MedMen Enterprises (MMNFQ) 17 Feb 212021 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by. And welcome to the MedMen Second Quarter Fiscal 2021 Earnings 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] I would now like to hand the conference over to your speaker today, Mr. Officer. Financial Chief Fulgham, Reece Please go ahead. please Ladies Difficulty. are Technical we and gentlemen, experiencing standby, Mr. Fulgham, please ahead. go

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

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

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

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

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

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

everyone you this for afternoon. Thank joining us

On on discuss to drive financial the company's second plans performance growth and progress turnaround an and update the the provide we'll call future quarter. our today, then for

First, and we're thrilled live cannabis in sector broader of lead in. we continued towards legalization alternatives to to a number at the and better which healthy the peaceful will U.S. world our in increased as medical enthusiasm outcomes justice applications more optimistic progress system, in believe criminal makes

able with are how recreational Arizona We in quickly was impressed sales to XXXX. flip through

the excited channels second both shocks. We quarter, Jumping in in Despite show progress were traffic the up significant in markets. of excluding business foot and California fiscal our more would are in the robustness slightly, core Evanston. in sales our about restrictions our our continued dynamism to

stories, turnaround significant effort of turnaround XX% margin. Critically, for sale showed in see simply and progress done those retail you gross or with also sales drastically our often sales. in New also respectively an bump margins Florida, reducing in we a inventory, in with number to situations saw significant continued retail liquidate will familiar retailers to prior year. and expansion I've We another XX%, from York up

in position are We that. the exact opposite than

plan. our profitability. accelerating to building economics. QX expanded from progress future in XXXX, We retail forward look fiscal in wall our the turnaround growth of to of in XX% core continued four XXXX margin turnaround for a phenomenal plan year now and the remainder in platform remains The have We XX% gross our QX

to ultimately portfolio trending impact. outsized X% in XX% restricted California line EBITDA, same-store were XX%. across the California the for quarter, an retail first XX%, sales before quarter and retail able despite weekly COVID-related sales and to in was taking from We continued the the our strong over hold from Still, capacity up we progress with

we generated revenue, increase second in the During Evanston. XX.X representing previous million quarter X.X% quarter from excluding the

these retail us. to cash of and positive flow quarter are achieved we the corporate note, continuing company's macro talent. SG&A the milestone been the we in to consecutive is Both have if foundation quarters history. second Other attract a of And roughly to in this all EBITDA. for scalable across significant related are tailwind to enterprise these a retail row; adjusted with the We gather this key of reduce elements before behind plan build to had continuing after the flat world-class our ahead A turnaround regards beginning achieved tax two done footprint. not

million As reminder, XXX at related SG&A approximately annually. was corporate its a peak, company's the

We continue quarter X.X over our been corporate reduce that previously pre-opening X.X other just SG&A excluding million, to spend and with million quarter-over-quarter. our costs had this decreased disclosed

we've retain shares. turnaround pleased Class governance. the such reduction leaders announce like we canceled with A in organization, I that of Officer, to talent Chief strength and Revenue our this plan, we the With overall bringing Strategist Chairman brand regards to the Zappos. also in then been spending, super including on We're at the even formerly McCourt, Tracy It However, accepted of improve belief and XXX,XXX to able across Board the Chief corporate talent. efficiency of continue speaks new the to and voting the position to

and that the cash and my Chairman As this existing organization very on from who's it to able partners. new From and perspective, seriously. balance attract responsibilities a its in take accountability CEO capital been we're benefits capital seat our the before, I I myself to and continue sheet both different shareholders, someone commitments pride of

for certain value belief our long-term covenants of partners During as have we the modified flexibility, the capital also the additional further the business. quarter, of evidence

XX and profitability. Green done we cash we in January than Although a still in to funding with from line of to sight more additional investable believe be work Gotham million to our position, announced Partners we an are strengthen ever

stakeholders have in up manufacturing. exciting to an of to believe support to patience expansion. bright We've the growth have it we those this rewarded future for a in I'll Florida we profile to will opening there delayed of open excitement stores the California we back open we we additional one markets where as cultivation two for the in and ability We Bossidy, Massachusetts, high our and ability And the slightly I of over significant continue appreciate Francisco, in the like our execute. Tim given the open are XX us. some year. over on set we our quarter, And as several work With best [indiscernible] who openings in San of Florida we open of doors of our months, as have an to two strongly of that, on highlights. new view well get number operations hit ahead openings XX in ongoing and of as Massachusetts where hard Operating on our Officer the our at Miami and number for opportunities as most to California strategy Chief hand last in Eustis markets We pipeline execute unlimited stores to continue of in state. openings schedule as the Finally, growth in believe been Emeryville that patients locations Florida, in around next in dispensaries We're Beach, and such be our the to months. next acceleration my openings our we existing

Thank you, Tom.

is well will about like earnings be out I we're with leadership; borne future the model, There's call, First, a our restrictions positioning a year. the some believe and This rest last optimistic team of more in our as we the here we're where MedMen way fantastic for of for capacity with together which excited positioned, Tom Tracy durability retail even we success California. in the welcoming also and the mentioned in to significant Reece even this MedMen. been

continues retail Our removing cash retail materializes our flow, cultivation again, be facilities, which EBITDA. improving stems complexity so supply and in from and to our key our chain from KPI

to our operating but gross we wall continue now stores. We the is drive forward leverage to existing driving us focus gains looking margin key will revenue to cost and will for and four additional continue find

Some continue ongoing initiatives of quality Florida. the in shelves our developing of include our key

licensing showing sales As XX% to only agreement in in levels production, quarter-over-quarter. with Mary's on cultivation Florida our shortly. have expanding capacity, recent in continued a brands of with saw of we same-store Medicinals the But we jump THC have Even exciting, more Not XX%, Dixie December, year-over-year XX%. BellRock and we our which Florida increase Tom to to on touch and XX% and quality agreed our stores. focused flower we sell mentioned, over will distribute manufacture, we our CLA cannabinoids double

and the ingestibles of gels potential topicals, expect BellRock our the regulatory next in with not balance to launch of initial including Florida, to with are Florida, surface be more products, the remainder partner months year. transdermal few excited in MedMen we patches, coming pending portfolio we We our with online just believe throughout scratching We approval in could of the the brand.

and is investment Next customer connection.

we were tourism. increase Vegas in on our undertaking frequency. email our links are model one up which providers seeing seen from enterprise rolling have are partnership versus With dynamic will us particularly of to partnership needs the CRM and early to to sales increase robust revenue. and the begin insights development the This newly are we relevancy deals. through realized THC to the an ramped behaviors, significantly focusing declines We design, and and traditional we on in velocity and with in lift customer. Claiborne; purchasing system, of sales messaging have reversed CRM provide the in regard also In four Cannabiotix, now the focus out investment is the in our have that us up drive begun Las customers' creating We've to that Recently an The XX% we products systems XX deepened days. This chance in over now with increases with U.S. Golden stronger in integration we last previously Las starts a seen results have markets and significant XX% customer top formed weekly focused enabling market, conversion, tests California, State, in next local volume into to brands set on within Vegas, our we increase anticipating content testing, pricing localization, revenue.

to of ability aggressive revenue plan, in analyze which our upon California. we seeds out XX shown days. This roll placed which in overall on and a XX exceeding grow is MedMen test first California, category, we [ph]. its successful to CRM three top is well strength The The our California the since Redding, have will in Our has successful to flower an launch of also category, in continue private roll in [limitation] as relaunch successful label, expectations only states launch. to will completion specific performing other above track, MedMen and we ability increase dramatically pre within million where $X as on in flower our our into relaunch

our operations, markets, we still on Finally, the financials, quarters, as our plan will spent in marketing for several after nothing most see stores you due to and core past emphasis looking retail turnaround over can brand customers our cannabis. the in yet sought we to are and measured our to in next

for believe revenue we delivery, in over and and the short cost delivery. part our as spend, transactions afterward, we improved capital $XX marketing to our effective minimums grow decrease are our most execution. of acceleration, opportunity our free primed an move were and through allocation within progress are our And delivery starting we we we well have to order in to our penetrated maintained implementation is up test of efficiency turnaround Delivery are and customer plan especially uses saw as strides and in over and make under as XX%. We significant XX% marketing, delivery able even marketing in increased spend, of scheduled a because up we of and ahead connection move

initiatives main able that drivers, achieve several will quarter. we during our I the were Turning to cost discuss retail into

choosing during restrictions California deliberately expand were to the margins the gross additional more XX% up holiday and increased from detail, XX% again our year-over-year. Quarter-over-quarter, period after in we be to and promotional implemented. from despite Our XX%

will margins Red. have MedMen the some we additional full from forward, with second our cash our terms in realize has our attractive as of EBITDA on execution to four quarter go our tax us an efforts on wall basis improve key an enabled vendors aggregate, well continued with the pricing after to achieve adjusted flow of being of as we In retail XX%. of On started continue to positive margin

an in In local and and in expansion revenue. Nevada the providing continue the Nevada, dividends the recreational similarly opening a the both with will our portfolio will best store California, above, that have we we market, store performing time for continues Oak our with us as a up we also with relaunch targeted some progress we nothing tick to spend in allow combination progress to believe San summer start our that of Francisco stores starting well. Massachusetts, with of In to and There's for ahead stores push two focus Fenway update we our the in to April. pay progress the secondary our in In targeted Park market, granted the currently And are MedMen Illinois, established licenses, terms and our our like Emeryville will Emeryville. believe in been store with mentioned significant provisional scale location in I'd cultivation market will Next, coming made was With license to two attractive. new of in review for a tourism, a each opening of that significant our on relationships we see have Red turn towards from of be in towards that abilities quarters vendor as we location be continuing partnership the opening newly market. opening. a National

the QX stores stores this QX XXXX, Florida grow continue especially eight $X.X Fenway before, because our shown take four our entire robust total revenue we that in In year, in total best the plan, one million last mentioned our markets, open. open. locations $X.X medical year shrink was pipeline had. Florida we've pride to significant we've being with we As and of ever growth portfolio. in In and our was the revenue of within is the In to million

yields will stores fifth the over growing our quarter-over-quarter. add sixth by We XX% and next several in months, driven

cost our over $XXX. We also decreased per pound by

stores first our in vendor partnerships, underway partnerships Hot are update power continued operation. saw quarter, a as expansion manufacturing our medical as announced to we Mustang, by New during in manufacturing with improvement us which calendar four shelf two well and In York, locations in as landlord our 'XX. and a in We driven XX will to project, recent allow new other deeper reminder all market, continued support we our an And and strategy execution our we on Springs, cultivation cultivation in as Desert proceed in the facilities. had up to

announce to shortly. up are something We

believe to of finalizing than ultimate agreements I we managing and it impact the wait. arrangements over While has flow longer the be worth Reece. complexity With these will ideal, will that taken the hand successfully cash

you, Thank Tim.

U.S. consistent And are in in rules second First, are issuer figures financial today's we I note SEC. call dollars. Also U.S. quarter, that considered the our under the a were on GAAP. domestic of the the with prepared U.S. statements quarters, as all with for such, prior accordance

top-line In of in wide system performance addition, I'll terms refer revenue. to our

best is progress. economic As representation our we of the that believe this

on can quarter. This a which quarter previous these MD&A company profit history to excluding a leading cash the You System quarter. reflective margin, XX%, the operational up margin margin fiscal reduction declined to we over revenue continued $XX.X the revenue general $XX.X for margin in last was XX% gross Overall, of profitability related the increase quarter was second only expenses year million, strong for to our not is XX.X quarter for million, X $XX.X deal in the totaled in best expenses, and and was operating make growth, previous million of due X% and to burn. fact Evanston. The million, in increase of totaled professional to to from same million reduction increase XX% and $XX.X general point corporate which Operating our gross the measures the costs. X.X% last the manufacturing. in due of driven retail increases in in improvements expenses but $XX.X quarter and Gross from gross million, continue within increased quarter. and information efficiency by including fees the payroll, the previous expenses, prior further in a significant from from of terms second the financial decrease the expenses, progress cultivation a was in find quarter, administrative primarily from in period, quarter we the by administrative the wide the the year, period

previous Our general second a from stock-based administrative last the quarter. quarter. million, costs quarter and period and same period X% totaled quarter decrease XX% second SG&A the excluding previous $XX approximately million, from a and selling, pre-opening year last from a totaled approximately expenses, compensation year decrease same corporate decrease a excluding the our and XX% XX% Further, $X.X the costs decrease deal from

opportunities, While optimization to the infrastructure expect there believe XX the we base levels existing over for at supporting we now XX additional asset the growth our managing are and other corporate both appropriate our is months. next

Turning to million, previous $XX.X to year the $XX.X million profitability, in quarter same the EBITDA loss period $XX.X in and adjusted was for quarter. million overall the compared last

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

the due the our relatively derive previous Retail and second adjusted on believe value a capacity we the California our and period totaled in a footprint, efficient increase the until let's quarter pickup mid-November, COVID-XX quarter, California. quarter X.X% take for The model to by additional same-store robust for million, was We $XX.X revenue has this up was pace saw for challenging, which retail our of options. sequentially the deeper the importance Evanston significant over our when driven divestiture. shown and Now this we from in sales flat look flexibility restrictions business. revenue while curbside at delivery

increased quality product of are has and web continued and this seeing margin. assortment to customer in course, feedback, traffic we Our increased improve and also

we recorded XX% down margin, ever, retail Moving gross best to our nationally. at quarter

During build clean in trust. hard that balances, commitments with each clear, Illinois in And to on There's favorable old done positive expand our our turnaround, terms slightly to MedMen. from back visibility with be overall are sticking our our relationships not vendors are retail We've improve Nevada, adjusted key XX% retail we very unrivaled worked and significant our markets the like to in shelf each portfolio. market And secure to and providing and quarter-over-quarter negative to we as vendor strong consolidating in gross we product have additional maintained pricing our up EBITDA relationships developed extremely X% margin margins We expansion. to agreements. to want of up space markets look supply and and our wholesale decreasing we but opportunity payment still to year-over-year.

costs additional and improvements. We have some efficiency

platform quarter coming across the by in significant amount the drive in traffic had visits. the until as a through our in We last driven go history. increases There's state be were quarter flow federal, in we we quarters. of accomplished But quarter been the for positive even taxes company's overall, and will Critically, never more sales. in retail factoring which projected EBITDA cash increases additional second when local for in operating forward retail row, and in our margin the leverage a in see will the rolling

continue expand, new As and gross ourselves our we through cash to top-line store normalizes margins across and pipeline our our the we are positioning generate cover to stores. costs corporate flow

and sheet, cash Turning million with balance the equivalents. our quarter ended to $X.X cash we

stretches an from continue our of to million the will and As turnaround with Capital final $XX in we work Partners we did fund our raise additional closely Tom Gotham plan. mentioned, to January Green Partners

with on cap partnering sheet. deleverage also announced continue our We as sources strategic as advisor funding provide updates well. I look we potentially to to month our Moelis table this a we are balance want diversify our and to

February voting to Given multi-class one-to-one into XX, I conclusion, million basis. approximately had shares additional team. join we shares, subordinate shares convertible as In our and structure XXX,XXX,XXX excited voting am a XXX,XXX,XXX subordinate which the on of redeemable MedMen an are

turnaround looks think MedMen a XXXX I I And so team done the think has fantastic for the in MedMen. job bright fiscal far.

renewed we of operationally can every addition to common of. sense the continue part as stories in is a sector the toward we financially With the I've move been make most to cannabis I the this exciting one with talent momentum we legislation day, say and add, in improvements growth that the

experience We our and and are retail. more profitable so well with and grow footprint provide cannabis doing become customers positioned even patients in best in to the

now will We to open your questions. Operator? up the call

Company We this don't over Unidentified Speaker A turn moment. I'll Unidentified any presenters. questions seem Q - - at to it have the Analyst to

This all our is today once to Thank for and Tom again. us joining presentation. you listening

this our story. element very, to said very to that COVID with new begins story. are a we loosen as We're hope increase exciting where We capital add right to begin As and and now. loosen, our restrictions pleased an is we

have before with your And again. you you thank pleased group to attendance this very we're with So again here us. today speaking for

this today's call. for joining. you Thank And concludes conference

disconnect. You may