Achieved $141.6 million Net Revenue in Q3 2024
Reported $25.1 million in Adjusted EBITDA
Anticipates $30 million of Annual Savings Through Transformation Initiatives
MORRISTOWN, N.J., Nov. 12, 2024 – PRESS RELEASE – Ascend Wellness Holdings Inc. (AWH), a vertically integrated multistate cannabis operator focused on bettering lives through cannabis, reported its financial results for the three months ended Sept. 30, 2024. Financial results are reported in accordance with U.S. generally accepted accounting principles (GAAP) and all currency is in U.S. dollars.
Business Highlights
- Commenced adult-use sales at five dispensaries in Ohio, achieving an average sales increase of over three times compared to their performance prior to the start of adult-use.
- Opened one dispensary in Whitehall, Pa., bringing the total number of consolidated and operating dispensaries in the AWH network to 39.
- Announced the appointment of three key executives to its leadership team: Sam Brill, a director, as CEO; Frank Perullo, a director and co-founder, as President; and Roman Nemchenko, previously Chief Accounting Officer, as Chief Financial Officer.
- Initiated a series of cost savings and transformation initiatives as part of commitment to sustainable profitability, pursuant to which the company aims to streamline operations and reduce expenditures by $30 million in 2025.
- As part of the transformation efforts, and following the appointment of new leadership, the executive team completed the next-level leadership transition to a tactical, lean team focused on controlling costs while continuing to drive growth. As part of this, AWH reduced management headcount by 15% at corporate and 10% at retail and operations.
- Following the quarter’s end, AWH launched Effin', an edibles-only brand focused on delivering targeted effects. The brand has been well received, quickly achieving the top spot in the edibles category at Ascend stores where it is available within the first week.
Q3 2024 Financial Highlights
- Total net revenue increased 0.3% year-over-year and increased 0.1% quarter-over-quarter to $141.6 million.
- Retail revenue decreased 7.6% year-over-year and increased 0.6% quarter-over-quarter to $93.6 million.
- Wholesale revenue increased 20.1% year-over-year but decreased 0.8% quarter-over-quarter to $48 million.
- Net loss for the third quarter of 2024 was $28.3 million compared to net loss of $11.2 million in Q3 2023 and $21.8 million in Q2 2024.
- Adjusted EBITDA1 was $25.1 million, representing a 17.7% margin1. Adjusted EBITDA decreased 14.9% and adjusted EBITDA margin decreased 317 basis points (bps) compared to prior year. Adjusted EBITDA declined 11.4% quarter-over-quarter and adjusted EBITDA margin was down 230 bps sequentially.
- As of Sept. 30, 2024, cash and cash equivalents were $65.3 million and net debt2 was $240.6 million.
- Generated approximately $2 million of cash flows from operations in Q3 2024, representing the seventh consecutive quarter of positive operating cash flow.
Management Commentary
"I want to express my gratitude to the board and all of our stakeholders as I step into this role and lead Ascend through its next chapter,” Ascend CEO Sam Brill said. “We are thrilled to lead this transformation and have already started to lay the groundwork for meaningful progress in the quarters ahead. Moving forward, we must focus on three financial priorities: improving profitability, maximizing asset efficiency, and enhancing cash flow generation. I'm excited to tackle these objectives with our team and create long-term value for our stakeholders.”
"We made meaningful progress during this transitional quarter as we navigated headwinds in a few of our key markets," Frank Perullo, co-founder and president, said. "Among the notable positives was the successful transition of five stores in Ohio to adult-use, the opening of our fifth dispensary in Pennsylvania, and significant steps taken to realign and optimize our workforce. Each of these milestones positions us to pursue our profit improvement goals more effectively. We are laser focused on strengthening our operational foundation to drive resiliency and unlock future potential."
"I am proud of the team for making progress on cost-management and transformation initiatives, reinforcing our commitment to creating a leaner and more resilient organization. These steps position us well to improve leverage and enhance long-term shareholder value," Chief Financial Officer Roman Nemchenko said.
Q3 2024 Financial Overview
Net revenue increased 0.3% year-over-year and 0.1% quarter-over-quarter to $141.6 million. The year-over-year increase in net revenue is attributable to a 5.7% increase in third-party wholesale and a 5.4% decrease in retail revenue. The quarter-over-quarter increase in net revenue is attributable to a 0.4% increase in retail and a 0.3% decrease in wholesale revenue.
Retail revenue in the third quarter of 2024 totaled $93.6 million or a 0.6% increase compared to prior quarter. This increase is attributed to the commencement of adult-use sales in Ohio, continued ramp-up and a new store opening in Pennsylvania as well as the ramp of new partner stores in Illinois, offset by declines in New Jersey, owned stored in Illinois, Massachusetts and Michigan. Third-party wholesale revenue in the third quarter of 2024 totaled $48 million, or a 0.8% decrease compared to prior quarter resulting from declines in New Jersey and Massachusetts.
1 Measure is a non-GAAP Financial measure. Please see the "GAAP Reconciliations" at the end of this release and non-GAAP financial definitions below.
2 Net Debt is equal to gross debt net of unamortized deferred financing costs less Cash & Equivalents.
Q3 2024 gross profit was $43.7 million, or 30.9% of revenue, compared to $41.6 million, or 29.4% of revenue, in the prior quarter. Q3 2024 Adjusted gross profit1 was $53.6 million, or 37.8% of revenue, compared to $53 million, or 37.5% of revenue, in the prior quarter. The slight sequential increase in adjusted gross profit is attributed to a nominal increase in retail sales as a percentage of total sales sequentially.
Net loss for the third quarter of 2024 was $28.3 million compared to net loss of $11.2 million in Q3 2023 and $21.8 million in Q2 2024. The sequential decline can be attributed to refinancing transaction costs and severance expense incurred in Q3 2024. Additionally, the prior quarter benefited from the reversal of certain compensation expense-related estimates.
Adjusted EBITDA1 was $25.1 million in Q3 2024. This represents a 14.9% decline year-over-year and a 11.4% decline quarter-over-quarter. The sequential decline was largely driven by the reversal of estimates noted above in the prior quarter.
Cash and cash equivalents at the end of Q3 2024 were $65.3 million and net debt2 was $240.6 million. Cash generated from operations in Q3 2024 was approximately $2 million, representing the seventh consecutive quarter of positive operating cash flow.
