PHOENIX, Ariz., Nov. 20, 2023 /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, 2023 ("Q3 2023"). All financial information is presented in U.S. dollars unless otherwise indicated.
Q3 2023 Highlights
*Systemwide Pro Forma Revenue and Adjusted EBITDA are non-GAAP measures. See "Note Regarding Non-GAAP Measures, Reconciliation, and Discussion." |
Management Commentary
"The third quarter marked the beginning of a transitional period for our business, which we firmly believe will positively impact our future performance and the long-term success of 4Front," said Leo Gontmakher, Chief Executive Officer of 4Front. "The strategic realignment of our state footprint was crucial to mitigate the continued losses and challenges we experienced from the demanding California market. With the drag on our profitability now behind us, we can place greater focus on our core markets of Illinois, Massachusetts, and Washington, where we are generating positive operating cash flow and anticipate the most promising growth opportunities."
"In Illinois, our wholesale revenue nearly tripled year-over-year and grew by a robust 40% over the quarter, underscoring the demand for our wider variety of products and brands and our deepening presence as a trusted supplier in the state. Complementing our operational footprint, our flagship facility in Matteson, IL is on track to power up by the end of the year, following the implementation of best-in-class, automated production equipment relocated from our closed facility in California. Additionally, we are actively advancing our retail expansion strategy with secured funding to support our efforts. We are on track to have a total of five operational stores in Illinois by fall 2024, starting with the first new store in Q1 and planning to inaugurate an additional store roughly every two months thereafter. Locations for two of the three additional stores have already been selected for build-out."
"Despite a challenging operating environment in Massachusetts over the summer, partially due to liquidation sales near two of our store locations, our brands remain both popular and profitable, particularly with Island flower and pre-roll sales growing sequentially by nearly 30%. In Washington, enhanced flower quality and brand refreshments have doubled our sales, marking a significant milestone with our first million-dollar flower month since 2021. Our targeted marketing efforts are beginning to show results across our footprint, with our top-selling brands of Island, Crystal Clear, and Legends increasing in both revenue and market share in various regions, following continued innovative launches and quality upgrades throughout our portfolio."
"Looking ahead, we are confident that the significant and necessary operational changes that we have made will help drive our underlying strategy of generating sustainable growth in the near term. By adhering to strict financial discipline and pursuing our targeted expansion plans, we anticipate the Illinois opportunity to be a pivotal factor in our growth, expecting it to potentially double the size of our Company. We are dedicated to leveraging this opportunity to expand our reach and solidify our position in the market."
Q3 2023 and Recent Operational Highlights
Q3 2023 Financial Overview
Systemwide Pro Forma Revenue from continuing operations was $28.0 million for Q3 2023 compared to $31.38 million for the second quarter of 2023 ("Q2 2023"). GAAP revenue attributed to continuing operations was $23.0 million in the third quarter of 2023. The revenue decrease was primarily attributable to lower pricing coupled with transitory pressures from competitors liquidating inventory before leaving the market.
Adjusted EBITDA was approximately $3.5 million, which was an increase of approximately 75% as compared to the second quarter of 2023.
As of September 30, 2023, the Company held cash of $2.8 million and has since secured $10 million in funding to build additional retail locations in Illinois. The Company has 668,243,141 subordinate voting shares outstanding as of November 20, 2023.
Conference Call
The Company will host a conference call and webcast today, Monday, November 20, 2023, at 5:00 p.m. ET to review its financial and operating results and provide an update on current business trends.
Date: | Monday, November 20, 2023 |
Time: | 5:00 p.m. Eastern Time |
Webcast: | |
Dial-in: | 1-888-664-6392 (North America Toll-Free) |
The conference call will be available for replay by phone until December 4, 2023, at 1-888-390-0541, replay code: 409525#. 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 Ventures Corp. ("4Front" or the "Company") (CSE: FFNT) (OTCQX: FFNTF) is a national, vertically integrated multi-state cannabis operator that owns or manages operations and facilities in Illinois, Massachusetts, and 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 1800 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
(Amounts expressed in thousands of U.S. dollars except for share and per share data)
September 30, 2023 | December 31, 2022 | |||
ASSETS | ||||
Current assets: | ||||
Cash | $2,765 | $14,271 | ||
Accounts receivable, net | 4,208 | 5,448 | ||
Other receivables | 222 | 93 | ||
Current portion of lease receivables | 3,945 | 3,810 | ||
Inventory | 17,162 | 18,888 | ||
Prepaid expenses and other assets | 2,536 | 1,015 | ||
Assets related to discontinued operations | 2,918 | 9,742 | ||
Total current assets | 33,756 | 53,267 | ||
Property, plant, and equipment, net | 39,286 | 34,414 | ||
Lease receivables | 4,436 | 5,611 | ||
Intangible assets, net | 27,351 | 29,240 | ||
Goodwill | 41,807 | 41,807 | ||
Right-of-use assets | 120,219 | 121,929 | ||
Deposits | 2,419 | 4,996 | ||
Long term assets related to discontinued operations | — | 53,468 | ||
TOTAL ASSETS | $269,274 | $344,732 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
LIABILITIES | ||||
Current liabilities: | ||||
Accounts payable | $12,305 | $11,101 | ||
Accrued expenses and other current liabilities | 8,958 | 9,101 | ||
Taxes payable | 38,539 | 36,577 | ||
Derivative liability | 16,096 | — | ||
Current portion of lease liability | 1,990 | 2,767 | ||
Current portion of notes payable and accrued interest | 8,248 | 9,059 | ||
Current liabilities related to discontinued operations | 11,807 | 8,845 | ||
Total current liabilities | 97,943 | 77,450 | ||
Convertible notes | 15,677 | 14,843 | ||
Notes payable and accrued interest from related party | 46,827 | 49,807 | ||
Long term notes payable | 10,908 | 10,456 | ||
Long term accounts payable | 977 | 962 | ||
Construction finance liability | 16,000 | 16,000 | ||
Deferred tax liability | 7,293 | 6,097 | ||
Lease liability | 124,241 | 120,672 | ||
Long term liabilities related to discontinued operations | — | 20,094 | ||
TOTAL LIABILITIES | 319,866 | 316,381 | ||
SHAREHOLDERS' EQUITY (DEFICIT) | ||||
Subordinate Voting Shares (no par value, unlimited shares authorized, 659,159,977 and 643,416,275 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively) | 306,561 | 304,602 | ||
Additional paid-in capital | 63,461 | 59,411 | ||
Deficit | (420,722) | (335,755) | ||
Equity attributable to 4Front Ventures Corp. | (50,700) | 28,258 | ||
Non-controlling interest | 108 | 93 | ||
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) | (50,592) | 28,351 | ||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) | $269,274 | $344,732 |
4FRONT VENTURES CORP.
Consolidated Statements of Operations
Amounts expressed in thousands of U.S. dollars except for share and per share data)
Three Months Ended | Nine Months Ended | |||||||
2023 | 2022 | 2023 | 2022 | |||||
REVENUE | ||||||||
Revenue from sale of goods | $20,110 | $25,035 | $67,709 | $70,847 | ||||
Real estate income | 2,892 | 3,065 | 8,747 | 8,981 | ||||
Total revenues | 23,002 | 28,100 | 76,456 | 79,828 | ||||
Cost of goods sold | (13,722) | (11,039) | (38,884) | (35,680) | ||||
Gross profit | 9,280 | 17,061 | 37,572 | 44,148 | ||||
OPERATING EXPENSES | ||||||||
Selling, general and administrative expenses | 18,729 | 12,938 | 44,511 | 35,371 | ||||
Depreciation and amortization | 817 | 859 | 2,406 | 2,474 | ||||
Share-based compensation | 3,678 | 863 | 4,912 | 2,291 | ||||
Transaction and restructuring related expenses | 195 | 60 | 212 | 734 | ||||
Total operating expenses | 23,419 | 14,720 | 52,041 | 40,870 | ||||
Income (loss) from continuing operations | (14,139) | 2,341 | (14,469) | 3,278 | ||||
Other income (expense) | ||||||||
Interest income | (21) | 6 | — | 8 | ||||
Interest expense | (3,322) | (3,642) | (9,561) | (9,066) | ||||
Change in fair value of derivative liability | (11,931) | 420 | (11,931) | 3,494 | ||||
Loss on disposal | (160) | — | (160) | — | ||||
Gain on contingent consideration payable | — | — | — | 2,393 | ||||
Loss on litigation settlement | — | (250) | (3) | (250) | ||||
Other | (1,054) | 456 | (2,621) | 352 | ||||
Total other expense, net | (16,488) | (3,010) | (24,276) | (3,069) | ||||
Net income (loss) from continuing operations before income taxes | (30,627) | (669) | (38,745) | 209 | ||||
Income tax benefit (expense) | 4,199 | (3,321) | (818) | (9,801) | ||||
Net loss from continuing operations | (26,428) | (3,990) | (39,563) | (9,592) | ||||
Net loss from discontinued operations, net of taxes | (35,668) | (4,611) | (45,389) | (11,449) | ||||
Net loss | (62,096) | (8,601) | (84,952) | (21,041) | ||||
Net income attributable to non-controlling interest | 5 | 5 | 15 | 15 | ||||
Net loss attributable to shareholders | $(62,101) | $(8,606) | $(84,967) | $(21,056) | ||||
Basic and diluted loss per share - continuing operations | $(0.04) | $(0.01) | $(0.06) | $(0.02) | ||||
Basic and diluted loss per share - discontinued operations | $(0.05) | $(0.01) | $(0.07) | $(0.02) | ||||
Weighted average number of shares outstanding, basic and diluted | 653,080,343 | 639,624,851 | 647,329,688 | 632,048,250 |
Note Regarding Non-GAAP Measures, Reconciliation, and Discussion
In this press release, 4Front refers to certain non-GAAP financial measures such as Systemwide Pro Forma Revenue and Adjusted EBITDA. These measures do not have any standardized meaning prescribed by GAAP and may not be comparable to similar measures presented by other issuers. 4Front defines Systemwide Pro Forma Revenue as total revenue plus revenue from entities with which the Company has a consulting contract or effectively similar relationship (net of any consulting fee or effectively similar revenue) but does not consolidate the financial results of per U.S. GAAP ASC 810. 4Front considers this measure to be an appropriate indicator of the growth and scope of the business.
Adjusted EBITDA is defined by the Company as earnings before interest, taxes, depreciation and amortization less share-based compensation expense and one-time charges related to acquisition, financing-related costs, and other non-recurring expenses. 4Front considers these measures to be an important indicator of the financial strength and performance of our business.
Systemwide Pro Forma Revenue from Continuing Operations Reconciliation for the Third Quarter Ended September 30, 2023
($ in 000's)
Revenue from Continuing Ops (GAAP) | $23,002 |
Less: Managed Asset Income | $2,848 |
Plus: Systemwide Revenue Adjustment | $7,842 |
Systemwide Pro Forma Revenue from Continuing Ops (non-GAAP) | $27,966 |
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.
Last Trade: | US$0.01 |
Daily Change: | 0.0035 33.33 |
Daily Volume: | 22,380 |
Market Cap: | US$12.800M |
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