iAnthus Capital Holdings, Inc. (“iAnthus” or the “Company”) (CSE: IAN) (OTCPK: ITHUF), which owns, operates, and partners with regulated cannabis operations across the United States, today reported its financial results for the fourth quarter and year-ended December 31, 2021. The Company’s Annual Report on Form 10-K, which includes its audited consolidated financial statements for the year-ended December 31, 2021 and the related management’s discussion and analysis of financial condition and results of operations, can be accessed on the Securities and Exchange Commission’s (“SEC’s”) website at www.sec.gov, the Company’s SEDAR profile at www.sedar.com, and on the Company’s website at www.iAnthus.com. The Company became a U.S. reporting company effective February 5, 2021. As such, the Company’s financial statements are reported in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). All currency is expressed in U.S. dollars.
2021 Financial Highlights
- Revenue of $203.0 million, up 34% from the prior year.
- Gross profit of $111.3 million, up 36% from the prior year.
- Gross margin of 54.8%, reflecting an increase of 0.8% from the prior year.
- Net loss of $76.2 million, or a loss of $0.44 per share, compared to a loss of $313.4 million, or a loss of $1.83 per share, in the prior year.
- Adjusted EBITDA(4) of $42.1 million, up from $8.7 million from 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, 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 December 31, 2021, consisted of principal amounts of $97.5 million and $60.0 million, and accrued interest of $30.9 million and $9.6 million, on the Secured Notes and Unsecured Debentures, respectively. In addition, as a result of the default, as of December 31, 2021, the Company has accrued additional fees and interest of $15.4 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 (together, the “Restructuring Support Agreement”) with the holders of its Secured Notes (the “Secured Lenders”) and a majority of the holders of its Unsecured Debentures (the “Consenting Unsecured Debentureholders”) to effectuate a proposed recapitalization transaction (the “Recapitalization Transaction”) to be implemented by way of a court-approved plan of arrangement (“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.
Q4 2021 Financial Highlights
- Revenue of $47.7 million, up 4% from the same quarter in the prior year.
- Gross profit of $24.2 million, up 8% from the same quarter in the prior year.
- Gross margin of 50.7%, reflecting an increase of 2.0% from the same quarter in the prior year.
- Net loss of $25.7 million, or a loss of $0.15 per share, compared to a loss of $26.7 million, or a loss of $0.16 per share, in the same quarter in the prior year.
- Adjusted EBITDA(4) of $8.2 million, up from $5.2 million from the same quarter in the prior year. EBITDA and Adjusted EBITDA are non-GAAP measures. Reconciliation tables of EBITDA and Adjusted EBITDA as used in this news release to GAAP are included below.
| Table 1: 2021 Financial Results | ||||||||||
| in thousands of US$, except share and per share amounts (unaudited) | 2021 | 2020 | Q4 2021 | Q4 2020 | ||||||
| Revenue | $ | 203,018 | $ | 151,669 | $ | 47,722 | $ | 45,981 | ||
| Gross profit | 111,283 | 81,840 | 24,194 | 22,395 | ||||||
| Gross margin | 54.8% | 54.0% | 50.7% | 48.7% | ||||||
| Net loss | (76,248) | (313,362) | (25,705) | (26,725) | ||||||
| Net loss per share | (0.44) | (1.83) | (0.15) | (0.16) | ||||||
| Table 2: Reconciliation of Net Income to Adjusted EBITDA | ||||||||||
| in thousands of US$ | 2021 | 2020 | Q4 2021 | Q4 2020 | ||||||
| Net loss | $ | (76,248) | $ | (313,362) | $ | (25,705) | $ | (26,725) | ||
| Depreciation and amortization | 31,040 | 27,920 | 7,774 | 7,504 | ||||||
| Interest expense, net | 23,098 | 20,282 | 5,953 | 5,450 | ||||||
| Income tax expense | 22,249 | 18,633 | 2,984 | 6,361 | ||||||
| EBITDA (Non-GAAP) | $ | 139 | $ | (246,527) | $ | (8,994) | $ | (7,410) | ||
| Adjustments | ||||||||||
| Impairment loss | 7,367 | 203,464 | 5,544 | – | ||||||
| Write-downs and other charges | 47 | 3,698 | (139) | 3,008 | ||||||
| Inventory reserve | 1,902 | – | 1,902 | – | ||||||
| Accretion expense | 9,057 | 16,962 | 774 | 4,491 | ||||||
| Share-based compensation | 6,522 | 11,543 | 1,613 | 1,938 | ||||||
| Gain from change in fair value of financial instruments | (285) | (5,163) | (275) | 7 | ||||||
| Income from equity-accounted investments | – | (182) | – | (43) | ||||||
| Debt obligation fees (1) | 1,677 | 13,764 | 422 | 422 | ||||||
| Non-recurring charges (2) | 12,752 | 11,110 | 7,347 | 2,830 | ||||||
| Change in accounting estimate (3) | 2,903 | – | – | – | ||||||
| Total Adjustments | $ | 41,942 | $ | 255,196 | $ | 17,188 | $ | 12,653 | ||
| Adjusted EBITDA (Non-GAAP) | $ | 42,081 | $ | 8,669 | $ | 8,194 | $ | 5,243 | ||
| (1) Reflects accrued interest on the Exit Fees. |
| (2) Includes one-time, non-recurring costs related to the Company’s Recapitalization Transaction, strategic review process, ongoing legal disputes, and other non-recurring costs associated with becoming a U.S. reporting company. |
| (3) In January 2021, the Company completed an assessment of the yield per gram that is used as an input to value the Company’s inventory. The timing of this review was based on a combination of factors accumulating over time that provided the Company with updated information to make a better estimate on the yield of its products. These factors included enhanced data gathering of crop production and yields into inventory. The assessment resulted in a revision of the Company’s production yield estimates that are used to value ending inventory. This change in accounting estimate was effective on January 1, 2021. |
| (4) See “Non-GAAP Financial Information” below for more information regarding the Company’s use of non-GAAP financial measures. |
Other Updates
New Jersey Acquisition
Subsequent to December 31, 2021, on January 7, 2022, the New Jersey Cannabis Regulatory Commission approved iAnthus New Jersey, LLC’s acquisition of 100% of the equity interests of New Jersey license holder MPX New Jersey, LLC (“MPX NJ”). On February 1, 2022, the Company closed on its acquisition of MPX NJ.
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