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4Front Ventures Reports Second Quarter 2024 Results

PHOENIX, Aug. 14, 2024 /CNW/ - 4Front Ventures Corp. (CSE: FFNT) (OTCQX: FFNTF) ("4Front" or the "Company"), a vertically integrated multi-state cannabis operator and retailer, today announced its results for the quarter ended June 30, 2024. All financial information is presented in U.S. dollars unless otherwise indicated.

Q2 2024 Financial Highlights

  • GAAP revenue from continuing operations of $18.7 million
  • Adjusted EBITDA1 of $2.6 million

1Adjusted EBITDA is a non-GAAP measure. See "Note Regarding Non-GAAP Measures, Reconciliation, and Discussion."

Management Commentary

"As I look back on our second quarter, I am incredibly proud of our team's execution against our 2024 priorities. Despite increased competition and inconsistent foot traffic, our disciplined strategy has kept revenue steady, and our concerted efforts to strengthen our wholesale strategy are paying off with a 10% increase in Illinois and a substantial 31% growth in Massachusetts," said Andrew Thut, Chief Executive Officer.

"Our Matteson facility in Illinois is now operational with 12,000 square feet of flowering canopy. We are on track to triple this capacity by mid-Q4. The strong demand for our flower, evidenced by substantial pre-sale interest and long-term supply contracts, underscores market confidence in our high-quality products. We anticipate a notable rise in wholesale revenue as we ramp up our harvest schedule starting in early September," Thut noted.

He added, "Since I assumed the role of CEO in January, we have made considerable strides. We completed a strategic reset of our Massachusetts grow facilities, optimizing production capabilities, and successfully launched the Matteson facility. Our wholesale channel has seen a strong resurgence, bolstered by a revitalized marketing strategy and an enhanced product lineup. Additionally, we have improved our retail menus and continue to strengthen our market presence. As we move into the second half of the year, our focus remains on driving innovation and maintaining high standards of quality. We are well-positioned to capitalize on emerging regulatory changes and continue delivering value to our shareholders while offering exceptional products to our customers."

Second Quarter 2024 Company Highlights 

Flagship Matteson, Illinois Facility Now Operational: The opening of 4Front's flagship facility in Matteson marks a pivotal milestone in the Company's expansion efforts within a supply-constrained market. With plants now in place, the facility's first harvest is scheduled for September 7th, followed by three additional harvests each month: seven in September, nine in October, twelve in November, and stabilizing at fifteen per month. This scale presents a significant opportunity for 4Front-branded wholesale in an Illinois market with limited cultivation capacity and an increasing number of dispensaries opening monthly.

Retail Expansion Update: The new store in Norridge is now open and positioned for strong performance. It benefits from a prime location in a large market with an attractive demographic, limited competition, ample parking, and advantageous co-tenancy with other high-traffic retailers. The store has been positively received and has demonstrated consistent week-over-week growth in both customer traffic and average basket size.

Wholesale: The Company's focused efforts to establish deep and strategic wholesale channel partnerships have resulted in a 10% increase in wholesale revenue in Illinois and a 31% increase in Massachusetts. This growth has been driven by several factors, including a cross-market initiative to enhance the Mission brand and product assortment by incorporating leading third-party brands, thus increasing the range of products available for wholesale. Additionally, improvements in quality and yields across cultivation facilities have expanded overall flower capacity and production. The strong market demand for the Company's brands and products, particularly in supply-constrained environments like Illinois, has further contributed to this success.

Introduced Crystal Clear Blast to Massachusetts and Illinois Markets: This innovative vape product marks a significant advancement in the Company's commitment to providing top-quality cannabis consumption devices, offering precision control through a unique 'blast' button and consistent delivery via a high-flow atomizer.

Post-Quarter End Developments

Kris Krane, a current director, became Chair of the Board: Mr. Krane, with extensive experience in the cannabis industry, previously served as the Company's President and contributed significantly to its growth. He is a regulatory and business strategist, and a frequent speaker at global cannabis conferences. Over the past two decades, he has worked to advance the cannabis industry, serving in key roles such as Associate Director of NORML, Executive Director of Students for Sensible Drug Policy, and Chair Emeritus of the National Cannabis Industry Association Board of Directors.

Launched New Brand 'Smoke Breaks' in Illinois and Massachusetts: The Company introduced its new brand, Smoke Breaks, in Illinois and Massachusetts. These mini pre-rolls, each weighing 0.35 grams, are designed for convenient and quick respites. Packaged in tins of five pre-rolls, they are available in five strains per state: two Daytime, two Anytime, and one Nighttime. Crafted with unbleached cones, the pre-rolls ensure a natural smoking experience.

Worcester, Massachusetts Cultivation Facility Update: The Worcester cultivation facility generated its first harvest on July 1st following a strategic reset that kept it offline for much of the first and second quarters. With the introduction of new genetics, updated SOPs, and investments in processing, the facility is expected to contribute 350-400 lbs. per month, primarily to the wholesale menu. Among the 33 strains now in focus, test results are averaging 33.5% THC, with peaks reaching 37.7% in the Banana Puddintain strain.

Q2 Financial Overview
Revenue was $18.7 million for Q2 2024, compared to $27.2 million in the corresponding quarter of the previous year and $18.8 for Q1 of 2024.

For the second quarter, Illinois reported total revenue of $8.2 million, slightly down from $8.5 million in Q1. This decrease was primarily influenced by heightened competition and inconsistent in-store traffic. Meanwhile, Massachusetts showed a positive trend, with total revenue increasing to $8.2 million in Q2 from $8.04 million in Q1. This growth was driven by strong wholesale demand, supply chain stability, and an optimized balance of own and third-party brands.

 The company's adjusted EBITDA 1 increased slightly to $2.6 million in the second quarter of 2024, compared to the previous quarter's performance.

1Adjusted EBITDA is a non-GAAP measure. See "Note Regarding Non-GAAP Measures, Reconciliation, and Discussion."

As of June 30, 2024, the company had $2.42 million in cash, cash equivalents, and restricted cash. The total debt principal amount as of quarter-end was $67.37 million, with future debt maturities totaling $40.27 million, excluding certain contingent liabilities.  

As of June 30, 2024, the Company had 913,923,993 Class A subordinate voting shares and 1,276,208 Class C multiple voting shares outstanding.

Conference Call
The Company will host a conference call and webcast to review its financial and operating results and provide an update on current business trends.

Date:

Wednesday, August 14, 2024

  

Time:

5:00 p.m. Eastern Time

  

Webcast:

Register

  

Dial-in:

1-888-510-2154 (North America Toll-Free)

The conference call will be available for replay by phone until August 28, 2024, at 1-888-660-6345, replay code: 73042#. Additionally, the webcast will be archived for approximately 90 days following the call and can be accessed via 4Front's Investor Relations website. For assistance, please contact This email address is being protected from spambots. You need JavaScript enabled to view it..

About 4Front Ventures Corp.

4Front is a national, vertically integrated multi-state cannabis operator with operations in Illinois and Massachusetts and facilities in Washington. Since its founding in 2011, 4Front has built a strong reputation for its high standards and low-cost cultivation and production methodologies earned through a track record of success in facility design, cultivation, genetics, growing processes, manufacturing, purchasing, distribution, and retail. To date, 4Front has successfully brought to market more than 20 different cannabis brands and over 1,800 products, which are strategically distributed through its fully owned and operated Mission dispensaries and retail outlets in its core markets. As the Company continues to drive value for its shareholders, its team is applying its decade of expertise in the sector across the cannabis industry value chain and ecosystem. For more information, visit https://4frontventures.com/.

4FRONT VENTURES CORP. Consolidated Balance Sheets (unaudited)
(Amounts expressed in thousands of U.S. dollars except for share and per share data)

  

June 30, 2024

 

December 31,
2023

ASSETS

    

Current assets:

    

Cash

 

$              2,424

 

$              3,398

Accounts receivable, net

 

5,033

 

3,682

Other receivables

 

1,603

 

735

Current portion of lease receivables

 

4,080

 

3,990

Inventory

 

17,563

 

17,087

Prepaid expenses and other assets

 

3,559

 

3,324

Assets held for sale or disposal

 

1,799

 

1,696

Total current assets

 

36,061

 

33,912

Property, plant, and equipment, net

 

37,596

 

36,549

Lease receivables

 

2,891

 

3,963

Intangible assets, net

 

25,831

 

26,793

Goodwill

 

41,807

 

41,807

Right-of-use assets

 

132,301

 

118,511

Deposits

 

2,503

 

2,419

TOTAL ASSETS

 

$         278,990

 

$         263,954

LIABILITIES AND SHAREHOLDERS' DEFICIT

    

LIABILITIES

    

Current liabilities:

    

Accounts payable

 

$           13,261

 

$           11,415

Accrued expenses and other current liabilities

 

9,961

 

9,014

Taxes payable

 

42,090

 

39,634

Derivative liability

 

5,478

 

4,550

Current portion of convertible notes

 

16,824

 

15,818

Current portion of lease liability

 

3,649

 

1,720

Current portion of notes payable and accrued interest

 

10,270

 

9,812

Current liabilities held for sale or disposal

 

11,927

 

12,037

Total current liabilities

 

113,460

 

104,000

Notes payable and accrued interest from related party

 

28,939

 

47,491

Long term notes payable

 

11,335

 

11,052

Long term accounts payable

 

2,477

 

977

Construction finance liability

 

16,000

 

16,000

Deferred tax liability

 

11,882

 

11,882

Lease liability

 

139,435

 

123,946

TOTAL LIABILITIES

 

323,528

 

315,348

SHAREHOLDERS' DEFICIT

    

Subordinate Voting Shares (no par value, unlimited shares authorized,
915,200,201 and 669,519,349 shares issued and outstanding as of June 30,
2024 and December 31, 2023, respectively)

 

337,222

 

308,952

Additional paid-in capital

 

68,854

 

66,948

Accumulated Deficit

 

(450,722)

 

(427,402)

Equity attributable to 4Front Ventures Corp.

 

(44,646)

 

(51,502)

Non-controlling interest

 

108

 

108

TOTAL SHAREHOLDERS' DEFICIT

 

(44,538)

 

(51,394)

TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT

 

$         278,990

 

$         263,954

4FRONT VENTURES CORP. Consolidated Statements of Operations (unaudited)
(Amounts expressed in thousands of U.S. dollars except for share and per share data)

  

Three Months Ended
June 30,

 

Six Months Ended
June 30,

  

2024

 

2023

 

2024

 

2023

REVENUE

        

Revenue from sale of goods

 

$       16,780

 

$       24,260

 

$       33,713

 

$       47,599

Real estate income

 

1,876

 

2,915

 

3,785

 

5,855

Total revenues

 

18,656

 

27,175

 

37,498

 

53,454

Cost of goods sold

 

(11,317)

 

(12,449)

 

(22,585)

 

(25,162)

Gross profit

 

7,339

 

14,726

 

14,913

 

28,292

OPERATING EXPENSES

        

Selling, general and administrative expenses

 

11,085

 

12,806

 

22,799

 

27,016

Depreciation and amortization

 

644

 

792

 

1,275

 

1,589

Transaction and restructuring related expenses

 

 

17

 

 

17

Total operating expenses

 

11,729

 

13,615

 

24,074

 

28,622

Income (loss) from continuing operations

 

(4,390)

 

1,111

 

(9,161)

 

(330)

Other income (expense):

        

Interest income

 

5

 

7

 

10

 

21

Interest expense

 

(1,702)

 

(3,075)

 

(4,191)

 

(6,239)

Change in fair value of derivative liability

 

867

 

 

1,630

 

Loss on disposal

 

 

 

(5)

 

Loss on extinguishment of debt

 

 

 

(11,752)

 

Loss on litigation settlement

 

 

 

 

(3)

Other

 

(22)

 

(1,417)

 

(121)

 

(1,567)

Total other expense, net

 

(852)

 

(4,485)

 

(14,429)

 

(7,788)

Net loss from continuing operations before income taxes

 

(5,242)

 

(3,374)

 

(23,590)

 

(8,118)

Income tax benefit (expense)

 

 

(1,951)

 

 

(5,017)

Net loss from continuing operations

 

(5,242)

 

(5,325)

 

(23,590)

 

(13,135)

Net income (loss) from discontinued operations, net of taxes

 

375

 

(6,139)

 

270

 

(9,721)

Net loss

 

(4,867)

 

(11,464)

 

(23,320)

 

(22,856)

Net income attributable to non-controlling interest

 

 

5

 

 

10

Net loss attributable to shareholders

 

$       (4,867)

 

$     (11,469)

 

$     (23,320)

 

$     (22,866)

Basic and diluted loss per share - continuing operations

 

$         (0.01)

 

$         (0.01)

 

$         (0.03)

 

$         (0.02)

Basic and diluted loss per share - discontinued operations

 

$              —

 

$         (0.01)

 

$              —

 

$         (0.02)

Weighted average number of shares outstanding, basic and diluted

 

913,579,549

 

646,690,827

 

872,695,123

 

644,415,447

Note Regarding Non-GAAP Measures, Reconciliation, and Discussion

In this press release, 4Front refers to certain non-GAAP financial measures. 4Front uses these non-GAAP measures to understand and compare operating results across accounting periods, for financial and operational decision making, for planning and forecasting purposes, and to evaluate the Company's financial performance.

As there are no standardized methods of calculating non-GAAP measures, our methods may differ from those used by others, and accordingly, the use of these measures may not be directly comparable to similarly titled measures used by others. Although Adjusted EBITDA is frequently used by investors and securities analysts in their evaluations of companies, Adjusted EBITDA has limitations as an analytical tool, and investors should not consider it in isolation or as a substitute for, or more meaningful than, amounts determined in accordance with U.S. GAAP.

4Front uses the non-GAAP measure Adjusted EBITDA which, as defined by the Company, excludes from Net Loss:

  • Interest income and expense, including interest expense related to leases;
  • Current income tax expense;
  • Non-cash depreciation and amortization expense, including amortization of leases;
  • Non-cash share-based compensation expense;
  • Non-cash changes in fair value of derivative liability;
  • Loss on extinguishment of debt; and
  • Loss on disposal of assets and lease terminations.

The closest comparable GAAP measure to Adjusted EBITDA is Net Loss. A reconciliation of Net Loss to Adjusted EBITDA follows.

Reconciliation of Net Loss to Adjusted EBITDA for the three months ended June 30, 2024 and 2023:

 

Three Months Ended June
30,

 

Six Months Ended June 30,

 

2024

 

2023

 

2024

 

2023

Net loss (GAAP)

$         (4,867)

 

$       (11,464)

 

$       (23,320)

 

$       (22,856)

Less: Net (income) loss from discontinued operations, net of taxes

(375)

 

6,139

 

(270)

 

9,721

Net loss from continuing operations

(5,242)

 

(5,325)

 

(23,590)

 

(13,135)

Adjusted for:

       

Interest income

(5)

 

(7)

 

(10)

 

(21)

Interest expense (1)

5,579

 

7,365

 

12,324

 

14,726

Income tax expense

 

1,951

 

 

5,017

Depreciation and amortization (2)

2,255

 

2,470

 

4,337

 

4,746

EBITDA Income (Loss) from Continuing Operations (Non-GAAP)

$           2,587

 

$           6,454

 

$         (6,939)

 

$         11,333

        

Share-based compensation (3)

898

 

214

 

1,906

 

1,234

Change in fair value of derivative liability

(867)

 

 

(1,630)

 

Loss on extinguishment of debt

 

 

11,752

 

Loss on disposal and lease termination

 

 

5

 

Adjusted EBITDA Income from Continuing

$           2,618

 

$           6,668

 

$           5,094

 

$         12,567

(Amounts expressed in thousands of U.S. dollars, unless otherwise stated)

 

(1) For the current period, interest expense includes interest related to leases of $3.9 million and $8.1 million for the three and six months ended June 30, 2024, respectively. Prior year amounts of $4.3 million and $8.5 million for the three and six months ended June 30, 2023, respectively, have been reclassified for consistency with the current year presentation. Non-cash interest expense related to leases was previously presented as a reconciling item from EBITDA from Continuing Operations (Non-GAAP) to Adjusted EBITDA from Continuing Operations (Non-GAAP).

(2) For the current period, depreciation and amortization expense includes amortization related to leases of $0.8 million and $1.7 million for the three and six months ended June 30, 2024. Prior year amounts of $1.0 million and $1.9 million for the three and six months ended June 30, 2023, respectively, have been reclassified for consistency with the current year presentation. Non-cash amortization expense related to leases was previously presented as a reconciling item from EBITDA from Continuing Operations (Non-GAAP) to Adjusted EBITDA from Continuing Operations (Non-GAAP).

(3) Although share-based compensation is an important component of employee and executive compensation, determining the fair value of share-based compensation involves a high degree of judgment and as a result the Company excludes share-based compensation from Adjusted EBITDA because its believes that the expense recorded may bear little resemblance to the actual value realized upon future exercise or termination of any related share-based compensation award.

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, the Company's ability to increase revenue and market share, 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.

There can be no assurance that forward-looking statements 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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