💸 High Impact

Ascend Wellness Is First Out Of The Gate

The What - Ascend Wellness Holdings, Inc. (OTC:AAWH) just dropped their Q2 2024 financials, and it’s a mixed bag but with some solid highlights worth noting. Gross revenue hit $172.7 million, up 14.3% year-over-year, though it dipped 0.9% from last quarter. Net revenue, stripping out intercompany sales, clocked in at $141.5 million—up 15.1% from last year but down a slight 0.6% quarter-over-quarter. Retail revenue rose 3.6% year-over-year to $93.1 million but took a 2.2% hit from Q1. Wholesale revenue is where the big gains are, with gross wholesale revenue jumping 30.1% year-over-year to $79.6 million, and net wholesale revenue up a whopping 46.2% to $48.5 million.

However, it’s not all rosy. The company posted a net loss of $21.8 million this quarter, a steep fall from the $0.8 million net income in Q2 2023. We will be listening to the conference call at 8:30 for commentary as it relates to the loss. Adjusted EBITDA came in at $28.3 million, showing a 32.9% increase year-over-year but a 12.7% decline quarter-over-quarter. The Adjusted EBITDA margin saw a nice boost of 269 basis points from last year to 20.0%, yet it dropped 278 basis points from Q1, thanks to lower profitability in wholesale and retail sectors in places like Massachusetts, Illinois, and New Jersey.

On the liquidity front, AWH ended the quarter with $83.7 million in cash and cash equivalents and net debt at $225.6 million. They generated $32 million in operating cash flows, marking the sixth straight quarter of positive cash flow, although it’s worth noting that $18 million came from state and federal tax refunds. Excluding those refunds, operating cash flow was around $14 million. Free cash flow hit about $27 million, or $9 million without the tax refunds. Strategic moves included refinancing $215 million of their term loan and opening two new dispensaries, setting up a stronger operational footprint despite the headwinds. All in all, AWH is navigating the ups and downs with some savvy financial maneuvers, positioning themselves for future growth.

Big Takeaway

Ascend Wellness Holdings, Inc. delivered a solid Q2 2024 performance with notable year-over-year revenue growth and strong wholesale gains, despite facing a net loss and increased competition in key markets. The company achieved a 14.3% rise in gross revenue and a 15.1% increase in net revenue, driven by strategic expansions and new store openings. However, profitability challenges led to a net loss of $21.8 million and a decline in Adjusted EBITDA margin. On the positive side, AWH maintained strong liquidity with $83.7 million in cash, continued its streak of positive operating cash flows, and successfully refinanced a significant portion of its debt, positioning itself for future growth amidst current market challenges.

📈 Dog Walkers

Chuck Schumer Has Entered Stage Right

Chuck Schumer is back in the cannabis headlines once again, but this time it has nothing to do with SAFE Banking. Instead, Chuck is making noise by penning a letter to the DEA to expedite the final ruling for rescheduling and get it done. He was joined by Tina Smith (D-MN), Ben Ray Luján (D-NM), Patty Murray (D-WA), and Kirsten Gillibrand (D-NY) in penning the letter. This is an overall bullish signal and plays into the thesis that the final ruling could be implemented by the end of August.

TerrAscend Inks Debt Deal

On Friday, TerrAscend announced that they had closed a debt financing round to the tune of $140 million, carrying a coupon of 12.75%. The financing was led by FocusGrowth Asset Management, and Jason Wild chipped in $7.5 million into the round as well, which is a bullish sign.

PR

New York Is Having Growing Pains…….. In A Good Way

In a survey conducted in the state of New York, 78% of dispensary owners said that their suppliers were frequently limiting product shipments, and the same sentiment was shared by processors regarding cultivators. This is a sign that demand in the market is starting to outstrip supply, which is both a good and bad sign at the same time.

The good news is the market is clearly maturing and growing from a sales perspective. The bad news is that there is clearly a shortage from a cultivation perspective as it relates to the overall NY market. New York is sure to experience some growing pains, and this should be seen as a sign of normalization and the culling of the illicit market within the state.

🗞️ The News

Marijuana recalls too slow to recover possibly contaminated product

Michigan cannabis operator charged with importing illegal THCA

Kamala Harris Is The First Major Presidential Candidate To Back Marijuana Legalization (Op-Ed)

Schumer, Booker And Other Senators Push DEA To ‘Promptly Finalize’ Marijuana Rescheduling

📭 Research

Initiating Coverage: Green Thumb Industries - Download Here

Reconfirming Buy Rating: MariMed - Download Here

Initiating Coverage Of Verano Holdings Corp. - Download Here

Initiating Coverage: TerrAscend - Download Here

📺 YouTube

Why These 5 Small Cap Stocks Grabbed Our Attention | TDR Small Cap Sunday

What we covered:

✅ Join us for the latest Small Cap Sunday podcast as we look at 5 new small cap stocks that have grabbed our attention.

Host Shadd Dales & TDR Lead Analyst Bill McNarland shares insights on an AI tech consultant company, a cybersecurity firm, a resource company, and two cannabis operators.

We review each companies financial performance, market trends, and investment appeal, analyzing companies like VCI Global Limited (NASDAQ: VCIG), and Plurilock Security Inc. (OTC: PLCKF) in both the tech and cybersecurity sectors.

We will also look at a mining company called Aton Resources (TSXV: AAN), along with Canadian cannabis company Cannara Biotech (OTC: LOVF), and finally multi state operating cannabis company Ayr Wellness (OTC: AYRWF).