4Front Announces Third Quarter 2020 Results and Business Update
PR Newswire PHOENIX, Nov. 30, 2020
Q3 Systemwide Pro Forma Revenue increased 18% quarter-over-quarter to $22.3 million, 170% year-over-year – Company became cash flow positive from operations in August
Company sale-leaseback transaction with Innovative Industrial Properties scheduled to close within two weeks. As a result of close, together with proceeds from the recently closed bought deal financing, the Company will have $16 million of cash and $43 million in long-term debt
Company is in the process of acquiring acreage to construct up to 210,000 square feet of flowering canopy and supporting manufacturing facility in Cook County, Illinois to exponentially increase capacity in state
Initial guidance for 2021 with Systemwide Pro Forma Revenue of $170-180 million and Adjusted EBITDA of $40-50 million
The Company's existing projects at maturity represent a long-term revenue and EBITDA opportunity upwards of $650 million and $250 million
PHOENIX, Nov. 30, 2020 /PRNewswire/ - 4Front Ventures Corp. (CSE: FFNT) (OTCQX: FFNTF) ("4Front" or the "Company") today announced its financial results for the third quarter of 2020. All financial information is presented in U.S. dollars unless otherwise indicated.
Third Quarter 2020 Financial Results Highlights
Systemwide Pro Forma Revenue for the third quarter 2020 increased 18% quarter-over-quarter to $22.3 million
IFRS Sales for the third quarter of 2020 increased by 25% quarter-over-quarter to $12.4 million
Adjusted EBITDA for the third quarter was $3.7 million Business Updates and Developments
Q3 2020 Systemwide Pro Forma Revenue increased 18% quarter over quarter to $22.3 million. Robust revenue trends continued across the portfolio led by the launch of recreational sales in Massachusetts in the quarter and the re-opening of Mission South Chicago in late July. Washington state experienced record sales in the quarter while increasing prices. The Company achieved positive operating cash flow beginning in the month of August 2020 and is poised to show significant operating leverage in 2021.
Strong balance sheet supports continued growth in 2020 through 2021. As of September 30, 2020, 4Front's balance sheet had cash and equivalents of $8.5 million with total debt of $76.5 million (excluding in-the-money convertible debt of $5.8 million).
On November 23, 2020, the Company closed an oversubscribed bought deal led by Beacon Securities for US$13.2 million. The Company also announced it entered into definitive purchase and sale agreements with an affiliate of Innovative Industrial Properties, Inc., providing for the sale and leaseback of 4Front's cultivation and production facilities in Tumwater, Washington and Georgetown, Massachusetts.
The all-cash sale price of $30 million is on-track to close by mid-December and will be used by the Company to pay down the outstanding senior secured debt obligation to affiliates of Gotham Green Partners.
As of November 30, 2020, pro forma for the close of the pending sale-leaseback transaction and including proceeds from the recently closed bought deal financing, the Company will have approximately $16 million of cash and $43 million of long-term debt due May 2024.
Company is finalizing plans to exponentially expand its cultivation and manufacturing presence in Illinois. The Company has one of 20 cultivation licenses in Illinois that allows for 210,000 square feet of flowering canopy and is currently acquiring acreage for construction of a cultivation facility and state of the art manufacturing facility, adding significant blue sky to its already established presence in Illinois
Final stages in construction of 185,000 square foot manufacturing facility in Commerce, California underway with completion scheduled for Q2 2021. The Company's fully funded state-of-the-art 185,000 square foot manufacturing only facility in Commerce, California is nearing completion and should be ready to serve the $3 billion California cannabis market in Q2 2021.
The project is on target to be completed in April 2021 with the Company planning for the first of its full line of edibles, tinctures and vape products to be on California retail shelves by May 2021.
Cultivation facility expansion completed in Illinois. Massachusetts facility retrofitting enters final phased approach. The Company's expansion at its Elk Grove, Illinois cultivation facility, which will increase the flowering canopy from 3,000 to 9,072 square feet, is substantially completed on time and under budget. The retrofitting of the Company's Georgetown facility is complete and ready for the phased installation of LED lights, which are expected to increase yields by 35 - 50%. In the quarter, weighted average annualized yields from flowering canopy across the portfolio was 319 grams per square foot.
Q4 opening of second Illinois retail location in Calumet City remains on schedule. Construction of the dispensary is substantially completed as the Company is set to open its second Illinois retail location in Calumet City (approximately one mile from the Indiana border) in December 2020. Final inspection is scheduled for December 8 with a Grand Opening currently anticipated on December 15, 2020.
Initial guidance for 2021 with Systemwide Pro Forma Revenue of $170-180 million and Adjusted EBITDA of $40-50 million. This guidance is fully funded and contemplates only current operations including December opening of the Calumet City retail location plus the opening of a Brookline, Massachusetts dispensary and the Commerce production facility in May 2021. This guidance includes facilities scheduled to open in 2021. If such openings are delayed due to Covid-19, guidance could be negatively affected.
Management Commentary
Leo Gontmakher, CEO of 4Front, said, "We are incredibly pleased with our third quarter 2020 results that reflect the Company's laser focus on execution. We have big plans for our platform, but it all starts with operational excellence and delivering to shareholders what we say we are going to deliver. While we have much more to accomplish, the hard work of our team has set the table for what I expect to be an exciting year for our company in 2021.
With 4Front's constant operational improvements and an expected strong year for the cannabis industry overall, we are pleased to provide Covid-qualified initial 2021 guidance of $170-$180 million in Pro Forma Systemwide Revenue and $40-$50 million in Adjusted EBITDA, with the longer-term opportunity in our current geographical footprint upwards of $650 million in revenue and $250 million in EBITDA.
Mr. Gontmakher added, "In addition to the strong fundamentals across our legacy markets, plus an encouraging regulatory environment, we are excited to announce the timing of our entry into California and will soon provide details about our aggressive expansion plans in Illinois, projected to be a multi-billion, medical and adult-use market.
"In summary," said Gontmakher, "achieving robust expansion and sustained profitability through our low-cost production model has proven to be both replicable and scalable across key US cannabis markets positioning 4Front as a major MSO player. With the completion of our bought deal financing, as well as the sale-leaseback transaction, 4Front will end the year with a strong balance sheet providing the financial stability to expand the business in our key target states."
Additional Details
As of the date of the MD&A, there were the equivalent of 534,177,375 Class A Subordinate Voting Shares outstanding when calculated as if all share classes were converted to Subordinate Voting Shares. For further details regarding 4Front's share structure, please see its profile at www.thecse.com.
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