4Front Ventures Reports Strong 2019 Revenue Growth

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Arizona-based multistate operator 4Front Ventures announced its preliminary full-year and fourth quarter 2019 financial results on Monday, reporting an annual revenue increase of 786% to $63.5 million.

In a news release, the vertically integrated cannabis firm said its fourth quarter sales of $17.5 million represented a 525% improvement versus the same quarter in 2018.

Despite the impressive full-year and fourth quarter revenue growth, 4Front — which has operations in California, Illinois, Massachusetts, Michigan, and Washington — posted adjusted EBITDA net losses of $5.4 million in Q4 and $20.9 million on the year.

Total 2019 net losses attributable to shareholders was $180.6 million, including a $146 million impairment charge related to the closing of the company’s merger with Cannex Capital Holdings last July.

“2019 was a transformative year for our company,” 4Front CEO Leo Gontmackher said via a news release. “With the acquisition of Cannex in July and its subsequent integration into 4Front during the second half of the year, 4Front became a leader in the mass-production of low-cost, high quality, branded cannabis products.”

4Front’s preliminary first quarter sales increased 38% versus the previous quarter, to $23.8 million, however adjusted EBITDA losses totaled $3.8 million, the company also shared.

Looking ahead, 4Front said it is currently in discussing the possibility of entering into a sale-and-leaseback agreement for 176,000 sq. ft. of cultivation, production and distribution space in Washington in an effort to remove senior secured debt owned by Gotham Green Partners from its books.

As of May 31, 2020, 4Front’s total debt was $80.1 million (excluding new convertible debt of $5.8 million from Navy Capital), the company reported.

“Reducing debt, in particular the elimination of the senior secured convertible debt, will greatly improve our financial flexibility and will allow us to consider a wider range of financing funding options as we look to expand deeper into those core markets,” Gontmackher said.

4Front is currently expanding facilities in Illinois and Massachusetts, and those upgrades are expected to be completed by Q4 of 2020. Improvements will triple output in Illinois and double output in Massachusetts, the company noted.

“We have been laser-focused on leaning out and replicating our low-cost cultivation and production model in targeted states,” Gontmackher said. “The implementation of this model at our facilities in Georgetown and Worcester, Massachusetts, and in Elk Grove Village, Illinois, is expected to enable us to increase production of cannabis products to meet the new adult-use demand expected in those two states.”

4Front said it expect to be cash flow positive during the back half of 2020 after reducing corporate overhead by 40% — which will save the company as much as $8 million annually — and selling noncore assets in a number of states.

“4Front has never been stronger than it is today, supported by a strengthened balance sheet, proven expertise and streamlined operations,” Gontmackher added. “We are extremely confident in how the company is positioned as we enter this new season in our history.”

Recall that 4Front last month raised $5.8 million in convertible debt from Navy Capital and finalized the sale of retail licenses in Pennsylvania to Ethos Cannabis for approximately $10.6 million. The sale of retail assets in Maryland is still pending.

A news release with additional information can be found here.


Tags: Earnings

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