10-Q: Ascend Wellness Reports Q3 2025 Loss Amid Revenue Decline

Ascend Wellness Holdings, Inc. reported a net loss of $25.8 million for Q3 2025, with revenue decreasing 12% year-over-year, primarily due to increased competition and pricing pressure.

Summary

• Net loss for the three months ended September 30, 2025, was $25.825 million, an improvement from $28.256 million in the same period of 2024.
• Net loss for the nine months ended September 30, 2025, was $69.490 million, compared to $68.203 million for the same period in 2024.
• Revenue for Q3 2025 decreased by $16.913 million (12%) to $124.734 million, from $141.647 million in Q3 2024, primarily due to increased competition and pricing pressure.
• Revenue for the nine months ended September 30, 2025, decreased by $45.558 million (11%) to $380.035 million, from $425.593 million in the same period of 2024.
• Gross profit margin improved to 35.0% in Q3 2025 from 30.9% in Q3 2024, and to 32.8% for the nine months ended September 30, 2025, from 32.3% in the same period of 2024.
• Operating loss for Q3 2025 was $1.325 million, an improvement from $2.417 million in Q3 2024.
• Operating profit for the nine months ended September 30, 2025, was $0.159 million, an improvement from an operating loss of $1.364 million in the same period of 2024.
• Adjusted EBITDA for Q3 2025 increased to $31.094 million (24.9% margin) from $25.117 million (17.7% margin) in Q3 2024.
• Adjusted EBITDA for the nine months ended September 30, 2025, increased to $86.667 million (22.8% margin) from $85.938 million (20.2% margin) in the same period of 2024.
• Cash and cash equivalents stood at $87.272 million as of September 30, 2025.
• Working capital improved to $113.210 million as of September 30, 2025, from $84.835 million as of December 31, 2024.
• The company repurchased 3,682 shares of Class A common stock for an aggregate cost of $1.580 million under its Buyback Program, with approximately $0.670 million remaining available.
• A default judgment of $10.300 million was awarded to Ascend against MedMen NY, Inc. for a prior deposit and working capital advances.

Sentiment

Score: 4

Explanation: Despite improvements in gross margin and Adjusted EBITDA, the company experienced a significant revenue decline due to market competition and pricing pressure. The accumulated deficit and explicit 'going concern' warning, along with increased inventory write-downs and the uncertainty of collecting a substantial legal judgment, point to ongoing financial challenges and a need for future capital.

Positives

• Net loss decreased in Q3 2025 to $25.825 million compared to $28.256 million in Q3 2024.
• Operating loss significantly improved in Q3 2025 to $1.325 million compared to $2.417 million in Q3 2024.
• Operating profit for the nine months ended September 30, 2025, was $0.159 million, an improvement from a loss of $1.364 million in the prior year period.
• Gross profit margin improved to 35.0% in Q3 2025 (from 30.9% in Q3 2024) and to 32.8% for the nine months (from 32.3% in 2024), driven by improved realization and production output.
• Adjusted Gross Profit increased to $57.825 million in Q3 2025 from $53.572 million in Q3 2024.
• Adjusted EBITDA increased to $31.094 million in Q3 2025 (24.9% margin) from $25.117 million in Q3 2024 (17.7% margin).
• Adjusted EBITDA for the nine months ended September 30, 2025, increased to $86.667 million (22.8% margin) from $85.938 million (20.2% margin) in the same period of 2024.
• General and administrative expenses decreased by $1.220 million (3%) in Q3 2025 due to cost-savings initiatives and the absence of a prior year reserve.
• Interest expense decreased by $3.919 million (24%) in Q3 2025, partly due to a large extinguishment loss in the prior year.
• Working capital improved to $113.210 million as of September 30, 2025, from $84.835 million as of December 31, 2024.
• Secured a new $9.345 million Mortgage Note for general corporate purposes and growth initiatives.
• Exercised the option to acquire Ohio Patient Access, LLC (OPA), consolidating it as a wholly-owned subsidiary in October 2025.
• A $10.300 million default judgment was awarded against MedMen NY, Inc. for deposit and working capital advances.
• Cash and cash equivalents of $87.272 million on hand, with positive net cash provided by operating activities ($21.737 million for nine months).
• Wholesale product sold increased to 53,000 pounds in Q3 2025 (from 48,000 pounds in Q3 2024) and to 165,000 pounds for the nine months (from 141,000 pounds in 2024).
• Benefited from adult-use sales in Ohio, which began during Q3 2024.
• Added two partner stores to the footprint during the quarter.

Negatives

• Revenue decreased by 12% in Q3 2025 and 11% for the nine months ended September 30, 2025, primarily due to increased competition and pricing pressure in Illinois and New Jersey.
• Net loss for the nine months ended September 30, 2025, increased to $69.490 million from $68.203 million in the prior year.
• Legacy dispensary locations experienced a revenue decline of $17.144 million in Q3 2025 and $49.486 million for the nine months.
• Wholesale revenue declined by $7.098 million in Q3 2025 due to increased competition and price compression.
• Higher write-downs of inventory items totaling $6.967 million in Q3 2025 (vs. $1.749 million in Q3 2024) and $13.883 million for the nine months (vs. $2.223 million in 2024).
• Income tax expense increased by 26% in Q3 2025 and 2% for the nine months, impacted by higher penalties and interest on tax payments and uncertain tax positions.
• An accumulated deficit of $469.846 million as of September 30, 2025, and a net loss for the nine months ended September 30, 2025, are indicators that raise substantial doubt about the ability to continue as a going concern.
• An uncertain tax liability totaling $186.818 million exists for uncertain tax positions related to IRC Section 280E.
• The collection of the $10.300 million judgment against MedMen NY, Inc. is uncertain due to MedMen's bankruptcy and receivership.
• Net cash provided by operating activities decreased by $16.389 million for the nine months ended September 30, 2025, compared to the prior year, partly due to lower tax refunds.
• Higher cash interest expense associated with new term notes.

Risks

• The effect of the volatility of the market price and liquidity risks on shares of Class A common stock.
• The effect of the voting control exercised by holders of Class B common stock.
• The ability to attract and maintain, and reliance on, key personnel.
• The ability to continue to open new dispensaries and cultivation facilities and grow as anticipated.
• The illegality of cannabis under federal law in the U.S. creates significant legal and operational risks.
• The ability to comply with state and federal regulations, which are evolving and subject to differing interpretations.
• The uncertainty regarding enforcement of cannabis laws in the U.S.
• The effect of restricted access to banking and other financial services due to federal illegality of cannabis.
• The effect of constraints on marketing and risks related to products.
• The effect of unfavorable tax treatment for cannabis businesses under IRC Section 280E, disallowing ordinary business expense deductions, leading to high effective tax rates and an uncertain tax liability of $186.818 million.
• The effect of proposed legislation on tax liabilities and financial performance.
• The effect of security risks.
• The effect of infringement or misappropriation claims by third parties.
• The ability to comply with potential future U.S. Food and Drug Administration (FDA) regulations.
• The ability to enforce contracts given the federal illegality of cannabis.
• The effect of unfavorable publicity or consumer perception.
• The effect of risks related to material acquisitions, dispositions, and other strategic transactions.
• The effect of agricultural and environmental risks.
• The effect of climate change.
• The effect of risks related to information technology systems.
• The effect of unknown health impacts associated with the use of cannabis and cannabis derivative products.
• The effect of product liability claims and other litigation.
• The effect of risks related to the results of future clinical research.
• The effect of intense competition in the cannabis industry, leading to pricing pressure and market saturation.
• The effect of the maturation of the cannabis market.
• The effect of adverse changes in wholesale and retail prices.
• The effect of sustained inflation.
• The effect of political and economic instability.
• The effect of outbreaks of pandemic diseases, fear of such outbreaks or economic disturbances due to such outbreaks.
• The effect of general economic risks, such as the unemployment level, interest rates, and inflation, and challenging global economic conditions.
• The accumulated deficit and net loss raise substantial doubt about the ability to continue as a going concern, requiring future capital raises.
• Uncertainty in collecting the $10.300 million judgment against MedMen NY, Inc. due to its bankruptcy and receivership.

Future Outlook

Management expects continued growth to be driven by opening new operational facilities and dispensaries under current licenses, partnership opportunities, expansion of current facilities, and increased consumer demand. The company has fully-financed expansion plans to achieve a target of 60 total retail locations, including partner locations, in the medium-term. New store opening plans are flexible and depend on market conditions, local licensing, construction, and regulatory permissions. The company also plans to continue accessing capital markets for additional funding through debt and/or equity financings to supplement future cash needs, as may be required.

Management Comments

• Management believes that substantial doubt of our ability to continue as a going concern for at least one year from the issuance of these Financial Statements has been alleviated due to the cash balance on hand and the generation of positive net cash provided by operating activities.
• Management plans to continue to access capital markets for additional funding through debt and/or equity financings to supplement future cash needs, as may be required.
• We believe in bettering lives through cannabis. Our mission is to improve the lives of our employees, patients, customers, and the communities we serve through the use of the cannabis plant.
• We are committed to providing safe, reliable, and high-quality products and providing consumers options and education to ensure they are able to identify and obtain the products that fit their personal needs.
• We expect continued growth to be driven by opening new operational facilities and dispensaries under our current licenses and through partnership opportunities, expansion of our current facilities, and increased consumer demand.
• Our new store opening plans are flexible and will ultimately depend on market conditions, local licensing, construction, and other regulatory permissions.
• Management expects to fund capital expenditures primarily by utilizing cash flows from operations.

Industry Context

The cannabis industry in the U.S. continues to face significant challenges, including federal illegality, intense competition, and pricing pressure across various markets, particularly in Illinois and New Jersey. Despite these headwinds, Ascend Wellness is expanding its footprint through acquisitions and partnerships, and benefiting from the commencement of adult-use sales in states like Ohio. The industry's unique regulatory environment, including the impact of IRC Section 280E on tax liabilities, continues to significantly affect financial performance and effective tax rates for operators like Ascend Wellness.

Legal Proceedings

• MedMen NY Litigation: Ascend Wellness Holdings, Inc. was awarded a $10.300 million default judgment against MedMen NY, Inc. (MMNY) on September 5, 2025, for a prior deposit and working capital advances.
• MedMen Bankruptcy/Receivership: MedMen Enterprises Inc. filed for bankruptcy in Canada on April 24, 2024, and its subsidiary, MM CAN USA, Inc., was placed into receivership in California on April 23, 2024, making collection of the judgment uncertain.
• IRC Section 280E Tax Positions: The company has an uncertain tax liability of $186.818 million for uncertain tax positions primarily related to the treatment of certain transactions and deductions under IRC Section 280E, and has been selected for examination of amended tax returns.
• Regulatory Compliance: Operations are subject to various local and state cannabis regulations, which are in direct conflict with federal law (Controlled Substances Act), posing risks of fines, restrictions, or loss of permits.

Related Party Transactions

• The Massachusetts Note (now settled) was issued to a borrower partially owned by an entity managed by one of the company's founders. The company also transacts with this retail dispensary in the ordinary course of business.

Stakeholder Impact

• Shareholders: Potential dilution from future equity financings; impact of share buyback program; uncertainty regarding the 'going concern' status; potential for stock price volatility due to market and regulatory risks.
• Employees: Continued employment and potential growth opportunities through expansion plans; equity-based compensation plans.
• Customers: Continued access to cannabis products through company-owned and partner stores; loyalty program benefits.
• Creditors: Secured debt obligations and covenants under the 2024 Term Notes and Mortgage Note; uncertainty regarding collection of judgment against MedMen.
• Suppliers: Commercial relationships with license holders for purchasing and supply arrangements.

Next Steps

• Continue to open new dispensaries and cultivation facilities and grow as anticipated.
• Pursue partnership opportunities and expansion of current facilities.
• Increase consumer demand.
• Access capital markets for additional funding through debt and/or equity financings.
• Finalize purchase price allocations for recent acquisitions within the measurement period (generally one year from acquisition date).
• Evaluate the impact of ASU 2023-09 (Income Taxes) on disclosures for the fiscal year ending December 31, 2025.
• Evaluate the impact of ASU 2024-03 (Disaggregation of Income Statement Expenses) on disclosures for annual periods beginning after December 15, 2026.
• Evaluate the impact of ASU 2025-03 (Business Combinations and Consolidation) on disclosures beginning January 1, 2027.
• Evaluate the impact of ASU 2025-05 (Financial Instruments Credit Losses) on consolidated financial statements and disclosures for annual reporting periods beginning after December 15, 2025.
• Anticipate closing of Midwest Partnership One's conditional adult-use license acquisition in the first half of 2026.
• Commence monthly principal and interest payments on the Mortgage Note on November 1, 2025.
• Maintain a debt service coverage ratio of not less than 1.30 to 1.00, measured annually, commencing December 31, 2026, for the Mortgage Note.
• Continue to evaluate the impact of the 'One Big Beautiful Bill Act' on the effective tax rate.
• Consider options to collect on the $10.300 million default judgment against MedMen.
• Fund up to $10.000 million under a research collaboration agreement through April 2031.
• Complete fully-financed expansion plans to achieve a target of 60 total retail locations in the medium-term.
• Seek regulatory approval for various pending acquisitions and license transfers.
• The Buyback Program will expire on January 1, 2026.

Key Dates

Recommendation

While Ascend Wellness shows some operational improvements like better gross margins and Adjusted EBITDA, the significant revenue decline, increased year-to-date net loss, and the explicit 'going concern' warning present substantial financial headwinds. The ongoing regulatory challenges of the cannabis industry, particularly the IRC Section 280E tax burden and the uncertainty of collecting a $10.3 million judgment, add to the risk profile. The company's plans for expansion and capital raises are positive, but the overall financial health remains precarious. A 'hold' recommendation is appropriate for investors already in the stock, awaiting clearer signs of sustained profitability and resolution of the going concern issue, while new investors should exercise caution due to the high risk.

Keywords

Cannabis, Multi-state operator, SEC filing, 10-Q, Financial results, Revenue, Net loss, Gross profit, Adjusted EBITDA, Dispensaries, Cultivation, Adult-use cannabis, Medical cannabis, Illinois, Maryland, Massachusetts, Michigan, New Jersey, Ohio, Pennsylvania, IRC Section 280E, Share buyback, Debt financing, Acquisitions, MedMen litigation, Going concern, Regulatory risk