Ascend Wellness Holdings, Inc. (OTCQX:AAWH) Q2 2022 Earnings Conference Call August 15, 2022 5:00 PM ET
Rebecca Koar – VP, IR
Abner Kurtin – Founder and CEO
Daniel Neville – CFO
Frank Perullo – Co-Founder, President, Chief Strategy Officer, Secretary & Director
Conference Call Participants
Matt McGinley – Needham
Kenric Tyghe – ATB
Neal Gilmer – Haywood Securities
Ty Collin – Eight Capital
Russell Stanley – Beacon Securities
Andrew Semple – Echelon Capital Markets
Diana Tokar – Canaccord Genuity
Good evening and thank you for standing by. Welcome to AWH’s Second Quarter 2022 Earnings Call.
I’d now like to hand the conference over to your first speaker today, Rebecca Koar, Head of Investor Relations. Please go ahead.
Good evening and welcome to AWH’s earnings call for the second quarter of 2022. The presentation that accompanies this call can be found on our website, www.awholding.com/investors.
Before we proceed, I would like to remind you that there are several risk factors and other cautionary statements contained in our SEC and SEDAR filings, including our annual report on Form 10-K for the year ending December 31st, 2021.
We filed our 10-Q for the quarter ending June 30th, 2022 earlier today. We will not review those risk factors and other cautionary statements on this call. However, we encourage you to read them carefully.
Various remarks on this call concerning expectations, predictions, plans and prospects constitute forward-looking statements or information. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ from historical or anticipated results.
Any forward-looking statements reflect management’s current view only and we undertake no obligation to revise or update such statements or make additional forward-looking statements in the future.
During today’s call, we will be referring to non-GAAP measures as defined and reconciled in our earnings materials in the appendix of the presentation. These non-GAAP measures, as defined by AWH, may not be comparable to measures with similar titles used by other companies.
On today’s call, we have Abner Kurtin, Chairman, Founder and Chief Executive Officer; Frank Perullo, President, Co-Founder, and Chief Strategy Officer; and Daniel Neville, our Chief Financial Officer.
With that, I’ll turn the call over to Abner starting on slide four.
Thanks Rebecca. I am extremely proud of the team for the performance in Q2 proving our strategy of successfully expanding our business. We are well on the way to becoming a premier MSO in our target markets east of the Mississippi.
We delivered record revenue for the company in both our retail and gross wholesale business. We attained robust growth and our financials exceeded expectations accelerated by an earlier than anticipated start to adult use sales in New Jersey and a rebound in the wholesale business.
Revenue grew 15% sequentially and adjusted EBITDA margins expanded by 220 basis points. The strength was across both business segments. Retail revenue increased 19% sequentially, while gross wholesale revenue increased 11%.
Moreover, we are very pleased with our initial transition to adult use in New Jersey. Our Rochelle Park store has been very successful. The store is now our number one store surpassing our $50 million revenue a year store in Collinsville, Illinois. We aren’t stopping here. We have significant continued upside in New Jersey. We expect to begin adult use sales at our Montclair, New Jersey store later this week, August 19th, subject to final approval by the town.
Our Fort Lee store opened last Friday for medical sales and we expect to commence adult use sales sometime in the fall. We have begun growing in the first phase of our canopy expansion in New Jersey and expect significantly more canopy to come online by year end. Accordingly, we continue to expand our New Jersey cultivation capabilities, so we’re able to offer more of our own products to our customers and increase gross margins.
The results in New Jersey illustrate our investment thesis. Last June, Rochelle Park averaged 1,800 transactions a month. This June transactions were up 23 times and revenue was up 17 times. Overnight, with the start of adult use sales, we’re able to significantly increase profitability. That is exactly why this business resembles such a stair step.
While we may go through lows in growth, when we do turn on assets, they ignite. We expect to see a similar dynamic in Pennsylvania and Ohio when those states become adult use at some point in the future.
Outside of New Jersey, the rest of the business performed well. Excluding adult use flips and new store openings, retail transactions grew by 8% sequentially, and despite pressure on basket sizes in some stores, retail revenue grew 4% sequentially. We are particularly pleased with the team from Ascend Michigan, which was able to achieve 23% retail sales growth despite being in a very competitive market. Turning assets on an app optimizing our existing asset base is our key focus.
In Q2, we secured an additional $65 million of debt to finance our expansion plans in Pennsylvania and other growth initiatives. It was highly opportunistic to secure this capital amid a capital drought in our industry.
We have one of the strongest balance sheets among our peers and no material majorities for the next three years, which is a huge competitive advantage. We ended the quarter with $140 million of cash, enough to fuel our near-term initiatives as we move towards generating cash flow from operations. We remain laser-focused on limiting non-essential CapEx, increasing operating cash flow, and becoming a cash flow generating company during 2023.
We — just today, we announced the signing of a definitive agreement that provides us the ability to acquire 100% of the stock of Ohio Patient Access, LLC. This transaction will add three medical dispensaries to our portfolio in Ohio and will bring us to the state-imposed five dispensary cap and further our exposure to this highly populated state with near-term rec potential. We have plans to build the dispensaries in central retail corridors in Sandusky, Piqua, and Cincinnati respectively. The Cincinnati location will be our Ohio flagship store and will be the only dispensary in downtown Cincinnati.
Not only will dispensary be across the street from a casino and less than a mile from the [indiscernible] and Red Stadium, but is the closest dispensary to the Kentucky border and intersects two major highways. This model is representative of our core retail philosophy to never sacrifice location.
Also subsequent to the quarter, we signed a definitive agreement to acquire two additional paper licenses in Illinois. We plan to cite one in Tinley Park, one of the fastest growing suburbs Southwest of Chicago, and the second one in an up and coming neighborhood in the Greater Chicago area.
Upon closing of these transactions, we will have 10 dispensaries in Illinois and will be at the state-imposed cap. In Illinois we will only be the fifth company to have reached the 10 store cap.
Going deep in the states which we operate and being a top player in each state is critical to high levels of profitability. Illinois is a great example of what can happen when you achieve scale and go deep within a state.
We entered the Illinois market fewer than four years ago and have since become a top player in the state. Our wholesale products are sold in 99% of the dispensaries. Our Ozone brand is one of the leading brands and we’ve become one of the highest — and we have one of the highest grossing dispensaries in the state.
Furthermore, once these deals closed, we will be at the retail cap in every one of our states, with the exception of the Pennsylvania market, which we are set to open early next year.
While scale in our existing states is our priority, we are considering opportunities to improve our footprint and future earnings potential outside of that footprint. We are actively pursuing multiple opportunities to enter Maryland. Maryland is home to more than 6 million people and has a mature medical program. Adult use is on the ballot in 2022 and we believe the start of adult use sales are likely to occur by the end of 2023.
Prohibitive taxation and access to capital pose challenges, but they also serve as a barrier to entry. In this environment, we choose to focus on building a moat around our business and carefully managing cash, which is where our team excels. We expect to see consolidation in the industry and a lot of opportunities to acquire desirable assets and we are prepared to be opportunistic with what we perceive to be heavily discounted transactions. All of the deals being contemplated have a higher returns profile and should improve the portfolio on a risk-adjusted basis.
In contrast, due to concerns about the status of MedMen New York’s assets, which have deteriorated materially since December 31st, we are not moving forward to close the transaction that we previously announced.
We have been engaged in negotiations with MedMen for 17 months and because of the state of MedMen’s assets, it is time for all of us to move on. Because we will not be moving forward with the MedMen transaction, we have $70 million of unencumbered cash at a time when cash is deal.
In addition, as many of you know, the regulatory environment in New York remains highly uncertain, given the unknown timing of the commencement of adult use sales, unclear licensing process, and the lack of policing of the illicit market. As a result, the New York market is not a priority for AWH, but we will continue to monitor it closely.
Management and the Board are excited about the asset base that we have and the trajectory of the industry, which remains one of the fastest growing sectors in the United States.
Given this momentum, we continue to believe in a sense potential to deliver long-term shareholder value. We are in this together and through the long haul. This support is evidenced by our entire Board of Directors, including my Co-Founder Frank and myself, making share purchases of Ascend common shares on the public market.
Additionally, several months ago, I elected to take all of my 2022 compensation as stock. Our team is 100% aligned with investors. Based on most analysts’ expectations, we traded a 30% to 45% discount on projected — compared to projected estimates of our peers. We view this as completely unjustified, given our best in class portfolio and execution of our business plan.
Not only are we aligned with investors, but we are making strides to help write some of the wrongs and injustices that plague our industry. Our contributions and Customer Match donations to the Last Prisoner Project recently passed 1.75 million since we started the program. These funds will undoubtedly be useful as the organization works to fight criminal and justices and fight for reform.
And additional — in addition to partnering on these efforts, Ascend is doing our own social equity work. We recently launched the Ascend Foundation, a nonprofit organization committed to the holistic wellness of our communities. Through the foundation, we’ve begun providing technical assistance to social equity applicants in New Jersey, allowing them to access to mentorship from our staff and have hired returning citizens in Chicago and Boston as endurance and we’ll be soon be kicking off a series of educational workshops and expungement clinics. This is important work and we are happy to be a small part of it.
With that, I will turn it over to my Co-Founder and AWHS President, Frank Perullo to provide detail on our progress in New Jersey starting on slide six.
Thank you, Abner. I will focus most of our conversation today on New Jersey, our most significant growth driver for 2022. Ascend is positioned to have an outsized benefit from New Jersey compared to our peers due to our size and exposure.
On April 21, Ascend was among seven alternative treatment centers in New Jersey, authorized by the New Jersey Cannabis Regulatory Commission to begin selling recreational adult use cannabis.
During our May earnings call, we provided some impressive stats about weekly sales and transactions at our Rochelle Park, New Jersey store. Our most recent weekly sales were up approximately 46% from this dispensaries first full week of recreational sales. I attribute this growth to our focus on store optimization, emphasis on order ahead, diversity of menu, and our ample parking.
Ascend is developing a reputation for being the fastest dispensary in the state offering the most convenient customer experience with an average time in the store of under eight minutes. Our Richelle Park team took the playbook from our highly successful counsel store in the St. Louis area, which gave us an edge by providing some of the best practices for running high volumes superstore.
Our Montclair store was the first dispensary in the state of New Jersey and is in the heart of Downtown Montclair. After weeks of delay to our startup adult use sales, we have been working with the town of Montclair, and are glad to have reached an agreement. We anticipate receiving approval from the township tomorrow, which would enable us to begin adult use sales on August 19.
Our Fort Lee store opened its doors to medical patients on Friday and is our flagship New Jersey dispensary. It’s the closest New Jersey dispensary to New York City, located in a prime position directly across the Hudson River from the city and is accessible to many major highways and thoroughfares in New Jersey.
We have big hopes for this flagship New Jersey location, which is currently operating as a medical-only store, but is expected to open for adult use sales this fall. We encourage everyone to take a trip out to see these stores.
Retail is something Ascend does right time and time again and that is evidenced by our execution in New Jersey as well as our $14.6 million average annual revenue per dispensary, which leads the industry.
Let’s move to slide seven to discuss our expanding cultivation and wholesale capabilities in the state. We’re making great strides in building out the scale and capabilities that our Franklin New Jersey cultivation facility. Just last week, we planted an incremental 4,000 square feet of canopy, bringing our total planted canopy to 20,000 square feet and we’re still on track for total of 42,000 square feet of canopy by the end of 2022. The expansion is going well and over time, this will allow us to source more retail products from our own cultivation, allowing us to expand margins.
We continue to dial in our process, improve our genetics, and refine our procedures, such that each week, we are noticing improvements in quality and yields. In April, we completed our ethanol extraction lab, enabling us to produce vape products and expand our offerings. Since the start of the year, we have launched nearly a dozen new products in New Jersey and ramped up to close to 20 wholesale clients.
We launched a partnership with Airo Products, a leading vape brand in the state that has been extremely well-received in the market. After initially serving only our retail stores, we expanded the collaboration to wholesale and are ramping up production.
Our kitchen is nearing completion and has been approved by the Cannabis Regulatory Commission. The kitchen will significantly expand our offerings by enabling us to produce edibles.
We are encouraged by the early signs of success we are seeing in New Jersey and are pleased to be part of this market, which is targeted to reach close to $2 billion in legal sales by 2025.
With that, I will turn it over to Dan to review the detailed financials starting on slide nine.
Thanks Frank. Good evening, everyone. Q2 was a strong quarter for Ascend. We achieved robust sequential revenue growth and significant margin expansion as we benefited from the successful start of adult use sales in New Jersey, increased utilization of our existing assets across the wholesale business, and improved capture of vertical margins.
Total system revenue increased by 16.2% sequentially to $118 million. While net revenue, which excludes the intercompany sales of wholesale products increased by 14.6% quarter-over-quarter to $97.5 million. The growth was primarily driven by the start of adult use sales in New Jersey and increases in wholesale volumes and realized pricing in New Jersey and Michigan.
Total retail revenue increased 19% sequentially to $76 million, representing 77% of net revenue. This growth was driven by the start of AU sales at Rochelle Park. Across the board, our average ticket remained roughly flat, but transactions increased 20% sequentially.
Excluding Rochelle Park and East Lansing, which opened in the quarter, transactions grew 8% sequentially. We are attracting new customers and our existing customers are shopping more frequently, despite pressure on their wallets from inflation.
Our average annualized revenue per dispensary was $14.6 million in the quarter, which remains among the highest in the industry and is a testament to our strategy to run high throughput doors in prominent retail locations.
Even in Michigan, a challenging market in many respects, we outperformed with organic retail sales up 22% sequentially boosted by a 15% improvement in traffic and a 7% increase in basket size.
Gross wholesale revenue increased to $42 million across our five cultivation sites, representing an increase of 11% sequentially as we expanded intercompany sales to our own retail stores, which also helped to boost gross profit.
Net wholesale revenue of $21.9 million was consistent with the prior quarter as increased pricing and volumes in New Jersey and Michigan were almost entirely offset by lower pricing in Illinois and lower volume sold in Massachusetts. We believe that wholesale pricing in Illinois will begin to stabilize as the 185 new retail licenses recently issued by Illinois begin to become active.
Adjusted gross profit increased by $7.9 million to $44.4 million, a 21.7% increase sequentially. Margins increased from 42.9% to 45.6%. This 268 basis point margin expansion was driven by increased pricing in New Jersey, higher wholesale volume throughput in New Jersey and Michigan, and higher intercompany sales as a percentage of wholesale sales.
Our Q2 adjusted EBITDA was $20.9 million, which represents a $4.5 million or 28% sequential increase. Our EBITDA margin for Q2 was 21.4%, which represents approximately 220 basis point quarter-on-quarter increase. This expansion is the result of more of our assets coming online.
Notwithstanding this notable progress and margin expansion, we believe we have unrealized upside potential ahead as we build out the rest of our own asset base. In the quarter we had $7.7 million of rent expense related to sale leaseback, the majority of which are represented in cost.
Let’s move on to discuss the balance sheet on slide 10 and our strong cash position. At the top of the slide, you’ll see our standard waterfall which bridges from Q1 cash to cash at the end of Q2. During the quarter, we used about $3 million of cash in total. We used approximately $10 million of cash flow from operations inclusive of $12 million in cash taxes.
Once the rest of New Jersey turns on, we expect to be cash flow from operations positive excluding a material cash tax payment we plan to making Q4. We also use $48 million in net cash for investing. This was inclusive of the story of PA LLC purchase and related payments thereof. We’re pleased to — we were pleased to raise $65 million in debt via the accordion feature on our term loan, bringing the total raised under the senior credit facility to $275 million.
We saw strong participation from existing lenders and appreciate their continued support. Net of other financing costs and payments, cash raised from financing for the quarter was $55 million. These funds will contribute to our acquisition plans in Pennsylvania, Ohio, and Illinois.
We ended the quarter with $141 million of cash and equivalents, $293 million in total debt, and $153 million in net debt. We do not have any material debt maturities for the next three years, and are proud of our strong balance sheet. We remain excited about our asset footprint and exposure to high growth markets like New Jersey, and look forward what the rest of the year has in store as we continue this growth journey.
With that, I’ll turn it over to the operator for questions.
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions]
The first question comes from Matt McGinley of Needham. Please go ahead.
Thank you. I noticed today that you’d be acquiring the three dispensaries in Ohio and a two in Illinois, but you didn’t provide any terms. Can you help us better define what you expect — when you expect those assets to be either operational or consolidated? And what the overall consideration is for the assets in Ohio and Illinois? And in New York, has a decision to walk away from purchasing the New York assets been agreed to by MedMen or is this something that’s likely to result in litigation from you walking away?
Dan, you want to walk through consideration for the deal?
Yes, sure. Hey, Matt. So, on the Ohio side of things, it structured in a couple of different payments. So, there was a $11.3 million that was due on signing of the auction agreement, which provides us the ability to acquire these dispensaries, there is an additional $11 million that is due upon the final regulatory approval of that transfer of these licenses, which will likely occur in to two and a half years’ time. And then there is a $7 million earn-out payment that is payable in cash or stock at the sellers option upon the commencement of adult-use sales in Ohio. So that’s the total for the three dispensaries in Ohio.
And that includes purchases of the life and certain real estate.
Yes. And the associated real estate for these three locations. On the Illinois side of things, the purchase price for the acquisitions was about $5 million apiece, I think it was $5.5 million for each of those, and the $3 million of cash went out the door on signing of the agreement, the remainder will be due upon the final license transfer approval by the Illinois regulators.
So in terms of New York, there’s really no agreement because we had signed a term sheet for a settlement that ended up not going forward, the remaining litigation is by us to close the original transaction that they failed to close last December. So we anticipate this being the end of the matter, though, we can’t control what others do. As we move forward here, we’re looking per the termination agreement to the refund of certain monies that we paid from them at the at the outset of the transaction.
Okay. Thank you.
Thank you. The next question comes from Kenric Tyghe. Please go ahead.
Thank you, and good evening. I’m wondering just build on the sort of change in tone around New York. I think as recently as last quarter, or certainly over the last couple of quarters. The tone has been very constructive around that opportunity set is how much of the decision here is a function of continued uncertainty in New York versus, the deterioration of the assets, as you call it out? And how should we sort of, what read should we take from that in terms of, why and how it’s changed as sharply as it has, in what appears to be a very short window of time? Thank you.
Yeah. Thanks for the question. It’s two separate issues, right, the transaction was terminated because of a deterioration of amendment assets. The point there being that the advantage to these licenses and the benefit of these licenses is the ability to execute really well at the outset of adult use, that we believe the deterioration of those assets materially impacted the ability to do that. And that made the transaction no longer to make sense.
In terms of New York, we’ve become more and more concerned as the months go by. So now as we look at the landscape, fresh without this transaction, we see better opportunities elsewhere. And the way, I have a background in the stock market. So the way I would describe New York is the highest beta opportunity in the state in the country, New York, obviously 20 million people going out use has a lot of potential. The problem is, as we discussed, there’s no visibility on a bunch of issues. And the regulators don’t seem particularly clear about what they want to do with licensing and what they want to do with the illicit market.
That gives the potential for New York to end up like LA. And LA, as we know, is a very difficult market for cannabis operators. But you know, we don’t have a crystal ball and it could be great. And we’re going to look at other opportunities to enter that state just as that field terminated, and we look at fresh opportunities. We’re more excited about Ohio and Maryland and expanding in Illinois, and the ability to expand in our core states where we’re having success. So for us, it’s more about that than a particular view on New York.
Very clear. Thanks.
Thank you. The next question comes from Neal Gilmer, Haywood Securities. Please go ahead.
Maybe just wanted to talk about the gross margin yet a nice improvement from Q1 to Q2. How should we think about that going forward with obviously, further contribution from New Jersey, which I believe you cited as helping those margins? And, should we be — considering that, in fact of potentially some of the other markets may have a little bit of pressure on margins, just given some of the pricing trends?
Yeah, so, I think as you think about gross margin going forward, you obviously have the benefit of New Jersey, which should expand from here. It’s an early adult use market pricing on both the retail side of things as well as the wholesale side is strong. So that’s clearly accretive to gross margins. But, similarly to this quarter, in other more developed markets like Massachusetts, like Illinois, like Michigan, although that was less of a factor this quarter, we do have some pricing pressure, I’d say price settling in those markets.
So pricing is settled a little bit in Illinois and Massachusetts, I think it’s more pricing pressure in terms of what we’re seeing in that market. So, I think you’ll have continued benefit from New Jersey, but to a large extent, I think as you look forward from this quarter, some of that benefit will be offset by pricing pressure in our other markets.
Yeah. Also, I mean, I think, as others have other industry participants have said, like a huge driver of gross margin is the verticality of your business, right. So in states like New Jersey, as that’s a pretty vertical market right now and that’s going to be our source of expansion. At the same time, we’re bringing our lab and kitchen online in New Jersey, which will provide opportunities to get more vertical. The same thing holds true in mass, where we’re looking to get our lab and kitchen online. So we’re hoping to offset some of the overall market pressures settling with higher degrees of verticality in a lot of our markets.
Okay, thanks very much.
Thank you. The next question comes from Ty Collin, Eight Capital. Please go ahead.
Thanks for taking my question. Just wondering if you could update us as to what proportion of your retail sales were owned brands this quarter? I think last quarter you mentioned 43%, with a target of getting to 50%. Also, wondering if that target a little bit higher now, given some of the contraction we’re seeing in the wholesale channels? And what do you kind of see as an upper limit for how high are willing to take that verticality? Thanks.
Yeah. So this quarter, we were at 435. I believe, last quarter, we were a bit lower, right around the mid-30s. So that’s where we are today. I think, we’re going to be focused on increasing or verticality, we don’t have a full assortment of offerings as Abner mentioned, from the lab and kitchen, both in New Jersey and Massachusetts. Our lab also just turned online in Michigan. So that we’ll be able to increase our assortment and offering an owned retail we’re not providing the full assortment today. But I still feel like we’d you know, I think Frank can speak to this a little bit. We would like to continue to offer other people’s products in our store. We don’t want to be a company own store. We want to provide our consumer choice. I don’t know, Frank, do you have anything to add, and
I think 50% a good goal, I think we do want to have the best products at the best prices and the best experience. But generally speaking, we have the opportunity to get to that 50% later this year, early next year by just opening up the assets that we’ve been working to turn on, including, as they mentioned, kitchens and labs in various states and getting all the form factors on the shelves as we have in Illinois, for example, we can do that successfully. I think we’ll get to our goal sometime later this year, early next year.
I mean, I think we’ve said like, we’re a bit of an earlier stage MSO compared to some of the others, particularly, the bigger ones that have reported. So this, we’re still turning on assets, we’re still turning on assets and getting vertical in every state. We just turn on our lab in Ohio as well. And we’re where we have a small grow. But we want to expand that. So we think there’s a lot of opportunity for us to grow both on the wholesale side and with verticality, as we expand and turn on these assets. We’re coming from low market shares. So we’re pretty excited about that.
The other thing we’re excited about is the 185 stores coming online in Illinois. We think that’s a potential to double the size of that market over some period of time. We see that some of that coming online in 2022, more of a 2023 story, and we’ll also benefit from the two stores taking us up from at the eight stores to the 10 cap.
Thank you. The next question comes from Russell Stanley, Beacon Securities. Please go ahead.
Hello, and thank you for taking my question. Maybe if I could just follow-up on average last comments around Illinois, given the pace of those retail licenses getting developed or your view on that, I guess what is your — you’ve just recently completed an expansion there? What’s your appetite or need for another expansion on the cultivation front in order to satisfy the additional 185 licenses coming out? How are you thinking about that at this point? Thanks.
Thanks. I mean, look, we’re just getting comfortable with 110,000 feet of canopy, which maybe it’s not Cresco size, but is pretty — it is our largest by far. So we really want to optimize that and optimize profits in that state. We think we have — we’re really right size to be able to do that. And we think generating — we really feel like we can get a high level of profitability with the wholesale penetration and the 10 stores.
So we’re not saying never, but it’s not on our agenda in the short-term. I think that will be the story, there isn’t really — well, there’s been a little bit of pressure in Illinois, like many other markets, there haven’t been a lot of capacity expansions. We don’t see a lot of capacity coming online in Illinois compared to other states. We think that should set up well for wholesale as these stores open.
Great. Thank you.
Thank you. The next question comes from Andrew Semple of Echelon Capital Markets. Please go ahead.
Hi, there. Good afternoon, and congrats on the solid Q2 results. My question is, your commentary is mostly referred to New Jersey driving revenue growth and retail revenue growth within the quarter. Could you maybe spend some time on how the rest of the retail network fared in Q2 on a state-by-state basis? I’m specifically interested in Illinois, Massachusetts, and whether you kept pace with overall market growth in those states and that. How are you faring so far in Q3?
I’ll let Dan do that. But we do want to keep talking about New Jersey, we really like New Jersey, but I think the question is bearable. Well, Dan, can give the state breakdown.
Yes. So as we referred to in the earnings script, we had a really — wasn’t just New Jersey contributing in the quarter, we had a really fantastic quarter in Michigan. We got some new leadership into the state, and really got our sea legs under us there and posted 22%, organic revenue growth sequentially quarter-on-quarter. We found that Grand Rapids, where we have two stores today is a very good market to be in. We have a third store coming online in that market. So that should provide additional potential for the market.
So Michigan, in addition to New Jersey, well off of a smaller base and a little bit less exciting without the AU flip, and a very good store, still did solid work in the quarter. If we look at without getting too much into our other markets, we saw growth — or without getting into too much detail market-by-market, we saw growth in Illinois in the current quarter, transactions were up, average ticket was down a little bit, but transactions over — more than offset the decline in average ticket.
Michigan, as I mentioned, transactions up and basket sizes notably were actually up on the quarter. And transactions were up in Ohio during the quarter, and an average ticket was down slightly, but again, growth in transactions more than compensating for the decline in the average ticket in that market.
Massachusetts, similar story, traffic was pretty strongly in the double-digits there, our average ticket was down low single-digits. So that’s kind of the consistent story across the market on a sequential — across our markets on a sequential basis. Transactions up in all of our markets, average tickets flat to slightly down for the most part with transactions offsetting the decline in average ticket.
And I know we’re pleased I know a lot — our results are better than many for the quarter. But I don’t think it’s a different macroeconomic view. I think we just had some idiosyncratic benefits of really strong execution by the retail team and really improving some of the areas that there was some upside. So, we’ve had success. Our Grand Rapids stores in Michigan, great area, we performed a lot better there. Our delivery program and math is getting at sea legs under a two, and so we see kind of more company specific factors that worked in our favor this quarter rather than something different than others from a macroeconomic point of view.
Great. That’s excellent color and very helpful. Congrats again on the Q2 results.
Thank you. The next question comes from Diana Tokar of Canaccord Genuity. Please go ahead.
Hey, guys. Thanks for taking my question. I just had one question regarding Pennsylvania, if you can just provide some color on the progress there. And if it’s still on track to be open in 2023. Thanks.
Yes. So, Frank, do you want to provide an update on timing?
Sure. So we’re working to start up the cultivation there sometime this fall. We are right on schedule for a sometime in the fall startup of the cultivation facility. And along with that to perfect the license, you do need associated retail to open up. And again, there we’re hoping to have at least one store open at the same time in the fall. But it could be two coming online this year. So we are on scheduled to start operations in Pennsylvania in late 2022, albeit with some risks that schedule in the coming months, but so far, so good.
Yes. Let me kind of give a little more color on our Pennsylvania strategy. Pennsylvania is a mature medical market. And to be fair to face wholesale pressures with some excess capacity for a medical market. We’re not looking to rush in there. We’re looking to be really smart and build a really good business for adult use.
And as we know, adult use has what we call second-mover advantage that a number of the stores that were cited for medical stores were available a few years ago, the environment now allows for more traditional retail citing, as well as citing that’s maybe potentially better for adult use. And that’s where we’re focused, adult uses was — is not on the ballot and has been proposed for the legislature. It’s not happening near term, but we expect to be a real player in that market. And we’re going to cite the six stores and size to grow for that opportunity. Not near term medical success.
Okay, great. Thanks for the color.
Thank you. There are no further questions at this time. I will turn the call back to Abner Kurtin for closing remarks.
Thanks. I would like to thank all our customers, shareholders, lenders, partners and employees for their continued support as we continue to work together to fulfill our mission of bettering our patients and customers lives with cannabis. The Board and management team remain enthusiastic about the trajectory of our industry, and more importantly in Ascend. Thank you for tuning in. And please reach out with any further questions.
This does conclude your conference call for today. We thank you for your participation and ask that you please disconnect your line.
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