Ascend Wellness Leads US Cannabis Industry Earnings Season with Solid Q2 Performance
Earnings season has kicked off for the cannabis industry with many multi state operating cannabis company announcing their latest earnings this week, including Ascend Wellness.
Ascend Wellness Holdings (OTCQX: AAWH) (CNSX:AAWH.U) is the first to report their earnings as they announced their latest financial results pre market this morning for the second quarter of 2024, ending on June 30th. Highlights from the report included net revenue of $141.54 million, compared to $122.99 million in the same period of 2023.
Financial results are reported in accordance with U.S. generally accepted accounting principles (“GAAP”) and all currency is in U.S. dollars.
Q2 2024 Financial Highlights
- Gross profit amounted to $41.57 million, which compares to $28.32 million in the same period last year.
- Adjusted EBITDA was $28.3 million, representing a 20.0% margin. Compared to the second quarter of 2023, Adjusted EBITDA increased 33%, while sequentially it declined 12.7%.
- Cash flow from operations amounted to $32 million, representing the sixth consecutive quarter of positive operating cash flow. Excluding approximately $18 million in state and federal tax refunds, cash flow from operations was approximately $14 million.
- Free cash flow excluding state and federal tax refunds was $9 million.
- Net loss was $21.78 million, compared to net income of $841,000 in Q2 2023.
- At the end of the reporting period, on June 30, 2024 the company had $83.7 million in cash and cash equivalents, and net debt stood at $225.6 million.
While AWH achieved a notable 14.3% increase in gross revenue and a 15.1% rise in net revenue, reaching $141.5 million, the company also reported a net loss of $21.8 million this quarter. This marked a steep fall from the $0.8 million net income in Q2 2023. The discrepancy in financial performance will be discussed further in the upcoming conference call at 8:30, providing insight into the factors contributing to the loss.
Adjusted EBITDA for the quarter came in at $28.3 million, showing a strong 32.9% increase year-over-year but a 12.7% decline quarter-over-quarter. The Adjusted EBITDA margin improved by 269 basis points from the previous year to 20.0%. However, it experienced a drop of 278 basis points from the first quarter due to lower profitability in wholesale and retail sectors, particularly in regions like Massachusetts, Illinois, and New Jersey.
On the liquidity front, AWH ended the quarter with $83.7 million in cash and cash equivalents, with net debt at $225.6 million. The company generated $32 million in operating cash flows, marking the sixth consecutive quarter of positive cash flow. It’s worth noting that $18 million came from state and federal tax refunds. Excluding these refunds, operating cash flow was approximately $14 million. Free cash flow reached about $27 million, or $9 million without the tax refunds.
Despite the profitability challenges, AWH made strategic moves during the quarter, including refinancing $215 million of their term loan and opening two new dispensaries to strengthen their operational footprint. The company is navigating the ups and downs with savvy financial maneuvers, positioning itself for future growth and success.
Our takeaway is Ascend Wellness Holdings, Inc. delivered a solid performance in their Q2 2024 earnings with notable year-over-year revenue growth and strong wholesale gains. While facing a net loss and increased competition in key markets, the company maintained strong liquidity, continued its streak of positive operating cash flows, and successfully refinanced a significant portion of its debt. These strategic actions position AWH for future growth and success amidst the current market challenges.
