Let’s look at iAnthus fundamental financial metrics for their September 30, 2019 earnings release.

Earnings release

Molly did a “Structure and Current State” on their September 30, 2019 financials.

Income Statement Drivers & Breakeven: Trend

iAnthus increased sales by 16% to $22 million QoQ after doubling last Q on backs of acquistion.  They opened one more dispensary in the Q, and now total 27 with 30 targetted by year end.

Sales & Gross Margin Table

Sales have stallled in Western region with under 1% growth, while Eastern Region has shown a 30% QoQ growth.

Not sure of the growth driver as …..

From June 30, 2019 MDA:

• As of June 30, 2019, the Company had a total of 26 dispensaries open and expects to have approximately 40 open by year end;
• [Eastern] Two dispensaries were opened in Q1 2019 and two additional dispensaries were opened in Daytona, FL and Orlando, FL in Q2 2019.
• [Western] ????

From September 30, 2019 MDA:

• During the quarter ended September 30, 2019, the Company opened four dispensaries in Florida and realized retail sales growth.
• As at September 30, 2019, the Company had a total of 27 dispensaries open and expects to have approximately 30 open by year end;
• [Eastern] Currently, the Company has 16 dispensaries and five cultivation and processing facilities open and operational in this region.
• [Western] Currently, the Company has four dispensaries and four cultivation and processing facilities open and operational in this region

OK… If they had 26 dispensaries opened in June and opened four in September Q… that would be 30 not 27.   But then in September MDA  16 + 4 = 20 which is less than 27.  Fuck, I am confused.

And they are curtailing their ambitions from 40 to 30.  Ahh.. fiscal restraint as a result of closing capital markets.

Cash will be needed and Gotham Green has this by the neck.

Goodwill and iNtangibles has fuelled sales with the ratio of G+I ($618 million) to PPE ($122 million) at 508% only topped by GTII’s 512%.

Income Statement Drivers & Breakeven: Peer

iAnthus is comparable and a slightly ahead of Acreage in Sales, coming in 8^th of 11 in the above Peer Group.

Gross Margin: USA Peer & Trend

GM has stabilized at 48%, with Eastern [above Table] sliding to 54% from 71% and Western improving to 39 from 23%.

I would do Gross Margin by store for each region but I am totally confused by their arithmetic.  And their MDA narrative provides little clues as to the changes.

Gross Margin: USA Peer

At 48% GM they are right in the middle of peer group.

Gross Margin: North American Peer Base

SGA & SBC as a % of Sales: Trend

G&A was consistent as % of sales QoQ at 99%.  It did increase $3 million in the QoQ.   With G&A at twice GM$’s iAnthus has a ways to go to get to +NOP.

SGA & SBC as a % of Sales: Peer

iAnthus trails only MedMen in aggregat SGA SBC. 

+Net Operating Profit Quarterly Breakeven Sales: USA Peer

To achieve +NOP at current GM% and OPEX$’s, iAnthus needs 203% in incremental sales.

+Net Operating Profit Quarterly Breakeven Sales: North American Peer

+EBITDA Quarterly Breakeven Sales: USA Peer

To achieve +EBITDA at current GM% and OPEX$’s, iAnthus needs 107% in incremental sales.

But with $3 million in Q interest and $11 million in debt due in the next twelve months +EBITDA isn’t enough.

+EBITDA Quarterly Breakeven Sales: North American Peer

EBITDA Trend & Peer:

Adj EBITDA slid to $11.5 million from $9.5 million as $1.5 million in additional GM wasn’t enough to counteract cash Opex.

“Waterfall” Trend – Sales, Bio Assets, Inventory, Delta’s

Inventory is greater than Q sales although FG inventory is at 28% of sales.

“Waterfall” Peer – Sales, Bio Assets, Inventory, Delta’s

iAnthus has inventory levels similar to GTII but not nearly the sales.

Cash Position

Cash is at $27 million down $3 million QoQ despite tapping an additional $21 million in Debt and they are dragging A/P with an increase of $11 million.

From MDA:

• As at September 30, 2019, 295,000 square feet of space (including approximately 225,000 of indoor square footage and 70,000 of outdoor square footage) has been fully built-out and an additional 200,000 square feet is currently under construction;

With an $11 million EBITDA Quarterly burn, another $3 million in interest quarterly, looming principal repayment, more dispensaries and more construction the need for more cash will be pressing.

The preceding is the opinion of the author and is in no way intended to be a recommendation to buy or sell any security or derivative. The author does not have a position in IAN and will not start one in the next five days.