MedMen Enterprises (MMNFQ) 7 Dec 202021 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by. And welcome to the MedMen First Quarter Fiscal Year 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. now today, hand Officer. Zeeshan would to conference I speaker your Hyder, Instructions] like the to over [Operator Chief Financial you. Thank Please go ahead.

joined will today’s fiscal we call, release, Thank XXXX Today, XX, issued with will results and Earlier provide Lynch; the and today, on afternoon, and management first call COO, a by press and September then to press release both remarks period am on website statements questions. we XXXX. financial and On you. Tom quarter the The our Bossidy. welcome available the Tim prepared CEO, open Good I everyone. along announcing our ending EDGAR are and for MD&A, SEDAR. company’s your filed

remind call outcomes results on to and by to expressed in the Before uncertainties forecasts the statements, projections, which subject could I’d you will actual materially nature forward-looking assumptions, cause we statements. today’s or involve estimates, from and risks forward-looking those to that their differ goals, like comments include are that and begin, the

and Forward-looking business other as funding. date our of financial speak as as operational and upon predictions to, of MedMen, new the among and of things, call future of and expectation, the plans These our not sources conference relied future be forward-looking statements of to expectations stores events. should our statements relate the for only operations and

Securities both basis and company’s under forming and was provided Additional SEDAR. Securities with today company’s the is information and United by filed and about the reports press issued the profile statements the Commission of company’s the and Exchange including which the assumptions and on available factors earlier Canadian the EDGAR factors forward-looking release, risk are material Regulators, States

contained and do any not today’s During otherwise EBITDA, EBITDA dollars defined that adjusted meaning in measures the refer by today. note, GAAP, earlier information non-GAAP call, certain U.S. our MD&A. standardized to Please financial such press we release all SG&A, in have unless the corporate press which prescribed MedMen and indicated. Reconciliations in earnings release will measures to are are GAAP as conference issued provided is

with the call turn Tom. Now like I’d over that, to to

everyone you is safe hope during these staying healthy and afternoon. this times. everyone us We unprecedented for Thank joining

review the an quarter, call chorus legalized have jurisdictions election turnaround season, adult On use more growing From of today then company’s our operational during first financial the on this including perspective, cannabis. the first a performance initiatives that the provide we’ll still recent for our discuss update medical states progress, macro and quarter. saw of past

country, about in support of the house more XX% a passage act legalization saw the and Additionally, the of last week. the now just bipartisan representatives historic majority, we

bring continue where towards to We’re is and to world news regulated. we’ll for legal optimistic that a good XXXX and work continue industry cannabis the will cannabis

to of close marketing This addition be retention approved The core adult to and customer where Frederick’s Zappos.com. recently progress will developed we’re use Hollywood, California, and in Guess, to MedMen local footprint future. it including states Tracy move are targeting is In not pleased exponential but MedMen, several for right this the week in our the company potential chapter has medical cannabis only market also cities XX of legalizing our over in-store that cannabis, company new executive our existing hire of management and pioneer we’re the measures. team excited our experience our next about A online efforts. proximity intelligence omnichannel a and Officer. as a Skechers, strategies business will the brands the to She and for years, our as and to Murad, invaluable leading for lead and speaks where as and of success customer in for to sales, merchandising as strategy, buying, product business. addition Chief unique in the as we now, well into McCourt is tremendous in company’s most Tracy in volumes MedMen leader new experience announce Tracy Revenue marketing

the a exceptional across Our ahead With a retain into ability our talent jump to goal will number discussing fiscal The and one of continue attract of fronts MedMen our turnaround the schedule business. to to to transformative of for for plan. turnaround differentiator was which business, with core was retail quarter particularly the primary in and improve our the of first be place let’s that, financial us against profile competitors. plan business our respect a

as progress the months, closures impacted timing past significant made which of rioting, the we milestones. over COVID six led the turnaround our last achieving quarter such While and store external factors, to

quarter was our much and us a different expectations. for This surpassed story even internal

where We’re that excited increase quarter first XX% revenue by XX%. by representing a previous quarter, from driven we in to revenue, $XX California announce a strong during our grew generated million quarter, in the

to we’re growing of the hard optimization In to with addition able the revenue, see to work fruits our respect all efforts.

yet positive to is achieved Our quite for the million significant which retail our to positive while in million, a flow we’re on achieve best retail there approximately XX% and for adjusted $XX company-wide improvement last loss we milestone across the from EBITDA, This first the adjusted quarter margin bringing gross ever we team. the our not $XX quarter, cash surpassed EBITDA after-tax a are also the footprint, company. quarter able

infrastructure the the optimizing to right sizing million. our model, corporate our was peak, its At related company’s retail biggest $XXX was addition task. SG&A approximately corporate next In

was by sheet first new then organization capital both and prospects. possible maintaining our and limits next as across this chip was company balance the We’ve done cash and attracting big as capital Over $XX away million. over priority existing the overall growth The efficiency, of the announce that upgrading deferring lending to the to just quarter excited and while from all our improving of this that I’m talent to SG&A partners. corporate past we’ve several quarters, strengthen to continued at

defer evidence of and interest the lender rent long-term to executed for while the The in of capital in Further agreements flexibility. also covenants we $XX the was XX certain to quarter, the belief support next our value modifying additional funds. over raise additional step partners have next business. million months, landlord the During

the commitments different new across million a quarter in During announced financing few we facilities. $XX

Our than to profitability. upsize believe true cash investors more quarter, we this strengthening commitment later line current our in to because done million positive of with $XX development work sight the on are a position, there’s we investable ever the still to of while be

stores new to number into we in we we’re high Florida, of the Lastly, turnaround months, the well-positioned liabilities part rightsizing well structure, eliminating the the The while markets, turnaround XX of cost for standard markets profile set expansions existing locations as most have planning like of exciting in work. California that Massachusetts growth a on openings and is and requires company. an next this have had state. narrowing turnaround the and We’ve this playbook me able over to down story the recognized new the evolve for able to about whole the hit best to to where is of brand we’ve being pause open begin acceleration a the in where store the into of markets as such most some new focus as been situation while and industry growth build

that, the hand next I’ll company over to the in urgency look time. to to also been continuing We’re we’ve how forward apartments company COO able a the execute appreciate capital chapter understands operational pleased around. as and our to which patience. I continue short amount of It this we’ll leading I expect responsibility turn to with Tim and develop. We seriously updates our to take for With Bossidy share in us they this the and much shareholders highlights. it extremely

Thank you, Tom.

excited I progress make First, incredibly continue here at we about like to and Tom MedMen. the

each to Our put results tireless here. quarter the by testament are team first work a in

sustainable growth execute We are a the plan. on continue turnaround foundation building to and for

Tom our not as to is interpreted profitability. As place want do he driving be only focus operationally. on focus the this mentioned, retail We

and manner removing openings the initiatives put revenue we and new to addition the respect marketing With retail are brand. over drivers place footprint were shows Retail cultivation flow financings our in We will the several and but store saw cash invest will the But corporate significant our the into accelerates to up of to a cash the our cover laser be from of to months, in have and past flow. this quarter. it flywheel then some in retail facilities, in growth capital primary same across the improving from supply disciplined focus overhead, KPI, complexity chain limit Generating business. to which begin of a only expanding required generate efforts. not spin our number is cash we dilution there retail of will flow and our MedMen our footprint growth what revenue,

our As continue made mentioned to to significant changes on we’ve customers marketing connection. last quarter, and ROI about we customer high we to the how focus think

past the several allocation and our about learned our disciplined while been to budget of customer we extremely change assortment months, Over on have we redefined marketing, base.

do, learn our grow manner. a will continue to We we and we targeted in as budget

integration millions a As services on successfully awareness off for of away successfully systems local Return past boosted a efforts starting quarter, that our of appear. point POS shied cannabis customers. number and we and these mentioned spent listing represent are into consumers we these and services last call, This jumping integrated patients. from this have third-party MedMen have to with

customer curation base process. respect local changes our benefited we’ve the made has and Our with buying to also from

to in the With of resulted focus piece are customers, emphasis million plus respect medical per $X product and growth and markets, double-digit availability quality box our we highest Our Florida, an of higher boosted rates month-over-month. That, their key to flower of million, cultivation yield shifting high in representing best educating to is our on to for are conversion. $X the physicians quality products continuing to is our on has and sale how improving recommend one patients. our earnings average which our turn increasing in safest revenue having

we belief in is fiscal improves pandemic of is assortment, growth the are and managed scaling revenue. experience controlled, to customer environment As remainder It the that the as XXXX. will and and our continued during firm our confident marketing ability highly better revenue economic continue improved drive a management initiatives team, our

quarter. was we achieve product. of our The the will drivers, to discuss able four to were biggest that we cost to during sourcing improvement related our retail key made Turning main initiatives I

ever able to margins communication, is partnership. in terms improved XX%, We the relationship. mutually gross been surpassed key transparency through vendors at beneficial our it We’ve pricing of best-in-class a highest Our retail believe they’ve secure been. and

our buying products. quality highest place in Our vendors them, are thrilled and by more but for for our allocation importantly, the and process, are stores revamped to discovery

an our for shelves appreciable partners, brands. our the So to provide lift

discussed we model our been points previous annualized revenue payroll, second the the California of start continues the of our as than savings, on payroll approximately plan, cost. wall of basis. terms The quarter, save staffing on to the with X four able cost over percentage a In provide way. with $XX efforts last an the biggest call dynamic Through to million turnaround down from we’ve leading

on In payment In processing, store and an first margin number our efforts addition basis full flow also four XX%. at of that retail and us positive being to payroll EBITDA our to optimization, our retail we including enhancements aggregate, adjusted our of sourcing other quarter chipped execution an continued and our of to enabled on has wall cash away achieve a to after-tax cost stores structure, supplies. are have undergoing changes

providing time Next, markets. in update some I’d like market, to each our on spend recreational with an starting progress

Francisco, California, As most stores new our store store some in We’ve our in growth store new operate further expansion, in state. and the our an a highest store while new best also enhance stores completed to nearly in with we LAX continue plan footprint of the two the already for Emeryville San to we and state, a in profitable update Pasadena.

Nevada, tourism COVID-XX. over to revenue in we quarter, the return of to XXX% without Moving began mandated this closures impact due if to saw increase past state

between new look Southern in California market, the ahead, store and the tremendous broader Vegas. brand to Las evaluate we synergies will given As we continue opportunities Vegas

quarters. tightness the the national that portfolio up coming we cultivation to various This the location terms partnerships our of expect well. performing Park the With are In perform wholesale continues also on will improve the we Oak the store is in Illinois, in and an revenue best extremely and revenue. working margin Nevada location show market, in

location. Evanston the decision made tough we our During quarter, sell the to

expand to needs we expect in license. additional in of that online While us. the the the capital attractive ability Park were excited evaluate still to prospects We short in our Oak order associated we to for turnaround $XX given of about plan, the highly cash the with market million proceeds is location bring market, as

recently We’ve licensing Newton in Massachusetts. provisional the is granting and front. of market Park progress Control the locations. Massachusetts adult-used in here Commission on us that our recreational We Cannabis favor made significant voted final Our license Fenway both announced

Moving markets, we’re be to excited for grow on can Florida, largest to our especially state believe MedMen. we medical the about which second

We current improve significant and plan doing are our plant drive both existing shrink-to-grow quality. proud Yields within our say, improving a to continue fantastic The are contesting with results continues yield to usually genetics are to teams results. canopy, showing improve gains. job

producing the available and in safest While flower we’ve always Florida. prided cleanest ourselves on

revenue Florida [ph], had out assortment, test We ready here a be be are CapEx XX%. to spend We a power range are co-manufacturing as patient will XX% now well. enough of that THC also momentum ‘XX. almost I this believe in of to calendar to to to reminder, go. a levels for locations these to $X our place also additive a recent pipeline stores and agreements with ready up under additional add and million, growth our well And XX want as opening slowing extend into most rolling in be to the canopy second experience. on we the they’ll over We’ll at able investment an

another locations five CapEx mothballed currently four and minimal to go have with dollars. We ready incremental

operational in manufacturing on and York, store location, profitability manufacturing and York our as seen is our well, of Now cultivation operate profitability We’ve the that including medical retail locations, is, New operation we going shows The improvement avenue up well an across our which in flow. uptick strategy to New revenue again, cohesive a as market, our asset last update Utica. continue a and as cash in will reflective forward. and fifth cultivation provide I four

of we to with sites quarter, announced retail compare cultivation to in finish the agreements control of significant operational partner to venue financial partnerships agreements. strong a take provide first these and Nevada and pursue an marketing report close facilities, the Hawks and this through line They’re During stores DHS Atlanta value California Mustang. would that our agreement and and

MedMen highly it private will shortly. label share to a for Zeeshan. This addition supply hope Red agreements that In update partnership our And on additional to turn offering. synergistic will we be I now

you, Tim. Thank

issuer June U.S. of the of of the company XX% a of company’s no voting met as more longer residents qualification result held a XX, shares As outstanding the than reminder, XXXX, as the by foreign private being the of

of We a U.S. under the the considered are rules SEC. now domestic issuer

for such As accordance financial or quarter in prepared quarter first U.S. as our fiscal GAAP. XXXX just last statements with were our they

figures dollars. jump U.S. Consistent prior today’s the Let’s call on quarters financial. all the are in into with

progress. revenue, I’ll is representation addition, as refer that topline In our of in believe our system-wide we performance the to terms best economic of

fiscal in one share the in to You MD&A quarter. $XX.X retail million previous are detail. profit $XX.X can the find we’ve profitability and over is for a this quarter. the up best our quarter. the for margin quarter had the first in $XX.X we quarter financial System-wide leading gross gross a previous further excited information in of to terms for Gross from million, measures million, quarter At high X-point level, on companywide margin XX%, these a was of the from was revenue increase XX% first

$XX.X corporate-related fees and by was corporate same XX% our at G&A declined including payroll, reduction and right-size in General the significant and from which cost. XX% our to and deal cost period structure, improvement continue million, previous facility. administrative expenses, professional primarily expenses, The last We in driven the quarter. totaled expenses from year storage by

decrease million, at when adjusted XX% quarter, a SG&A period year, same were the million we spend. previous from we decrease. XX% last quarter the approximately totaled corporate $XX SG&A $XX quarterly to corporate in a Even first Our compared saw

for existing months the supporting there base both the the opportunities, XX optimization appropriate expect growth our now are additional sit are to approximately next annualized asset XX levels on we we costs, our at and million months. basis While an over which $XX managing other corporate believe

this our overall of in million. same was million. coming the last loss able loss to in the compared loss we to previous half $XX.X cut EBITDA adjusted $XX.X period at quarter’s million, year, our adjusted $XX.X were Turning profitability, to EBITDA quarter, In

which the MedMen quarter, the shortly. million days into $XX.X we $X.XX and or retail continues this achieving to and cultivation in or our to believe revenue compared to I’ll move and COVID-XX year. we of even, As there’s path production as rebound $X.XX loss achieve shareholders discussions able early Overall, get of clear from $XX.X million to a considering per comprehensive per of net DHS along, especially we attributable previous breakeven and to profitability share partnership was were past share, the loss Mustang

revenue California sequentially. look the up business. the over Retail revenue Let’s totaled million, now This quarter was $XX.X XX% this which first our quarter. was quarter in footprint, a take previous our retail at deeper XX% by up driven for to increase

Beverly XX% Our contributed such and Hollywood sequential flagship quarter. West XX%, in and the LAX, Hills as to the increase up California. factors Several during stores, respectively, were XX%,

the this shelter-in-place our First, traffic lifting into of orders in resulted store store. increased year earlier

customer. been our retail revenue and stores May, third, which recognizing a past received that closed the which Second, It’s by third-party. on we sizable to unrest of has because for important revenue. improved only our the impact store, most this over the the rioting in we’re social our had for in six quarter, partial of quality California license to due temporarily Evanston and the has divest know our to well months, quarter, product last vastly assortment And agreement

Evanston million $XX of included quarter this revenue. for quarter number a revenue of pre-announced Our full

move XX% develop our portfolio California. months, extremely vendors all our retail of each Moving six our terms with best markets, and nationally Even with opportunity key as and to our holds hovering move very there’s as past By still to We strong retail product Mustang XX% gross over expect improvement the recorded payment we we progress we pricing with the favorable up. margin. that relationships in around north expand significant will margins down are allow quarter still mid-XXs, partnership on and ever, to to MedMen. still Illinois, these in are consolidating the XX%. partner in normalizes room supply along, for have where deals gross market margins we same margin. true Nevada, In discussions our potential that us our of anticipate margins the The

we to improvement overall retail addition In retail EBITDA gross margin significant made have well. in as

in Our adjusted XX% positive this further to in for when across factoring cash state in were processing. breakeven such taxes positive local payroll our retail flow retail payment EB history. from ITDA federal, by jumps reductions first previous optimization quarter quarter, the time and costs, primarily in the store operating we the company’s for and the Even the as driven quarter

thrilled gross capital as growth great cover We initiative with put in are ourselves in we’re since and position normalizes up, producing the corporate to and the that our our a and footprint margins we’ll our believe to retail costs stores. topline progress continue our pick across

Moving sheet, loan. an end, secured in upsize facility, to additional completed as million the our quarter convertible transactions senior on subsequent equivalent. including coming There a balance cash unsecured quarter well as in ended $XX capital the and were our number the raising cash of under capital to in term with we we

business we work homestretch our note the as our our well. turnaround to to A funding cap continue enter quick as capital continue of plan. closely We the on with table partners

within voting very along shares shares, wrap of voting XXX.X Xrd, we structure, as had while and of prepared with To I a focus looks and about our convertible MedMen. We’ve and Given capital, additional what profitability redeemable progress revamped and subordinate board, do this the to leader rest U.S. work tremendous growth past basis. the renewed fiscal are as retail one-to-one made cannabis retail subordinate XXXX with are like are on XXX.X a on return for December our rest more approximately excited in team team a year shares optimistic reach and still over and which up the well-positioned the the multi-class to of the remarks, a million an we business additional into to there’s year

up open now your will to call the We question.

from Cowen. [Operator your question Vivien line of from a Instructions] And first Azer comes

Your is line open.

evening. Good Hi. question. for Thanks the

just what us happening more cycle Zeeshan is one, so looks you first your that update housekeeping give late. reporting So a on real given Can time item, like? a cash your balance

Vivian. Hey,

end, which couple a so of million So additional roughly a quarter convertible our facility, we of One couple $X.X Subsequent on to the in drew as down announced the and the increase we Stable we facility so had so. of around under $XX balance end quarter Hankey end, of different financings. terms sheet. our what million we of post was announced, or we September, announced or was under the then another million Road proceeds unsecured the

what announced and of with now to quarter our end So post that’s of existing working kind in. additional we then right financings kind funds new bring on also capital we’re partners

question, as California. And about think few back, the over some on in jurisdictions of mean, guess, the That’s real went and operating next I my months. just orders Okay. fact, other Los stay-at-home I today, in then you Angeles guys in landscape helpful. kind

demand? Thanks. guys thinking the on consumer So impact are about how you

don’t why Tom. This Tim, that? is you Sure. take

Absolutely.

impacted pickup. through weather and a be But will I there the addition pretty really we’re with this think store to income that, success think will we’ve from an in will reducing But some scheduled have capacity delivery stores. delivery But storage there’s we we is impact with our again, good be unbelievably we that don’t that XX% thing pickup the because getting fact to with I shape. think take able good any in-store So that be curbside think, now from -- the the well-positioned built out in foundation, the on think we’ll capacity where and seen operation, a in this of there I around sales. out positive from we’ve delivery of XX% especially California to curbside have absolutely

much. very Thanks Understand.

Partners. Your question Capital line Fortune a ROTH from of from comes Scott next

line Your open. is

and you afternoon want grow stepped of and XXXX? for Good Where you XXXX? capital cash stores taking one positions with are that growth have Kind flow prioritizing to -- two second a of the question. and four You year next here? thanks of capital Tim, your Massachusetts, allocations in in for plan up in the in allocation allocation to Florida, Illinois. near-term going providing timeline potentially resources and just forward

to Yeah. Tim, again. why you don’t markets take those

Yeah. Absolutely.

So, expanding how as discussed, market go. our are and are be going our canopy to stores how attractive to our dollars ready ROI allocated I that think, store highest already within given in Florida, just is to many footprint

dollars running. going the the But excited So are and But list. getting go incredibly that stores, parallel with terms top ROI up two to those that’s part then about. two And will high our after as to to we’ve canopy location, CapEx San Francisco Massachusetts incredibly stores opportunities as priority be regulatory and of of and pieces CapEx allocation we’re right Emeryville those Florida our open the our expansion. dollars up dollars they’ll again also which then of got in be the that minimal come on after allocating timed of far to in

the Okay. one in real asset the on the of up then follow what’s And sales, quick, kind Illinois.

coming with sales the you’re opportunities on board with potential here and legal positioning and thoughts looking You states M&A the that on at? that’s there? there, occur your starting additional of rate other took to And for states favorable the rest assets market Arizona and new

Tim. ahead, Go

be what -- out there resonates -- in where portfolio to going think, I our are further where now really is to we’ll brand way sheet now, expansion absolute our delevering sit we view we’re a we standpoint. highest on disciplined most right we right mean, our will But the think the other our I what markets our look we from continue value well-positioned and at for focus and for portfolio. we that with we’re opportunities So, from current the to standpoint continue cash that at about is balance

on. pass I’ll it color. the for Thanks Okay.

closing [Operator there call I will no Instructions] time. at turn for questions presenters And remarks. to further are back this our some over the

Well, I appreciate today. to join the us taking everyone time

very pleased the And we’re look safe the and again all headwinds forward we’re making. macro and We’re speaking the time. -- thanks facing. for the we I We just hope that stay Take that with to headwinds am care. progress taking that healthy. pleased despite with everyone you all

call. Ladies today’s you Thank participating. and gentlemen, conference for this concludes

disconnect. may You now