Ascend Wellness targets 60-store network within 12 months as margin expansion continues

Earnings Call Insights: Ascend Wellness Holdings (AAWH) Q3 2025

MANAGEMENT VIEW

* CEO Samuel Brill stated that "the industry landscape remains consistent with last quarter" and emphasized ongoing challenges including intensified competition and sector-wide price compression. Brill highlighted a "monumental shift in consumer preferences towards cannabis" and noted research showing that "61% of U.S. adults consider cannabis a healthier choice than alcohol," with this figure rising among recent users.
* Brill outlined the company's core strategic pillars: profitability, sustainability, and densification. He reported that "well over $30 million in annual expenses [were] eliminated ahead of schedule," supporting margin expansion and improved profitability. The densification strategy, which aims to expand the company's retail footprint, remains on track.
* Brill reported net revenue of $124.7 million for the quarter, a 2% decline from the prior quarter, attributing the decrease to "ongoing pricing pressures in several states, coupled with heightened discounting and promotional activities from new and existing competitors."
* Ohio was highlighted as the company's "strongest retail market," while regulatory delays have slowed the opening of new stores, slightly impacting the anticipated revenue contribution from these locations. The company remains confident in its pipeline and expects to reach 60 total Ascend and partner locations within the next 12 months, with 13 stores currently active in the pipeline.
* Brill emphasized operational enhancements and disciplined cost management, noting an adjusted gross profit of $57.8 million, a 4.6% increase quarter-over-quarter, and an adjusted EBITDA of $31.1 million, up 8.9% from the prior quarter. Adjusted EBITDA margin expanded to 24.9%.
* The CEO highlighted the launch of a "fully integrated digital e-commerce platform" and the increasing adoption of Ascend Pay, with transactions through the feature rising from 2.7% to 6.7% of total sales by the end of October. The Ascenders Club loyalty program now has over 64,000 new accounts.
* Product innovation was highlighted, with over 420 SKUs launched year-to-date and the company on pace to reach nearly 550 by year-end. Brill noted that the High Wired and Simply Herb brands have achieved significant market share gains, and a new premium brand, Honor Roll, will launch in Illinois in December.
* CFO Roman Nemchenko reported, "the company generated $124.7 million of revenue and $31.1 million of adjusted EBITDA for the third quarter of 2025," and described improvements in margin and disciplined pricing as key drivers of profitability. Nemchenko also noted, "During the quarter, we repurchased and canceled approximately 1 million shares."

OUTLOOK

* Management projects that "top-line performance to remain relatively stable with projected revenue slightly down from Q3." Adjusted EBITDA margin is expected "to exceed 23%, along with a much stronger cash flow generation given the timing of the next interest payment in Q1 of next year."
* Brill stated that the company remains focused on its densification strategy, continuing to pursue "greater scale and sustainability in our core markets." The company expects to achieve its goal of 60 locations within the next 12 months, subject to regulatory approvals.

FINANCIAL RESULTS

* Nemchenko stated revenue for Q3 was $124.7 million and adjusted EBITDA was $31.1 million. Retail sales were $83.8 million, down $2.7 million from Q2, driven by declines in both average basket size and transaction volume, particularly in Illinois and New Jersey. Wholesale sales totaled $41 million, flat to Q2, with a sales mix improvement toward finished goods.
* Cash at quarter-end was $87.3 million. Nemchenko explained a decrease of $8 million in cash, impacted by a $19.1 million semiannual interest payment. CapEx for the quarter was $6.4 million. The company continues to expect full-year CapEx in the $30 million to $35 million range.
* The company repurchased and retired about 1 million shares during the quarter, representing a 7% reduction in the trailing 12-month average shares outstanding.

Q&A

* Frederico Yokota Gomes, ATB Capital Markets: Asked about the causes of lower retail transaction volumes. Brill responded, "It's probably a 50-50 mix between the 2. And it's -- you have additional competition in our key markets. When I look at New Jersey, they added 52 stores this year. And New Jersey now has almost as many stores as Illinois, which also added about 20."
* Gomes also inquired about regulatory delays. Brill specified that New Jersey's new program caused delays but recent approval allows for progress on five additional stores in the state.
* Neal Gilmer, Haywood Securities: Asked about margin sustainability and potential one-time improvements. Brill stated, "No, I think this is the fruit of all of our hard work to try to get to this point. I mean this was a weakness that we've had and the strategy, I think, is working. There's no single call out that I would say was onetime for this quarter."
* Luke Hannan, Canaccord Genuity: Asked about Ohio's outperformance. Brill noted new pre-rolls were well received and anticipated additional growth with regulatory changes. Hannan also asked about third-party brand buying discipline. Brill described a "process that is focused on what it is that we're buying, how we're populating our menu in a more disciplined way."
* Andrew Semple, Ventum Financial: Inquired about retail strategy and margin outlook. Brill explained the company is seeing "people actually pay higher prices for some of these things because they're new and fresh," while maintaining discipline on discounting.

SENTIMENT ANALYSIS

* Analysts raised concerns regarding lower transaction volumes, margin sustainability, competitive pressures, and regulatory delays. The tone was probing but constructive, seeking clarity on operational strategies and market headwinds.
* Management maintained a confident and disciplined tone, repeatedly emphasizing operational improvements and strategic discipline. Brill stated, "We're not going to play in that game and give product away for free," and described the margin improvement as "the fruit of all of our hard work."
* Compared to the previous quarter, analysts' questions were more focused on competition and margin durability, while management continued to display confidence in their cost control and product strategy.

QUARTER-OVER-QUARTER COMPARISON

* Revenue declined from $127.3 million in Q2 to $124.7 million in Q3, while adjusted EBITDA increased from $28.6 million to $31.1 million. Adjusted gross margin improved from 43.4% to 46.4%.
* The densification strategy progressed, with the store count rising from 44 to 46. The launch of the digital e-commerce platform and continued innovation in branded products were further advanced in Q3.
* Management tone remained confident, emphasizing progress in margin expansion and operational discipline. Analysts shifted from general market questions in Q2 to specific concerns about pricing, competition, and regulatory delays in Q3.

RISKS AND CONCERNS

* Management cited intensified competition and ongoing price compression as persistent industry risks. Regulatory delays, particularly in New Jersey, affected the anticipated pace of new store openings and revenue contribution.
* The company is addressing these challenges through pricing discipline, product innovation, and targeted expansion, while maintaining a strong cash position to support strategic initiatives.
* Analysts repeatedly questioned the durability of improved margins and the impact of aggressive discounting by competitors.

FINAL TAKEAWAY

Ascend Wellness delivered margin expansion and improved profitability in Q3 2025 despite a modest revenue decline driven by heightened competition and price compression. The company advanced its densification strategy, launched innovative digital and product platforms, and remains on track to reach 60 total locations within the next 12 months. Management highlighted operational discipline and a focus on higher-margin branded products as key drivers of sustainable growth and resilience amid ongoing industry headwinds.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/aawh/earnings/transcripts]

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* Ascend Wellness Holdings, Inc. (AAWH) Q3 2025 Earnings Call Transcript [https://seekingalpha.com/article/4841560-ascend-wellness-holdings-inc-aawh-q3-2025-earnings-call-transcript]
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