Ascend Wellness Releases Fourth Quarter, Full Year 2023 Financial Results

• Q4 2023 Net Revenue Increased 25% Year-over-Year to $140 million
• Q4 2023 Adjusted EBITDA Increased 15% Year-over-Year to $32 million
• Full Year 2023 Net Revenue Increased 28% Year-over-Year to $519 million
• Full Year 2023 Adjusted EBITDA Increased 14% Year-over-Year to $107 million 
• First Full Year of Positive Cash from Operations and Positive Free Cash Flow
• Company Ended Q4 2023 with $73 Million of Cash and Cash Equivalents
  

NEW YORK, March 12, 2024 – PRESS RELEASE – Ascend Wellness Holdings Inc. (AWH), a vertically integrated multistate cannabis operator with operations in seven states, reported its financial results for the fourth quarter and full year ended Dec. 31, 2023. Financial results are reported in accordance with U.S. generally accepted accounting principles (GAAP) and all currency is in U.S. dollars.

Financial Highlights

• Gross Revenue: 
• Q4 2023: Total revenue of $173.1 million increased 1.9% quarter-over-quarter and increased 28.7% year-over-year.
• FY 2023: Total revenue of $635.2 million increased 30.3% year-over-year.
• Net Revenue:
• Q4 2023: Net revenue, which excludes intercompany sale of wholesale products, decreased 0.8% quarter-over-quarter to $140.2 million, and increased 25.0% year-over year.
• FY 2023:  Net revenue increased 27.8% year-over year to $518.6 million.
• Net Loss: 
• Q4 2023: Net loss of $19.3 million compared to net loss of $15.1 million in Q4 2022.
• FY 2023: Net loss of $48.2 million compared to net loss of $80.9 million for FY 2022.
• Adjusted EBITDA¹: 
• Q4 2023: Adjusted EBITDA was $32.4 million, a 9.6% increase quarter-over-quarter and a 14.8% increase year-over-year. Adjusted EBITDA Margin was 23.1%, a 218 basis point increase compared to the prior quarter and a 207 basis point decrease compared to the prior year.
• FY 2023: Adjusted EBITDA was $106.5 million, a 14.3% increase year-over-year. Adjusted EBITDA Margin was 20.5%, a 243 basis point decrease compared to the prior year.
• Balance Sheet: 
• As of Dec. 31, 2023, cash and cash equivalents were $72.5 million, and net debt², which equals total debt less unamortized deferred financing costs less cash and cash equivalents, was $236.2 million.
• Cash Flow: 
• Q4 2023: Generated $16.7 million Cash from Operations in the quarter, representing the fourth quarter in a row the company generated Cash from Operations. Generated $8.4 million Free Cash Flow³ in the quarter, representing the second quarter in a row the company generated positive Free Cash Flow.
• FY 2023: Generated $54.5 million Cash from Operation³ in the full year, representing the first full year the company generated Cash from Operations since the company was founded. Generated $30.3 million Free Cash Flow³ for the full year, representing the first full year the company generated positive Free Cash Flow. Both of these metrics exclude the benefit of $20.8 million in cash that the company received throughout the year attributable to an Employee Retention Tax Credit.

Full Year 2023 Business Highlights 

• First full year generating positive Cash from Operations and Positive Free Cash Flow. 
• Opened six dispensaries during 2023, made up of Grand Rapids, Mich.; New Bedford, Mass.; Tinley Park, Ill.; Piqua, Ohio; Sandusky, Ohio; and Northlake, Ill. Subsequent to year-end, the company opened a dispensary in Cincinnati, bringing the total to 35 dispensaries. 
• During the year, the company was the first multistate operator in the United States to launch the “Cannabis Outlet Model” in select markets. AWH outlets feature the same great products at everyday low prices. The company has deployed this model in eight of its dispensaries.
• In April, the company acquired four dispensaries in Maryland, marking the company's entry into its seventh state. Soon after the purchase, the company began adult-use sales in Maryland at the start of the program in July.
• Sold more than 165,000 pounds of product wholesale, more than doubling the pounds sold compared to prior year. Full year gross wholesale revenue increased in all six wholesale markets compared to prior year.
• Simply Herb brand rose to the No. 1 selling brand in Massachusetts. Ozone rose to No. 3 selling brand in New Jersey and remained No. 3 selling brand in Illinois. Overall, AWH brands were No. 4 in all of the third-party wholesale markets in which the company competes.
• Launched three new brands in the year, Royale, a super-premium brand; Tunnel Vision, a brand high in tetrahydrocannabivarin (THCV); and Common Goods, a value-based flower brand.
• In May, the company appointed John Hartmann as CEO of the company. Later in the year, the company announced key leadership changes. These changes included the appointment of Mark Cassebaum as chief financial officer; the appointment of Chris Holzer as chief of operations; the appointment of Rick Wilkins as chief of stores; and the appointment of Denise Pedulla as chief legal officer and corporate secretary. Subsequent to the end of the year, Melissa Feck was appointed chief people officer.

Management Commentary

Abner Kurtin, executive chairman of AWH said, "Thank you to our stakeholders for helping us deliver a strong Q4 and full year 2023. We remain excited about our future prospects, as we continue to anticipate positive changes in federal cannabis reform. Further to the federal progress, we are seeing promising advancements across the states. We were pleased Ohio voters endorsed adult-use cannabis in the fall and expect the program to roll out in the coming quarters. In addition to the legislative progress in Ohio, we have been happy to see the governor of Pennsylvania's enthusiasm and call to action for his state legislators to draft an adult-use bill."

John Hartmann, CEO, said, "AWH had an excellent quarter and full year. Our notable achievements translated into impressive financial success, with 2023 net revenue reaching $519 million, a robust 28% growth from the previous year. This growth was fueled by expansion of both retail and wholesale businesses, including a 21% increase in the retail business driven by store openings and strategic acquisitions and a 47% growth in the third-party wholesale business as we increased our presence in New Jersey, Massachusetts, and Illinois. Despite cultivation challenges faced in Franklin, New Jersey, earlier in the year, and initial pressure on our Illinois retail from the start of neighboring Missouri's recreational sales, we rebounded, achieving an Adjusted EBITDA of approximately $107 million, reflecting 14% growth. Our key strategic initiatives and our commitment to execution ensured strong financial performance. In addition to this, we continue to see robust geographic diversification, and successful brand performance."

Mark Cassebaum, chief financial officer, said, "We are pleased to have generated meaningful cash from operations and free cash flow for the quarter and for the full year. This is particularly important as we are in the early stages of discussions to refinance our term loan due in August 2025. These conversations have been productive, and we are pleased with the initial reception in the market. We remain committed to disciplined growth, and investing in low-risk capex opportunities that present a high return on invested capital."

Q4 2023 Financial Overview

Net revenue, which excludes intercompany sales of wholesale products, decreased 0.8% quarter-over-quarter to $140.2 million. The sequential decrease was led by declines in Illinois retail, which were partially offset by new stores and gross wholesale revenue growth in New Jersey, Massachusetts, and Michigan. Net revenue increased 25% year-over-year driven by: the opening of six new stores; the acquisition of four Maryland stores; increases in third-party sales in New Jersey, Massachusetts, and Illinois; and an increase in intercompany sales in Massachusetts. These increases were partially offset by a decline in retail sales in Illinois. 

Total retail revenue decreased 3.9% sequentially to $97.3 million for the fourth quarter of 2023, largely led by declines in Illinois. However, these declines were partially offset by the three new store openings within the quarter and improvement in our Pennsylvania stores' performance. Notably, however, retail revenue increased 15% compared to Q4 2022.

Gross wholesale revenue in the quarter was $75.8 million, up 10.4% quarter-over-quarter. This was driven by gross wholesale growth in New Jersey, Massachusetts, and Michigan compared to the prior quarter. Net wholesale revenue, after intercompany sales, was $42.8 million, up 7.1% quarter-over-quarter. This improvement was driven by third-party wholesale increases in New Jersey and Massachusetts. Q4 2023 represented the fourth quarter in a row where the company has experienced sequential growth in gross and net wholesale revenue.

Q4 2023 gross profit was $47.5 million, or 33.9% of revenue, as compared to $43.6 million, or 30.8% of revenue, in Q3 2023.

Q4 2023 Adjusted Gross Profit¹ was $60.1 million, or 42.9% of revenue, as compared to $56.4 million, or 39.9% of revenue, for 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, start-up costs included in cost of goods sold, and non-cash inventory adjustments. Adjusted Gross Profit¹ dollars increased 6.5% quarter-over-quarter, driven by an increase in gross profit dollar contribution from Athol, Mass., and Franklin, N.J.  Adjusted Gross Profit dollars increased 12.4% year-over-year, driven most notably by dollar improvements in Massachusetts, New Jersey, and Maryland.

Adjusted Gross Profit¹ margin on a consolidated basis increased 294 basis points quarter-over-quarter to 42.9%. This was driven by improvements in utilization and productivity in Athol, Mass., and Franklin, N.J.  

Total general and administrative (G&A) expenses for Q4 2023 were $47 million, or 33.5% of revenue, compared to $40 million, or 28.3% of revenue, for Q3 2023. G&A expenses as a percentage of revenue were up as a result of timing of certain expense accruals and one-time employment related items. 

Net loss attributable to AWH for Q4 2023 was $19.3 million during the quarter compared to $11.2 million in the prior quarter. This $8.1 million variance is primarily a result of one-time compensation related expenses.

Adjusted EBITDA¹, which adjusts for tax, interest, depreciation, amortization, equity-based compensation, and other items deemed one-time in nature, was $32.4 million in Q4 2023, a 9.6% increase quarter-over-quarter. Adjusted EBITDA Margin¹ was 23.1%, a 218-basis point increase compared to Q3 2023. 

Full Year 2023 Financial Overview

Net revenue, which excludes intercompany sale of wholesale products, increased 27.8% year-over-year to $518.6 million, driven by an increase in both the retail and wholesale business.

Total retail revenue was $371.2 million for FY 2023, a 21.3% increase year-over-year. The growth was driven by: the opening of six new stores; the acquisition of four stores in Maryland that started adult use in July; and the full year benefit of adult use sales in New Jersey. These improvements were partially offset by a decline in retail sales in Illinois, largely driven by start of adult-use sales in Missouri and additional retail stores coming online in Chicago area. 

For the full year 2023, the company expanded gross wholesale by 45.3% revenue to $264.1 million. This was fueled by growth in all six of AWH's wholesale markets compared to the prior year. Net wholesale revenue increased 47.4% year-over-year to $147.4 million, driven by third-party wholesale growth in New Jersey, Illinois, and Massachusetts.

Full year 2023 gross profit was $155.1 million, or 29.9% of revenue, compared to $134.6 million, or 33.1% of revenue, for the prior year.

Full year 2023 Adjusted Gross Profit¹ was $209 million, or 40.3% of revenue, compared to $185.1 million, or 45.6% of revenue, in 2022. Adjusted Gross Profit¹ dollars increased 12.9% year-over-year. Adjusted Gross Profit¹ margin decreased 529 basis points year-over-year driven by margin declines in Illinois retail and New Jersey cultivation. 

Total G&A expenses for 2023 were $158.7 million, or 30.6% of revenue, compared to $137.1 million, or 33.8% of revenue, for 2022 as we leveraged overhead to support new markets and further utilized our existing infrastructure.

Net loss for 2023 was $48.2 million, compared to a net loss of $80.9 million for 2022. This improvement was driven by an increase in gross profit and a lower provision for income taxes.

Adjusted EBITDA¹, was $106.5 million in 2023. This represents a 14.3% increase year-over-year. Adjusted EBITDA Margin¹ was 20.5%, a 243-basis point decrease compared to 2022, driven by lower margins in Illinois retail and New Jersey cultivation, partially offset by lower G&A as a percent of revenue due optimization of existing asset footprint and to increased leveraging of corporate infrastructure. 

Non-GAAP Financial Information

This press release includes certain non-GAAP financial measures as defined by the U.S. Securities and Exchange Commission (SEC).  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.

View the company’s complete Q4 2023 and full-year 2023 balance sheet here.