4Front Ventures: Q3 Revenue Increases 14% Sequentially To $32.5M

4Front Ventures Corp. FFNT FFNTF announced its financial results for the third quarter that ended September 30, 2022 ("Q3 2022").

Q3 2022 Highlights

  • Systemwide Pro Forma Revenue totaled $37.3 million representing a 9% increase from the second quarter of 2022 ("Q2 2022") and 13% from the third quarter of 2021 ("Q3 2021")
  • GAAP revenue increased 25% year-over-year to $32.5 million.
  • Adjusted EBITDA increased 24% year-over-year to $9.3 million. According to the press release, systemwide Pro Forma Revenue and Adjusted EBITDA are Non-GAAP measures.
  • Posted record net sales in Massachusetts, while expanding market share with the launch of four new brands
  • Expecting positive operational cash flow by December 2022 as a result of continued operational improvements through fiscal 2022

"Over the last twelve months, we have remained focused on executing our winning strategy of replicating operational excellence,” said Leo Gontmakher, CEO of 4Front. “Owing to our success in Washington, we have strongly positioned 4Front across our footprint in what we believe to be the best value creation opportunity in the supply chain – as a low-cost, high-quality supplier of cannabis consumer packaged goods."

Q3 2022 Operational Highlights

  • Posted record net sales growth in 4Front's cornerstone market of Massachusetts, with a near 40% increase in market share from January 2021 and hitting an all-time high in the mid-single digits in Q3 2022. "Our growth in Massachusetts in the third quarter is a clear example of our strategy coming to fruition, as we capitalized on our low-cost production methodologies to improve the quality of our growth and drive sales volumes across all product categories,” Gontmakher said.
  • Launched four new brands in Massachusetts, including premier California cannabis brand Island, following 4Front's acquisition of Island Cannabis Co. in April 2022.

Moreover, as a result of the early success of the initial launch of Island, the Company plans to introduce pre-rolls and infused pre-rolls in Massachusetts in the fourth quarter of 2022 ("Q4 2022"), reads the press release.

  • Unveiled National Breast Cancer Awareness Month Campaign in October in partnership with the Pink Gene Foundation and donated $1 from each of 4Front's Pink Gene-marked cannabis products sold at the Company's Mission dispensary retail locations and hundreds of retail locations across California, Illinois, Massachusetts, and Washington.
  • On track to substantially complete construction of 4Front's Matteson, Illinois cultivation and production facility in Q4 2022 with operations expected to commence in the third quarter of 2023
  • Expecting positive operational cash flow as of December 2022, as a result of operational success and increased financial discipline.

Q3 2022 Financial Overview: Systemwide Pro Forma Revenue for Q3 2022 was $37.3 million, up 9% from Q2 2022 and 13% from Q3 2021. GAAP revenue for Q3 2022 was $32.5 million, up 14% from Q2 2022 and up 25% from Q3 2021. “This increase is primarily due to increased revenue in the Company's wholesale revenue as it ramps those portions of its business in California, Illinois, and Massachusetts,” according to the report.

Adjusted EBITDA for Q3 2022 was $9.3 million, up 24% from Q3 2021, representing an Adjusted EBITDA margin of 25%. The continued growth of Adjusted EBITDA and margins is expected to persist through 2023 as the Company's operations drive increased production and higher sales volumes without material increases to overhead.

As of September 30, 2022, the Company had $5.3 million of cash and $49.5 million of related-party long-term debt not due until May 2024. The Company anticipates an additional $8 to $10 million in non-dilutive cash to be added to the balance sheet before the end of 2022. As of November 14, 2022, the Company has 640,386,686 subordinate voting shares outstanding.

Added Bloom Farms and Bloom Farms Wellness brands (collectively, "Bloom Farms"), to 4Front's growing portfolio in California, and Rolled-out Island Mini Infused Prerolls in California in November, further expanding the Company's product offering in the state are the subsequent events of the company.

“4Front is an outlier thanks to the automation and scale of our manufacturing facilities and the depth of our product offering, and we believe we have created one of the most nimble and diverse platforms in the industry,” Gontmakher concluded.

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Photo: Courtesy of Maxim Hopman On Unsplash

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