4Front Ventures Corp

Good afternoon and welcome to the Forefront Ventures second quarter 2023 earnings conference call. Today's call is being recorded. At this time, all lines have been placed on mute to prevent any background noise. After the prepared remarks, there will be a question and answer session. As a reminder, during the course of this conference call, Forefront's management may make forward-looking statements that are based on current expectations and are subject to a number of free and uncertainties that may cause actual results to differ materially from expectations. These results are outlined in the Risk Factors section of the company's filings and disclosure materials. Any forward-looking statements should be considered in light of these factors. Please note that as safe harbor, any outlook presented speaks as of today, and Forefront Management does not undertake any obligation to revise any forward-looking statements in the future. I will now turn the call over to Leo Gontmacher. Chief Executive Officer of Farfront Ventures, please go ahead.

Thank you, Operator. Good afternoon, everyone, and thank you for joining us today. I'm joined on today's call by our Chief Investment Officer, Andrew Toot, Consulting President, Carl Toscano, Interim Chief Financial Officer, Nicole Frederick, President of California Operations, Ray Landgraf, President of Illinois and Massachusetts Operations, Brandon Mills, and our Director of Finance, Brian Emke. On today's call, I will provide an overview of our second quarter highlights. I will then hand the call over to Andrew, who will expand on our financial results and give an update on current business trends and what's in store for the remainder of the year and into 2024. We'll then conclude with a question and answer session, where the management team will be available for any follow-ups. At Forefront, we are guided by our winning strategy of replicating operational excellence. Since our inception, our primary focus has centered around the enhancement and efficiency of our low-cost production capacities, while also thoughtfully expanding our product range on a state-by-state basis. At present, we are actively generating operational cash flow in Massachusetts, Illinois, and Washington. Additionally, our upcoming cultivation and processing facility in Madison, Illinois, is scheduled to become operational within the current year. In conjunction with this development, Our plan to establish eight more retail stores in Illinois positions us to effectively double the size of our company within the next 12 to 18 months, while expanding margins and generating additional cash flow. Building upon the operational enhancements implemented in 2022, which led to improved genetics and flower quality, and complemented by the introduction of new products across our platform, we continue to see success from this strategy in our key markets of Illinois and Massachusetts. Moreover, we are now starting to reap the additional benefits and advantages in Washington, where the combination of elevated flower quality and fresh branding is poised to further improve our market share. Furthermore, we have taken swift measures in California to right-size the cost structures in that market. As we said on our last call, Forefront is unwilling to sustain prolonged profitless revenue in any market in which we operate. As we sit here today, our aggressive moves to scale back California operations have resulted in those operations no longer being a drag on the company's cash generation. Going forward, our operations in California are in a very tight range as current market conditions in that state continue to remain challenged, largely due to atrocious regulation. Our incremental capital, both human and monetary, is now laser-focused on executing our growth plans I'd like to underscore that we manage our overall business much in the same way we oversee our facility, with an unwavering focus on the various factors that we can adjust to meet market demand and adapt our product mix in response to evolving trends and economic circumstances. Throughout this process, we have maintained a leading position in producing affordable, high-quality cannabis products on a large scale. As the landscape evolves, we retain the flexibility to adapt if needed. directing our attention toward opportunities that promise the highest return on investment within our portfolio. With this purpose in mind, we remain dedicated to implementing our operational efficiency improvement plan, placing a strong emphasis on generating long-term cash flow while upholding self-sustainability as a core strategy for the company. As part of this commitment, we are actively exploring the potential to consolidate our operating assets in California, and have optimized our retail, cultivation, and processing operations across our entire footprint. By ingraining self-sustainability as a fundamental asset, our goal is to cultivate a resilient and thriving business model that can independently flourish for years to come. Our cost-cutting measures alone have resulted in approximately $9 million reduction in our annualized cost structure. This achievement has put us on solid ground as we focus on generating profitable top-line growth and position our business for further execution and profitability improvements for the remainder of the year. I want to reiterate the point that our focus through the remainder of 2023 is on profitable growth. During Q2, our cultivation and manufacturing activities reached optimal levels, building upon an already strong base to meet increased consumer demand. This prompted us to launch dozens of new products in all major product categories, including further expansion of the island brand of products and the entry into the vape category in illinois for the first time our market share has benefited from growing consumer interest across our footprint particularly in mass and illinois where we continue to aggressively grow our presence and differentiate through steady launches of new products to these markets the expanded product menu in massachusetts and illinois anchored by a high quality flower drove an overall increase in our Massachusetts and Illinois wholesale business of 9% from Q1 2023. In Massachusetts, our cultivation process improvements have resulted in continual increases in packaged flower production, with over 80% of that flower testing at more than 25% total active cannabinoids in Q2. We also pursued the expansion of our value distillate vape products, catering to customers who seek a more intricate experience by introducing products like live resin that close to richer and more complex turkey supplies. The construction of our cultivation and production facility in Matson, Illinois was largely completed in April. The facility is truly remarkable, seamlessly integrating best in breed process, systems and technologies from each of our other facilities, which have yielded extremely high quality, low cost and consistent products. We continue to push as hard as we can on the timeline to get power to the facility, and the current expectation being set by ComEd is that this is a fall 2023 event. With necessary easements now in place and laying of power lines ongoing, we're confident this timeline is achievable. With our existing business stable and the majority of our markets generating operational cash flow, we look forward to the step function growth in 2024 when our Illinois assets come online. We've demonstrated the ability to replicate our mature market SOPs when we brought our Washington way to Massachusetts. We've shown that we can learn and adapt on the fly, improving those SOPs through the acquisition and integration of NECC in early 22. And we've proven that our model not only works, but exceeds market average as evidenced by our ability to roughly maintain our market share in Massachusetts with our three-store footprint despite the expansion of third-party retail in the state and prices declining over 40%. It is this blueprint that we're incredibly excited to fully bring to Illinois upon the opening of a massive production facility and expansion of our retail footprint. As we've previously highlighted, Illinois stands as our most substantial avenue for growth over the coming 12 to 18 months. We're eagerly anticipating the opportunity to showcase our complete capabilities in one of the nation's most promising markets. With that, I'll now pass the call over to Andrew to discuss trends in our performance in our key markets, as well as our financial results for 2-2. Andrew?

Thanks, Leo.