Net revenue

Ascend Wellness Net Revenues Increased +28% YoY, Q1 2022 Financial Results and MedMen Settlement

Ascend Wellness Holdings, Inc. AAWH AAWHa vertically integrated, multi-state cannabis operator, on Wednesday released its financial results for the three months ended March 31, 2022.

First Quarter 2022 Financial Highlights

  • Gross revenue of $101.2 million decreased 0.8% quarter over quarter and increased 33.4% year over year.
  • Net revenuewhich excludes intercompany wholesale product sales, fell 3.8% quarter-over-quarter but increased 28.7% year-over-year to 85.1 million dollars.
  • Net loss of $27.8 million in the quarter, compared to $16.5 million in the fourth quarter of 2021.
  • Adjusted EBITDA of $16.4 million, representing a margin of 19.2%. This represents a decline of 17.1% quarter over quarter.
  • Adjusted EBITDA margin of 19.2% represents a decrease of 309 basis points compared to the previous quarter.
  • Balance sheet: As of March 31, 2022, cash and cash equivalents were $143.8 million and net debt was $89.9 million.

Company Highlights

  • During the first quarter of 2022, Ascend focused on bringing new awnings online in Barry, Illinois and Athol, Massachusetts, and preparing for the imminent start of adult sales at the dispensary in Rochelle Park in New Jersey. The company completed its first harvest at the Barry Greenhouse on March 29 and began planting an additional 37,000 square feet at Athol after the quarter ended.
  • Ascend launched its value segment brand, Simply Herb, which is now sold in all current markets in which the company operates.
  • The company ended the quarter with 20 operating dispensaries and 213,000 square feet of canopy in five states and will use the remainder of the year to build a cultivation facility and six dispensaries, with plans to begin operations in Pennsylvania in 2023. .

Agreement in court

After the quarter, AWH, MedMen NY, Inc. and MM Enterprises USA, LLC MMEN MMNFF signed a term sheet agreeing to settle their lawsuit in the New York State Supreme Court’s Commercial Division in New York County.

To settle the dispute, AWH will raise consideration for the transaction by $15 million, $4 million of which is contingent upon the start of adult use sales at a MedMen NY dispensary.

“The revised total consideration of $88 million remains significantly lower than recent previous transactions. Upon closing, AWH will enter its seventh state,” the company said in a press release.

Management commentary

“The first quarter of 2022 was a transitional quarter for Ascend as we made investments to launch the next phase of our growth story,” said Abner Kurtine CEO and co-founder. “As we prepared for adult use sales in New Jersey, we significantly increased our total canopy capacity and recently entered the Pennsylvania market. The early days of adult use sales in New Jersey indicate that the state will be a key driver of growth for the remainder of 2022.”

Q1 2022 financial overview

  • Net revenue decreased 3.8% quarter-over-quarter, primarily due to wholesale pricing pressure in Illinois and Massachusetts and lower average retail basket size in each of the states where we operate, with the exception of Ohio.
  • Total Retail Revenue was $63.3 million for the first quarter of 2022, which represents a decrease of 2.4% compared to the previous quarter.
  • Gross Wholesale Revenue increased to $37.9 million, a sequential increase of 2.1%, driven by growth in intercompany wholesale sales.
  • Net Wholesale Revenue decreased 7.8% sequentially to $21.8 million, primarily due to pricing pressure in Illinois and Massachusetts. Gross profit for the first quarter of 2022 was $23.4 million, or 27.6% of revenue, compared to $30.8 million, or 34.8% of revenue, for the prior quarter. “The decline is primarily due to start-up costs incurred prior to the start of some major operations, which are expected to begin later this year.”
  • Q1 2022 Adjusted Gross Margin was $36.5 million, or 42.9% of revenue, compared to $37.5 million, or 42.4% of revenue, for the prior quarter. Adjusted gross profit in dollars decreased 2.7% quarter over quarter due to lower realized prices in Illinois and Massachusetts. Adjusted gross profit margin on a consolidated basis increased by 50 basis points quarter-on-quarter to 42.9%. “This was primarily driven by higher intercompany sales as a percentage of wholesale sales in the quarter.”
  • Retail Gross and Wholesale Gross Profit Earnings both declined sequentially, primarily due to smaller basket sizes in retail and wholesale pricing pressure in Illinois and Massachusetts.
  • Total general and administrative expenses (excluding litigation settlement) for the first quarter of 2022 was $33.2 million, or 39.0% of revenue, compared to $31.6 million, or 35.7% of revenue, for the prior quarter. “Operating expenses as a percentage of revenue increased in the quarter as the company increased its staff to support crop expansions before realizing related revenue contributions.”
  • Net loss attributable to AWH for the first quarter of 2022 was $27.8 million, a loss of $0.16 per basic and diluted common share, primarily due to operating costs and a one-time settlement charge related to the settlement of a dispute between shareholders regarding one of the convertible note purchase agreements.
  • Photo courtesy of Lelen Ruete.