FFNTF - disrupting the world's largest cannabis market
FFNTF is a LONG - The cannabis industry is coming it's way.
FFNTF reported a strong 1Q22 quarter suggesting that $50 million in EBITDA is possible for 2022 and has significant future growth from there. We like the company's position for value creation in the cannabis industry around low-cost, high-quality production and distribution of cannabis consumer packaged goods. With the California opportunity now looking like a reality, the company's long-term guidance of revenue and EBITDA opportunity from the current assets is $650 million in revenue, and $250 million in adjusted EBITDA is looking low. FFNTF reported 2Q22 adjusted EBITDA of $9 million, up 53% from Q1 2021, representing an adjusted EBITDA margin of 28%, up significantly YoY and is expected to grow with incremental revenue growth as CA ramps and MA sees leverage from the NECC acquisition.
Comments on the California Cannabis market - Is the market bottoming?
"Commerce facility is only just starting to make waves in the industry, and we believe that we now have the means to considerably disrupt the world's largest cannabis market; it's happening. After a brutal winter in California, where operators struggled to move products and pricing hit all-time lows, a death knell for inexperienced operators without the capability to scale, we're starting to see a rebound as retailers begin to clear inventory, municipalities enact much-needed tax holidays and pricing in general improvements from its November-December trough. We view the turmoil in California as a golden opportunity to begin consolidating market share from unprofitable operators to accelerate our growth."
FFNTF Commerce, CA facility has the capacity for $500 million in processing revenues and is ramping with a "90-day rolling average, customer count is up to 240 in May, up from 224 in April and 188 in March." The company will look to fill capacity by making strategic acquisitions, among other ways. The company also announced that it was looking to expand its retail footprint in the state.
Massachusetts update
The market is coming the company's way! The CEO's commentary from the call - "While we think the market headwinds in Massachusetts might be transitory as the number of retail locations is expected to increase; the long-term trend will be towards reduced pricing, which is precisely what we at 4Front are positioned for. Our broad portfolio of 22 brands allows us to mix and match products and menus very efficiently, and we've increased house brands -- we increased house brands sell-through during Q1 and Q2 in both Massachusetts and Illinois. In Massachusetts, our in-house brands represented around 66% of revenue in 2021, and we think that number could be as high as 80% for 2022 and potentially push the limit as high as 85%, which we believe to be one of the highest percentages of in-house brands sell-throughs in the state."
Illinois Update
"In Illinois, we continue to see solid performance in our two new retail locations and plan to add to our Illinois retail footprint as we move through 2022. After further optimizing our cultivation processes over the summer, we're able to sell out of everything we grow. Plus, with the construction of our Madison facility ramping up and ahead of schedule, we look forward to its capacity not only be able to meet our growing retail needs in the 2023 and beyond but also to generate meaningful wholesale revenue as our suite of products hit the market that year."
A powerful statement from the CIO
"Everything we're doing right now is not only building our company but setting us up to be the ideal merger partner as we become the poster child for scale and efficiency." Andrew Thut, CIO.
Industry price performance
As noted by last week's performance, the bottoming process is starting to see a divergence in performance between USA cannabis and Canadia Cannabis.
SAM is looking for ways to grow
In the waning days of the seltzer trade, SAM announced it was looking at the cannabis market. Now SAM has officially launched a cannabis beverage TeaPot in Canada. When will it come to Boston? lol
