Ayr Strategies Reports Financial Results & Reaches Agreements to Enter New Markets

Ryan Allway

August 27th, 2020


Ayr Strategies Inc. (CSE: AYR.A, OTCQX: AYRSF) (“Ayr” or the “Company”), a vertically-integrated cannabis multi-state operator (MSO), is reporting financial results for the three months ended June 30, 2020, as well as preliminary results for July 2020. The Company is also announcing that it has entered into an agreement to expand its footprint to include cultivation, production and dispensary assets in Pennsylvania. Unless otherwise noted, all results are presented in U.S. dollars.

“Our business has performed extremely well across market environments, and we enter the next phase of our corporate development in a position of even greater operational strength,” said Ayr CEO Jon Sandelman. “Over the past four months, we have driven consistent, material month-over-month improvements in our operations. We achieved monthly records for revenue, adjusted EBITDA and operating income in July, and we are currently operating at an exceptional $181 million and $77 million annual run rate for revenue and adjusted EBITDA, respectively. I am incredibly proud of our team’s hard work and the momentum we have generated; but I want to stress that we are just getting started.”

Financial Highlights ($ in millions, excl. margin items)

Revenue $ 11.7 $ 11.7 $ 10.2 $ 5.8 $ 9.8 $ 12.7 $ 15.1
Gross Margin before Fair Value Adj. 48.2% 48.7% 52.3% 58.2% 61.9% 60.2% 60.8%
Adj. EBITDA $ 2.9 $ 3.0 $ 2.5 $ 0.8 $ 3.3 $ 5.0 $ 6.4

The preliminary July 2020 results are subject to change following completion of the company’s quarterly financial reporting process.

  Q1 2020
Q2 2020
% Change
Revenue $ 33.6 $ 28.3 (16)%
Gross Profit $ 20.3 $ 23.5 16%
Gross Profit before Fair Value Adj. $ 16.6 $ 17.1 3%
Operating Income/(Loss) $ (4.9) $ 1.0 N/A
Net Income/(Loss) $ 1.6 $ (7.5) N/A
Adj. EBITDA $ 8.4 $ 9.1 8%

Sandelman continued: “Our monthly revenue improvements have been driven by exceptional retail growth in Nevada, where dispensary sales have grown by nearly 20% month-over-month in July. Gross margins have also benefitted from our expanded cultivation capacity in the state, which has driven higher levels of vertical integration in our dispensaries. The additional dispensary licenses we were recently granted in Clark County and Henderson will allow us to deepen our presence and reach an even greater number of patients and customers, and we are targeting opening our new Clark County dispensary before year end. In Massachusetts, our wholesale business has continued to ramp up due to our expanded cultivation capacity and strong demand resulting from new recreational dispensaries coming online every month. Our two medical dispensaries have also nearly doubled in revenue from pre-COVID levels. Our success in the Massachusetts and Nevada markets, especially amid a challenging operating environment, demonstrates the power and discipline of our strategy as we take our approach into new markets.”

Acquisition Overview

Speaking on Ayr’s proposed acquisition, Sandelman commented: “Our entry into new markets will build on the successful operational foundation we have established over the last 12 months, where we drove exceptional organic growth across our business. Moreover, we did so while simultaneously building the strong 600+ person team, culture, and financial and operational control framework we have today.

“The transaction we are announcing today and the additional transactions we will announce through the rest of this quarter are just the first step to expanding our footprint and firmly establishing Ayr as a top MSO – not only in terms of revenue, adjusted EBITDA, operating income and cash flow generation, but also in terms of presence across the industry’s most relevant markets. We believe today’s announced acquisition in Pennsylvania, along with the two expected additional markets to be announced later this quarter, will integrate efficiently into our established platform as a result of the strong foundation and scalable systems we have built. As we expand our footprint, we intend to repeat the playbook of excellent operations and successful greenfield project development that we have established and proven over the last 12 months.

“Similar to our prior acquisitions, we are bringing on exceptional teams to add to our deep talent pool, and we are purchasing these assets at very attractive levels of forward adjusted EBITDA for a combination of $27 million cash, $15 million stock and $15 million vendor notes. We have also been working diligently with strong institutional financing partners to seek to ensure that our future expansion plans are fully financed. We are extremely pleased that the debt markets have been highly receptive to Ayr’s strong credit profile. We are proud of the platform we have built and believe this is the beginning of an even stronger growth cycle for Ayr.

“Finally, I am thrilled to welcome a few new members to the Ayr team. Glenn Isaacson, who currently serves as Vice Chairman at Cushman & Wakefield, is joining our Board of Directors. He is also on the board of the American Foundation for AIDS Research.  Glenn’s experience will prove invaluable and we look forward to leveraging his expertise as we continue to expand our footprint. Further, Megan Kulick has joined as our new Head of Investor Relations; she is a Wall Street veteran who also brings great cannabis experience. Karen Rinaldi has been promoted to our Head of Human Resources, a role that has become incredibly important as we have grown to over 600 employees and counting. We are excited to have these key new members of the team on board.”

Market Highlights Pennsylvania
Population (m) 12.8
Legal Status Medical
License Issuance Limited
Penetration Rate (%)1 2.9%
# of Active Dispensaries 89
# of Cultivators & Processors 32

1 Penetration rate is calculated as current number of patients in a respective state divided by total state population.


Ayr has reached an agreement to acquire and develop six retail dispensaries and a significant cultivation and production footprint in a limited license state for total consideration of $57 million. The PA market is undersupplied with high barriers to entry and potential for substantial growth, as it has only 32 grower processor licenses and 198 dispensary permits to serve a rapidly growing medical patient base.

Ayr plans to acquire the membership interests in a licensed operator which includes a 143,000 ft² cultivation and processing facility with the initial construction phases comprising 45,000 ft² nearly complete. The 13-acre site provides ample room for further expansion even beyond the existing 143,000 ft² facility. The licensed operator also has the right to operate six dispensaries poised to open in excellent retail locations, most of which are clustered in the Pittsburgh and Philadelphia region. Three of these dispensaries are expected to open by January 2021. The licensed operator also has a strong research program in collaboration with a local medical school. The agreement, which is reflected in a binding term sheet, is subject to, among other things, the satisfactory completion of due diligence, the receipt of required regulatory approvals and the absence of a material adverse change.

Operational Highlights

As a reminder, Nevada regulators limited all cannabis sales to delivery-only beginning March 21, 2020, with curbside pick-up approved on May 1st and in-store sales on May 9th. In Massachusetts, regulators restricted adult use cannabis sales beginning March 24, 2020, with adult use sales commencing on May 25th.

Nevada Results

  • July average daily revenues were over $300k; daily transaction volumes over 4,360, with an average ticket of $71 per transaction
  • Recently awarded two additional dispensary licenses in the greater Las Vegas market—one in Clark County and one in Henderson—and aim to open the additional Clark County dispensary this year

Massachusetts Results

  • July average daily retail revenues are currently over $56k; daily transaction volumes over 350, with an average ticket of $162 per transaction
  • Selling to 48 of the state’s 67 dispensaries, with valuable inventory to sell into the state’s growing recreational market
  • Wholesale revenues have ramped to over $3.4 Million in July, reflecting growth of over 30% from levels at the start of 2020

Cultivation Expansions

  • In Massachusetts, Ayr has completed several months of harvests from its cultivation expansion, resulting in strong inventories available to address pent-up demand for adult use sales
  • The new Massachusetts cultivation facility is producing excellent results, with THC levels up to 30%, and improved gross margins in the state of approximately 70% in Q2 from the low 60% range in Q1
  • In Nevada, product from Ayr’s cultivation expansion arrived in stores in June, allowing for internally sourced product to increase from 25% in Q1 to over 40% in Q2
  • Nevada gross margin increased as a result, to approximately 60% in Q2 from 44% in Q1

Conference Call

Ayr CEO Jonathan Sandelman, COO Jennifer Drake and CFO Brad Asher will host the conference call, followed by a question and answer period.

Conference Call Date: Thursday, August 27, 2020
Time: 8:30 a.m. Eastern time
Toll-free dial-in number: (877) 282-0546
International dial-in number: (270) 215-9898
Conference ID: 5578887

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at (949) 574-3860.

The conference call will be broadcast live and available for replay here.

A telephonic replay of the conference call will also be available after 11:30 a.m. Eastern time on the same day through September 3, 2020.

Toll-free replay number: (855) 859-2056
International replay number: (404) 537-3406
Replay ID: 5578887

Financial Statements

Certain financial information reported in this news release is extracted from Ayr’s financial statements as at and for the three and six month periods ended June 30, 2020. These results presented herein are preliminary and subject to change. Ayr will file its interim financial statements on SEDAR shortly. All such financial information contained in this news release is qualified in its entirety by reference to such financial statements.

Definition and Reconciliation of Non-IFRS Measures

The Company reports certain non-IFRS measures that are used to evaluate the performance of its businesses and the performance of their respective segments, as well as to manage their capital structures. As non-IFRS measures generally do not have a standardized meaning, they may not be comparable to similar measures presented by other issuers. Securities regulators require such measures to be clearly defined and reconciled with their most comparable IFRS measure.

The Company references non-IFRS measures and cannabis industry metrics in this document and elsewhere. Non-IFRS measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these are provided as additional information to complement those IFRS measures by providing further understanding of the results of the operations of the Company from management’s perspective. Accordingly, these measures should not be considered in isolation, nor as a substitute for analysis of the Company’s financial information reported under IFRS. Non-IFRS measures used to analyze the performance of the Company’s businesses include “adjusted EBITDA.”

The Company believes that these non-IFRS financial measures provide meaningful supplemental information regarding the Company’s performances and may be useful to investors because they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making. These financial measures are intended to provide investors with supplemental measures of the Company’s operating performances and thus highlight trends in the Company’s core businesses that may not otherwise be apparent when solely relying on the IFRS measures.

Adjusted EBITDA

“Adjusted EBITDA” represents income (loss) from operations, as reported, before interest and tax, adjusted to exclude extraordinary items, non-recurring items, other non-cash items, including stock-based compensation expense, depreciation and amortization, the adjustments for the accounting of the fair value of biological assets and the incremental costs to acquire cannabis inventory in a business combination, and further adjusted to remove acquisition related costs.

A reconciliation of how Ayr calculates adjusted EBITDA is provided below. Additional reconciliations of adjusted EBITDA and other disclosures concerning non-IFRS measures will be provided in our MD&A for the 3 months ended June 30, 2020.  As well, the Company reminds you that adjusted EBITDA is a non-IFRS measure.

This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.

Ryan Allway

About Ryan Allway

Mr. Allway has over a decade of experience in the financial markets as both a private investor and financial journalist. He has been actively involved in the cannabis industry since its inception, covering public and private companies.

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