Vext Science Inc. Outperforming In Arizona (undefined:VEXTF)

Vext Science Inc. (OTCQX:VEXTF) (VEXT) reported Q1/22 earnings results of $10.8M in revenues and $3.9M in adjusted EBITDA. Results were modestly above our estimates of $10M/$3.8M and reflected strong profitability for the company despite continued inflationary pressures on consumer spending and Arizona wholesale pricing pressure. As in Q4, VEXT was one of few Arizona operators to not be significantly impacted by macro headwinds in Q1 and we believe results can be attributed to the solid execution capabilities of management and the positioning of VEXT’s Vapen brand amongst customers. Moving forward, we expect further strong results and for the Vapen brand to gain additional share as a top value play for consumers and the benefit of capacity expansion initiatives completed in Arizona during Q1/22. We are confident that growth and share gains, coupled with the launch of operations in Ohio in the coming months will drive enhanced awareness amongst investors and peers for VEXT with the latter eventually bringing a takeout for the company by a larger operator looking for a trusted partner to scale with that brings a proven track record of brand development, cash generation and leading profitability while still being valued at a meaningful discount. We also believe VEXT’s management team could become the target to lead a consolidated entity post a takeout which would provide an additional motivation for M&A.Our estimates are unchanged for now with our Q2/22 estimates reflecting a modest sequential revenue and adjusted EBITDA uptick on seasonality while we continue to expect a stronger second half inclusive of greater cultivation capacity access and an expanded retail presence. Any Ohio contributions, which are likely in Q4, remain incremental to our forecasts until we have greater clarity on the scope and scale of operations. With that said, we continue to expect Ohio contributions to be meaningful particularly if VEXT can eventually convert its JV in the state into a fully owned operation.Our price target remains $0.83. Our price target reflects an EV/EBITDA multiple of 7.3x our ‘22 estimate and 5.2x 2023 so still well below the current multiples of the broader peer group respectively.

Required Research Disclosures

	Distribution of Ratings/IB Services
			IB Services in Past 12 months
Rating	Count	Percent	Count	Percent
Buy (Buy)	15	100%	0	0%
Hold (Hold)	0	0%	0	0%
Sell (Sell)	0	0%	0	0%
Not Rated (NR)	0	0%	0	0%

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