MedMen Reports First Quarter Fiscal 2020 Financial Results – Designated News Release
- First quarter revenue of $44.0 million, up 105% year over year
- Opened four new retail locations during the quarter, including three in Florida and one in California
- Company is licensed for 70 retail stores and currently operates 33 retail locations across 9 states, including pending acquisitions
- Post quarter end, announced five-part plan to reduce costs and accelerate path towards profitability
LOS ANGELES, November 26, 2019–(BUSINESS WIRE)–MedMen Enterprises Inc. (“MedMen” or the “Company”) (CSE: MMEN) (OTCQX: MMNFF) today released its consolidated financial results first quarter 2020 ended September 28, 2019. All financial information in this press release is reported in U.S. dollars, unless otherwise indicated.
Management Commentary
We entered Fiscal 2020 on a mission to build a more nimble and financially flexible MedMen. As we right-size our organization and implement an intensified focus on free cash flow generation, our business will become more efficient, in turn allowing us to better serve our stakeholders. Through the successful execution of these goals, we expect MedMen will be EBITDA positive by the end of calendar year 2020.
Adam Bierman, MedMen co-founder and chief executive officer
“Since 2016, MedMen has aggressively executed on a plan to become the most recognizable brand in cannabis. The company’s focus on profitability will provide greater flexibility to navigate near term market fluctuations, as they continue to capitalize on the sector’s overall opportunity. We have supported the business since 2016 and are supportive of the vision going forward,” said Ben Rose, executive chairman of the Board and chief investment officer of Wicklow Capital.
First Quarter Fiscal 2020 Review
Financial:
- Revenue: Systemwide revenue across MedMen’s operations in California, Nevada, New York, Illinois and Arizona increased to $44.0 million for the quarter, up 105% year-over-year and 5% sequentially.
- Gross Margin: Gross margins across retail operations were 52% compared to 50% in the prior quarter. The increase in gross margins reflect increased leverage with suppliers and favorable vendor terms.
- Corporate SG&A: Corporate SG&A totaled $30.6 million, a 21% decrease from fiscal second quarter 2019, representing $31.6 million in annualized savings since the initial cost-cutting efforts began.
- Adjusted EBITDA Loss: The Company reported an Adjusted EBITDA loss of $22.2 million for the quarter. Approximately $7.4 million of rent expense was not included in Adjusted EBITDA for the quarter due to the application of IFRS 16 Leases. Adjusted EBITDA loss under the previous methodology would have been $29.6 million compared to a $39.4 million loss in the previous quarter.
Retail Highlights:
- California: California retail revenue totaled $30.0 million for the first quarter, representing a 9% sequential increase from the previous quarter. In California, MedMen has 17 retail licenses, 13 of which are operational as MedMen stores.
- Nevada: MedMen’s Las Vegas location on Paradise, the closest dispensary to the airport, remains the Company’s second best-performing store across the U.S.
- Florida: During the quarter, the Company opened three locations in Florida, which include retail stores in St. Petersburg, Key West and Pensacola.
- Arizona: The Company continued to operate three retail locations in Arizona, through the acquisitions of Monarch and Level Up, which were both announced in fiscal 2019.
- Illinois: Through the acquisition of Seven Point earlier in the year, the Company currently operates a medical dispensary in Oak Park, Illinois. Due to regulatory changes and the termination of the PharmaCann transaction, the Company expects to have four operational recreational stores in Illinois during calendar 2020.
- Massachusetts: The Company’s Fenway location is pending final regulatory approval and construction is anticipated to begin in calendar year 2020. In Newton, Massachusetts MedMen has signed a lease on a retail location and now is awaiting pending regulatory approvals.
- New York: The Company operates four medical dispensaries in the state, with a flagship location on Fifth Avenue near Bryant Park.
CPG Highlights:
- Nevada Factory, Mustang: The ramp-up of MedMen’s Nevada manufacturing and cultivation facility continues to progress with the factory generating positive EBITDA for its first quarter ever. The factory is expected to be at full capacity by the second quarter of calendar year 2020. In the past eight weeks, [statemade] was the highest-selling pre-roll brand at MedMen stores across Nevada. In addition to its in-house brands, the Company executed licensing deals with leading cannabis brands, Platinum Vape and Nature’s Lab for manufacturing and distribution in the state.
- California Factory, Desert Hot Springs: MedMen anticipates its manufacturing and cultivation facility in California will be operating at full capacity in the first-half of calendar 2020. As of November 2020, the Company’s [statemade] brand is officially available throughout California and was the highest selling pre-roll brand at the Downtown Los Angeles, Abbot Kinney and Beverly Hills locations.
- Florida Factory, Eustis: MedMen is in the process of expanding its manufacturing and cultivation facility in Florida to keep up with the growth of its retail footprint in the state, which currently includes eight locations.
Technology Highlights:
- Delivery: On August 19, 2019, the Company announced the launch of its same-day delivery in California. The platform expands MedMen’s omni-channel experience by offering customers best-in-class production selection with expedited delivery times. On November 15, 2019, the Company announced that the delivery platform had exceeded $6 million in annualized run-rate revenue.
- Loyalty Program: Earlier in the year, the Company furthered its commitment to its customers by launching a first-of-its-kind loyalty program, called MedMen Buds. As of today, the Company announced had enrolled over 170,000 members into its loyalty program.
Plan to Achieve Positive EBITDA:
- On November 15, 2019, the Company announced a five-part plan to achieve positive EBITDA by the end of calendar 2020. The 90 day plan includes: 1) focusing on core markets while divesting non-core assets; 2) reducing corporate SG&A; 3) driving asset-level EBITDA; 4) limiting cash outlays for the next 12 months; and 5) reinvesting in the Company’s employees and culture.
- As part of this corporate rightsizing, the Company initiated the process of laying off 190 employees, including over 80 corporate-level employees, which combined comprised 20% of the total employee base. The layoffs once complete are anticipated to achieve $10 million in annual cost savings.
- Additional cost savings: $20 million in annual savings through reductions in marketing and technology spend; at least $2 million in annual savings through re-negotiated insurance policies for healthcare, D&O and property.
Subsequent Events:
- Credit Facility: As part of the amendment to the Company’s $250 million senior secured credit facility, Gotham Green Partners has an obligation to fund the $10 million tranche by November 29, 2019.
- Continued Florida Expansion: Post the quarter end, MedMen opened four additional stores in Florida comprising Jacksonville Beach, Central Orlando, Tallahassee and Sarasota bringing the Company’s total state store count to eight retail locations.
- Transfer of Assets in Illinois and Virginia: On October 8, 2019, the Company announced the termination of its Business Combination Agreement with PharmaCann. As part of the agreement to terminate, MedMen will forgive $21.0 million owed by PharmaCann under an existing line of credit, and PharmaCann agreed to pay a termination fee to MedMen through a transfer of the membership interests in three entities holding the following four assets: 1) an operational cultivation and production facility in Hillcrest, Illinois, 2) a retail location in Evanston, Illinois, 3) a retail license for Greater Chicago, Illinois, and 4) a license for a vertically integrated facility in Virginia. The transfer of the Virginia license closed on October 18, 2019 and the transfer of the Evanston license is anticipated to close on December 2, 2019.
- Sale of Interest in Treehouse REIT: The Company recently sold its stake in the manager of Treehouse REIT, the first ever cannabis-focused REIT to target both cannabis retail and cultivation / manufacturing operations, for net proceeds of $12.5 million.
ADDITIONAL INFORMATION
Additional information relating to the Company’s first quarter 2020 results is available on SEDAR at www.sedar.com in the Company’s Interim Financial Statements and Management Discussion & Analysis (“MD&A”) for the quarter.
MedMen refers to certain non-IFRS financial measures such as Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), adjusted EBITDA (defined as earnings before interest, taxes, depreciation, amortization, less certain non-cash equity compensation expense, including one-time transaction fees and all other non-cash items) and four-wall retail gross margins. These measures do not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other issuers.
Please see the “Supplemental Information (Unaudited) Regarding Non-IFRS Financial Measures” at the end of this press release and the MD&A for more detailed information regarding non-IFRS financial measures.
CONFERENCE CALL AND WEBCAST:
MedMen Enterprises will host a conference call and audio webcast with Chief Executive Officer and Co-Founder Adam Bierman and Chief Financial Officer Zeeshan Hyder today at 5:00 pm Eastern to discuss the financial results in further detail.
Webcast Information:
A live audio webcast of the call will be available on the Events and Presentations section of MedMen’s website at: https://investors.medmen.com/events-and-presentations/default.aspx and will be archived for replay.
Calling Information:
Toll Free Dial-In Number: (844) 559-7829
International Dial-In Number: (647) 689-5387
Conference ID: 7253627
ABOUT MEDMEN:
Founded in 2010, MedMen is North America’s premium cannabis retailer. Founders Adam Bierman and Andrew Modlin have defined the next generation discovery platform for cannabis and all its benefits. A robust selection of high-quality products, including MedMen-owned brands [statemade], LuxLyte and MedMen Red, coupled with a team of cannabis-educated associates cement the Company’s commitment to providing an unparalleled experience. MedMen’s industry-leading technology enables a fully compliant, owned-and-operated delivery service and MedMen Buds, a nationwide loyalty program. MedMen believes that a world where cannabis is legal and regulated is safer, healthier and happier. Learn more at www.medmen.com
