On August 5, 2024, Ascend Wellness Holdings Inc (AAWH, Financial) released its 8-K filing detailing its financial results for the second quarter of 2024. Ascend Wellness Holdings Inc is a vertically integrated multi-state operator focused on adult-use or near-term adult-use cannabis states in limited licenses markets. The company's core business is the cultivation, manufacturing, and distribution of cannabis consumer packaged goods, which it sells through company-owned retail stores and third-party licensed cannabis retail stores. It generates maximum revenue from the retail product segment.
Performance Overview
Ascend Wellness Holdings Inc (AAWH, Financial) reported net revenue of $141.5 million for Q2 2024, a 15.1% increase year-over-year but a slight 0.6% decrease quarter-over-quarter. This figure fell short of the analyst estimate of $145.38 million. The company also reported a net loss of $21.8 million, a significant decline from the net income of $0.8 million in Q2 2023.
Adjusted EBITDA for the quarter was $28.3 million, representing a 32.9% increase year-over-year but a 12.7% decrease quarter-over-quarter. The Adjusted EBITDA margin stood at 20.0%, up 269 basis points year-over-year but down 278 basis points sequentially.
Financial Achievements and Challenges
Despite the revenue miss, Ascend Wellness Holdings Inc (AAWH, Financial) achieved several financial milestones. The company generated approximately $32 million of cash flows from operations, marking the sixth consecutive quarter of positive operating cash flow. Excluding state and federal tax refunds, cash flow from operations was approximately $14 million. Additionally, the company generated approximately $27 million of free cash flow, or $9 million excluding tax refunds.
However, the company faced challenges, including increased retail competition in select markets and declining profitability in its wholesale business. These factors led to a revision of the full-year guidance, with expectations for net revenue to increase between 11% and 13% and Adjusted EBITDA to increase between 5% and 10% for the full year 2024 compared to the prior year.
Income Statement Highlights
| Metric | Q2 2024 | Q2 2023 |
|---|---|---|
| Net Revenue | $141.5 million | $122.9 million |
| Gross Profit | $41.6 million | $28.3 million |
| Net Loss | ($21.8 million) | $0.8 million |
| Adjusted EBITDA | $28.3 million | $21.3 million |
Balance Sheet and Cash Flow Highlights
As of June 30, 2024, Ascend Wellness Holdings Inc (AAWH, Financial) had cash and cash equivalents of $83.7 million and net debt of $225.6 million. The company successfully refinanced $215 million of its existing term loan with a new, oversubscribed Senior Secured Note facility.
Management Commentary
"As I reflect on the quarter, I am grateful to our stakeholders, including our valued patients and customers, our dedicated employees, and our supportive lenders and investors. In Q2, we achieved robust year-over-year growth for several of our key metrics, including a 15% increase in revenue and a 33% rise in Adjusted EBITDA," said John Hartmann, Chief Executive Officer.
"Although we delivered solid growth compared to last year, our performance this quarter did not meet our expectations. Consequently, we are actively managing costs and optimizing business functions to address this shortfall," added Mark Cassebaum, Chief Financial Officer.
Analysis
Ascend Wellness Holdings Inc (AAWH, Financial) demonstrated strong year-over-year growth in revenue and Adjusted EBITDA, reflecting the company's ability to expand its market presence and improve operational efficiency. However, the sequential decline in revenue and profitability highlights the challenges posed by increased competition and market dynamics. The company's proactive measures to manage costs and optimize business functions are crucial for sustaining growth and improving profitability in the coming quarters.
For more detailed insights and the complete financial report, visit the 8-K filing.
Explore the complete 8-K earnings release (here) from Ascend Wellness Holdings Inc for further details.
