Ventum Capital Markets Downgrades Ayr Wellness (ARA/A:CN) (AYRWF) to Neutral, 'Q4/24 Results Disappoint as Leverage Looms Large'The analyst comments "EVENT: Ayr Wellness Inc. (“Ayr†or “the Companyâ€) reported Q4/24 results that again missed estimates. Sales were roughly flat QoQ, in line with guidance and expectations. However, adj gross margins and adj. EBITDA fell well below our estimates (and management's guidance for flat EBITDA QoQ) as costs continued to climb while pricing continued to fall. Management noted a few one-time items in the quarter, including negative impacts from new Florida seed-to-sale tracking, inventory liquidation in Massachusetts, and ongoing start-up costs associated with assets under development (among other items). EBITDA margins are expected to somewhat recover in Q1/25 as Ayr moves past these events. However, management's Q1/25 guidance was still below well expectations, signalling ongoing softness into 2025. Management indicated Q1/25 sales are expected to decline by mid-single digits QoQ, suggesting sales below the prior consensus of $114.8M and our prior estimate of $113.2M. With reduced earnings expectations for 2025, we now believe that Ayr needs to continue accruing 280E taxes for the year to manage its liquidity. We expect 280E tax accruals to raise cash of $48M for the Company in 2025, leaving Ayr with a projected YE 2025 cash balance of $28M. We see the risk of an ~$20M funding gap if the Company is unable to continue accruing 280E taxes due to stricter IRS enforcement (though this would likely prompt widespread industry court challenges). Meanwhile, the Company continues to have a heavy debt burden, with current debt listed as $25M, and a sizeable majority of the remaining $391M due in late 2026. With disappointing Q4/24 earnings and an ongoing search for a full-time CEO/ CFO, the Company is on weaker footing as it enters a period where it needs to begin considering debt refinancing solutions. Ayr needs positive catalysts to materialize this year to improve its position in debt refinancing talks. Key potential catalysts include federal rescheduling (which could save Ayr up to $50M/year in taxes), Pennsylvania adult-use legalization, and its new Ocala, FL cultivation facility coming online in Q3/25."