We the conservative achievable changes seen in trying couple our the in and be to modeling. last of way think and sure

that sticking end say, of range. bottom you to the as are, we So

Brad Asher

spent for be about then 'XX purchases, investment that was terms Between we CapEx it's year than definitely And flow. half of million and that. will M&A in in less 'XX cash $XXX cash an of flow, us.

less to flow, operating M&A have and for as addition So we're well. going in CapEx uses cash improved to


Russell of from Stanley Securities. comes question next Beacon Our

Russell Stanley

approvals stores can area or Boston area that, you remind are third by many still you open over additional how what expect on outstanding? Just to to your year us parties? And related next stores, the so Boston

Jennifer Drake

Russ. Thanks so much,

inspection. then regulatory inspector hard what Cannabis to and approved. that, after come and that But therefore, we're literally, meeting -- And just ready just exactly will and to the -- more The final will when are go. handicap this QX But be so one there's get do maybe that we're is waiting be Control line, We're X-yard the sufficient. report So XX-yard close we're close. will so stores it's Commission finished; in for on hopeful We're at so XXX% approvals. -- we're those we we're line. very to

I another XX Greater apologies to a asked question, you think an should elsewhere adult-use question, -- Sorry, you XX -- of dispensaries have about stores that's Boston Boston. time. important the over in have overall asked number should Boston

X a close Cannabis to But X, do dispensary to, I on Commission month. approvals you every are once adult-use those others. Control think fairly meeting we when relative happen see

to So get the XX XX to to closer over we that to X X expect do quarters. next


question Bennett comes next Our Jefferies. from Owen of

Owen Bennett

if a an to thinking wanted M&A or becoming here scale, understanding another this or states has arose? would into it's your Obviously, have come get a of with like then bit impacted down? just how target Has linked looking I consider share overall MSO now. prices you're with this, opportunity a about new to hit. taken you Well, increasingly thinking And of merger the price also important,

Jennifer Drake

Owen. you your so for Hi, question. Thank much

We are means that we some and activity continue been could is or price be we so, think to that about for public very public there at the do right and M&A that But and but bar to the be that with on always saying getting very I over additional the we've taking our we states is been looking will that very at right XX X the for footprint high. high states. new asset footprint, right in that also will the do time. team, is bar footprint states think maybe additive an excellent believe do XX our saying we've today to historically


This call. conference concludes today's

day. have you and disconnect lines. Thank a may You your for participating, pleasant