AYR Strategies Inc: Overlooked Pot Stock Expands to New Markets

AYR Strategies Stock Up 63% Since November

AYR Strategies Inc (CNSX:AYR.A, OTCMKTS:AYRWF) might be the best under-the-radar cannabis play out there right now. Thanks to a number of recent developments, AYRWF stock should be in the spotlight in 2021.

AYR Strategies stock is up 176% year-over-year, 588% since bottoming in March, and 63% since the beginning of November. While a rising tide lifts all boats, there’s more than enough reason for investors to get excited about AYRWF stock in 2021.

AYR Strategies Inc recently reported record third-quarter results and announced expansion into Arizona, Pennsylvania, and Ohio.

The company opened its first dispensary in Pennsylvania in October and it expects to open additional dispensaries in 2021. Moreover, AYR Strategies is on track to roll out recreational pot sales in Massachusetts in 2021.

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AYRWF Stock Overview

Based in New York City, Ayr Strategies is a seed-to-sale, multi-state cannabis operator with operations focused on high-growth markets. (Source: “Investor Presentation,” AYR Strategies Inc, December 22, 2020.)

The company’s anchor operations are in Massachusetts and Nevada, but it also has an established footprint in Arizona, Ohio, Florida, Ohio, Pennsylvania, and New Jersey. In four of those states—Nevada, Arizona, Massachusetts, and New Jersey—recreational cannabis is now legal.

AYR Strategies Inc has more than 200,000 square feet of production and cultivation space, which is capable of growing 17,000 pounds of cannabis flower every year. It also has more than one million square feet of cultivation and processing facilities in development.

Thanks to the company’s strong acquisition and expansion plans, AYR Strategies is positioned to be one of the top five multi-state marijuana operators in the U.S. by 2022. In that year, the company expects to report pro-forma revenue of at least $725.0 million and pro-forma earnings before interest, taxes, depreciation, and amortization (EBITDA) of at least $325.0 million.

Acquisition of CannTech PA

On December 23, AYR Strategies closed its acquisition of CannTech PA, for a total purchase price of $57.4 million. (Source: “Ayr Strategies Completes Acquisition of CannTech in Pennsylvania,” AYR Strategies Inc, December 23, 2020.)

The acquisition includes a 143,000-square-foot cultivation and processing facility on 13 acres. The first phase of the planned build-out of the facility has been completed and approved for cultivation.

CannTech PA’s license permits up to six dispensary locations in Pennsylvania, including its first dispensary in New Castle.

CannTech PA plans to open two additional stores in the first quarter, with three more openings planned for the second half of 2021. Four of these additional dispensaries will be in the Pittsburgh and Philadelphia metropolitan areas, while one will be in Erie.

Expansion to Seven States With Two Acquisitions

On December 22, AYR Strategies announced the proposed acquisition of Liberty Health Sciences Inc (CNSX:LHS, OTCMKTS: LHSIF), a vertically integrated operator in Florida, for $290.0 million. (Source: “Ayr Strategies Enters into Agreements to Expand Footprint with Strategic Acquisitions in Florida and New Jersey,” AYR Strategies Inc, December 22, 2020.)

AYR Strategies also announced the proposed acquisition of Garden State Dispensary, a licensed marijuana operator in New Jersey, for $101.0 million.

Including these and other pending transactions, Ayr Strategies will have operations in seven states, with a total population of 73 million people. Those states include four recreational pot markets and three medical marijuana markets.

The Liberty Health Sciences acquisition includes a 387-acre cultivation campus in Gainesville, FL, more than 300,000 square feet of production facilities in operation, 28 open retail dispensaries, seven completed and ready-to-open dispensaries, and seven dispensaries currently under construction.

Garden State Dispensary is one of 12 existing vertical license holders in New Jersey and one of the state’s original six alternative treatment centers.

Garden State Dispensary has three open dispensaries (the largest footprint of any cannabis operator in the state) and 30,000 square feet of cultivation and production facilities in operation. An additional 75,000 square feet is currently under construction.

Definitive Merger Agreement With Parma Wellness Center

On December 18, AYR Strategies announced that it had moved to a definitive merger agreement (from a letter of intent) with Parma Wellness Center, LLC. The transaction is expected to close—subject to the customary approval by the Ohio Department of Commerce—in the first quarter of 2021. (Source: “Ayr Strategies Moves to Definitive Merger Agreement with Parma Wellness Center, LLC,” AYR Strategies Inc, December 18, 2020.)

Parma Wellness holds a provisional Level 1 medical marijuana cultivator license, with initial construction plans for 25,000 square feet of canopy inside a 58,000-square-foot building. Following the closing and completion of the initial phase of the Level 1 cultivation facility build-out, Ohio law will allow Ayr to further expand its canopy space (subject to the approval of the Ohio Department of Commerce).

Acquisition of DocHouse LLC

On November 19, AYR Strategies announced that it had closed its acquisition of DocHouse LLC, a licensed marijuana grower-processor in Pottsville, PA. (Source: “Ayr Strategies Completes Acquisition of DocHouse in Pennsylvania,” AYR Strategies Inc, November 19, 2020.)

“Pennsylvania is a terrific medical market where demand is robust, but supply is not,” said Jonathan Sandelman, chairman and CEO of AYR Strategies.

“Our entry into Pennsylvania will build on the successful operational foundation we have established in Massachusetts and Nevada, where our cultivation and production talent has driven both meaningful top line growth and increased profitability…”

The transaction includes a 38,400-square-foot cultivation and extraction facility, which has the capacity to expand to 74,000 square feet. The facility is expected to be operational in the second quarter of 2021.

Record Q3 Results

On November 18, AYR Strategies announced that its revenue for the third quarter ended September 30 increased 41% year-over-year and 61% sequentially, to $45.5 million. (Source: “Ayr Strategies Reports Third Quarter 2020 Results & Updates Investors on 2021 Expansion Initiatives,” AYR Strategies Inc, November 18, 2020.)

The company reported a third-quarter net loss of $26.8 million (loss of $0.96 per share), compared to third-quarter 2019 net income of $26.1 million ($0.84 per share).

AYR Strategies Inc reported third-quarter adjusted EBITDA of $19.3 million, a 123% increase over the third-quarter 2019 adjusted EBITDA of $8.7 million, and a 112% increase over the second-quarter 2020 adjusted EBITDA of $9.1 million.

“These past several months have been a transformative period for our business,” said Sandelman. “We had a record quarter with revenues up 42% year-over-year and 61% sequentially and Adjusted EBITDA more than doubled.”

Sandelman noted that AYR Strategies’s strong annual run-rate through the third quarter did not include its new dispensary in Las Vegas, the company’s transition to recreational marijuana retail sales in Massachusetts, nor its recently announced acquisitions in Arizona, Pennsylvania, and Ohio—all of which will be completed in 2021.

Analyst Take

2020 was a transformational year for AYR Strategies Inc, but by all accounts, this year will be even more defining.

2021 will be a year of material growth for the company in the recreational marijuana market, as AYR Strategies closes a number of strategic acquisition deals and opens new dispensaries.

All of this points to a robust 2021 for AYR Strategies stock.