Culture of always doing what you say you're going to do. Cannabis multi-state-operators (MSO's) are using many different strategies to become the dominant national player. Ayr Wellness (OTCQX: AYRWF) CEO Jonathan Sandelman joins Dan Humiston to share some of the tactics he's used to build their company. He talks about how the internal infrastructure that they built during the overpriced acquisitions frenzy is now helping them unlock hidden value in their acquisitions. Produced by PodCONX Raising Cannabis Capital - https://podconx.com/podcasts/raising-cannabis-capital Dan Humiston - https://podconx.com/guests/dan-humiston Ayr Wellness - https://ayrwellness.com/ Jonathan Sandelman - https://podconx.com/guests/jonathan-sandelman
Culture of always doing what you say you're going to do.
Cannabis multi-state-operators (MSO's) are using many different strategies to become the dominant national player. Ayr Wellness (OTCQX: AYRWF) CEO Jonathan Sandelman joins Dan Humiston to share some of the tactics he's used to build their company. He talks about how the internal infrastructure that they built during the overpriced acquisitions frenzy is now helping them unlock hidden value in their acquisitions.
Raising Cannabis Capital - https://podconx.com/podcasts/raising-cannabis-capital
Dan Humiston - https://podconx.com/guests/dan-humiston
Ayr Wellness - https://ayrwellness.com/
Jonathan Sandelman - https://podconx.com/guests/jonathan-sandelman
RC Ayr Wellness
Dan Humiston: [00:00:00] Today on raising cannabis capital, we are joined by Jonathan. Sandeman the CEO of air wellness, Jonathan, welcome to the show.
Jonathan Sandelman: Well, thank you for having me today.
Dan Humiston: Well, I'm glad you could stop by to give us an update in the short time that we have today. I'd like to talk about your plans for 2022 and beyond. But before we do, let's do a quick update where you are today. for our listeners that aren't familiar with our wellness, one of the largest multi-state operators in the industry right now, and through acquisitions and organic growth, you're one of the leading contenders in this national brand race. What states are you currently operating in?
Jonathan Sandelman: We're currently operating in Massachusetts, New Jersey, Pennsylvania, Ohio, Florida. Arizona Nevada.
Dan Humiston: Did I count eight there?
Jonathan Sandelman: Yeah. Eight states.
Dan Humiston: Oh, my gosh, when we were doing the research, I think you were at seven , one of the things I found really compelling about you and your [00:01:00] approach to running a corporation like this is the, you have this mantra .
If we say we're going to do it, we're going to do it. How important is that to have your culture within your organization? To know that there's pressure, we say we're going to do it.
Jonathan Sandelman: Well, I love that you brought up the word culture and it was funny in our management meeting this morning. I actually challenged my management team to talk about our competitors. And pick another company whose drives culture is the hidden asset on their balance sheet. It's only about culture there. It's only about talent.
It's creating an environment where people feel secure to come and do their best work. I'm a strong vision guy. I say, what I do, I do what I say. And my goal has always been. To have , the 2,500 members of our team at the air company, all [00:02:00] pulling their oars in the same direction for an excellent outcome.
Dan Humiston: I think that's so important, I if we say we're going to do something we're obligated to do it, there's a lot of integrity in that statement. And When things get bad, if they know that's what the plan is , then needs to stick to the plan and make sure that it gets done.
You've done a great job , absorbing your acquisitions and making them more profitable. At what point do you intend to convert everything into one brand?
Jonathan Sandelman: so we said on our last earnings call, that it is now time for air to do exactly that. And you will see that process begin in the fourth quarter of this year and continue into next. Now, please understand. In the beginning, when I created and founded this company, I had a limited amount of capital and I had two choices in my mind a, by the best in class operators.
In each date we decided to enter [00:03:00] or B buy less states in great operators and spend the money on changing this. And since I had to make that choice, it had to be a capital allocation because of the limited amount of capital I had, what I chose is these assets will get scares, especially the best operators.
And so I put all of our shareholder capital into doing justice. Arizona very different position today. We're a much larger company, with much greater access to capital. And so now we can do both. We can buy best in class operators and unify the brand.
Dan Humiston: interesting that you said that though, because you talked a little bit like a startup person, like a right out of the gate entrepreneur. Cause that's,, the approach that entrepreneurs have to take. I only have this many resources it's not unlimited But you do what you gotta do and you're in the midst of a land grab. It feels like, and if the opportunities are there, you have to take advantage of them and then come back [00:04:00] and backfill. , as you move down the road, I think one of the questions that always comes to mind when I'm talking with somebody that does a lot of acquisitions is at what point, or is there a.
Where you have to slow down and digest the acquisitions.
Jonathan Sandelman: So, I don't know if you know that air started as, as back. And then the original company, bought five different operating companies. When I was done with that, I looked around to see what our competitors were doing. And I thought the market was very over here. And again, I come from a wall street background.
It was a markets guy. It was an operator's finance person. So I understood something that's the market seemed to be missing at that time, which is a very simple concept that all your listeners know, and that is markets are cyclical. They don't move from the left quadrant to the right quadrant without correcting.[00:05:00]
So I saw this Uber aggressiveness in terms of their acquisition strategies and leveraging up their balance sheets. And I didn't think that would end well. I bought my five companies. I paused for 13 months taking a lot of heat, why I wasn't being more aggressive, but during that 13 months, I didn't sit. I asked my team to build up their talent.
To build their SOP and technology I felt very strongly, the market would correct and acids would get cheaper. And , I said to my management team, let's be ready. That the technology be ready, let the head count. Let the systems and the S and P is ready.
And so when that time came, what you've witnessed is how aggressive we've become. And we do it for one very important reason. We have the team, you have the [00:06:00] talent, you have the SOP, but most importantly, the day we close each acquisition that new. Is on our tech stack. We have total control. We don't run legacy systems.
There's one operational stack at air. We have complete transparency into all of our businesses and that's key. You don't want to build tall buildings on weak foundation.
Dan Humiston: That's awesome. In a perfect example of that is your Liberty acquisition. , I just saw how much more profitable you made that organization following your SLPs and in your approach to business, , you really discovered a lot of hidden value and that axis.
Jonathan Sandelman: Liberty , is an asset that's very near and dear to my heart for two years. I, I chased that asset and over two years preparedness reasons [00:07:00] it didn't work. And then when I thought the time was right, what I became increasingly concerned with, and I think this is more true today than ever is the land grab in Florida.
I felt if air didn't move, when we moved and be super aggressive, as you can see us opening stores were opening stores faster than anyone in this. Because my core belief is if you're not doing the land grab and you're not being aggressive about opening retail, you'll be locked out of the state. What do I mean, I frankly do not think that every municipality will have 10 cannabis stores in it.
So in our review, each municipality will have a limited number of stores. And if you're not in them today, you're likely [00:08:00] to be locked out forever. That's the land grab you were talking about, and that's what we're seeing in the.
Dan Humiston: You know,
That's one of those who, where you got to trust your gut. You have to just your gut, and you have boots on the ground, you know , what the environment is telling you. So you gotta trust your gut. I have a feeling you're on the right track, but, I'm going to jump ahead because we're running out of time under the heading of say, what we do, do what we say.
You have some pretty aggressive projections for 2022, , in the very limited time, maybe you can give our listeners some idea as to how you intend to hit your projections through either organic growth or acquisitions. Just give us just an overview of how.
Jonathan Sandelman: Well is in a very unique position. Six out of our eight states, maybe seven we'll do over a hundred million dollars a piece.
Dan Humiston: I read that.
Jonathan Sandelman: This is a company had tremendous operational leverage. There hasn't been a single acquisition we made.[00:09:00] That was a very efficient business. That's the upside. If investors solely look at the multiples that I'm paying without realizing with our SOP, our talent, our know how our systems, that we've been able to improve every company we've bought
Dan Humiston: No.
Jonathan Sandelman: to me, the, effect of multiple Is so much more discounted than the headline number.
We buy companies that are in our states that are not vertically integrated. They buy it from a third party. Now they buy it from us. That's a creative, that's not in the headline number. And so there's a tremendous amount of operational leverage as we take over these companies. We improved their sales per square but we improve their manufacturing process.
And most important, we improve the cultivation because at [00:10:00] air, everything starts with the plant. Well, we say it's not the box it's what's inside the box and you may have heard me say our aspiration is to be the largest quality cultivating. In the marketplace.
Dan Humiston: Quality always wins. And you seem like you're on the right track right now. And for investors that are listening will have all of error wellness's information in the show notes, including their stock symbols and links to their websites. So I'm sure if you want more information, somebody from Jonathan's team will be there to answer it.
And provided you're up for it. John, I'd love to have you back on a few more times because we just scratched the surface. There are so many questions that I didn't get to today, but I enjoyed our conversation and I look forward to having you on again.
Jonathan Sandelman: Well, that would be a pleasure. And I enjoyed it also. And there, there's more to tell. It's not always easy to do it in 10 minutes soundbites. So I [00:11:00] look forward to our next conversation.