Not to lose sight of this important story in IL.
Illinois may finally be able to move forward with distributing 185 new cannabis dispensary licenses.
A Cook County Circuit Court judge is expected to lift a stay in a lawsuit challenging the licensing process, allowing the state to hand out the licenses in the coming weeks.
Illinois' recreational market has been beset by lawsuits, stifling its ability to move forward with issuing licenses, many of which are expected to go to minority-owned businesses. The 185 dispensary licenses have been in limbo since April 2021, when WAH Group filed suit, claiming it had been unfairly excluded from a 2020 lottery because of an application mishap. While the resolution of WAH’s claim is unclear, it is no longer seeking to block the issuance of those 185 licenses. Adding 185 more licenses means new dispensaries will get up and running, allowing further growth in the market by customers will have greater access to cannabis products.
AYR Earnings
2Q22 will look like 1Q22, so delivering on better trends in 3Q22 will be an inflection point?
Ayr Wellness (AYRWF) reported Q1 GAAP EPS of -$0.11, beats by $0.17, and Revenue of $111.2M (+90.4% Y/Y) misses by $1.53M. Ayr continues to anticipate an annualized run-rate of $250 million of Adjusted EBITDA, $100 million of operating income, and $800 million of revenue for Q4 2022.
- AYR 1Q22 sales of $111.2 million, up 90% year-over-year and flat quarter-over-quarter.
- No surprise as many markets continued to experience pricing pressure, resulting in a sequential decrease in sales. Although the company did note that they were able to hold or gain market share in many states and In Nevada, its market share according to BDSA is at an all-time high. In Florida, same-store sales increased 5% quarter-over-quarter.
- Wholesale sales increased 5% sequentially, driven by an increase in nearly every market despite the competitive environment during the quarter.
- 1Q22 adjusted EBITDA was $19.5 million, representing an increase of 6% year-over-year. The sequential decrease in adjusted EBITDA, of $6.7 million, was largely driven by a decrease in adjusted gross profit of $5.4 million. Adjusted EBITDA margin was down 14% YoY and 5.9% QoQ
- The adjusted gross margins in 1Q22, of 52.1%, down from 56.7% in Q4 (started Q1 with lower base pricing due to the compounding effect of Q4 price compression) expects a similar level of gross margin next quarter.
- Will 2H22 see an upside in GMs driven by increased internal sourcing and economies of scale from cultivation facilities coming online?
- This is the result of optimizing headcount and realizing efficiencies across the board as we continue to fine-tune the integration of our recent acquisitions.
- Ayr ended the quarter with a cash balance of $78.7 million, with $33.2 million spent on CapEx, representing roughly half the outstanding CapEx for the year.
Management Comments:
- "We have made excellent progress this year to complete major CAPEX projects and receive regulatory approvals across our footprint. We will now unlock the revenue streams from these various assets going forward - including the start of adult-use sales in New Jersey and Boston next month.
- "We invested heavily in these assets ahead of the revenue benefits which has temporarily reduced our operating margins, however, we expect these investments to put our forward earnings power in a much stronger position and anticipate improvements to both our top and bottom line in H2 of 2022 as these assets come online and begin to ramp."
- "It has been well-telegraphed by our peers that Q1 was a challenging period for the industry. However, we have maintained or even increased retail market share across most of our footprint despite this challenging backdrop, while also increasing wholesale revenue."
CGC - A sinking ship
The market was braced for a bad quarter, but nothing like this!
How does a company print an “Adjusted Gross Margin” of (32%), or cannabis GM of ($171 million) on sales of $66 million? Is management even showing up to work while they collect the million in compensation? CGC reported net revenue of C$111.8Mvs FactSet's C$129.7M and Adjusted EBITDA (C$121.8M) vs FactSet (C$67.2M)
The best part of the press release is the FY2023 Priorities & Outlook:
- Strengthening our market position in premium segments in Canada - driven by our flower cultivation strategy, delivering flower with in-demand attributes under the Doja and 7ACRES brands
- Making strategic investments to increase distribution, brand activation and new product development in high-growth consumer packaged good brands - BioSteel and Storz & Bickel
- Identifying opportunities to expand brands across the U.S. and within the Canadian recreational market, to fully realize the North American potential of the Canopy Growth brand portfolio; As a result of these actions, the company expects to be Adjusted EBITDA positive in FY2024 excluding investments in BioSteel and U.S. THC. LOL
I read this outlook from the company as it has no real strategy and that it will NEVER be profitable!
