Ascend Wellness Q1 Earnings Call Highlights
Ascend Wellness (OTCMKTS:AAWH) reported first-quarter 2026 results that management said came in ahead of its guidance, as the cannabis operator pointed to improving retail mix, higher vertical sales and new store growth despite weaker post-holiday demand and weather disruptions.
Chief Executive Officer and Director Sam Brill said the quarter reflected “resilience” in a difficult operating environment marked by “atypical seasonality and continued industry headwinds.” Chief Financial Officer Roman Nemchenko said the company generated $116.0 million in net revenue, down $3.6 million, or 3%, from the fourth quarter of 2025.
Retail sales were $83.1 million, down 2.2% sequentially, while wholesale revenue fell 5% to $33.8 million. Nemchenko attributed the declines to softer consumer spending after the holiday season, winter weather disruptions and ongoing pricing pressure from competition. He said transactions recovered meaningfully by the end of March.
Margins Improve Despite Lower Sales
Ascend reported adjusted gross profit of $53.9 million, down $0.8 million, or 1.4%, from the prior quarter. However, adjusted gross margin expanded 70 basis points to 46.1%.
Management said the margin improvement was driven by better verticality, optimized menu assortment and stronger margins on third-party product sales. Brill said retail revenue represented 71.1% of net revenue, up 60 basis points sequentially, reflecting a continued shift toward vertical sales.
Adjusted EBITDA was $26.3 million, down $3.9 million, or 12.9%, from the prior quarter, with an adjusted EBITDA margin of 22.5%. Nemchenko said the decline was primarily due to lower sales and higher SG expenses tied to incentive compensation accrual timing, the annual reset of employer taxes and new store openings.
During the question-and-answer session, Nemchenko said further margin upside could come from densification and a higher mix of direct-to-consumer sales. Brill cautioned that future margin gains will depend in part on the level of price compression facing the industry.
Regulatory Developments Take Center Stage
Brill opened the call by highlighting what he described as a significant regulatory shift. He said the U.S. Department of Justice issued an order on April 23 rescheduling medical cannabis from Schedule I to Schedule III.
“While this is not full legalization, it is a historic step forward for the industry,” Brill said.
He said Ascend is also monitoring the DEA’s administrative hearing process for adult-use cannabis, which he said is expected to begin June 29. Brill said broader rescheduling could eventually improve access to capital and financial services, including traditional banking, credit card acceptance and institutional investor interest.
The company is also “actively exploring pathways to uplist to a major exchange,” Brill said. He added that Ascend is evaluating the implications of the DOJ order for its Section 280E uncertain tax position, though Nemchenko said the company made no changes to that position in the first quarter.
In response to an analyst question about how much revenue is tied to medical cannabis, Brill said it is too early to provide a figure because the order does not yet provide enough clarity on definitions or treatment of cultivation and wholesale sales.
Retail Expansion and Loyalty Program Remain Priorities
Ascend said it has added five stores year to date, including three in the Northeast and two in the Midwest. Brill said the company opened an Eatontown, New Jersey, partner-owned and operated location on April 20 with cannabis reform advocate Kyle Page. Ascend has four additional partner store opportunities in its New Jersey pipeline.
The company’s retail pipeline includes 10 additional stores. Brill said Ascend expects to expand its company-owned and partner-owned store footprint from 51 locations to at least 60 by year-end, subject to regulatory approvals.
Brill said Ascend is also focused on improving the customer experience. He cited an average Google store rating of 4.6 out of 5 stars and more than 370 retail pop-ups across the company’s footprint during the quarter.
Ascend Pay adoption increased to 8% of transactions in the first quarter from 6.2% in the fourth quarter, which Brill said is helping streamline payments and speed checkout. Loyalty membership rose more than 34% sequentially, and roughly 89% of transactions were tied to Ascenders Club members, who spent nearly 20% more per transaction.
When asked whether the loyalty program could be used to expand margins, Brill said its main purpose is customer retention in competitive markets. Nemchenko added that loyalty members tend to shop more frequently, spend more and show improved verticality, creating a margin benefit.
CPG Strategy Gains Traction
Brill said Ascend is advancing its consumer packaged goods strategy by shifting its product mix toward higher-margin offerings. He said Ascend ranked as the No. 2 brand house by sales and units across Illinois, Massachusetts and New Jersey combined in the first quarter, citing BDSA data.
Ascend’s market share across those three states grew 11% sequentially, helped by new product launches. Brill said the company’s infused flower portfolio rose 37.5% sequentially, while High Wired gained 44% more share and ranked as the No. 1 infused flower brand across those three states in the quarter, according to BDSA.
Brill also highlighted the relaunch of Ozone, Ascend’s flagship brand, following investments in flower quality, strain diversity and consistency. He said Ozone was Ascend’s best-selling brand in the first quarter and drove an “unexpected” 2.6% vertical sales increase after the relaunch.
Balance Sheet and Outlook
Ascend ended the quarter with $60.9 million in cash, down $24.8 million from year-end. Nemchenko said operating cash outflows included a $19.1 million recurring biannual interest payment and a $17 million settlement of a previously disclosed arbitration matter.
Capital expenditures totaled $5.2 million in the quarter, including $1.8 million for new store build-outs and $3.4 million for cultivation and manufacturing projects. The company continues to expect about $20 million in Capital spending for 2026, with most of the budget directed toward new store openings.
Nemchenko said Ascend temporarily suspended operations at its Lansing, Michigan, cultivation facility after quarter-end to begin remediation related to a fire incident. He said the company does not expect the shutdown to have a material impact on its Michigan business.
For the second quarter, Ascend expects top-line growth of 2% to 3%, driven by new store openings and more favorable seasonality across comparable stores. Adjusted EBITDA margin is expected to remain in the low-20% range.
About Ascend Wellness (OTCMKTS:AAWH)
Ascend Wellness Holdings, Inc engages in the cultivation, manufacture, and distribution of cannabis consumer packaged goods in the United States. The company offers flower, pre-rolls, concentrates, vapes, edibles, tinctures, and other cannabis-related products under the Common Goods, SimplyHerb, Ozone, Ozone Reserve, Royale, Tunnel Vision, Miss Grass, Lowell Smokes, Edie Parker, 1906, and AiroPro brands. It also owns, operates, and manages cannabis cultivation facilities and dispensaries. The company sells its products through company-owned retail stores and third-party licensed retail cannabis stores.
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