4Front Announces Fourth Quarter and Fiscal Year 2020 Results and Provides Business Update
Tue, April 6, 2021
Q4 Systemwide Pro Forma Revenue increased to $25.0 million, with full year 2020 Systemwide Pro Forma sales of $88.1 million
Q4 Adjusted EBITDA increased 59% sequentially to $5.9 million, representing Adjusted EBITDA margin of 24%
Reiterated FY2021 guidance for Systemwide Pro Forma Revenue of $170-180 million and Adjusted EBITDA of $40-50 million
The Company's existing licensed projects at maturity represent a long-term revenue and EBITDA opportunity upwards of $650 million and $250 million, respectively
PHOENIX, April 6, 2021 /CNW/ - 4Front Ventures Corp. (CSE: FFNT) (OTCQX: FFNTF) ("4Front" or the "Company") today announced its financial results for the fourth quarter and fiscal year ended December 31, 2020. All financial information is presented in U.S. dollars unless otherwise indicated.
Fiscal Year 2020 ("FY 2020") Financial Results Highlights
Systemwide Pro Forma Revenue was $88.1 million
GAAP-reported revenue was $57.6 million, a 203% increase compared to the prior year
Adjusted EBITDA was $5.9 million
Operational Highlights
Opened second Illinois Mission Dispensary in Calumet City, and recently announced 2021 expansion plans in Illinois which includes the build out of an up to 558,000 square foot cultivation and production facility
Completed expansion and retrofit of cultivation and production facility in Georgetown, MA and Elk Grove Village, IL. Continued construction on state-of-the-art 185,000 square foot production facility in Commerce, California, fully funded and on track for Q2 2021 opening
Third Massachusetts dispensary in Brookline on track for Q2 2021 opening
Completed sale leaseback transaction with Innovative Industrial Properties; ended year with $18.9 million of cash and $47.3 million in long-term debt due in May 2024
Management Commentary
"4Front's strong fiscal 2020 performance is validation that our core strategy of replicating low-cost production methods, developed and refined within our Washington facilities, combined with our steadfast focus on execution is working," said Leo Gontmakher, Chief Executive Officer of 4Front. "We ended 2020 with tremendous business momentum that we have carried into the new year, as we scaled and replicated our operations across the growing adult-use markets of Massachusetts, Illinois and California."
Mr. Gontmakher added, "Our strong performance was driven by growing consumer demand for our quality manufactured products introduced in Massachusetts over the last year, the continued strength of the Illinois market, and a solid quarter out of our Washington facilities. We also completed the construction of our second Illinois dispensary in Calumet City, which opened in December, plus our cultivation/manufacturing facilities in Illinois and Massachusetts which we successfully transitioned into the 'Washington Way' with cultivation yields now meeting or exceeding those from our Washington facilities."
Mr. Gontmakher concluded, "We are well positioned to further scale the business and execute on our expansion strategy in 2021. This includes significantly expanding our cultivation and manufacturing footprint in Illinois and entering the $3 billion California market. Further bolstering our financial position is the fact that we are now generating positive operating cash flow, in line with our stated goals from the start of the year. Given the strength of our operations, I am pleased to reiterate our 2021 guidance of $170-$180 million in Pro Forma Systemwide Revenue and $40-$50 million in Adjusted EBITDA, with the longer-term view to generate $650 million in revenue and $250 million in EBITDA based on our current licensed footprint."
Business Updates and Developments
Q4 2020 Systemwide Pro Forma Revenue increased 12% quarter-over-quarter to $25.0 million. This growth was driven by continued robust activity across the Company's portfolio of operating assets, led by the first full quarter of recreational sales in Massachusetts and the opening of 4Front's second Illinois retail location in Calumet City.
Q4 Adjusted EBITDA increased 59% quarter-over-quarter to $5.9 million representing adjusted EBITDA margin of 24%. The Company continued to demonstrate considerable operating leverage in the fourth quarter, exceeding internal expectations, after initially achieving profitability during the third quarter of 2020. Through the combination of 4Front's low-cost production model, tight expense controls, and accelerating revenues the Company is well positioned to extend its profitability as it scales up its operating footprint. The Company achieved positive operating cash flow of $3.2 million in Q4 2020 and remains poised to show significant operating leverage in 2021.
In Q4 2020 4Front opened its second Illinois Mission Dispensary in Calumet City, and recently announced additional 2021 expansion plans in Illinois. The expansion plan includes the build out of an up to 558,000 square foot cultivation and production facility (the "Facility"), which the Company recently secured financing to build. Subsequent to the year end, the Company entered into definitive agreements with both the landowner and an affiliate of Innovative Industrial Properties, Inc., to acquire the land for $6.5 million and fund the approximately $45 million buildout of phase one of the Facility. The first phase constitutes 258,000 square feet of building comprising 65,000 square feet of flowering canopy with approximately 70,000 square feet of manufacturing space and is expected to be operational in the fourth quarter of 2022.
The Company's fully-funded, state-of-the-art 185,000 square foot manufacturing only facility in Commerce, California is nearing completion and is expected to be ready to serve the California cannabis market in Q2 2021. The Company is planning to launch its first full line of edibles, tinctures and vape products on California retail shelves starting in May 2021.
Construction remains on schedule at the Company's third Massachusetts dispensary in Brookline. Final inspection by the Cannabis Control Commission anticipated to occur in June 2021 and the Company remains confident that it will open the Brookline dispensary in Q2 2021.
2021 Outlook
Based on the continued strength of the Company's operations and robust consumer demand, 4Front reiterates its previously announced FY 2021 guidance and anticipates 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 plus the opening of the Brookline, Massachusetts dispensary and the Commerce production facility in Q2 of 2021. If such openings are delayed due to Covid-19, guidance could be negatively affected.
(Please see Note Regarding Non-GAAP Measures, Reconciliation, and Discussion below.) (*Please see the Financial Statement section below, and the Company's Fourth Quarter 2020 Condensed Consolidated Financial Statements and Management Discussion and Analysis ("MD&A"), available under the Company's EDGAR profile)
Additional Details
As of the date of the MD&A, there were the equivalent of 566,186,697 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.
Conference Call
The Company will also host a conference call and webcast on Tuesday, April 6, 2021 at 5:00 p.m. ET to review its operational and financial results and provide an update on current business trends.
To join the call, dial 1-877-407-0792 toll free from the United States or Canada or 1-201-689-8263 if dialing from outside those countries. The webcast can be accessed at this link.
The call will be available for replay until Tuesday April 13, 2021. To access the telephone replay, dial 1-844-512-2921 toll free from the United States and Canada, or 1-412-317-6671 if dialing from outside those countries, and use this replay pin number: 13717894.
About 4Front Ventures Corp.
4Front (CSE: FFNT) (OTCQX: FFNTF) is a national multi-state cannabis operator and retailer, with a market advantage in mass-produced, low-cost quality branded cannabis products. 4Front manufactures and distributes a portfolio of over 25 cannabis brands including Marmas, Crystal Clear, Funky Monkey, Pebbles, and the Pure Ratios wellness collection, distributed through retail outlets and their chain of strategically positioned Mission branded dispensaries.
Headquartered in Phoenix, Arizona, 4Front has operations in Illinois, Massachusetts, California, Michigan, and Washington state. From plant genetics to the cannabis retail experience, 4Front's team applies expertise across the entire cannabis value chain. For more information, visit 4Front's website www.4frontventures.com.
