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💪 Pennsylvania Is Back On The Clock 💪

Author

Anthony Varrell
November 12, 2024

GM Everyone,

Yesterday was once again a bloodbath on the tape, leaving many scratching their heads, as at this point the stocks are flashing like the entire industry is going out of business—which it's not. Meanwhile, the appointments for the Trump administration continue to roll in as we wait for any that will potentially have implications on the sector.

A little longer than a 7 minute read.

💸 The Tape

Ascend Wellness Reports Q3 Numbers

In the ever-blooming world of cannabis, Ascend Wellness Holdings (AWH) is trying to light up its path to profitability. The vertically integrated multi-state operator just dropped its Q3 2024 financial results, and while the numbers might not induce euphoria, there are some bright spots.

Crunching the Numbers: A Mixed Bag

Now, let's get down to the nitty-gritty—the financials:

  • Total Net Revenue came in at $141.6 million, marking a meager 0.3% increase year-over-year and a 0.1% uptick quarter-over-quarter. Not exactly the kind of growth that sends stock charts into the stratosphere, but in this market, flat is the new up.

  • Retail Revenue dipped 7.6% year-over-year but nudged up 0.6% from the previous quarter to $93.6 million.

  • Wholesale Revenue surged 20.1% compared to last year but saw a slight 0.8% drop from Q2, settling at $48 million. Think of it as two steps forward, one step back—a dance the cannabis industry knows all too well.

  • Net Loss ballooned to $28.3 million, a significant slide from the $11.2 million loss in Q3 2023 and deeper than the $21.8 million hole in the previous quarter. It seems profitability remains the unicorn everyone’s chasing.

  • Adjusted EBITDA was $25.1 million with a 17.7% margin, down 14.9% year-over-year and 11.4% quarter-over-quarter.

  • Cash and Cash Equivalents stood at $65.3 million, which might sound robust until you consider the Net Debt of $240.6 million. It's the financial equivalent of having a Ferrari with monthly payments that could bankrupt a small nation.

  • On the brighter side, Ascend generated approximately $2 million in Operating Cash Flow, marking the seventh consecutive quarter of positive figures in this category. Baby steps.

Pennsylvania Expansion: Whitehall Welcomes New Dispensary

Not one to rest on its laurels, Ascend also planted roots in Whitehall, Pennsylvania, opening its 39th dispensary. While 39 isn't a number typically celebrated (it's no 420, after all), each new location strengthens Ascend's foothold in a market that's as tightly regulated and looking at a potential adult use conversion in 2025.

Trimming the Fat: Cost-Cutting Initiatives

Speaking of navigation, Ascend announced a series of cost-saving maneuvers aiming to streamline operations and reduce expenditures by a cool $30 million in 2025. Part of this belt-tightening involved reducing management headcount by 15% at corporate and 10% at retail and operations. It's a tough pill to swallow, but in an industry where profitability often seems as elusive, tough decisions are the order of the day.

Effin' Edibles: A Sweet Success Story

On a sweeter note, the company launched "Effin'," an edibles-only brand that's been gobbled up faster than free samples at a warehouse club. In its first week, Effin' didn't just make a splash—it cannonballed to the top spot in the edibles category at Ascend stores. If only their financials could ascend as swiftly.

Executive Commentary: Optimism Amid Challenges

CEO Sam Brill expressed gratitude (always a solid start) and outlined a focused strategy on improving profitability, maximizing asset efficiency, and enhancing cash flow generation. In corporate speak, that's code for "we're tightening our belts and hoping for the best."

President Frank Perullo highlighted the successful adult-use transition in Ohio, the new Pennsylvania dispensary, and workforce optimizations—a kinder, gentler way of saying layoffs. Each milestone, he suggests, positions Ascend to better chase those elusive profit margins.

CFO Roman Nemchenko chimed in, proud of the team's cost-management efforts and commitment to building a leaner, more resilient organization. Given the net loss figures, "leaner" might be less strategy and more necessity.

Looking Ahead: Cautious Optimism or High Hopes?

Ascend Wellness Holdings finds itself at a critical juncture. The company is making strategic moves—expanding into burgeoning markets, launching popular new products, and cutting costs where possible. However, the persistent net losses and slim margins suggest that the path to profitability is fraught with challenges that no amount of executive shuffling or cost-cutting can easily overcome.

Investors and industry watchers will undoubtedly keep a keen eye on how Ascend maneuvers through the regulatory hurdles and market pressures that define the cannabis landscape. Will their strategies yield a bountiful harvest, or are they sowing seeds in rocky soil?

One thing's for sure: in the high-stakes game of cannabis finance, Ascend is playing to win—even if the odds are as unpredictable as, well, the effects of a new edible.

📈 Dog Walkers

GTI Gets Into The Hemp Beverage Business

Agrify Corporation (Nasdaq: AGFY) seems to be stirring up a new concoction to quench investors' thirst for growth. The cannabis industry solutions provider announced a non-binding letter of intent to acquire assets from Double or Nothing LLC, the brains behind the Señorita brand of hemp-derived legal THC (HDLT) beverages. In exchange for 530,000 shares of Agrify's common stock or equivalents—adding a generous splash to its current 1.4 million shares outstanding—Agrify aims to close this deal before the year's last call.

Interim CEO Ben Kovler, perhaps channeling his inner mixologist, declared this an "exciting time" for Agrify, highlighting a fresh energy and a balance sheet as strong as a top-shelf tequila. Believing that Americans are hankering for alternatives to alcohol, Kovler sees HDLT drinks as the next big thing—like the craft beer boom but with a THC twist.

Señorita, crafted by winemaking duo Charles Bieler and Joel Gott, offers THC-infused beverages mimicking classic cocktails like margaritas, minus the hangover. With distribution in Canada and nine U.S. states, and an appetite for expansion, Agrify's investment could be the salt on the rim that propels Señorita—and Agrify—to new heights. As Kovler might say, "Más Señorita Por Favor!"

PA Is On The Clock

Pennsylvania's political landscape just got a whole lot greener, and we're not just talking about its rolling hills. With Democrats retaining control of the House, Majority Leader Matt Bradford quipped there's a "will in the House to move forward" on marijuana legalization. Of course, the GOP-controlled Senate might play the role of buzzkill, but every party needs a designated driver, right?

Responsible PA, the group cheerleading adult-use legalization, is lighting up over this news. They point out that in some districts, a smoky 68% of voters support legal cannabis. Even though Republican incumbents held onto their seats, a significant chunk of their constituents are saying, "Puff, puff, pass the legislation already!"

Bipartisan efforts are also sprouting, with Reps. Aaron Kaufer (R) and Emily Kinkead (D) introducing a legalization bill. Governor Josh Shapiro is ready to roll too, promising to "come back and continue to fight" for legalization.

Even some GOP senators are mellowing out. Senate President Pro Tempore Kim Ward admitted she's against arresting folks over cannabis and casually mentioned that without it, she might not have met her husband. Talk about a personal investment!

For investors eyeing the cannabis market, Pennsylvania might soon be the next state to watch. If legislation passes, the market could blossom faster than a well-tended cannabis plant under optimal conditions. Just remember, in politics and investments, timing is everything—and it looks like Pennsylvania's clock is set to 4:20.

👾 Number Of The Day

53.2% % of market share in British Columbia for Hybrid flower.

Data provided by:

🗞️ The News

📺 YouTube

Ex-Nikki Haley Advisor Predicts Trumps Stance on Cannabis | Trade to Black

What we covered:

✅ On our latest Trade To Black Podcast, former Nikki Haley strategic advisor Rick Wiley will join us to share his views on how the Trump administration may handle cannabis reform. He will outline the approach for passing legislation in Congress and how to leverage campaigns to accomplish these goals.

Plus, Dan Ahrens from Advisorshares (NYSEARCA:MSOS) will join us to talk about recent price action involving cannabis stocks and how he's preparing for the volatility that lies ahead.