Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ascend Wellness Holdings Inc reported a 25% increase in total revenue net of inter-company sales, reaching $142 million.
- Adjusted EBITDA for the quarter was $32.5 million, up 39% from the previous year, showing strong profitability.
- The company successfully opened eight new dispensaries and acquired four in Maryland, contributing to retail growth.
- Ascend Wellness Holdings Inc has a strong cash position with $73 million in cash and equivalents, enhancing its financial stability.
- The company is actively pursuing a retail partnership strategy with social equity licensees, aiming to expand its footprint by over 50%.
Negative Points
- Retail sales experienced a 2% sequential decline due to increased competition in New Jersey and Illinois.
- Despite overall growth, there were modest sequential declines in retail offsetting gains in the wholesale segment.
- The company faces ongoing challenges with debt refinancing, although it is in constructive conversations with lenders.
- Ascend Wellness Holdings Inc is subject to market normalization and price competitiveness due to increased competition in key states like Illinois and New Jersey.
- Quarterly fluctuations in free cash flow generation are expected due to the timing of working capital uses and capital expenditures.
Q & A Highlights
Q: With respect to the debt refinancing, how do you expect the DEA news to help in conversations with potential and existing lenders pending implementation?
A: (John Hartmann - President, Director) The DEA news has not significantly changed the refinancing context for Ascend specifically. However, the potential removal of 280E tax implications upon formal rescheduling could enhance lender confidence. The company aims to complete refinancing before the debt becomes current in April of this year.
Q: Regarding the guidance for cash flow of $55 million to $65 million, how much do you expect to come from working capital release, if any?
A: (John Hartmann - President, Director) The guidance reflects confidence in achieving the projected cash flow, despite quarterly fluctuations related to working capital investments in inventory for new markets and wholesale relationships. The company remains committed to being free cash flow positive for the year.
Q: Can you comment on the expected mix between wholesale and retail in your guidance, and how it might impact margins?
A: (John Hartmann - President, Director) The mix between wholesale and retail is not expected to change substantially throughout the year. The company continues to open new dispensaries and grow its wholesale business, maintaining a balance between the two.
Q: How do you view the valuation discount of your stock compared to peers, and what can be done to close this gap?
A: (John Hartmann - President, Director) The discount is partly due to the timing of Ascend's public listing during a market decline. The company believes that disciplined performance, efficient capital deployment, and taking advantage of regulatory catalysts will enhance its valuation.
Q: Could you provide more details on how you achieved the increase in gross profit margin in Q1?
A: (Mark Cassebaum - Chief Financial Officer) The improvement in gross margin is attributed to better performance and leverage at cultivation sites, optimizing existing infrastructure, and ramping up investments made in previous quarters.
Q: Regarding the Ohio market, do you expect to keep your retail doors well supplied in the early days of the adult-use market?
A: (John Hartmann - President, Director) Ascend is prepared for the launch of adult-use sales in Ohio, with a combination of its own products and established third-party relationships ensuring a robust supply for its dispensaries.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
