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3rd Quarter Earnings


Tracy Schaff
(@tracy)
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Joined: 8 months ago
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Systemwide Pro Forma Revenue1 of $33.1 million compared to $22.3 million in Q3 2020, increased 48% year over year, and decreased 4% sequentially as compared to Q2 2021

GAAP-reported revenue of $25.9 million, an increase of 70% year over year and a decrease of 4% from Q2 2021

Q3 2021 Adjusted EBITDA increased 103% to $7.5 million as compared to $3.7 million in Q3 2020, representing an Adjusted EBITDA margin of 23% as compared to an Adjusted EBITDA margin of 22% in Q2 2021

 

Commenced Construction on the First Phase of an up to 558,000 Sq. Ft. Cultivation and Production Facility in Matteson, Illinois

State-of-the-art 170,000 Square Foot Manufacturing Facility in Commerce, California Now Officially Open and Operational

Announced Proposed Acquisition of Massachusetts Based New England Cannabis Corporation

The Company's Existing Licensed Projects at Maturity Represent a Long-term Revenue and EBITDA Opportunity Upwards of $650 Million and $250 Million

Conference call to be held today, November 17, 2021 at 5:00 p.m. ET

PHOENIX, Ariz., Nov. 17, 2021 /CNW/ - 4Front Ventures Corp. (CSE: FFNT) (OTCQX: FFNTF) ("4Front" or the "Company"), a vertically integrated, multi-state cannabis operator and retailer, today announced its financial results for the third quarter ended September 30, 2021 ("Q3 2021"). All financial information is presented in U.S. dollars unless otherwise indicated.

 

Q3 2021 Financial Results Highlights

  • Systemwide Pro Forma Revenue of $33.1 million compared to $22.3 million in Q3 2020, an increase of 48% year over year and decrease of 4% from Q2 2021

  • GAAP-reported revenue of $25.9 million, an increase of 70% year over year and a decrease of 4% from Q2 2021

  • Adjusted EBITDA of $7.5 million, an increase of 103% year over year and flat as compared to Q2 2021, representing an Adjusted EBITDA margin of 23% as compared to an Adjusted EBITDA margin of 22% in Q2 2021

Q3 2021 Operational Highlights and Current Developments

  • California

  • Illinois

  • Massachusetts

Management Commentary

"In the third quarter we reached several substantial operational milestones that we believe have set the table for our growth well through 2022 and beyond," said Leo Gontmakher, Chief Executive Officer of 4Front. "While we experienced some regulatory delays in getting Commerce up and running, we are more confident than ever that we have the tools, facilities, and teams in place to meet our considerable growth expectations in the coming year."

"During the quarter we made meaningful progress in the development of our three key growth markets of California, Illinois, and Massachusetts," Mr. Gontmakher added. "In Illinois, we officially broke ground this summer on the construction of our cultivation and production facility in Matteson. Construction of the facility is expected to last through 2022, with Phase 1 anticipated to come online in the first quarter of 2023, offering 4Front's in-house brands and products to the growing retail and wholesale markets in the state."

"Following the opening in Brookline of our third adult-use Mission dispensary in Massachusetts, we were thrilled to announce our proposed acquisition of New England Cannabis at the beginning of October. We believe that the acquisition of NECC and its fully operational, brand-new cultivation and production facility will more than double our total flowering canopy in Massachusetts and is expected to be accretive to 2022 EBITDA and beyond. As we continue to bring our high quality, low-cost cultivation and efficient production methodologies to Massachusetts, we are confident that the mechanics are now in place for continued operational efficiency at scale," he continued.

"In California, we are happy to announce that our highly anticipated 170,000 square foot manufacturing facility in Commerce is now open, operational, and currently manufacturing nine of 4Front's 20 brands and over 160 different SKUs. We will be providing our suite of high-quality, branded products and wholesale goods to licensed dispensaries throughout the state through our partnership with Nabis, a leading distributor in the California market. As our Commerce team continues to ramp up production, we fully expect the facility will soon become the premier multi-product manufacturer in the country due to the sheer scale and its high-throughput efficiencies," said Mr. Gontmakher.

"We have consistently stated that the advantages to our low-cost, scalable operations are most readily apparent when applied over a large platform, and we remain focused on demonstrating the value of the 4Front model at scale following the completion of these latest operational initiatives. Our team's diverse skillset combined with our compelling asset base in strategic markets has given us significant momentum coming into the end of 2021, and I am more confident than ever that 4Front is positioned for robust, scaled growth in 2022," Mr. Gontmakher concluded.

Business Updates and Developments

Systemwide Pro Forma Revenue of $33.1 million compared to $22.3 million in Q3 2020, an increase of 48% year over year and decrease of 4% over Q2 2021. GAAP-reported revenue similarly increased 70% year over year to $25.9 million but decreased 4% over Q2 2021. The modest sequential down-tick in growth compared to the previous quarter was impacted by permitting delays during the local review process for both the Commerce, CA facility and Brookline, MA dispensary.

Q3 2021 Adjusted EBITDA grew 103% year-over-year to $7.5 million, up from $3.7 million in Q3 2020 and flat as compared to Q2 2021, representing an Adjusted EBITDA margin of 23% as compared to Adjusted EBITDA margin of 22% in Q2 2021. While higher overall dispensary sales and increased sales of the Company's internally produced products continue to drive systemwide margin improvements as designed, meaningful quarterly EBITDA growth predicated on a fully operational California manufacturing facility was temporarily hindered due to delays in the local review process for the Commerce facility.

Construction of the Company's new cultivation and production facility in Matteson, Illinois, is now underway. Construction of the first phase, a 250,000 square foot building with 65,000 square feet of flowering canopy and approximately 70,000 square feet of manufacturing space began in August and is anticipated to be completed in Q4 2022. 4Front intends to use the facility to produce the Company's more than 20 in-house brands and 1,800 products, which will be offered to Illinois customers at an accessible price point at its Mission Dispensaries and partner dispensaries across the state. The Matteson facility is also expected to produce a variety of wholesale, white-labeled products such as flower, concentrates, edibles, tinctures, gel capsules and other manufactured products for other multi-state operators, cannabis businesses and brands in Illinois. The full expansion of the facility, once realized, will encompass 558,000 square feet to help meet demand in the fast-growing Illinois cannabis market. The first phase of the facility is expected to begin operations in Q1 2023.

The Company's state-of-the-art 170,000 square foot manufacturing facility in Commerce, California is now open and operational. The Company's branded and wholesale manufactured products will be sold to licensed dispensaries in California via its partnership with Nabis, a leading distributor of cannabis products covering 100% of licensed retailers in the state. The facility is Currently producing nine of 4Front's 20 brands and 164 different SKUs including gummies, hard candy, caramels, fruit chews, mints, capsules, tinctures, vapes and infused pre-rolls, and 4Front brand favorites like Maris™ Mints, Marmas™, Pebbles™, Chewees™, Hi-Burst™, Verdure™ and Terp Stix™. Nabis has also leased 20,000 square feet of the Company's Commerce facility, enabling retail products to seamlessly integrate into Nabis' inventory for distribution.

The Company has announced the proposed acquisition of NECC, significantly bolstering 4Front's presence in the key Massachusetts market. Following a capital commitment from Navy Capital to lead in the financing of the proposed acquisition, the Company has entered into agreements to acquire 100% interest of NECC for a total consideration of $55 million. The transaction, once closed, is expected to be accretive to 2022 EBITDA and beyond and will significantly expand 4Front's strategic position in this core market, enabling broader market penetration of its diverse range of low-cost, high-quality products and brands. Subject to receipt of regulatory approval and the satisfaction or waiver of customary closing conditions, the acquisition of NECC is expected to close in the fourth quarter of 2021.

Conference Call Details

The Company will host a conference call and webcast today, Wednesday, November 17, 2021, at 5:00 p.m. ET to review its operational and financial results and provide an update on current business trends.

DATE:

Wednesday, November 17, 2021

TIME:

5:00 p.m. Eastern Time

U.S./CANADA TOLL-FREE DIAL-IN:

866-248-8441

CONFIRMATION NUMBER:

1662764

WEBCAST:

The conference call will be broadcast live and available for replay at this link.

REPLAY:

A telephonic replay of the conference call will be available until Wednesday, December 1, 2021.

Toll-free replay number: 1-888-203-1112

Replay entry code: 1662764

INTERNATIONAL DIAL-IN ASSISTANCE:

Contact IR@4FrontVentures.com

_______________________

1 See "Note Regarding Non-GAAP Measures, Reconciliation, and Discussion" below for more information regarding non-GAAP measures referred to herein: Systemwide Pro Forma Revenue and Adjusted EBITDA


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