4Front Ventures Reports Q1 2022 Financial Results, Declines 8% Sequentially To $26.1M, CEO Optimistic

4Front Ventures Corp FFNTF , a vertically integrated, multi-state cannabis operator and retailer, announced its financial results for the first quarter ended March 31, 2022.

Q1 2022 Highlights

• Systemwide Pro Forma Revenue increased 7% year-over-year to $32.4 million.

• GAAP revenue increased 13% year-over-year to $26.1 million.

• Adjusted EBITDA increased 53% year-over-year to $9.0 million.

• Completed accretive acquisition of New England Cannabis Corporation, more than doubling 4 Front’s total flower canopy in Massachusetts and scaling its presence as a dominant wholesaler and producer in the state.

• Signed a definitive agreement to acquire Island Cannabis Co., combining premier California brand with 4Front's state-of-the-art Commerce, California manufacturing facility (acquisition subsequently completed in April 2022).

Management Commentary

"Our business inflected during the first quarter of 2022 as a result of the investments and efficiencies we made over the last 18 months to meet our long-term strategic goals," said Leo Gontmakher, CEO of 4Front. "We now have a fully-capitalized infrastructure in place to drive robust growth through this year. Our thesis of providing consistent, low-cost production at scale continues to play out as designed.

"In California, we were proud to announce the acquisition of Island at the end of March and its subsequent closing in April. The Island brand and its seasoned management team are perfect complements to the 4Front model. The scale of our Commerce operations enables us to buy similarly successful, attractive brands and manufacture them at considerably lower costs, producing strong margins which fall right to our bottom line," Gontmakher said.

"The acquisition of NECC and its state-of-the-art facility, the best we have ever seen, has contributed to improvements not only in Massachusetts but across our platform as we further implement their practices into our own process," Gontmakher said. "We're excited to set up our next stage of growth in Illinois, with the first phase of our latest facility in Matteson expected to be completed in six months."

Operational Highlights and Current Developments

• In January 2022, the Company completed its acquisition of NECC, following approval by the Massachusetts Cannabis Control Commission. NECC's state-of-the-art 55,000 square foot cultivation and production facility significantly bolsters 4Front's strategic position in the Massachusetts market and expands the Company's institutional knowledge of lighting, airflow, and fertigation techniques.
• In March 2022, 4Front signed a definitive agreement to acquire Island Cannabis Co., a leading California producer of pre-roll, flower, and concentrate products, and the first California brand to join 4Front's platform.
• Construction of 4Front's cultivation and production facility in Matteson, Illinois remains ahead of schedule and on track to be completed in Q4 2022. The 250,000 square-foot initial phase is expected to begin operations in Q1 2023 and will be a key growth factor moving forward as the company expands its wholesale business and retail footprint in Illinois.

Q1 2022 Financial Overview

• Adjusted EBITDA for Q1 2022 was $9.0 million, up 53% from Q1 2021, representing an Adjusted EBITDA margin of 28%. Stepwise growth of Adjusted EBITDA and margin is expected to continue through 2023 as 4Front's operations drive increased production, higher sales volumes, and additional retail opportunities.
• As of March 31, 2022, 4Front had $8.6 million of cash and $48.7 million of related-party long-term debt not due until May 2024.
• As of Monday 23, 2022, 4Front has 636,636,686 subordinate voting shares outstanding.

Image By Ilona Szentivanyi.