Mr. Adam Bierman reports
MEDMEN REPORTS SECOND QUARTER FISCAL YEAR 2019 FINANCIAL RESULTS
Medmen Enterprises Inc. has released its consolidated financial results
for the second quarter of fiscal 2019. All financial information for the
13-week period ended Dec. 29, 2018, is reported in U.S. dollars,
unless otherwise indicated.
"Our strong second quarter results support Medmen's commitment to drive
strong retail and sales performance, while efficiently scaling the
company and executing on our growth strategy," said Adam Bierman, Medmen
chief executive officer and co-founder. "As we emphasized last quarter,
we are in a new phase of growth, one focused on continuing to
operationalize our industry-leading retail footprint and increasing our
profitability. We are confident in the team we've built to drive our
After going public almost one year ago, Medmen has established a
record of growth and success. With approximately 7-per-cent market share in
California, the largest cannabis market in the United States, the company is
planning to open 16 new locations across the U.S. in calendar 2019. Of
the 16 new locations, 12 will be based in Florida, where Medmen is
licensed for up to 30 locations. Additionally, four retail sites in
Florida are expected to open in the next 90 days in the following
locations: Key West, Orlando, West Palm Beach and St. Petersburg.
Second quarter 2019 overview
Systemwide sales revenue of $29.9-million, which represents a 39.1-per-cent
quarter-over-quarter increase over first quarter fiscal 2019 ended
Sept. 30, 2018;
Gross profit margin improved to 53 per cent from 45 per cent in the prior quarter due
to unrealized gain on changes in fair value of biological assets;
Company's eight retail locations in California reported a combined
$23.7-million in revenue, a 28-per-cent quarter-over-quarter increase.
Signed definitive agreement in December to acquire PharmaCann in an
all-stock transaction; the transaction will double Medmen's geographic
footprint to 12 states, which account for over 50 per cent of the U.S.
Expanded California footprint into northern California through the
signing of definitive agreements for the acquisitions of a retail
licence in Emeryville and a microbusiness licence for retail,
distribution, cultivation and manufacturing cannabis on site in San
Jose; the first transaction closed in second quarter 2019, and the second
transaction closed in third quarter 2019;
Signed definitive agreement to acquire the retail operations and
licence for a store in Santa Ana, Calif., through an all-stock
transaction with Captor Capital Corp.; this location was already
operating under the Medmen brand through a management contract;
transaction closed in third quarter 2019;
Closed on acquisition of Omaha Management Services LLC, which owns
Monarch, an Arizona-based vertically integrated medical licence holder
with a flagship retail location in Scottsdale, plus cultivation and
Launched a comprehensive suite of new cannabis products, which are currently being sold in Medmen's Nevada
Announced the completion of investment in California-based flower
brand Old Pal, which provides everyday high-quality cannabis flower
Appointed Michael Kramer as chief financial officer; Mr. Kramer offers
three decades of retail experience and has excelled in both
operational and financial roles, including as chief financial officer of high-profile
retailers, such as Apple Retail Inc., Forever 21 and Abercrombie &
Appointed Ben Cook as chief operating officer; Mr. Cook has extensive
experience leading omnichannel distribution, global market expansion
and supply chain optimization; his experience executing complex
strategies for global, high-growth companies, including Apple, Sam's
Club and Target, is invaluable to Medmen's growing multistate
operations and expansion plans.
Capital market and financing activities:
Announced relationship with newly formed Treehouse Real Estate
Investment Trust, a cannabis-focused REIT that has now
raised $133-million to acquire properties from Medmen and other
cannabis real estate;
Closed a $77-million senior secured term loan with funds managed by
Hankey Capital and with an affiliate of Stable Road Capital;
Closed, on Dec. 5, a $56-million bought deal equity financing,
issuing 13.64 million units at a price per unit of $4.11, with each unit
being composed of one Class B subordinate voting share and one Class
B subordinate voting share purchase warrant; the exercise price of
such warrants is $5.16 (U.S.) per share; they are exercisable for a term
expiring on Sept. 27, 2021.
Uplisted to the OTCQX Best Market by OTC Markets Group under the
ticker symbol MMNFF on Oct. 24.
Closed acquisition of Seven Point, a licensed medical cannabis
dispensary located in Oak Park, Ill.;
Closed acquisition of Kannaboost Technology Inc. and CSI Solutions
LLC, collectively referred to as Level Up, in a cash and stock
transaction valued at $33-million on Feb. 12, 2019; Level Up holds
licences for two vertically integrated operations in Arizona,
including retail locations in Scottsdale and Tempe, and 25,000 square
feet of cultivation and production capacity in Tempe and Phoenix; the
company also received a 40-per-cent stake in top-selling brand KIND
Concentrates, which is currently distributed in over 90 per cent of the
dispensaries in Arizona.
Capital market and financing activities:
Completed the sale of three properties to Treehouse for net proceeds
of approximately $18.4-million, after repayment of debt.
Second quarter fiscal year 2019 review
In an effort to increase transparency, provide a better understanding of
Medmen's business and ensure sales comparability between years, the
company is basing accounting on the four-five-four calendar structure.
Additionally, the company is now breaking out performance by
retail, cultivation and manufacturing, corporate selling, general and administrative, and preopening
For the second quarter of fiscal 2019, systemwide revenue was $29.9-million. This represents a 39.1-per-cent quarter-over-quarter increase over the
first quarter of fiscal 2019 ended Sept. 30, 2018. Systemwide
revenue, pro forma to include pending acquisitions that have not yet
closed, would have been $49.5-million for the quarter.
Systemwide retail revenue for the quarter
is based on 16 retail stores that were operational at the end of the
quarter. This includes the Medmen Paradise location near McCarran
International Airport in Las Vegas, which opened in October, and the
Medmen Scottsdale location in Arizona, which began to be included in
Medmen's results in December following the closing of the Monarch
Strong systemwide retail revenue for the quarter is primarily
attributable to Medmen's stores in Southern California's recreational
market. In California, the company's eight retail locations reported a
combined $23.7-million in revenue, which represents a 28-per-cent
Cultivation and manufacturing:
For the second quarter of
fiscal 2019, the company reported a $4.9-million EBITDA loss for
cultivation and manufacturing, of which approximately $4-million is
related to costs associated with the company's first full-scale factory,
Project Mustang in Nevada.
Corporate SG&A: During the second quarter, the company
continued to make significant investments in building the corporate
infrastructure and team required to execute its strategy for long-term
growth. Corporate SG&A includes corporate infrastructure and growth
initiatives, such as corporate payroll, sales and marketing, and technology,
among other things. Of the total $40.9-million corporate SG&A expenses,
$14.4-million was corporate payroll, which included the buildout of
several teams within the company, including finance and accounting,
digital, business intelligence, and marketing. SG&A expenses also
included $8.6-million in marketing and branding as compared with $4.8-million in the first quarter of 2019.
The company incurred $3.0-million of
preopening expenses in the second fiscal quarter of 2019, primarily
driven by rent expenses of retail stores, cultivation/manufacturing
sites and facilities that are not yet operational.
Gross profit for the second quarter, before biological asset adjustment,
was $13.3-million, as compared with $500,000 in the second fiscal
quarter of last year. For the second quarter, gross profit margin after
biological asset adjustment was 53 per cent, compared with 45 per cent in the previous
For the second quarter 2019, the company reported a total net loss of
$64.6-million compared with a net loss of $66.5-million for the first
quarter. Net loss per share attributable to the company in the second
quarter was 25 cents versus a net loss of 27 cents for the first quarter.
Additional information relating to the company's second quarter 2019
results is available in the company's interim financial statements and
related management's discussion and analysis, filed on SEDAR.
Medmen refers to certain non-international financial reporting standard measures, such as annualized
sales per square foot, earnings before interest, taxes, depreciation and
amortization, four-wall EBITDA, and adjusted EBITDA (earnings
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). These measures do not
have any standardized meaning prescribed by IFRS and may not be
comparable with similar measures presented by other issuers.
Conference call and webcast
Medmen Enterprises will host a conference call and audio webcast with
Mr. Bierman and chief financial
officer Michael Kramer today at 5 p.m. Eastern Time to discuss the financial
results in further detail.
A live audio webcast of the call will be available on the events and
presentations section of Medmen's website.
Toll-free dial-in number: 844-559-7829
Conference ID: 9283806
About Medmen Enterprises Inc.
Medmen is a cannabis retailer with operations across the United States and
flagship stores in Los Angeles, Las Vegas and New York. Medmen's mission
is to provide an unparalleled experience that invites the world to
discover the remarkable benefits of cannabis because a world where
cannabis is legal and regulated is a safer, healthier and happier world.
We seek Safe Harbor.
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