Ayr Wellness Inc.

Ayr Wellness Inc. (OTC: AYRWF) is a vertically integrated cannabis multi-state operator (MSO) in the United States through its operating companies in various states throughout the country. The Company is a cultivator, manufacturer, and retailer of cannabis products and branded cannabis packaged goods. It operates through the cannabis sales segment. Its products include flowers, vapes, beverages, edibles, concentrates and others.

Recent Financial and Business Updates: 

Second Quarter and Recent Highlights

• Retail Expansion and Updates
  • New Retail Location: The company recently opened its 86th retail location.
  • Retail Sales Growth: Retail sales in Q2 increased by 1% compared to Q1, with a notable 6% increase in total transactions.
  • Florida Expansion: AYR has expanded its presence in Florida, opening 10 new stores in 2023, totaling 62 open locations to date. The company aims to conclude 2023 with a total of 64 stores, compared to the 52 it had at the beginning of the year.
  • Re-branding: The company successfully re-branded all its Florida stores to AYR Cannabis Dispensary.
  • Ohio Dispensary License: AYR announced its intention to acquire a third dispensary license in Ohio.
  • Exclusive Licensing Agreement: AYR disclosed an exclusive licensing and retail agreement with Kiva Confections, a renowned global cannabis edibles provider. This partnership will introduce Kiva's award-winning cannabis edibles to the Florida market through AYR's retail locations in the state. 

• Corporate Updates:
  • Tahoe Hydroponics Acquisition: AYR completed the acquisition of Tahoe Hydroponics, an award-winning cultivator and a leading producer of high-quality cannabis flower in Nevada.
  • Amended Agreement: AYR reached an agreement to amend the terms of contingent consideration under the membership interest purchase agreements of GSD NJ, LLC, and Sira Naturals Inc.
  • Promissory Note Payment Deferral: The company also reached contingent agreements to defer approximately USD 69 million of promissory note payments.
  • Refinancing: After the quarter ended, AYR closed a USD 40 million refinancing and upsizing of its existing mortgage for its Gainesville cultivation facility, resulting in a net cash inflow of USD 14 million. The new loan carries an interest rate of 5-year FHLB Rate + 4%.

• Financing and Capital Structure:
  • Capital Expenditures: The company invested USD 6.7 million in capital expenditures during Q2 and concluded the quarter with a cash balance of USD 60.0 million.
  • Shares Outstanding: AYR has approximately 77.2 million fully diluted shares outstanding based on a treasury method calculation.
  • Refinancing Impact: Following the paydown of the existing USD 25.3 million mortgage on July 7, 2023, the company's pro forma cash balance reached USD 74 million.
  • ERC Application: In 2023, AYR applied to the U.S. Internal Revenue Service ("IRS") for the employee retention credit ("ERC"). The company anticipates receiving USD 12.3 million related to its ERC application. 

• Outlook: The company maintains its commitment to financial stability and positions itself for sustainable long-term growth and profitability in all its operational markets. AYR anticipates revenue and Adjusted EBITDA growth in the second half of 2023 and into 2024, with the goal of achieving positive GAAP cash flow from operations for the entire calendar year 2023.

Technical Observation (on the daily chart)

The Relative Strength Index (RSI) observed over a 14-day period registers at 36.23, currently recovering from oversold conditions, with expectations of taking support from the levels around USD 0.80-USD 1.00. Furthermore, the stock's current position is situated below both the 21-day Simple Moving Average (SMA) and the 50-day SMA, potentially acting as dynamic short-term resistance levels.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing. 

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc. 

How to Read the Charts?

The yellow colour line reflects the 21-period simple moving average (SMA) while the blue line indicates the 50- period simple moving average (SMA). SMA helps to identify existing price trends. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The orange colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The red and green colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps with easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices. 

The reference date for all price data, currency, technical indicators, support, and resistance levels is November 03, 2023. The reference data in this report has been partly sourced from REFINITIV. 

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

RSI: Relative Strength Index

USD: United States dollar 

Note: Trading decisions require a thorough analysis by individual. Technical reports in general chart out metrics that may be assessed by individuals before any stock evaluation. The above are illustrative analytical factors used for evaluating the stocks; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance.