Bottoms ARE a Process
AYRWF did not have a great quarter (growth slowed, price normalization & regulatory delays), most of which was known. The magnitude of the issues was unknown, and yesterday's price action in the stock tells the story.
Ayr Wellness reports 4Q21 EPS $0.35 vs. year-ag, including $52.9M fair value gain on financial liabilities. Revenue $111.8M vs FactSet $106.2M; Adjusted EBITDA $26.1M vs FactSet $26.0M. While the quarter came in as expected, the guidance was soft as also, as expected:
"Given prior construction delays and uncertain regulatory timelines regarding key revenue-generating initiatives, including regulatory approval for adult-use sales and cultivation expansions in both Massachusetts and New Jersey, the company expects financial results in H1 of 2022 to remain relatively flat, in-line with industry trends, followed by a step-function in growth beginning in Q3 2022 and continuing through Q4 2022. Assuming the company receives these regulatory approvals sufficiently early in Q3 2022, the company anticipates an annualized run-rate of $250M of Adjusted EBITDA, $100M of operating income, and $800M of revenue; for Q4 2022."
AYRWF's prior guidance was for (A)EBITDA of $250-300M and revenue of $800M in 2022; before reporting FactSet 2022, adjusted EBITDA and revenue consensus forecasts are $250.4M and $748M, respectively. We see those numbers coming down to revenues of $700M and (A)EBITDA of $220M.
Yesterday the stock was down 1.4% on the news and now 23% YTD. The lack of volatility on the earnings release on the new guidance is part of the bottoming process. Trading at 1.1x 2022 Revenues and 3.4x revised (A)EBITDA expectations, the stock reflects the bad news. The good news is that we will be comparing against this quarter in nine months, and the company will be experiencing significant growth from the 2021 capital spending that has not yet kicked in.
NJ Update
New Jersey voters endorsed the legalization of adult recreational weed use in a ballot referendum in November 2020, but getting there has been a daunting task. Round Two of applicants wanting to enter the cannabis industry in New Jersey is officially on.
On Tuesday, the state Cannabis Regulatory Commission began accepting applications from those interested in opening a retail outlet to sell recreational cannabis to adults. By 4 p.m., the commission said it had received 172 applications. The problem the states faces is this reality - "You have to factor in the 90-day review process for their application, then the 120 days in order to meet the requirements of the location (municipality), then they have to get up and running and create supply and ramp up their staffing," said DeLoreto. "They may start selling by the end of the year.
Given the industry's capital constraints, round two applicants will not be up and running until 2023.
Super-Pharm is Israel's Duane Reed/CVS; they currently distribute medical cannabis.
Israeli pharma chain Super-Pharm will independently import cannabis to sell for medical purposes in its chains, N12 reported on Thursday. The hybrid strain named "Miracle Alien Cookies," imported from Portuguese agriculture company Agrivabe's specialized farm, will be branded and sold by Super-Pharm as Cannavix Miracle. Super-Pharm announced an initial price of NIS 299 for ten g. of Cannavix Miracle. THE JERUSALEM POST
