AYR Wellness Inc. (CSE: AYR.A)(OTCQX: AYRWF) delivered its unaudited financial results for the second quarter ending June 30, 2024, as revenue slipped sequentially and was only a tiny bit higher than last year.  Ayr Wellness reported revenue of $117 million in the quarter, which was a .5% improvement over last year’s revenue of $116 million for the same quarter.

Revenue fell by .6% sequentially from the first quarter revenue of $118 million. Ayr Wellness also missed the Yahoo Finance average analyst estimate for revenue of $119 million.

Ayr Wellness told investors that the decline was driven by a “decrease in retail dollars for same-store sales of $8,962 or 8.6%, while the number of transactions has been roughly flat and partially offset by an increase of $3,137 from new store openings and acquisitions.” On a positive note, Ayr noted that wholesale revenues grew by approximately 51.8%, primarily driven by a rapid increase in store openings in New Jersey, presenting increased wholesale opportunity and modest increases in Ohio, Pennsylvania, Nevada and Massachusetts.

Expenses drop, but losses rise

Total operating expenses dropped by roughly 10.4% to $54 million. The decrease in total operating expenses was primarily attributable to lower payroll expenses, professional fees, acquisition and transaction costs and stock compensation.

However, net losses grew to $38 million in the quarter versus last year’s net loss of $29 million. The company blamed the increase in net losses on higher income taxes and an increase in interest expense due to the terms of the debt extension and new debts. Earnings per share were ($0.34) which was worse than the analyst expectations of ($0.25).

CEO and President David Goubert said, “Our team remains acutely focused on laying the groundwork for AYR’s next phase of growth. This includes advancing the progress made over the last 18 months to improve operations across our markets, continuing to invest in our CPG brands and retail experience, and ensuring that AYR is best positioned to capitalize on the anticipated transition to adult use in three of our core markets: Ohio, Florida, and Pennsylvania. We continue to believe AYR has more upside from these three markets than any other company in our industry.”

Goubert added, “While we are encouraged by the progress we’ve made in our operations, the second quarter presented challenges due to both internal and external factors including wholesale pricing pressure, tightening consumer wallets from persistent inflation, and margin pressure in select markets where we have recently increased our cultivation and production, but which are not yet optimized. Despite these near-term setbacks, we are well positioned for growth and margin expansion in the second half of 2024 as our adult-use growth catalysts materialize in Ohio along with improved operations in these recently scaled markets.

Looking ahead

For the third quarter, AYR told investors it expects revenue growth to be up low to mid-single digits from the second quarter based on the timing and ramping of the Ohio Adult Use rollout. AYR also said in its statement that it expects to improve Adjusted EBITDA margins from current levels in the second half of 2024 as the company rebuilds toward its 25% Adjusted EBITDA margin target.

The company said, “AYR also continues to expect positive GAAP cash flow from operations for calendar 2024, as well as positive free cash flow for calendar 2024 assuming the elimination of 280E tax liabilities.”