Generates
Q3 2022 Adjusted EBITDA of
Quarterly performance highlighted by revenue and margin growth in cornerstone market of Massachusetts
Expecting operating cash flow positive as of
Conference call to be held today,
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 - 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
Systemwide Pro Forma Revenue and Adjusted EBITDA are Non-GAAP measures. See "Note Regarding Non-GAAP Measures, Reconciliation, and Discussion."
Management Commentary
"Our growth in
"Our products and brands are also having a banner year. We launched four new brands in
"Finally, the growth we have fostered over the past year through our unmatched efficiencies and savings has resulted in our expected ability to return to positive operational cash flow by the end of the year. 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. I am incredibly proud of our team and what we have built over the last year, and I look forward to continuing the momentum into 2023 with our strong pathway toward sustained growth."
Q3 2022 Operational Highlights
- Posted record net sales growth in 4Front's cornerstone market of
Massachusetts , with a near 40% increase in market share fromJanuary 2021 and hitting an all-time high in the mid-single digits in Q3 2022. Additionally, the Company significantly grew sales volumes across all categories, including flower, vapes, and edibles. Sequentially, flower volume increased by over 65%, resulting in a quarter-over-quarter increase of approximately 101% in flower sold inMassachusetts in Q3 2022. Further, 4Front realized an approximate 71% increase in wholesale customers from Q2 2022 to Q3 2022. - Launched four new brands in
Massachusetts , including premierCalifornia cannabis brand Island, following 4Front's acquisition ofIsland Cannabis Co. inApril 2022 . The Company unveiled 11 new strains of Island packaged flower, produced exclusively for the Commonwealth at its state-of-the-art facilities. As a result of the early success of the initial launch of Island, the Company plans to introduce pre-rolls and infused pre-rolls inMassachusetts in the fourth quarter of 2022 ("Q4 2022"). - Unveiled National Breast Cancer Awareness Month Campaign for the month of October in partnership with the
Pink Gene Foundation and donated$1 from each of 4Front's Pink Gene-marked cannabis products sold at theCompany's Mission dispensary retail locations and hundreds of retail locations acrossCalifornia ,Illinois ,Massachusetts , andWashington . The proceeds raised from this partnership went toward helping women be proactive in the fight against breast cancer by providing education and resources and supporting research. - 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. In the event 4Front can expedite access to full facility power, operations could commence as early as the second quarter of 2023. - Expecting positive operational cash flow as of
December 2022 , as a result of operational success and increased financial discipline.
Subsequent Events
Added Bloom Farms and Bloom Farms Wellness brands (collectively, "Bloom Farms "), to 4Front's growing portfolio inCalifornia .Bloom Farms' cannabis products include vapes and concentrates, while its wellness line offers a hemp-derived selection of vapes, tinctures, and topicals. The Company will leverage its active partnerships with leading retailers and distributors to further expand availability of theBloom Farms product offering inCalifornia and beyond.- Rolled-out Island Mini Infused Prerolls in
California in November, further expanding the Company's product offering in the state. Made in small batches, each 10-pack features single strain, all-natural flower infused with highly potent THCA diamonds, available in six premium launch strains, including: Purple Fritter; Alien OG; Papaya Rosé; White Runtz; Blue Dream; and Black Jack. The Island Mini Infused Prerolls are available for purchase at leading dispensaries acrossCalifornia and via delivery through Eaze, the nation's largest cannabis delivery marketplace.
Q3 2022 Financial Overview
Systemwide Pro Forma Revenue for Q3 2022 was
Adjusted EBITDA for Q3 2022 was
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
Financial Statements
4FRONT VENTURES CORP.
Formerly
Consolidated Balance Sheets
As of
(Amounts expressed in thousands of
|
| |||
ASSETS | ||||
Current assets: | ||||
Cash | ||||
Accounts receivable, net | 8,722 | 1,946 | ||
Other receivables | 20 | 289 | ||
Current portion of lease receivables | 3,765 | 3,630 | ||
Inventory | 30,936 | 20,087 | ||
Current portion of notes receivable | — | 109 | ||
Prepaid expenses and other assets | 2,392 | 2,232 | ||
Total current assets | 51,121 | 50,874 | ||
Property, plant, and equipment, net | 58,697 | 42,633 | ||
Lease receivables | 5,942 | 6,748 | ||
Intangible assets, net | 54,452 | 26,246 | ||
41,393 | 23,155 | |||
Right-of-use assets | 103,229 | 100,519 | ||
Deposits | 5,165 | 5,364 | ||
TOTAL ASSETS | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
LIABILITIES | ||||
Current liabilities: | ||||
Accounts payable | ||||
Accrued expenses and other current liabilities | 11,620 | 9,411 | ||
Taxes payable | 32,805 | 23,968 | ||
Derivative liability | 8 | 3,502 | ||
Current portion of contract liabilities | 653 | — | ||
Current portion of convertible notes | — | 2,784 | ||
Current portion of lease liability | 3,428 | 3,629 | ||
Current portion of notes payable and accrued interest | 9,299 | 3,413 | ||
Total current liabilities | 69,116 | 48,838 | ||
Convertible notes | 15,513 | 14,641 | ||
Notes payable and accrued interest from related party | 49,422 | 48,266 | ||
Long term notes payable | 10,279 | 1,709 | ||
Long term accounts payable | 1,200 | 1,200 | ||
Contract liabilities | 2,000 | — | ||
Contingent consideration payable | — | 2,393 | ||
Construction finance liability | 16,000 | — | ||
Deferred tax liability | 6,884 | 7,849 | ||
Lease liability | 100,322 | 93,111 | ||
TOTAL LIABILITIES | 270,736 | 218,007 | ||
SHAREHOLDERS' EQUITY | ||||
Equity attributable to | 304,602 | 274,120 | ||
Additional paid-in capital | 54,487 | 52,197 | ||
Deficit | (309,913) | (288,857) | ||
Non-controlling interest | 87 | 72 | ||
TOTAL SHAREHOLDERS' EQUITY | 49,263 | 37,532 | ||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
4FRONT VENTURES CORP.
Formerly
Consolidated Statements of Operations
For the Three and Nine Months Ended
(Amounts expressed in thousands of
Three Months Ended | Nine Months Ended | ||||||
2022 | 2021 | 2022 | 2021 | ||||
REVENUE | |||||||
Revenue from sale of goods | |||||||
Real estate income | 3,407 | 2,815 | 9,323 | 8,374 | |||
Total revenues | 32,474 | 25,941 | 86,961 | 76,032 | |||
Cost of goods sold | (17,427) | (10,269) | (46,144) | (30,210) | |||
Gross profit | 15,047 | 15,672 | 40,817 | 45,822 | |||
OPERATING EXPENSES | |||||||
Selling and marketing expenses | 5,462 | 5,992 | 16,955 | 17,863 | |||
General and administrative expenses | 7,126 | 7,170 | 21,336 | 17,418 | |||
Depreciation and amortization | 1,020 | 831 | 2,990 | 2,466 | |||
Transaction and restructuring related expenses | 60 | — | 2,069 | — | |||
Equity based compensation | 862 | 2,603 | 2,290 | 7,978 | |||
Total operating expenses | 14,530 | 16,596 | 45,640 | 45,725 | |||
Income (loss) from operations | 517 | (924) | (4,823) | 97 | |||
Other income (expense) | |||||||
Interest income | 6 | 2 | 8 | 13 | |||
Interest expense | (4,157) | (2,532) | (10,195) | (7,894) | |||
Amortization of loan discount upon conversion of debt to equity | — | — | — | (2,915) | |||
Change in fair value of derivative liability | 420 | 3,345 | 3,494 | 502 | |||
Gain on contingent consideration payable | — | — | 2,393 | — | |||
Loss on litigation settlement | (250) | — | (250) | — | |||
Loss on lease termination | — | — | — | (1,210) | |||
Other | (1,815) | 56 | (1,866) | 56 | |||
Total other income (expense), net | (5,796) | 871 | (6,416) | (11,448) | |||
Net loss before income taxes | (5,279) | (53) | (11,239) | (11,351) | |||
Income tax expense | (3,322) | (4,541) | (9,802) | (10,545) | |||
Net loss | (8,601) | (4,594) | (21,041) | (21,896) | |||
Net income attributable to non-controlling interest | 5 | 5 | 15 | 15 | |||
Net loss attributable to shareholders | |||||||
Basic and diluted loss per share | |||||||
Weighted average number of shares outstanding, basic and diluted | 639,624,851 | 592,631,092 | 632,048,250 | 590,084,188 |
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 Three Months Ended
($ in 000's)
Revenue (GAAP) | |
Less: Managed Asset Income | 3,873 |
Plus: Systemwide Revenue Adjustment | 8,734 |
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
Forward looking statements may include, without limitation, statements related to future developments and the business and operations of
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, and 4Front does not assume any liability for disclosure relating to any other company mentioned herein.
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