Ascend Wellness Holdings Reports $142.4M Net Revenue for Q1 2024

NEW YORK, May 7, 2024 - PRESS RELEASE - Ascend Wellness Holdings, Inc. ("AWH," or the "Company" or "Ascend") (CSE: AAWH.U) (OTCQX: AAWH), a vertically integrated multi-state cannabis operator with assets in Illinois, Maryland, Massachusetts, Michigan, Ohio, New Jersey, and Pennsylvania reported its financial results for the three months ended March 31, 2024 ("Q1 2024"). Financial results are reported in accordance with U.S. generally accepted accounting principles ("GAAP") and all currency is in U.S. dollars.

Q1 2024 Financial Highlights

• Gross revenue increased 23.4% year-over-year and 0.6% quarter-over-quarter to $174.2 million.
• Net revenue, which excludes intercompany sales of wholesale products, increased 24.7% year-over-year and 1.6% quarter-over-quarter to $142.4 million.
• Retail revenue increased 15.1% year-over-year and decreased 2.2% quarter-over-quarter to $95.2 million.
• Gross wholesale revenue increased 35.2% year-over-year and 4.2% quarter-over-quarter to $79.0 million.
• Wholesale revenue, net of intercompany sales, increased 50.2% year-over-year and 10.2% quarter-over-quarter to $47.2 million.
• Net loss of $18.2 million during the quarter compared to $18.5 million in Q1 2023.
• Adjusted EBITDA¹ was $32.5 million, representing a 22.8% margin. Adjusted EBITDA increased 39% and margin improved 239 basis points year-over-year. Adjusted EBITDA improved 0.4% quarter-over-quarter and Adjusted EBITDA margin was largely flat sequentially.
• As of March 31, 2024, cash and cash equivalents were $72.9 million and net debt² was $237.6 million.
• Generated $3.9 million of cash flows from operations, representing the fifth consecutive quarter of positive operating cash flow.
  
  

¹Adjusted EBITDA/margin and Adjusted Gross Profit/margin are a non-GAAP financial measures. Please see the "GAAP Reconciliations" at the end of this release.

²Total debt less cash and cash equivalents less unamortized deferred financing costs.

Business Highlights

• Opened two dispensaries in Q1 2024, in Cincinnati, Ohio and Monaca, Pa., bringing the total number of operating dispensaries across the network to 36.
• Secured operating agreements with two additional partner dispensaries, bringing total number of partner stores in the pipeline to four.
• Operationalized second cultivation and manufacturing facility in Massachusetts, bringing total number of facilities to seven with 255,000 sq. ft. of active canopy. Further development at this facility is underway with plans to expand total cultivation across the portfolio to 260,000 sq. ft.
• Entered into two long-term supply agreements in Maryland, providing both AWH and third-party branded products to serve retail and wholesale customers in the state.
  

Management Commentary

"I want to extend my gratitude to all of our stakeholders for their dedicated efforts in delivering a solid first quarter. We've seen tremendous 25% year-over-year growth in revenue and a 39% increase in adjusted EBITDA, complemented by a 239-basis point expansion in our Adjusted EBITDA margin compared to the prior year. This quarter also marks our fifth consecutive period of gross wholesale growth. These achievements reflect the hard work of our team, and they underscore our commitment to sustained operational excellence and financial health," continued John Hartmann, Chief Executive Officer. 

"We had a strong first quarter to start the year, highlighted by our generation of cash from operations for the fifth consecutive quarter. This consistent performance is a testament to our strong execution across multiple markets. Looking ahead to the rest of the year, we are optimistic about our financial outlook. We project revenue growth between approximately 12% and 15%, and an adjusted EBITDA increase of approximately 17% to 22% compared to 2023. Additionally, we are targeting cash from operations generation for the full year between $55 million and $65 million," said Mark Cassebaum, Chief Financial Officer. 

Q1 2024 Financial Overview

Net revenue increased 24.7% year-over-year and 1.6% quarter-over-quarter. Sequential growth was driven by growth in the wholesale business partially offset by declines in the retail business.

Total retail revenue in the first quarter of 2024 was $95.2 million, representing a 15.1% increase compared to Q1 2023 driven by the opening of eight new stores and the acquisition of four dispensaries in Maryland. This represents a 2.2% decrease compared to the prior quarter driven by declines in the New Jersey and Illinois markets resulting from an increased presence of competition, and declines in several other markets resulting from a challenging compare to Q4 2023, which benefited from more holidays. 

Gross wholesale revenue was $79.0 million, a 4.2% sequential increase, driven by growth in Illinois, New Jersey, Pennsylvania, and Ohio despite declines in Massachusetts and Michigan. Net wholesale revenue, excluding intercompany sales, increased 10.2% sequentially to $47.2 million, driven by increases in third-party wholesale sales in Illinois, New Jersey, and Pennsylvania.

Q1 2024 gross profit was $52.0 million, or 36.5% of revenue, compared to $47.5 million, or 33.9% of revenue, in the prior quarter. Q1 2024 Adjusted Gross Profit1 was $62.4 million, or 43.8% of revenue, compared to $60.1 million, or 42.9% of revenue, in 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, and non-cash inventory adjustments. Adjusted Gross Profit1 margin increased 94 basis points sequentially primarily driven by margin dollar contributions from New Jersey and Illinois cultivation, and Massachusetts retail. 

Total Q1 2024 general and administrative ("G&A") expenses were $49.5 million, compared to $47.0 million in the prior quarter. Total G&A expenses as a percentage of revenue improved from 33.5% of revenue in the prior quarter to 34.7% of revenue as the Company leveraged existing G&A infrastructure.

Net loss for the first quarter of 2024 was $18.2 million.

Adjusted EBITDA¹, which adjusts for tax, interest, depreciation, amortization, equity-based compensation, and other items deemed one-time or non-recurring in nature, was $32.5 million in Q1 2024. This represents a 39.3% increase year-over-year and a 0.4% increase quarter-over-quarter driven by the aforementioned gross profit improvements. Adjusted EBITDA Margin1 of 22.8% expanded 239 basis points compared to prior year and decreased 28 basis point compared to the prior quarter driven by the aforementioned gross profit improvements being partially offset by the absence of a one time G&A benefit that impacted Q4 2023. 

Non-GAAP Financial Information

This press release includes certain non-GAAP financial measures as defined by the United States Securities and Exchange Commission ("SEC"), including Adjusted Gross Profit, Adjusted Gross Margin, Adjusted EBITDA, and Adjusted EBITDA Margin. 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.