4Front Ventures Reports Second Quarter 2023 Financial Results

Systemwide Pro Forma Revenue of $35.2 million in Q2 2023

Matteson Facility on track to open in 2H 2023 and grew Illinois revenue by ~8% QoQ with broadening of product offering

Expanded Massachusetts and Illinois wholesale revenue by 9% sequentially following cultivation quality enhancements and robust product launch pipeline

Progressed operational efficiency improvement plan with ~$9 million reduction in annualized cost structure

PHOENIX, Aug. 15, 2023 /PRNewswire/ – 4Front Ventures Corp. (CSE: FFNT) (OTCQX: FFNTF) (“4Front” or the “Company”), a vertically integrated, multi-state cannabis operator and retailer, today announced its financial results for the second quarter ended June 30, 2023 (“Q2 2023”). All financial information is presented in U.S. dollars unless otherwise indicated.

Q2 2023 Highlights 

• Systemwide Pro Forma Revenue totaled $35.2 million, compared to $34.8 million in the second quarter ended June 30, 2022 (“Q2 2022”)
• GAAP revenue increased 8% year-over-year to $30.7 million
• Adjusted EBITDA of $2.0 million compared to $3.5 million in the first quarter ended March 31, 2023 (“Q1 2023”)

Management Commentary

“I am pleased with the progress we have made furthering our strategy of driving profitable growth as we continue to prudently optimize our business model,” said Leo Gontmakher, Chief Executive Officer of 4Front. “With our ongoing operational improvements and aggressive cost-cutting measures, we have reduced our annualized cost structure by approximately $9 million. This keeps us on track to generate topline growth and position 4Front for further execution and profitability improvements while upholding self-sustainability as a core strategy for the Company.”

Gontmakher continued, “We have built a strong foundation of valuable assets across our strategically focused footprint, which has enabled 4Front to remain resilient within state markets that we believe will unlock the greatest long-term growth opportunities – specifically Illinois and Massachusetts. As mentioned last quarter, we are not willing to sustain prolonged profitless revenue in any market in which we operate. With this mindset, we have made the decision to aggressively scale back our California operations to reduce the drag this market has had on our margins and cash flow generation. Our incremental capital is now focused on executing our growth plans in Illinois.”

Gontmakher continued, “In our view, Illinois is one of the nation’s most promising markets to capitalize on our best-in-class platform and breadth of cultivation and processing capabilities. With our Matteson Facility anticipated to come online in the second half of the year and our strategy to establish eight more retail dispensaries in the state, we are positioned to effectively double the size of our Company within the next 12 to 18 months while expanding margins and generating cash flow.”

Gontmakher concluded, “I am excited for what the future has in store for 4Front. Our platform is optimized and efficient and achieving operational cash flow emphasizes the significance of only pursuing projects that add cash to our balance sheet. There is a tremendous amount of long-term growth potential in our core markets, and we are confident that our robust operational discipline and focused strategic vision will strongly benefit us toward generating significant value for our shareholders and building our presence as a leading cannabis CPG company.”

Q2 2023 and Recent Operational Highlights

• Maintaining a strong vertical presence in Illinois with sequential revenue growth of approximately 8% in the state, enabling 4Front’s retail operations to outperform the market average retail store by approximately 11% with two operational retail stores out of over 120 statewide dispensaries. Following the acquisition of a third retail dispensary license in Illinois in Q1 2023, the Company continues to engage in advanced discussions regarding the acquisition of additional retail licenses, as well as funding opportunities to facilitate additional expansion efforts in Illinois.
  
• On track to launch operations at 4Front’s cultivation and production facility in Matteson, IL (the “Matteson Facility”) in the second half of 2023, providing over ~43,000 square feet of the total ~67,000 square feet of flowering canopy and ~70,000 square feet of manufacturing space, with a total of ~250,000 square feet. The Matteson Facility will be the largest cannabis cultivation and production facility in Illinois and will house the widest breadth of extraction and manufacturing capabilities designed to support 4Front’s growing retail and wholesale presence.
  
• Appointed Mark Maze to Vice President of Operations in Illinois, bolstering the Company’s strategic oversight and expertise within its deepening footprint in the state. Mark joins 4Front with a wealth of cannabis industry experience and a successful track record of launching, scaling, and optimizing large cultivation and manufacturing facilities with some of the industry’s largest multi-state operators. Prior to working in the cannabis industry, Mark spent nearly a decade in progressively advancing roles as a Project Engineer and Plant Manager in the automotive and packaging industries, respectively.
  
• Expanded offering and maintained market share in Massachusetts with the launch of a comprehensive product suite across three of 4Front’s award-winning flagship brands, including Island, Crystal Clear, and Marmas. The anticipated lineup of newly launched products includes Island live resin disposable cartridges and vapes, limited-edition Marmas marmalade bites gummy variety pack, and Crystal Clear cartridges and disposable vapes, now available at Mission stores and partner dispensaries across the state.
  
• Diversified the 1988 brand’s offering with the debut of infused pre-rolls, featuring 1-gram infused blunts available in four new exclusive strains. The newly debuted pre-rolls are available at Mission stores and partner dispensaries in Illinois and Massachusetts.
  

Q2 2023 Financial Overview

Systemwide Pro Forma Revenue was $35.2 million for Q2 2023 compared to $34.8 million in Q2 2022. GAAP revenue was $30.7 million for Q1 2023, up 8% from Q2 2022. The revenue growth can be attributed to increased production activity and expanded retail and wholesale sales in Illinois and Massachusetts and was offset by seasonality and market price compression in various markets.

Adjusted EBITDA was $2.0 million for Q2 2023 compared to $3.5 million in Q1 2023. The Company anticipates Adjusted EBITDA improvements as the benefits of its cost-savings measures and optimization initiatives are realized and drive meaningful profitability improvements.

As of June 30, 2023, the Company held cash of $5.4 million and $50.1 million of related party long-term debt not due until May 2026.

The Company has 648,583,519 subordinate voting shares outstanding as of August 15, 2023.

Conference Call

The Company will host a conference call and webcast today, Tuesday, August 15, 2023, at 5:00 p.m. ET to review its financial and operating results and provide an update on current business trends.

The conference call will be available for replay by phone until August 29, 2023, at 1-888-390-0541, replay code: 267747#. Additionally, the webcast will be archived for approximately 90 days following the call and can be accessed via 4Front’s Investor Relations website. For assistance, please contact IR@4FrontVentures.com.