Ayr Strategies Inc. (CSE: AYR.A, OTCQX: AYRSF) (“Ayr” or the
“Company”), a vertically-integrated cannabis multi-state operator
(MSO) with a presence in the western and eastern U.S., today
announces it has authorized a stock repurchase program for up to
the maximum repurchase amount allowed in a 12-month period for CSE
listed companies, equal to 5% of the Company’s outstanding
Subordinate Voting Shares (“SVS”).
Jonathan Sandelman, CEO of Ayr, commented: “The
trajectory of our business has built considerable momentum over the
course of the third quarter. The strength of our operating
performance gives us the confidence to increase the midpoint of our
2019 forecast. Additionally, our solid cash flow generation
profile allows us added flexibility to opportunistically repurchase
our stock at extremely attractive levels while still delivering on
our prior commitments to shareholders, namely generating strong
organic growth and expanding our geographic footprint through
acquisitions.”
The maximum number of shares able to be
repurchased over the next 12 months totals 725,892 SVS, and will be
funded with cash flow generated from operations, which is estimated
to average approximately US$1.7 million per month in 2019.
The repurchase program is eligible to commence on October 1,
2019.
“Other exchanges allow for up to 10% of shares
to be repurchased under similar programs, and given the highly
attractive valuation of Ayr stock today, management would have
supported a larger buyback authorization had it been possible as a
CSE listed stock,” continued Mr. Sandelman. “We believe
repurchasing our shares represents one of the most attractive
buying opportunities in the cannabis sector today, and this
announcement reinforces our commitment to driving shareholder
value.
“The share repurchase program will in no way
interfere with our short-term, medium-term or long-term goals as a
company. We are delivering on our stated plans for strong
organic growth, and our capex programs in Nevada and Massachusetts
are fully funded from cash on hand. Moreover, we continue to
be active in discussions regarding multiple forms of business
combinations in order to expand our footprint.”
August 2019 Operational Update: Solid
Organic Growth Since Ayr Acquisition
- Total preliminary revenue for the month of August was US$11.5
million compared to US$10.6 million in July and US$8.8 million in
June, versus a pre-acquisition monthly average of US$7.9 million in
the first quarter of 2019.
- August preliminary Adjusted EBITDA levels are pacing 30% above
the pre-acquisition monthly average Adjusted EBITDA in Q1.
- Daily transactions increased 4% to over 4,300 in August
compared to 4,200 in July 2019 and a pre-acquisition monthly
average of approximately 3,000 in the first quarter of 2019.
- In Nevada, Ayr increased revenue from house brands in its most
productive dispensaries to 17% of sales in August 2019, up from 10%
of sales in July 2019 and less than 3% in the first quarter of
2019. The Company is well on track to meet its goal of sourcing
more than 50% by Q2 2020.
- Massachusetts wholesale preliminary revenue of $2.5 million
exceeded target, and the Company continues to capture new wholesale
accounts as more dispensaries open and have high demand for
product.
- The Massachusetts cultivation facility expansion, taking
cultivation canopy from 13,000 square feet to 32,000 square feet,
is on track for Q4 completion.
- The Nevada cultivation facility expansion, taking cultivation
canopy from 14,000 square feet to 31,000 square feet, began
construction in August.
2019 & 2020 Outlook
Based on the strong Q3 performance to date, Ayr
is increasing the midpoint of 2019 revenue and Adjusted EBITDA
forecasts, and is reiterating confidence in 2020
guidance.
|
2019 (post QT annualized) |
2020 |
|
Prior Range |
Revised Range |
|
Revenue |
US$110 - US$130 million |
US$120 - US$130 million |
US$225 - US$245 million |
Adjusted EBITDA |
US$30 - US$40 million |
US$35 - US$40 million |
US$105 - US$115 million |
These targets, and the related assumptions,
involve known and unknown risks and uncertainties that may cause
actual results to differ materially. While Ayr believes there
is a reasonable basis for these targets, such targets may not be
met. These targets represent forward-looking
information. Actual results may vary and differ materially
from the targets. See “Forward-Looking Statements” and
“Assumptions” below.
Interim Financial Results
Certain financial information reported in this
news release, for seasonality and other reasons, may not be
representative of annualized full year results. Monthly
results in the first quarter of 2019 represent historical results
of the acquired businesses under their prior ownership
structure. As well, Q3 figures included in this news release
are preliminary and subject to change.
Definition and Reconciliation of
Non-IFRS Measures
The Company reports certain non-IFRS measures
that are used to evaluate the performance of such businesses and
the performance of their respective segments, as well as to manage
their capital structure. As non-IFRS measures generally do
not have a standardized meaning, they may not be comparable to
similar measures presented by other issuers. Securities
regulations require such measures to be clearly defined and
reconciled with their most directly comparable IFRS measure.
The Company references non-IFRS measures and
cannabis industry metrics in this document and elsewhere.
These measures are not recognized measures under IFRS and do not
have a standardized meaning prescribed by IFRS and are therefore
unlikely to be comparable to similar measures presented by other
companies. Rather, these are provided as additional
information to complement those IFRS measures by providing further
understanding of the results of the operations of the Company from
management’s perspective. Accordingly, these measures should
not be considered in isolation, nor as a substitute for analysis of
the Company’s financial information reported under IFRS.
Non-IFRS measures used to analyze the performance of the Target
Businesses include “Adjusted EBITDA”.
The Company believes that these non-IFRS
financial measures provide meaningful supplemental information
regarding the Company’s performances and may be useful to investors
because they allow for greater transparency with respect to key
metrics used by management in its financial and operational
decision-making. These financial measures are intended to
provide investors with supplemental measures of the Company’s
operating performances and thus highlight trends in the Company’s
core businesses that may not otherwise be apparent when solely
relying on the IFRS measures.
Adjusted EBITDA“Adjusted EBITDA” represents
income (loss) from operations, as reported, before interest, tax,
and adjusted to exclude extraordinary items, non-recurring items,
other non-cash items, including stock based compensation expense,
depreciation, and the non-cash effects of accounting for biological
assets and inventories, and further adjusted to remove acquisition
related costs.
A reconciliation of how Ayr calculates Adjusted
EBITDA and reconciles it to IFRS figures is provided in its
management’s discussion and analysis as at and for the three and
six months ended June 30, 2019.
Forward-Looking Statements
Certain information contained in this news
release may be forward-looking statements within the meaning of
applicable securities laws. Forward-looking statements are often,
but not always identified by the use of words such as “target”,
“expect”, “anticipate”, “believe”, “foresee”, “could”, “estimate”,
“goal”, “intend”, “plan”, “seek”, “will”, “may” and “should” and
similar expressions or words suggesting future outcomes. This news
release includes forward-looking information and statements
pertaining to, among other things, Ayr’s future growth plans,
information relating to the commencement, termination and manner of
the stock repurchase program, future developments in connection
with the stock repurchase program, funding of the stock repurchase
program, and the Company’s intention to repurchase SVS from the
Company’s shareholders. Numerous risks and uncertainties could
cause the actual events and results to differ materially from the
estimates, beliefs and assumptions expressed or implied in the
forward-looking statements, including, but not limited to:
anticipated strategic, operational and competitive benefits may not
be realized; events or series of events may cause business
interruptions; required regulatory approvals may not be obtained;
acquisitions may not be able to be completed on satisfactory terms
or at all; and Ayr may not be able to raise additional capital.
Among other things, Ayr has assumed that its businesses will
operate as anticipated, that it will be able to complete
acquisitions on reasonable terms, and that all required regulatory
approvals will be obtained on satisfactory terms and within
expected time frames.
Assumptions
On July 12, 2019, Ayr provided updated financial
guidance for 2019 reflecting the impact, in particular, of the
delayed closing of Ayr’s qualifying transaction and of the
lengthened process for municipal approval of conversion from
medical to recreational status for Ayr’s Massachusetts-based
dispensaries. Reflecting these factors, as well as other changes to
assumptions in the normal course of business, Ayr established new
targets for anchor portfolio revenue and Adjusted EBITDA as set
forth in the table above. Today, we are reaffirming that
guidance.
In developing the guidance set forth above, Ayr
made the following assumptions and relied on the following factors
and considerations:
- The targets are based on discussions with the management teams
of the Target Businesses and their historical results, particularly
in respect of 2019 year to date results.
- The targets are subject to the completion of in place
cultivation and product facility expansion and improvement plans
anticipated to come online in 2019 and 2020, and the relocation of
one dispensary.
- Revenue growth assumptions at established recreational
dispensaries depend on a variety of factors, including among other
things, location and degree of seasoning as a recreational
dispensary, and average to 7% growth year over year from 2019 to
2020.
- Revenue growth assumptions for dispensaries and wholesale
activities in markets transitioning from medical status to
recreational status are based on anticipated production capacity
available from a vertically-integrated supply chain, with capacity
not taken up in dispensary sales available for wholesale. These
assumptions include current production levels at cultivation and
production facilities, plus production capacity in process of
construction and planning, starting from target completion dates.
Prices are projected forward at recently realized medical and
recreational wholesale and retail prices.
- Cost of goods sold, before taking into account the impact of
value changes in biological assets (which are non-cash in nature,
and, accordingly, are excluded from calculations of Adjusted
EBITDA), have been projected based on estimated costs of production
and capacity available from a vertically-integrated supply chain.
Cost of goods sold relating to inventory purchased from third
parties have been projected in line with historical levels.
- Selling, general and administrative expenses at the state level
are assumed to increase in dollar terms year over year, but to
decrease as a percentage of revenues due to inherent scalability of
selling, general and administrative expenses. Additionally, total
selling, general and administrative expenses include an allocation
for corporate overhead and public company costs.
About Ayr Strategies Inc.
Ayr is a vertically integrated multi-state
operator in the U.S. cannabis sector, with an initial anchor
portfolio in Massachusetts and Nevada. Through its operating
companies, Ayr is a leading cultivator, manufacturer and retailer
of cannabis products and branded cannabis packaged goods. Ayr seeks
to create regional clusters in core geographies for future
expansion, while pursuing strong organic growth within its existing
portfolio. For more information, please visit
www.ayrstrategies.com.
Media Contact:Desiree
RosaMULTIPLYT: (202) 292 4566Email: desiree.rosa@wearemultip.ly
Investor Relations Contact:Sean
Mansouri, CFA or Cody SlachGateway Investor RelationsT: (949)
574-3860Email: AYR@gatewayir.com
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