iAnthus reported Q1/19 financial results that came in slightly ahead of our estimates with US$18.5M in proforma revenues compared to our forecast of US$17.6M. With is acquisition of MPX closed in early February, IAN officially increased its exposure to 11 states, nine of which already have operations up and running. The 22% QoQ increase in the company’s top line was largely a result of overall market growth and new dispensary openings in New York and Florida in addition to continued MPX wholesale penetration. Perhaps more importantly, as part of its Q1/19 release, management also indicated that its pro forma in revenues one month subsequent to period end in April/19 reached ~US$8.5M, resulting in a current top-line revenue run-rate of >US$100M, which we believe demonstrates that IAN is currently in the midst of a steep revenue inflection point.
As the company continued to scale its operations during the quarter, excluding MPX acquisition related costs, cash opex increased to US$13.7M, resulting in an Adj. EBITDA loss of (US$5.1M); still a slight beat to our (US$7.6M) forecast.
Figure 8: IAN: Actual vs. Estimated Q1/2019 Financial Results
Source: Company Reports, Canaccord Genuity estimates
Operational Updates
iAnthus recently unveiled its national retail brand, “Be, The Cannabis Store” andexpects the first flagship retail store in Brooklyn to be open in fall of this year. Further on the retail front, we believe iAnthus saw meaningful progression in its dispensary buildouts during the quarter as they currently operate 21 retail stores across nine states and are targeting another 47 openings. In particular, iAnthus is laser-focused on opening its doors to the recreational market in Massachusetts and hopes to be selling recreational products in Boston by FQ3/19. We also note that the company is continuing to progress in Florida with plans to open another 3 stores (taking its dispensary count in the state to six) over the next 45 days. On the wholesale front, the company indicated that its MPX branded products are already in ~110 cannabis dispensaries nationwide and its recently announced acquisition of CBD for Life also has products in upwards of 1,000 traditional retailers.
Updated estimates
Following the quarter, we have updated our model for Q1/19 actuals and tarped down our remaining FY2019 forecasts as the Massachusetts market continues to roll-out its recreational platform at a rather modest pace.
Figure 9: IAN: FY2019-FY2020 updated estimates
Source: Company Reports, Canaccord Genuity estimates
IAN currently trades at 7.2x its CY2020 EVEBITDA, compared to its peers at 13.4x and we believe the company (on a relative basis) is currently the most undervalued MSO in our coverage.