In the cannabis industry, it can be a challenge to stand out from the competition. Now try to operate and be successful in 7 different states. Ascend Wellness currently has 36 dispensaries and 7 cultivation facilities in Illinois, Massachusetts, Maryland, Michigan, New Jersey, Pennsylvania and Ohio. And the company continues to expand. Moreover, their Q1 earnings showed results that exceeded the company's expectations. "We're really particular about the markets we operate in. Moreover, we try to have the right products at the right price and at the right time," says Rebecca Conti Koar, Executive Vice President, Investor Relations & Strategy at Ascend Wellness Holdings.
Rebecca Conti Koar
Q1 earnings
The company's Q1 2024 earnings exceeded revenue expectations, Koar says. "Our revenue was up 24.7% compared to last year. This was mainly driven by the addition of 8 new stores, the acquisition of four stores in Maryland, and growth across all of our wholesale markets," Koar says.
Compared to last year, Ascend's EBITDA was up 39%. "On top of that, we had a strong margin improvement, which is up 239 points compared to last year. Yet the most exciting thing for us is that we had our fifth quarter in a row of positive cash from operations generation."
Navigating the challenges
Meanwhile, many U.S. cannabis companies have had a challenging couple of years. So how has Ascend been able to achieve this? "I believe there are a few reasons. First of all, we're really particular about the markets that we operate in. Most of the markets we're in are limited-license markets. We also usually enter adult-use or near adult-use markets. Then we aim to enter the market with the right products at the right price and time. It's important to cater to the needs of our audience with the products that we offer. That's why we have different brands that fill the whole spectrum of good-better-best value offerings. We believe that has worked really well for us."
Koar says that the company does notice that some markets are more challenging than others. "It's pretty market-specific. In a new market, prices will go up a little bit, and then it comes to a lull before the market is about to turn to adult use. Then when there is a supply-demand constraint, the prices skyrocket. Once the supply catches up to the demand, it settles down. To balance these market fluctuations, our mindset is to operate in different markets in all these different areas of the market development."
Expanding cultivation
One market where Ascend Wellness has seen a lot of potential is Massachusetts. The company has recently acquired a second cultivation facility in the state. "We started with about 35,000 square feet of canopy at our first facility in Massachusetts. The three stores we have in the state were doing so well that we needed more cultivation. So we recently acquired a second facility with 15,000 square feet of canopy. We also built out a kitchen in this facility, so that we're able to produce our own gummies."
"We're also really excited about the conversion to adult-use in Ohio," Koar says. "This is officially set to start next month. We have 5 dispensaries there, which we will convert to adult-use, and hope to add 3 more as a result of the rollout." That does not mean that the medical patients will be forgotten. "We will continue to serve and maintain our relationships with our medical patients," she says.
Schedule III
Now that rescheduling is on the horizon, Koar says that it reinforces Ascend's tax strategy. "First of all, it's very beneficial for the industry that there is a federal acknowledgment of cannabis as a state-legal business and its medical and recreational benefits. On top of that, it reinforces our tax strategy, as we stopped paying our 280E related tax liability in 2023. The tax code regarding these deductions is onerous and not fair, and having it eliminated will be a major help to the profitability of many cannabis companies."
For more information:
Ascend Wellness Holdings
www.awholdings.com