4Front Ventures Announces Fourth Quarter and Full Year 2021 Financial Results and Provides Business Update

2021 Systemwide Pro Forma Revenue¹ increased 50% year-over-year to $132.7 million

2021 GAAP revenue increased 81% year-over-year to $104.6 million

2021 Adjusted EBITDA increased 479% year-over-year to $34.0 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, Ariz., March 30, 2022 /PRNewswire/ – 4Front Ventures Corp. (CSE: FFNT) (OTCQX: FFNTF) (“4Front” or the “Company”), a vertically integrated, multi-state cannabis operator and retailer, today announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2021 (“Q4 2021” and “FY 2021”). All financial information is presented in U.S. dollars unless otherwise indicated.

Q4 2021 Highlights

• Systemwide Pro Forma Revenue increased 35% year-over-year, and remained flat sequentially, at $33.8 million
• GAAP revenue increased 68% year-over-year, and 10% sequentially to $28.5 million
• Adjusted EBITDA increased 160% year-over-year to $13.2 million
• Commenced operations at California production facility

FY 2021 Financial Highlights

• Systemwide Pro Forma Revenue increased 50% year-over-year to $132.7 million
• GAAP revenue increased 81% year-over-year to $104.6 million
• Adjusted EBITDA increased 479% year-over-year to $34.0 million, or 32.6% of revenue
• Cash flow from operations increased to $7.4 million in FY 2021 as compared to a loss of $14.0 million in FY 2020

Management Commentary

“Our fourth quarter results showed strong year-over-year growth, representing steady execution in the face of macro headwinds and reinforcing our thesis of consistent, low-cost production at scale,” said Leo Gontmakher, Chief Executive Officer of 4Front. “2021 saw substantial operational achievements within our company which continue to set the stage for a considerable ramp in production and sales growth through 2022 and beyond.”

“The capabilities of our core operating footprint have increased by an order of magnitude with our 170,000 sq. ft. state-of-the-art production facility in Commerce, California up and running smoothly as designed. Following the opening of the facility in November, we have become even more excited as a management team about the multiple growth avenues that have presented themselves in arguably the largest cannabis market in the world. The activity and interest we’re seeing after just a few months of operations have us more confident than ever that 4Front is uniquely positioned for success in a California market that we believe is open to consolidation and subsequent streamlining of cost efficiencies.”

“Our Commerce facility manufactures cannabis products at considerably low prices, allowing us to buy attractive brands in this highly-fragmented market and make them immediately accretive. The recently announced acquisition of Island Cannabis Co. (‘Island’) will be a great fit and meets all the criteria we look for in accretive M&A.”

“Revenue growth in our Massachusetts operations will be greatly bolstered by the closing of the acquisition of New England Cannabis Corporation (‘NECC’) in late January, which more than doubled our total flowering canopy and nearly tripled our kitchen, processing and distribution space. Additionally, the cultivation practices developed by the NECC team were already operating at what we believe to be the industry’s highest standards. Coupled with our advanced production methodologies, we believe we will be a formidable wholesaler in the competitive Massachusetts market. As the integration of NECC continues to ramp over the coming weeks, we are intent on further increasing the market penetration of our award-winning brands in the state in the near term.”

“Our team’s hard work in 2021 has laid the groundwork for continued strong growth to take root this year. We anticipate a very active first half of 2022, and we are more confident than ever that we are positioned with the tools, facilities, and teams in place to realize considerable growth and continue to build value for 4Front stakeholders for years to come,” he concluded.

Operational Highlights and Current Developments

In Q4 2021, the Company announced its proposed acquisition of NECC, which was subsequently completed in late January 2022 following approval by the Massachusetts Cannabis Control Commission. The acquisition of NECC’s state-of-the art 55,000 square foot cultivation and production facility significantly bolsters 4Front’s strategic position in the core Massachusetts market and expands the Company’s institutional knowledge of lighting, airflow, and fertigation techniques. The transaction enables the broader penetration of 4Front’s diverse range of low-cost, high-quality products and brands, and increases its scale to enable wholesale operations in the state.

4Front’s production facility in Commerce, California commenced operations in November 2021. In addition to manufacturing 4Front-branded products, the 170,000 square foot facility is designed for open-ended growth, with over $500 million of extensive manufacturing capacity. The Company expects to leverage this facility by accretively layering acquired brands and third-party processing contracts on behalf of partners over the coming quarters.

As announced this afternoon, 4Front has signed a definitive agreement to acquire Island Cannabis Co., a leading California producer of pre-roll, flower, and concentrate products. The transaction represents the first California brand to join 4Front’s platform, adding operating talent to the Company’s bench and premium flower to its product suite. The acquisition of Island is expected to close in Q2 2022, subject to certain customary closing conditions and approvals.

The ongoing construction of 4Front’s cultivation and production facility in Matteson, Illinois remains ahead of schedule. The 250,000 square foot phase one is on track to be completed in Q4 2022 with operations beginning in Q1 2023. 4Front anticipates that the Matteson facility will be a key growth factor in 2023 and beyond as we expand our wholesale business and retail footprint in Illinois.

Q4 and FY 2021 Financial Overview

Systemwide Pro Forma Revenue for Q4 2021 was $33.8 million, up 35% from Q4 2020, and total Systemwide Pro Forma Revenue for FY 2021 was $132.7 million, an increase of 50% from the prior year. GAAP revenue for Q4 2021 was $28.5 million, up 68% from Q4 2020, and total GAAP revenue for FY 2021 was $104.6 million, up 81% from 2020. While the Company expects pricing in limited license states to naturally become more competitive in future years, 4Front believes wholesale growth in both Massachusetts and Illinois is poised to strengthen over the year as additional retail comes on-line in those under-stored states.

Adjusted EBITDA for Q4 2021 was $13.2 million, up 160% from Q4 2020. Adjusted EBITDA for FY 2021 was $34.0 million, up 479% from the prior year, representing an Annual Adjusted EBITDA margin of 32.6%. Margins were supported by a higher percentage of sales from vertically-integrated operations, and ongoing improvements in cultivation and manufacturing efficiencies are expected to mitigate pricing pressures as markets mature.

As of December 31, 2021, the Company had $22.6 million of cash and $48.3 millionof related-party, long-term debt not due until May 2024. As of today the Company has 627,826,303 subordinate voting shares outstanding.

Conference Call Details

The Company will host a conference call and webcast today, Wednesday, March 30, 2022, at 5:00 p.m. ET to review its operational and financial results and provide an update on current business trends.