Systemwide Pro Forma Revenue of
Matteson Facility on track to open in 2H 2023 and grew
Expanded
Progressed operational efficiency improvement plan with
Q2 2023 Highlights
- Systemwide Pro Forma Revenue totaled
$35.2 million , compared to$34.8 million in the second quarter endedJune 30, 2022 ("Q2 2022") - GAAP revenue increased 8% year-over-year to
$30.7 million - Adjusted EBITDA of
$2.0 million compared to$3.5 million in the first quarter endedMarch 31, 2023 ("Q1 2023")
*Systemwide Pro Forma Revenue and Adjusted EBITDA are non-GAAP measures. See "Note Regarding Non-GAAP Measures, Reconciliation, and Discussion." |
Management Commentary
"I am pleased with the progress we have made furthering our strategy of driving profitable growth as we continue to prudently optimize our business model," said
Gontmakher continued, "We have built a strong foundation of valuable assets across our strategically focused footprint, which has enabled 4Front to remain resilient within state markets that we believe will unlock the greatest long-term growth opportunities – specifically
Gontmakher continued, "In our view,
Gontmakher concluded, "I am excited for what the future has in store for 4Front. Our platform is optimized and efficient and achieving operational cash flow emphasizes the significance of only pursuing projects that add cash to our balance sheet. There is a tremendous amount of long-term growth potential in our core markets, and we are confident that our robust operational discipline and focused strategic vision will strongly benefit us toward generating significant value for our shareholders and building our presence as a leading cannabis CPG company."
Q2 2023 and Recent Operational Highlights
- Maintaining a strong vertical presence in
Illinois with sequential revenue growth of approximately 8% in the state, enabling 4Front's retail operations to outperform the market average retail store by approximately 11% with two operational retail stores out of over 120 statewide dispensaries. Following the acquisition of a third retail dispensary license inIllinois in Q1 2023, the Company continues to engage in advanced discussions regarding the acquisition of additional retail licenses, as well as funding opportunities to facilitate additional expansion efforts inIllinois . - On track to launch operations at 4Front's cultivation and production facility in
Matteson, IL (the "Matteson Facility") in the second half of 2023, providing over ~43,000 square feet of the total ~67,000 square feet of flowering canopy and ~70,000 square feet of manufacturing space, with a total of ~250,000 square feet. The Matteson Facility will be the largest cannabis cultivation and production facility inIllinois and will house the widest breadth of extraction and manufacturing capabilities designed to support 4Front's growing retail and wholesale presence. - Appointed
Mark Maze to Vice President of Operations inIllinois , bolstering the Company's strategic oversight and expertise within its deepening footprint in the state. Mark joins 4Front with a wealth of cannabis industry experience and a successful track record of launching, scaling, and optimizing large cultivation and manufacturing facilities with some of the industry's largest multi-state operators. Prior to working in the cannabis industry, Mark spent nearly a decade in progressively advancing roles as a Project Engineer and Plant Manager in the automotive and packaging industries, respectively. - Expanded offering and maintained market share in
Massachusetts with the launch of a comprehensive product suite across three of 4Front's award-winning flagship brands, including Island,Crystal Clear , and Marmas. The anticipated lineup of newly launched products includes Island live resin disposable cartridges and vapes, limited-edition Marmas marmalade bites gummy variety pack, andCrystal Clear cartridges and disposable vapes, now available at Mission stores and partner dispensaries across the state. - Diversified the 1988 brand's offering with the debut of infused pre-rolls, featuring 1-gram infused blunts available in four new exclusive strains. The newly debuted pre-rolls are available at Mission stores and partner dispensaries in
Illinois andMassachusetts .
Q2 2023 Financial Overview
Systemwide Pro Forma Revenue was
Adjusted EBITDA was
As of
The Company has 648,583,519 subordinate voting shares outstanding as of
Conference Call
The Company will host a conference call and webcast today,
Date: | |
Time: | |
Webcast: | Register |
Dial-in: | 1-888-664-6392 (North America Toll-Free) |
The conference call will be available for replay by phone until
About
Consolidated Balance Sheets
(Amounts expressed in thousands of
|
| |||
ASSETS | ||||
Current assets: | ||||
Cash | ||||
Accounts receivable, net | 10,141 | 7,391 | ||
Other receivables | 245 | 77 | ||
Current portion of lease receivables | 3,900 | 3,810 | ||
Inventory | 25,365 | 25,592 | ||
Prepaid expenses and other assets | 2,442 | 1,207 | ||
Total current assets | 47,443 | 53,267 | ||
Property, plant, and equipment, net | 55,482 | 56,906 | ||
Lease receivables | 4,851 | 5,611 | ||
Intangible assets, net | 29,531 | 30,927 | ||
53,926 | 53,955 | |||
Right-of-use assets | 135,577 | 138,451 | ||
Deposits | 3,696 | 5,615 | ||
TOTAL ASSETS | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
LIABILITIES | ||||
Current liabilities: | ||||
Accounts payable | ||||
Accrued expenses and other current liabilities | 13,069 | 14,265 | ||
Taxes payable | 41,194 | 36,577 | ||
Current portion of contract liabilities | 639 | 369 | ||
Current portion of lease liability | 3,638 | 4,479 | ||
Current portion of notes payable and accrued interest | 7,946 | 9,059 | ||
Total current liabilities | 81,210 | 77,450 | ||
Convertible notes | 15,398 | 14,843 | ||
Notes payable and accrued interest from related party | 50,451 | 49,807 | ||
Long term notes payable | 10,744 | 10,456 | ||
Long term accounts payable | 1,733 | 1,362 | ||
Contract liabilities | 2,000 | 2,000 | ||
Construction finance liability | 16,000 | 16,000 | ||
Deferred tax liability | 7,614 | 8,278 | ||
Lease liability | 137,530 | 136,185 | ||
TOTAL LIABILITIES | 322,680 | 316,381 | ||
SHAREHOLDERS' EQUITY | ||||
Subordinate Voting Shares (no par value, unlimited shares authorized, 649,859,727 and | 305,699 | 304,602 | ||
Additional paid-in capital | 60,645 | 59,411 | ||
Deficit | (358,621) | (335,755) | ||
Equity attributable to | 7,723 | 28,258 | ||
Non-controlling interest | 103 | 93 | ||
TOTAL SHAREHOLDERS' EQUITY | 7,826 | 28,351 | ||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
Consolidated Statements of Operations
Amounts expressed in thousands of
Three Months Ended | Six Months Ended | |||||||
2023 | 2022 | 2023 | 2022 | |||||
REVENUE | ||||||||
Revenue from sale of goods | ||||||||
Real estate income | 3,000 | 2,951 | 6,006 | 5,916 | ||||
Total revenues | 30,696 | 28,439 | 61,072 | 54,487 | ||||
Cost of goods sold | (21,100) | (16,123) | (40,488) | (28,717) | ||||
Gross profit | 9,596 | 12,316 | 20,584 | 25,770 | ||||
OPERATING EXPENSES | ||||||||
Selling and marketing expenses | 6,748 | 6,384 | 13,786 | 11,493 | ||||
General and administrative expenses | 7,533 | 6,556 | 15,389 | 14,210 | ||||
Depreciation and amortization | 866 | 1,123 | 1,736 | 1,970 | ||||
Share-based compensation | 214 | 390 | 1,234 | 1,428 | ||||
Transaction and restructuring related expenses | 17 | 2,009 | 17 | 2,009 | ||||
Total operating expenses | 15,378 | 16,462 | 32,162 | 31,110 | ||||
Loss from operations | (5,782) | (4,146) | (11,578) | (5,340) | ||||
Other income (expense) | ||||||||
Interest income | 7 | — | 21 | 2 | ||||
Interest expense | (3,075) | (3,418) | (6,271) | (6,038) | ||||
Change in fair value of derivative liability | — | 1,774 | — | 3,074 | ||||
Gain on contingent consideration payable | — | 2,393 | — | 2,393 | ||||
Loss on litigation settlement | — | — | (3) | — | ||||
Other | (663) | (107) | (8) | (51) | ||||
Total other income (expense), net | (3,731) | 642 | (6,261) | (620) | ||||
Net loss before income taxes | (9,513) | (3,504) | (17,839) | (5,960) | ||||
Income tax expense | (1,951) | (3,042) | (5,017) | (6,480) | ||||
Net loss | (11,464) | (6,546) | (22,856) | (12,440) | ||||
Net income attributable to non-controlling interest | 5 | 5 | 10 | 10 | ||||
Net loss attributable to shareholders | ||||||||
Basic and diluted loss per share | ||||||||
Weighted average number of shares outstanding, basic and diluted | 646,690,827 | 636,653,975 | 644,415,447 | 628,175,765 |
Note Regarding Non-GAAP Measures, Reconciliation, and Discussion
In this press release, 4Front refers to certain non-GAAP financial measures such as Systemwide Pro Forma Revenue and Adjusted EBITDA. These measures do not have any standardized meaning prescribed by GAAP and may not be comparable to similar measures presented by other issuers. 4Front defines Systemwide Pro Forma Revenue as total revenue plus revenue from entities with which the Company has a consulting contract or effectively similar relationship (net of any consulting fee or effectively similar revenue) but does not consolidate the financial results of per
Adjusted EBITDA is defined by the Company as earnings before interest, taxes, depreciation and amortization less share-based compensation expense and one-time charges related to acquisition, financing-related costs, and other non-recurring expenses. 4Front considers these measures to be an important indicator of the financial strength and performance of our business.
Systemwide Pro Forma Revenue Reconciliation for the Second Quarter Ended
($ in 000's)
Revenue (GAAP) | |
Less: Managed Asset Income | |
Plus: Systemwide Revenue Adjustment | |
Systemwide Pro Forma Revenue (non-GAAP) |
Forward-Looking Statements
Statements in this news release that are forward-looking statements are subject to various risks and uncertainties concerning the specific factors disclosed here and elsewhere in 4Front's' periodic filings with securities regulators. When used in this news release, words such as "will, could, plan, estimate, expect, intend, may, potential, believe, should," and similar expressions, are forward-looking statements.
Forward-looking statements may include, without limitation, statements related to future developments and the business and operations of 4Front, statements regarding when or if transactions will close or if and when required conditions to closing are attained, the completion of construction projects, the Company's ability to increase revenue and market share and become cash-flow positive, the impact of transactions on the business of 4Front, and other statements regarding future developments of the business. Although 4Front has attempted to identify important factors that could cause actual results, performance, or achievements to differ materially from those contained in the forward-looking statements, there may be other factors that could cause results, performance, or achievements not to be as anticipated, estimated, or intended, including but not limited to closing conditions, regulatory and permitting approvals, performance of third-party vendors, changes in laws or enforcement of existing laws, limited operating history, reliance on management, requirements for additional financing, competition, limits on market growth and state adoption due to inconsistent public opinion and perception of the medical-use and adult-use marijuana industry, and political change.
There can be no assurance that such information will prove to be accurate or that management's expectations or estimates of future developments, circumstances, or results will materialize. As a result of these risks and uncertainties, the results or events predicted in these forward-looking statements may differ materially from actual results or events.
Accordingly, readers should not place undue reliance on forward-looking statements. The forward-looking statements in this news release are made as of the date of this release. 4Front disclaims any intention or obligation to update or revise such information, except as required by applicable law.
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