4Front Ventures Corp. (OTCQX: FFNTF) has been expanding, despite sales being flat and the economic downturn triggered by the coronavirus pandemic.
The Vancouver, Canada-based company currently has operations across five states: Illinois, California, Michigan, Washington and Massachusetts, where it was recently authorized to commence adult-use retail and production operations in Worcester.
More stores are on the way in those states and others, according to 4Front CEO Leo Gontmakher, who recently spoke with Benzniga about his company’s plans.
BZ: Describe the approval process for Worcester. What steps does the Massachusetts Cannabis Control Commission require?
L.G.: For Worcester specifically, there were multiple layers of approval in this process. We previously announced that the CCC had approved Worcester’s opening for adult-use sales. However, following CCC approval we needed to pass a post-license inspection in order to receive approval to operate from the CCC executive director. We received that final approval and are on target to open next week.
What makes this particular location in Worcester significant?
This particular location holds a special place within 4Front, since we’ve been working on it going back to our early days in 2013. This was originally a site used by an advisory client of ours in the first round in Massachusetts, who was not awarded a license. We later teamed up with them in the second round and began the process of applying for a medical license at the same location under the Mission brand.
That process took longer than anticipated and we opened for medical sales two years ago, and have been working on this final approval ever since. We’re excited about the possibilities at this location, as we feel it is centrally located and easily accessible for area residents, with ample parking and a large floor plan that provides a comfortable experience for our customers.
Sales at 4Front were flat quarter-over-quarter — what overall market trends do you feel influenced this?
This can mostly be attributed to having to shut down our Chicago store for two months due to looting, which we think affected our sequential growth rate in the quarter by as much at 10%. During our earnings call earlier in the week, we discussed seeing accelerating fundamentals in our business during July and August.
Approval of adult-use sales in Massachusetts, the reopening of our IL operations and record sales in our Washington operations are providing a nice tailwind for our business as we move into the second half of the year. 4front also achieved positive operating cash flow in the month of August and expects a positive adjusted EBITDA starting in the third quarter of 2020.
What will be different in the third quarter?
[The third quarter] should include a nearly full quarter of sales from our reopened South Chicago location, a near full quarter of sales in Georgetown, and a partial quarter of sales in Worcester. We are also seeing the manifestation of the hard work we’ve done around the right-sizing of our cost-cutting and streamlining of our business. Together with accelerating revenue trends, we expect to see meaningful operating leverage in our business as we finish the year and move into the 2021
Commencing adult-use licensure is a milestone for the company. Now that it’s imminent, what’s next?
Our plan is to continue to focus on maximizing our potential in our core markets. 2021 will include launching our large-scale processing facility in Commerce, California, tripling our wholesale output form our cultivation center in Illinois, ramping up production of our Washington State infused products brands in Massachusetts, and launching new stores in Illinois and Massachusetts.