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iAnthus Q1 Revenue Decreases 10% Sequentially to $42.8 Million
First Quarter 2022 Financial Highlights
- Revenue of $42.8 million, a sequential decrease of 10% from Q4 2021 and a decrease of 17% from the same period in the prior year.
- Gross profit of $22.5 million, relatively flat when compared to Q4 2021 and a decrease of 24% from the same period in the prior year.
- Gross margin of 52.6%, reflecting a sequential increase of 560bps from Q4 2021 and a decrease of 480bps from the same period in the prior year.
- Net loss of $10.1 million, or a loss of $0.06 per share, compared to a loss of $26.9 million or a loss of $0.16 per share in Q4 2021, and compared to a loss of $19.5 million, or a loss of $0.11 per share, in the same period in the prior year.
- Adjusted EBITDA(5) of $3.4 million, a sequential decrease from $8.2 million in Q4 2021 and decrease from $13.0 million from the same period in the prior year. EBITDA and Adjusted EBITDA are non-GAAP measures. Reconciliation tables of EBITDA and Adjusted EBITDA as used in this news release to GAAP are included below.
- Due to liquidity constraints experienced by the Company, the Company did not make applicable interest payments due on its 13% senior secured convertible debentures (“Secured Notes”) and its 8% convertible unsecured debentures (“Unsecured Debentures”) due during 2020. As previously disclosed by the Company, the non-payment of interest in March 2020 triggered an event of default with respect to these components of the Company’s long-term debt, which, as of March 31, 2022, consisted of principal amounts of $97.5 million and $60.0 million, and accrued interest of $34.8 million and $10.8 million, on the Secured Notes and Unsecured Debentures, respectively. In addition, as a result of the default, as of March 31, 2022, the Company has accrued additional fees and interest of $15.8 million (“Exit Fees”) in excess of the aforementioned amounts that are further detailed in the Company’s financial statements.
- As disclosed in the Company’s filings with the applicable Canadian securities regulators and the SEC, the Company entered into a restructuring support agreement dated July 10, 2020, as amended on June 15, 2021 (as amended, the “Restructuring Support Agreement”) with the holders of its Secured Notes (the “Secured Lenders”) and a majority of the holders of its Unsecured Debentures to effectuate a proposed recapitalization transaction (the “Recapitalization Transaction”) to be implemented by way of a court-approved plan of arrangement under the Business Corporations Act (British Columbia). Pursuant to the terms of the Recapitalization Transaction and subject to the closing thereof, the Company is required to issue an aggregate of 6,072,579,699 common shares upon the extinguishment of (i) $22.5 million of Secured Notes (including the Exit Fees) plus interest accrued thereon, (ii) $40.0 million of Unsecured Debentures plus interest accrued thereon, and (iii) interest accrued above the principal amount of $14.7 million of the interim financing provided by the Secured Lenders. The Recapitalization Transaction remains subject to the receipt of all necessary regulatory approvals and approval by the Canadian Securities Exchange. The financial highlights herein do not give effect to the consummation of the Recapitalization Transaction.
On April 1, 2022, the Maryland Medical Cannabis Commission (the “MMCC”) approved the proposed change of ownership control of the Company’s wholly-owned subsidiary, S8 Management, LLC (“S8”), contemplated by the Recapitalization Transaction. S8 currently controls four licensed entities in Maryland through management service agreements.
On November 4, 2021, the Company announced that the Florida Department of Health, Office of Medical Marijuana Use (the “OMMU”), by notice dated October 29, 2021, approved the variance request (the “Variance Request”) filed by the Company’s subsidiary, McCrory’s Sunny Hill Nursery, LLC (“McCrory’s”), to approve the proposed change of beneficial ownership of McCrory’s contemplated by the Recapitalization Transaction. Subsequently, on December 9, 2021, iAnthus announced that, on November 19, 2021, Michael Weisser, Benjamin Pollara and Florida for Care, Inc., a not-for-profit corporation representing members including qualified Florida medical marijuana patients, filed a Petition for Formal Administrative Hearing (as amended, the “Petition”) with the OMMU, challenging the OMMU’s approval of the Variance Request and requesting a formal administrative hearing before an administrative law judge (“ALJ”) at the Florida Division of Administrative Hearings. The OMMU informed the Company that, as a result of the filing of the Petition challenging the agency’s decision within the permissible challenge period, the OMMU’s prior approval is not an enforceable final agency order until there is a final resolution of the Petition and a final agency order is rendered. On May 4, 2022, the OMMU issued a final agency order, accepting the recommendation of the ALJ and dismissing the Petition.
The Company continues to seek the remaining state regulatory approvals in Massachusetts, New Jersey, and New York.
Resignation of Randy Maslow and Appointment of Robert Galvin as Interim CEO and Director
On May 4, 2022, the Company announced the resignation of Co-Founder and Interim Chief Executive Officer, Randy Maslow from his executive positions with the Company, including all positions with the Company’s subsidiaries and its affiliates, and from the Company’s Board of Directors (the “Board”) and committees, effective as of May 6, 2022 (the “Resignation Date”). Mr. Maslow will continue to serve the Company in a consulting role for a period of six months following the Resignation Date.¹
1 The Company’s financial statements for the quarter ended March 31, 2022, and associated Management’s Discussion and Analysis of Financial Condition and Results of Operations include additional information on the separation agreement the Company entered into with Mr. Maslow.
On May 6, 2022, the Company announced the appointment of Robert Galvin as Interim Chief Executive Officer and member of the Board, effective as of May 6, 2022.
Opening of Atlantic City, New Jersey Dispensary
On May 5, 2022, the Company opened its first dispensary in the state of New Jersey. The dispensary, which operates under the MPX NJ brand, is located in Atlantic City, New Jersey.
Non-GAAP Financial Information
This release includes certain non-GAAP financial measures as defined by the SEC. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are included in the tables above. This information should be considered as supplemental in nature and not as a substitute for, or superior to, any measure of performance prepared in accordance with GAAP.
In evaluating our business, we consider and use EBITDA as a supplemental measure of operating performance. We define EBITDA as earnings before interest, taxes, depreciation and amortization. We present EBITDA because we believe it is frequently used by securities analysts, investors and other interested parties as a measure of financial performance. We define Adjusted EBITDA as EBITDA before stock-based compensation, accretion expense, write-downs and impairments, gains and losses from changes in fair values of financial instruments, income or losses from equity-accounted investments, changes in accounting policy, non-recurring costs related to the Company’s Recapitalization Transaction, and litigation costs related to ongoing legal proceedings.
The terms EBITDA and Adjusted EBITDA are not defined under GAAP, and are not a measure of operating income, operating performance or liquidity presented in accordance with GAAP. EBITDA and Adjusted EBITDA have limitations as an analytical tool, and when assessing the Company’s operating performance, investors should not consider EBITDA or Adjusted EBITDA in isolation, or as a substitute for net income (loss) or other consolidated income statement data prepared in accordance with GAAP. Among other things, EBITDA and Adjusted EBITDA do not reflect the Company’s actual cash expenditures. Other companies may calculate similar measures differently than us, limiting their usefulness as comparative tools. We compensate for these limitations by relying on GAAP results and using EBITDA and Adjusted EBITDA only as supplemental information.
iAnthus owns and operates licensed cannabis cultivation, processing and dispensary facilities throughout the United States. For more information, visit www.iAnthus.com
The Company may be impacted by business interruptions resulting from pandemics and public health emergencies, including those related to the ongoing novel coronavirus disease (“COVID-19”). An outbreak of infectious disease, a pandemic, or a similar public health threat, such as the ongoing outbreak of COVID-19, or a fear of any of the foregoing could adversely impact the Company by causing operating, manufacturing, supply chain, and project development delays and disruptions, labor shortages, travel, and shipping disruption and shutdowns (including as a result of government regulation and prevention measures). It is unknown whether and how the Company may be affected if such a pandemic persists for an extended period of time, including as a result of the waiver of regulatory requirements or the implementation of emergency regulations to which the Company is subject. Although the Company has been deemed essential and/or has been permitted to continue operating its facilities in the states in which it cultivates, processes, manufactures, and sells cannabis during the pendency of the COVID-19 pandemic, subject to the implementation of certain restrictions on adult-use cannabis sales in both Massachusetts and Nevada, which have since been lifted, there is no assurance that the Company’s operations will continue to be deemed essential and/or will continue to be permitted to operate. The Company may incur expenses or delays relating to such events outside of its control, which could have a material adverse impact on its business, operating results, financial condition, and the trading price of its common shares.
We are consistently seeing cannabis stocks reporting declining revenue. I attribute this to expanding social activity as COVID restrictions are lifted and people resume a more normalized lifestyle where they are not holed up in their homes smoking their brains out.
iAnthus ITHUF stock is one I have wanted to take a close look at. But, this is also a stock that has a whole host of haters out there. One day, I'm going to have to cross that line and do a thorough look at ITHUF stock.