AAWH Sales Down 10%

Key Points

• EPS (GAAP) matched analyst estimates, but GAAP revenue missed forecasts after declining 10.1% compared to Q2 2024.

• Retail expansion continued, with the store count rising to 44 and new branded products launched, but topline revenue (GAAP) remained flat despite this growth.

• Adjusted EBITDA margin (non-GAAP) improved by 1.3 percentage points, and positive operating cash flow extended to a tenth consecutive quarter, yet Net losses (GAAP) widened compared to Q2 2024.

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Ascend Wellness (OTC:AAWH), a multistate cannabis operator with a focus on both retail stores and vertically-integrated branded products, released its Q2 2025 results (reported in accordance with U.S. GAAP) on August 7, 2025. The company reported a GAAP net loss per share of ($0.12), while GAAP revenue came in at $127.3 million, slightly below the $128.3 million GAAP consensus forecast. Year over year, GAAP revenue dropped 10.0%. Adjusted EBITDA rose to $28.6 million, giving an Adjusted EBITDA margin of 22.4%. The period highlighted operational achievements in store expansion, product launches, and cash flow generation. However, Persistent pricing pressure, stagnant revenue, and rising net losses underscored the challenging industry environment for cannabis operators.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Company Overview and Strategic Focus

Ascend Wellness operates cannabis dispensaries and manufacturing facilities across seven states: Illinois, Maryland, Massachusetts, Michigan, New Jersey, Ohio, and Pennsylvania. It pursues a vertically-integrated model, meaning it handles cultivation, manufacturing, and retail delivery under its own brands. Its products include cannabis flower, pre-rolls, concentrates (extracts and oils), vapes, and edibles.

The company’s recent focus has revolved around disciplined market expansion, regulatory compliance, and enhancements to its proprietary brands. It aims to build competitive resilience through increasing its store footprint, developing innovative cannabis products, and strengthening balance sheet flexibility. Key success factors include regulatory adherence, customer loyalty, efficient capital management, and product quality.

Quarterly Highlights and Underlying Trends

During H1 2025, Ascend Wellness expanded its retail operations by adding five new locations across core markets, pushing the total to 44 dispensaries (including partner-run sites). The company reaffirmed its goal to reach 60 total locations in the medium term, representing a 50% expansion since launching that target at the end of 2024. However, the additional retail sites did not lead to significant growth in total company revenue (GAAP), signalling that industry-wide price compression and mature markets are counteracting the impact of store openings.

On the financial side, Net revenue (GAAP) landed just under analyst forecasts, down from Q2 2024 due to ongoing challenges in wholesale sales and sector-wide pricing pressure. Retail revenue grew 2.5% quarter over quarter to $86.5 million (GAAP), while Wholesale revenue (GAAP) fell 6.4% to $40.8 million. Gross profit (GAAP) improved from the prior quarter to $41.4 million, and the gross margin (GAAP) increased to 32.5%. Adjusted gross margin and Adjusted EBITDA margin both improved sequentially as the business benefited from tighter cost controls and a higher ratio of in-house branded products, even as overall net losses widened to $24.4 million (GAAP).

In product development, the company intensified its push toward proprietary cannabis products, launching 225 new stock keeping units (SKUs) in H1 2025 and preparing for approximately 300 more products later in the year. Notably, management introduced "High Wired," a line of infused cannabis flower and pre-rolled products, targeting experienced users. This line quickly became a top seller in Illinois and Massachusetts. The company also revamped its digital presence, launching a new e-commerce system featuring artificial intelligence-powered recommendations and an overhauled, tiered customer loyalty program called the Ascenders Club.

From a financial management perspective, the company refinanced its debt by replacing an existing $60 million term loan with a $50 million private placement of senior secured notes due in 2029, and retired $10 million in short-term debt. Share repurchases continued, with approximately 1.9 million shares bought back, contributing to a decrease in average outstanding shares to 203.9 million. End-of-period cash (GAAP) was $95.3 million. The company delivered its tenth consecutive quarter of positive operating cash flow, generating $17.8 million, and reported free cash flow (non-GAAP) of $12.1 million. Despite a net debt load of $254.3 million (non-GAAP), management described its balance sheet as strong. There were no material acquisitions this quarter, and the business emphasized organic and partner-led growth.

In business mix, the company further shifted towards retail sales, as retail revenue increased and wholesale revenue decreased. Management noted that Ascend maintains the number two brand house position for cannabis sales and units across Illinois, Massachusetts, and New Jersey, based on recent third-party industry surveys (BDSA). However, lower pricing in wholesale channels, especially in Illinois, continues to weigh on total revenues (GAAP).

Looking Ahead: Guidance and Key Watch Points

Ascend Wellness did not provide specific forward guidance for fiscal 2025 revenue, profit, or margin. Management reaffirmed its commitment to expand to 60 stores over the medium term and highlighted priorities such as boosting product innovation, optimizing balance sheet strength, and growing its customer base through digital and in-store initiatives.

The main watch points for investors in future quarters are whether store expansions drive overall revenue growth amid ongoing pricing pressure, the success of proprietary product launches in gaining market share, as evidenced by a 4% sequential increase in Q1 2025, and the continued generation of positive operating cash flow. Investors should also monitor the pace and effectiveness of cost-saving measures, further developments in regulatory environments in the states where the company operates, and how management manages debt relative to ongoing net losses. AAWH does not currently pay a dividend.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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