Ayr Wellness (AYRWF) 11 Nov 222022 Q3 Earnings call transcript

Welcome to the Ayr Wellness Inc.

Third Quarter 2022 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 for 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 September 30th, 2022.

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

You may begin.

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on the will achieving the cash capital pass flow. the and I'll continue over To on volatility in cash to position Drake, the our profile current to now maximizing focused focus on impact call has and XXXE company-wide the conditions, priority. end, COO. based are we However, on market a including we current top that success as our Jennifer markets liquidity

the within challenges and macroeconomic cannabis know both the industry. all We Brad. landscape Thanks, in exist,

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that XXXX solid QX, to the growth in and John his QX XXXX. anticipate expand further opening ahead, trends mentioned solid that in results we Looking growth as remarks, continue sequential we expect in established we sequential

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over to The call our closing liquidity be key our turn we We at essentially assets have the a and the optimization the is remarks. John million and in. will are where we earnings ample just our year for advantage in is be first time now invested $XXX footprint ramping. of on XXXX state-by-state complete, balance XXXX back CapEx our important and strength the cash same strong of position I'll in we've optimize will are time, with cycle most of the our today continued balance sheet And of of the year. flow have operational infrastructure books, cash full factor in sheet. for the to his of taking most the front our our maturities in our

you, Thank Jen.

the action remains from time we While Ayr only world, earlier scale much find time revenue, upcoming our major of monitor, the Maryland has and our existing proved that priority, cannabis. to that ready government. for that optimization I the comes. to Tuesday, a unlock assets further our will to see concrete remains ourselves has uplist Ayr and that laid and exciting in exciting organization. we cannabis adapt the developments in voters an matter of meantime, more profitability catalysts discussed it's until reform and groundwork many uncertain of to and On In to be an continues when time day Missouri exchange a for federal a the it including in

and support questions. their As take always, thank your invaluable contributions. teammates you We'll your for our now for to

We will analyst Instructions]. [Operator now the begin session. question-and-answer

Please Our first of Capital question Tyghe go Markets. ATB comes from Kenric ahead.

remarks, and prepared the In in genetics morning. high-quality called good the out Florida. And you. Thank premium you flower

some also how made on quality key market relative highlighted premium in menu your the insight market. improvement average you impacted changes more and also and has You also how has that both power, flower to in in basket speak that pricing provide the in terms to the Could your share competitors absolute that impacted and that your you market?

so Thanks question. for Kenric. the you, much Thank

of over we months several the really menu In terms sea a with Florida, incredibly months, change the us. really the for over had are last we've pleased been several traction it that last has and

very, that first with we're happy pleased as that and question. So to very very have the

in time and really few on have In terms we first have the - stores, SKU the mix impact months the our for we our particular basket last participating of been that our over quality more market, set the in Florida. more market. high-quality the in that of going the to of basket we more we're have in the the that And age larger in the sell segment sizes the

love will entirely said, Now incredible Introducing the very introduced within an more is but summer. over, in in known branding. pricing they're would market, of because has also brand, Tripper as it's introducing offering a days I our which over the success segment been we They Florida Florida. the love medicinal brand our taken our being it's say that really Road quality later getting. Tripper also that that Florida Road I say, flower everyday the and People low value the same

with in we've folks think market that. follow I other suit the seen some

been something for So Nevada, really started guess done powerful. $XX quarter. We the were of one And $XX home is our in indicates, customers that it famous being we've the imitation approach aid a footprint. I greatest that has the sorry, But it's it to flattery. throughout we where

wonderful Brad? great Road the - and in reception So really on Tripper. for high-quality barbell ends and the of terms the actually flower of I doing would both also say we're

in add would September, early October, launched late our that just we've brands, including premium [indiscernible]. Yes, I

And bans in expect well. as settle QX in of saw premium a out bit size so to and we while we to rebound of mix QX basket terms sales in QX, a decrease in little those that in ticket the

ahead. Please from question next of Genuity. comes go Our Canaccord Matt Bottomley

Good Thanks morning, questions all. for the here. taking

Just to balance wanted go the to sheet. back

very some Is your color CapEx other in budgeting I able of on some lot M&A of provide, lot name historical relative for year XXXX, greater the So of due coverage. acquisitive than of gives if a on going to buckets you're it's of a levels. appreciate to needs working payments a capital, potential year? come that any picture the in potentially next So a interest the there any cash less next contingent on wondering these whether peers? coming into cash I'm the Anything potential just

to Thanks for with talking so as $XXX about when we've to question. very And the about try it sheet, very million much over balance near-term the so transparent looked our we our We strongly the market external sheet. comes said, be the to liquidity feel with - we balance on capitalization.

the et is to what a consideration to forward give it as item, cash newest discuss amount - out try the it technical very contingent is cetera. happy consideration. type low go no slide to XX there's that. in discuss offline. decent stock, think percentage a respect of forward to from I expectation to as you'll you deck break capitalization very, a through It contingent with Slide goes our of our a which consideration. If see goes cash, deck, considerations that we by very virtually But happy through there It debt, And

from Our Needham. ahead. Matt go of comes next Please question McGinley

you. Thank

or quarter-over-quarter, next fourth price the, you in that guess, better and than be would of to line expect expect guess, you relative the EBITDA have expectations margins mid-XXs compared Why operating the You the middle you'd to to I EBITDA And top revenue? by noted pressures you you EBITDA but to note that quarter down in up be would I you the year? compression. mention other income didn't to visibility noted into growth XX% grow and macro

a And were most the growth really and to to I Matt. Thanks because look QX SG&A sequential would lot like indicate growth question, our lot going as really we solid the looking for feel of - the say But see will QX, people like to don't look expect to line terms think what expect what we wanted strongly there that's we well. I we're sequential in we we market. what signal get the at some was we which QX about growth, - leverage Brad, really you strong, to think quarter-over-quarter. to that is QX we a why add? EBITDA we to the

Yes.

terms it's of trends product top not our to on line, internalization shift guiding and the In we're seeing more that our of stores. on so

it's so sold to whether contribution retail, dollars the comfortable guiding we wholesaler gross profit So in and more basis, same it's a felt on profitability.

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

basis. this existing in expect business clearly I and QX patient consistent the thinking should thinking the go and we more Florida there's company that gross running flower we the into within the strategy XXXX the you to Or state that? more just states. and bring on pound? we improvement can How that should back better want and results. there. at remain your on as significant stage been I the how in that to focused infrastructure on be state? so that all should utilize margins we down wondering in be cost market. ask And gross data about you a dry and Congrats indicating volumes this per volume margin acquisition Should QX as improve guess margins to relatively on I'm is along just It's see a about

of in especially continue and and to our we've across say, last because months, I XX would on production have cultivation have that Hi the over Andrew, in business. can, Florida on the Florida we're optimize I that we continuous the improvement focused the would facility part that And our to been costs Make the just our our almost Grow question. footprint. uniquely for thanks bring down focus both we say continue continuing focused and so customer extent acquisition to - production, to much

our your gross So very to be get Florida Florida to be new continuously improving memory acquiring stores our these as we cultivation muscle in strong it's of starting said, we will are out continue we to XX-plus a customers. and That point, margins facilities. absolutely, business, to really open new great

So would say answer is I that the and. to both

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

the color menu appreciate consumer on But in I the products lot the out priorities you're there, the with in understand because - stuff markets. a help initiatives just challenged new across us context consumer the new rolling of this market.

With the premium on are ramping seeing fully And be categories, that and to approved sticking as Jersey. products? on stores new just what quick production and market would expect When sales the Jersey those value the that's as New the side the you then in far segment, a consumer New you really the with optimize with great? update do

Sure.

to I so. we Scott, think in road. stuck to you do there, like answer but XXX% will

our So in flower. are XX-plus know, terms of as you - of percent the SKUs menu, what

incredibly to people what seen important our differentiated really introduce markets, into Florida like to higher great get part we've right. at brands more great Road well. does It unique, is, love and just is we've of a are People - to the love example genetics It's and it's spectrum. new it. introduced as though these premium And price they value us reacting extremely we as brand. Tripper. in flower branding They even So the the LIT, are well a those

well quality the product. spectrum. compelling branding. we're the It's of ends that on the inside seeing of of quality that's branding, both because those We're is seeing because the of So brands people what active react

that bit good We consumer now. When are huge it days, we But LIT Florida, same in Tripper we sales of the first we - of with given the probably has Massachusetts. seeing within, introduced head of traction we a few right a into portion as our it market. the are with did a Road - introduced value we up really saw made start a nature when SKU

So briefly. to really - New Jersey results seen on Switching both good really we've sides. we've seen

our some own stores got own As I products We mentioned, flower of in September. into we our in got October. the

SKUs So stores. to own important XX% the flower our of the super again, plus flower, being into get

Jersey we So the seeing and well. optimize you'll continue and fourth New see - first quarter improve quarter into through anticipate the as the to probably

Our of next from ahead. BTIG. DeCourcey go Jon Please comes question

Hi the guys. Congrats quarter. on

on touch much don't on - precautionary or closures to how today QX storm? from any were it, latest name wanted meaningful Hurricane were Just yesterday today's I piggybacking then closures a there to of for trying for you that, on results? quantified think plan of hurricane the drag either Ian the ever And but I'm

thanks the John, question. for

First BTIG. of to all, welcome

think first analyst. this your BTIG call as our I is

you're in hope well I settling So there.

of were our safe accounted we and It facilities the us, for of particularly ourselves of a our people the third importantly and In that have revenue, and more most terms lost for. importantly, Florida for impact all of think, the and And quarter. our $XXX,XXX hurricanes cultivation and production was material were essentially unharmed we on consider not did in fortunate impact probably business.

it's impactful time, So the Ian. ourselves now particularly impactable we sitting less - right where Ian. it's fortunate With consider certainly, has we've very I very less we're materially than less say state been had would tough because and of Nicole, lucky Florida, Hurricane had, with a

dent. So big make again, not going something that's a to

Our go question comes Bond next Andrew ahead. of from Please Jefferies.

Hi, good as of dialogue, any your these comment to relative your like And impact? the strategy smaller you through be pressures? are seen largest Thank on revisit I line less morning. consumer. Owen the headwinds you've you to navigate this on which states this? macro Andrew Thank you Bond headwinds you're can our around impacts the or might scale there comments And where question. how on seeing impact an in the you you. Could from your larger for macro taking markets MSOs expand for Bennett. wanted

you so the much Thank for Sure. question.

areas macro consumer the of impact headwinds, income. And would to our on our is for particular, we've lower where seen in skews say that's terms footprint, the In - I Nevada. probably going biggest mean

market I - it's the generally a would Ayr relative is What it's a is of month, been pride And on of Nevada gained that's last this us, year. is share and has X/X share meaningful for and the I seen for market market that data it it's data for everyone Nevada it generally the generally I or this that strong. think business, that roughly point little to - down our say market while down is time depending incredibly think decrease. a bit, size

strong much Florida of we've competitive our strong very generate At XX stores tough continue to Nevada. than we an Nevada, revenue and really cash is the six despite in We the larger comes share into that have that gain stores stores our is now have Nevada point, flow Nevada. are And Florida. playbook from contributor incredibly and but - that in like business we and XX success fact Florida revenues places this market our out in to a taken

I them that indicate So That goes that show that for to the is strong Florida how Nevada just and just passed the us. shows Nevada. fact breadth you mentioned in same

being environments. product So and positioned from remember earlier knowing our consumer important difficult uses well tough for we said that comes a - this that this is when as markets these I in that strong foundation the It for us wellness. for business experience it's Nevada to fundamentally like

go Matt from Please ahead. comes Genuity. question next Canaccord Bottomley Our of

Thanks.

Just me. a follow-up for

guys speaking market some that the retail of the you more share gains Just on at had level.

out higher. noted think you sequentially so markets six I of seven

lot to you've If had Florida, balance are word, your what is segment, historical What's on there. your that mentioned. think of this products strategy, of you'll out do you've Obviously, same? premium How looking now put in a as what share nice to some the given brand in you philosophy the build they gains to you forward to dynamics know stay a market if that's Just trying environment? the premium I inflationary this need you spend? the where profitable? value more which versus right in the isn't shift terms Do down call willing consumers a

factor. form each together, brand point for across product put and price have When put think across brand that you our factors Thank that to price Sure. portfolio the Matt. across offerings that and we portfolio form very the about our best quality we the we've points. follow-up, together at consciously

doesn't premium. doesn't only So and mean sell that we that mean That Kynd. LIT we're only

down personal at so move customer It brand get Road by we sell up the everyone best happens talks I be our to Tripper family. spectrum about a to consciously our brand. knows established We and me it value Tripper. I for that price point money the who branding our within is the love brand love But also and Road have staying it. value can price portfolio, brand. that favorite my and

if there a it Road but than midstream, was in flush cash. with to years So Tripper year, two would their more inflation popular, on they come the great probably a see splurge people down, economy within like to whenever is want today, have in to our go bit will and be be a in up going or But with that. customers family it more times pocket, we they do stay they money can little and pick - want our

market conditions different customer. that brand portfolio our conscious we've putting resonate weather So very with together and still can been a about

as This concludes the today's Wellness call. as conference Ayr session question-and-answer well

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