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," said Adam Bierman, MedMen co-founder and chief executive officer. "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."
"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:
Retail Highlights:
CPG Highlights:
Technology Highlights:
Plan to Achieve Positive EBITDA:
Subsequent Events:
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
Cautionary Note Regarding Forward-Looking Information and Statements
This press release contains certain "forward-looking information" within the meaning of applicable Canadian securities legislation and may also contain statements that may constitute "forward-looking statements" within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Such forward-looking information and forward-looking statements are not representative of historical facts or information or current condition, but instead represent only MedMen's beliefs regarding future events, plans or objectives, many of which, by their nature, are inherently uncertain and outside of MedMen's control. Generally, such forward-looking information or forward-looking statements can be identified by the use of forward-looking terminology such as "target of", "objectives", "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or may contain statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "will continue", "will occur" or "will be achieved". The forward-looking information and forward-looking statements contained herein may include, but are not limited to, expectations regarding the timing and results of the Company's ongoing corporate SG&A optimization efforts, the target of being EBITDA positive by the end of calendar year 2020, expectations to continue to eliminate layers in the organization, expected increases in gross margins, implementing a cost rationalization program, consolidating corporate offices to reduce rent expense, other considerations that could impact achieving positive EBITDA, and the production capacity of cultivation and manufacturing factories.
This forward-looking information is based on certain assumptions made by management and other factors used by management in developing such information. These include the following:
By identifying such information and statements in this manner, MedMen is alerting the reader that such information and statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of MedMen to be materially different from those expressed or implied by such information and statements, including the following risks:
Although MedMen believes that the assumptions and factors used in preparing, and the expectations contained in, the forward-looking information and statements are reasonable, undue reliance should not be placed on such information and statements, and no assurance or guarantee can be given that such forward-looking information and statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information and statements. The forward-looking information and forward-looking statements contained in this press release are made as of the date of this press release, and MedMen does not undertake to update any forward-looking information and/or forward-looking statements that are contained or referenced herein, except in accordance with applicable securities laws. All subsequent written and oral forward-looking information and statements attributable to MedMen or persons acting on its behalf are expressly qualified in its entirety by this notice.
Non-IFRS Measures
This press release uses certain non-IFRS measures. Management uses non-IFRS financial measures, in addition to IFRS financial measures, to understand and compare operating results across accounting periods, for financial and operational decision-making, for planning and forecasting purposes and to evaluate the Company's financial performance. These measures include EBITDA, which is defined as net income or loss adjusted for net interest and other financing costs, provision for income taxes, and amortization and depreciation.
Management believes that these non-IFRS financial measures assess the Company's ongoing business in a manner that allows for meaningful comparisons and analysis of trends in the business, as they facilitate comparing financial results across accounting periods and to those of peer companies. Management also believes that these non-IFRS financial measures enable investors to evaluate the Company's operating results and future prospects in the same manner as management. These non-IFRS financial measures may also exclude expenses and gains that may be unusual in nature, infrequent or not reflective of the Company's ongoing operating results.
As there are no standardized methods of calculating these non-IFRS financial measures, the Company's methods may differ from those used by others, and accordingly, the use of these measures may not be directly comparable to similarly titled measures used by others. Accordingly, these non-IFRS financial measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
SOURCE: MedMen Enterprises
MEDMEN ENTERPRISES INC. | ||||||||||
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | ||||||||||
AS OF SEPTEMBER 28, 2019 AND JUNE 29, 2019 | ||||||||||
(Amounts Expressed in United States Dollars Unless Otherwise Stated) | ||||||||||
September 28, 2019 |
June 29, 2019 |
|||||||||
ASSETS | ||||||||||
Current Assets: | ||||||||||
Cash and Cash Equivalents | $ |
42,236,178 |
|
$ |
33,753,751 |
|
||||
Restricted Cash |
|
12,141 |
|
|
55,618 |
|
||||
Accounts Receivable |
|
3,151,631 |
|
|
1,487,430 |
|
||||
Current Portion of Prepaid Rent - Related Party |
|
- |
|
|
1,580,205 |
|
||||
Prepaid Expenses |
|
8,472,119 |
|
|
14,147,213 |
|
||||
Derivative Assets |
|
2,448,562 |
|
|
5,213,126 |
|
||||
Income Taxes Receivable |
|
2,994,072 |
|
|
3,459,019 |
|
||||
Biological Assets |
|
2,754,899 |
|
|
3,076,158 |
|
||||
Inventory |
|
40,456,695 |
|
|
29,176,192 |
|
||||
Assets Held for Sale |
|
8,453,664 |
|
|
- |
|
||||
Other Current Assets |
|
22,947,187 |
|
|
18,913,039 |
|
||||
Due from Related Party |
|
5,403,130 |
|
|
4,921,455 |
|
||||
Total Current Assets |
|
139,330,278 |
|
|
115,783,206 |
|
||||
Non-Current Assets: | ||||||||||
Prepaid Rent - Related Party, Net of Current Portion |
|
- |
|
|
4,327,077 |
|
||||
Property and Equipment, Net |
|
399,493,631 |
|
|
220,989,461 |
|
||||
Intangible Assets, Net |
|
179,209,136 |
|
|
175,552,837 |
|
||||
Goodwill |
|
91,933,531 |
|
|
85,560,531 |
|
||||
Other Assets |
|
39,439,999 |
|
|
32,417,123 |
|
||||
Total Non-Current Assets |
|
710,076,297 |
|
|
518,847,029 |
|
||||
TOTAL ASSETS | $ |
849,406,575 |
|
$ |
634,630,235 |
|
||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||
LIABILITIES: | ||||||||||
Current Liabilities: | ||||||||||
Accounts Payable and Accrued Liabilities | $ |
53,849,166 |
|
$ |
49,794,041 |
|
||||
Income Taxes Payable |
|
24,453,535 |
|
|
16,873,177 |
|
||||
Other Current Liabilities |
|
11,758,575 |
|
|
10,550,240 |
|
||||
Derivative Liabilities |
|
4,215,065 |
|
|
9,343,485 |
|
||||
Current Portion of Lease Liabilities |
|
17,570,252 |
|
|
2,502,813 |
|
||||
Current Portion of Notes Payable |
|
13,146,816 |
|
|
20,229,641 |
|
||||
Due to Related Party |
|
4,922,968 |
|
|
5,640,817 |
|
||||
Total Current Liabilities |
|
129,916,377 |
|
|
114,934,214 |
|
||||
Non-Current Liabilities: | ||||||||||
Lease Liabilities, Net of Current Portion |
|
276,134,636 |
|
|
95,726,766 |
|
||||
Other Non-Current Liabilities |
|
49,835,098 |
|
|
30,877,794 |
|
||||
Deferred Tax Liabilities |
|
24,500,321 |
|
|
24,578,609 |
|
||||
Senior Secured Convertible Credit Facility |
|
115,767,928 |
|
|
90,270,837 |
|
||||
Notes Payable, Net of Current Portion |
|
74,851,057 |
|
|
77,392,749 |
|
||||
Total Non-Current Liabilities |
|
541,089,040 |
|
|
318,846,755 |
|
||||
TOTAL LIABILITIES |
|
671,005,417 |
|
|
433,780,969 |
|
||||
SHAREHOLDERS' EQUITY: | ||||||||||
Share Capital |
|
629,761,969 |
|
|
556,651,469 |
|
||||
Contributed Surplus |
|
69,776,751 |
|
|
63,026,656 |
|
||||
Accumulated Deficit |
|
(435,078,733 |
) |
|
(383,622,726 |
) |
||||
Total Equity Attributable to Shareholders of MedMen Enterprises Inc. |
|
264,459,987 |
|
|
236,055,399 |
|
||||
Non-Controlling Interest |
|
(86,058,829 |
) |
|
(35,206,133 |
) |
||||
TOTAL SHAREHOLDERS' EQUITY |
|
178,401,158 |
|
|
200,849,266 |
|
||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ |
849,406,575 |
|
$ |
634,630,235 |
|
MEDMEN ENTERPRISES INC. | ||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||
13 WEEKS ENDED SEPTEMBER 28, 2019 AND THREE MONTHS ENDED SEPTEMBER 30, 2018 |
||||||||||
(Amounts Expressed in United States Dollars Unless Otherwise Stated) | ||||||||||
13 Weeks Ended September 28, 2019 |
Three Months Ended September 30, 2018 |
|||||||||
Revenue | $ |
43,974,745 |
|
$ |
21,460,195 |
|
||||
Cost of Goods Sold |
|
22,150,013 |
|
|
9,809,333 |
|
||||
Gross Profit Before Fair Value Adjustments |
|
21,824,732 |
|
|
11,650,862 |
|
||||
Realized Fair Value of Inventory Sold |
|
(10,997,772 |
) |
|
- |
|
||||
Unrealized Gain on Changes in Fair Value of Biological Assets |
|
6,386,921 |
|
|
(1,947,936 |
) |
||||
Gross Profit |
|
17,213,881 |
|
|
9,702,926 |
|
||||
Expenses: | ||||||||||
General and Administrative |
|
49,066,463 |
|
|
65,739,450 |
|
||||
Sales and Marketing |
|
5,783,728 |
|
|
4,800,233 |
|
||||
Depreciation and Amortization |
|
11,280,064 |
|
|
2,450,320 |
|
||||
Total Expenses |
|
66,130,255 |
|
|
72,990,003 |
|
||||
Loss from Operations |
|
(48,916,374 |
) |
|
(63,287,077 |
) |
||||
Other Expense (Income): | ||||||||||
Interest Expense |
|
11,618,049 |
|
|
2,410,032 |
|
||||
Interest Income |
|
(369,342 |
) |
|
- |
|
||||
Amortization of Debt Discount and Loan Origination Fees |
|
2,931,805 |
|
|
58,758 |
|
||||
Change in Fair Value of Derivatives |
|
(132,895 |
) |
|
(773,929 |
) |
||||
Unrealized Gain on Changes in Fair Value of Investments |
|
(11,480,321 |
) |
|
- |
|
||||
Unrealized Loss on Changes in Fair Value of Contingent Consideration |
|
2,743,443 |
|
|
- |
|
||||
Other Expense |
|
20,438,042 |
|
|
105,627 |
|
||||
Total Other Expense |
|
25,748,781 |
|
|
1,800,488 |
|
||||
Loss Before Provision for Income Taxes |
|
(74,665,155 |
) |
|
(65,087,565 |
) |
||||
Provision for Income Taxes |
|
7,970,304 |
|
|
1,408,658 |
|
||||
Net Loss and Comprehensive Loss |
|
(82,635,459 |
) |
|
(66,496,223 |
) |
||||
Net Loss and Comprehensive Loss Attributable to Non-Controlling Interest |
|
(51,159,144 |
) |
|
(54,018,293 |
) |
||||
Net Loss and Comprehensive Loss Attributable to Shareholders of MedMen Enterprises Inc. | $ |
(31,476,315 |
) |
$ |
(12,477,930 |
) |
||||
Loss Per Share - Basic and Diluted: | ||||||||||
Attributable to Shareholders of MedMen Enterprises Inc. | $ |
(0.16 |
) |
$ |
(0.27 |
) |
||||
Weighted-Average Shares Outstanding - Basic and Diluted |
|
191,711,038 |
|
|
46,948,133 |
|
||||
MEDMEN ENTERPRISES INC. | ||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||
13 WEEKS ENDED SEPTEMBER 28, 2019 AND THREE MONTHS ENDED SEPTEMBER 30, 2018 |
||||||||||
(Amounts Expressed in United States Dollars Unless Otherwise Stated) | ||||||||||
13 Weeks Ended September 28, 2019 |
Three Months Ended September 30, 2018 |
|||||||||
|
|
|
|
|||||||
CASH FLOW FROM OPERATING ACTIVITIES: | ||||||||||
Net Loss and Comprehensive Loss | $ |
(82,635,459 |
) |
$ |
(66,496,223 |
) |
||||
Adjustments to Reconcile Net Loss and Comprehensive Loss to Net Cash Used in Operating Activities: | ||||||||||
Unrealized Gain on Changes in Fair Value of Biological Assets |
|
(6,386,921 |
) |
|
- |
|
||||
Deferred Tax (Recovery) Expense |
|
(78,288 |
) |
|||||||
Interest Expense |
|
11,618,049 |
|
|
- |
|
||||
Realized Fair Value of Inventory Sold |
|
10,997,772 |
|
|
- |
|
||||
Depreciation and Amortization |
|
15,009,625 |
|
|
2,661,950 |
|
||||
Accretion of Debt Discount and Loan Origination Fees |
|
2,931,805 |
|
|
58,758 |
|
||||
Change in Fair Value of Contingent Consideration |
|
2,743,443 |
|
|
- |
|
||||
Accretion of Deferred Gain on Sale of Property |
|
(252,084 |
) |
|
- |
|
||||
Unrealized Gain on Changes in Fair Value of Investments |
|
(11,480,321 |
) |
|
- |
|
||||
Loss on Extinguishment of Debt |
|
20,852,426 |
|
|
- |
|
||||
Share-Based Compensation |
|
5,076,484 |
|
|
11,183,536 |
|
||||
Shares Issued for Acquisition Costs |
|
421,497 |
|
|
- |
|
||||
Change in Fair Value of Derivatives |
|
(132,895 |
) |
|
(773,929 |
) |
||||
Changes in Operating Assets and Liabilities: | ||||||||||
Accounts Receivable |
|
(1,664,201 |
) |
|
5,746 |
|
||||
Prepaid Rent - Related Party |
|
- |
|
|
473,750 |
|
||||
Prepaid Expenses |
|
5,675,094 |
|
|
(9,885,821 |
) |
||||
Income Taxes Receivable |
|
464,947 |
|
|
- |
|
||||
Biological Assets |
|
(4,289,592 |
) |
|
1,947,936 |
|
||||
Inventory |
|
(10,875,503 |
) |
|
(4,905,117 |
) |
||||
Other Current Assets |
|
(558,609 |
) |
|
- |
|
||||
Due from Related Party |
|
(481,675 |
) |
|
(877,618 |
) |
||||
Other Assets |
|
(7,022,876 |
) |
|
3,342,671 |
|
||||
Accounts Payable and Accrued Liabilities |
|
2,199,410 |
|
|
16,624,543 |
|
||||
Income Taxes Payable |
|
7,580,358 |
|
|
- |
|
||||
Other Current Liabilities |
|
(2,950,720 |
) |
|
436,778 |
|
||||
Due to Related Party |
|
(717,849 |
) |
|
(4,060,138 |
) |
||||
NET CASH USED IN OPERATING ACTIVITIES |
|
(43,956,083 |
) |
|
(50,263,178 |
) |
||||
|
|
|||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||
Purchases of Property and Equipment |
|
(10,237,002 |
) |
|
(21,654,267 |
) |
||||
Internally Developed Software Cost Capitalized |
|
(1,580,400 |
) |
|
- |
|
||||
Purchase of Investments |
|
- |
|
|
(6,500,000 |
) |
||||
Proceeds from Sale of Property |
|
20,400,000 |
|
|
- |
|
||||
Distributions |
|
(310,633 |
) |
|
- |
|
||||
Acquisition of Businesses, Net of Cash Acquired |
|
(1,000,000 |
) |
|
(6,625,000 |
) |
||||
Additions to Restricted Cash |
|
43,477 |
|
|
4,752,612 |
|
||||
|
- |
|
||||||||
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES |
|
7,315,442 |
|
|
(30,026,655 |
) |
||||
|
|
|||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||
Exercise of Warrants for MedMen Corp Redeemable Shares |
|
- |
|
|
6,116,506 |
|
||||
Issuance of Subordinate Voting Shares for Cash |
|
38,894,012 |
|
|
61,579,231 |
|
||||
Proceeds from Issuance of Senior Secured Convertible Credit Facility |
|
25,000,000 |
|
|
- |
|
||||
Proceeds from Issuance of Notes Payable |
|
- |
|
|
2,473,339 |
|
||||
Principal Repayments of Notes Payable |
|
(10,193,715 |
) |
|
(5,740,630 |
) |
||||
Lease Liability Payments |
|
(5,863,079 |
) |
|
- |
|
||||
Interest Paid on Notes Payable and Senior Secured Convertible Credit Facility |
|
(2,204,356 |
) |
|
- |
|
||||
Debt Issuance Costs |
|
(509,794 |
) |
|
- |
|
||||
Contributions - Non-Controlling Interest |
|
- |
|
|
200,000 |
|
||||
|
|
|||||||||
NET CASH PROVIDED BY FINANCING ACTIVITIES |
|
45,123,068 |
|
|
64,628,446 |
|
||||
|
|
|||||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
|
8,482,427 |
|
|
(15,661,387 |
) |
||||
Cash and Cash Equivalents, Beginning of Period |
|
33,753,751 |
|
|
79,159,970 |
|
||||
|
|
|||||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ |
42,236,178 |
|
$ |
63,498,583 |
|
||||
MEDMEN ENTERPRISES INC. | ||||||||||
NON-IFRS RECONCILIATION | ||||||||||
13 WEEKS ENDED SEPTEMBER 28, 2019 AND | ||||||||||
THREE MONTHS ENDED SEPTEMBER 30, 2018 | ||||||||||
(Amounts Expressed in United States Dollars Unless Otherwise Stated) | ||||||||||
13 Weeks Ended September 28, 2019 |
Three Months Ended September 30, 2018 |
|||||||||
Net Loss (IFRS) | $ |
(82,635,459 |
) |
$ |
(66,496,223 |
) |
||||
Add Impact of: | ||||||||||
Transaction Costs |
|
1,019,922 |
|
|
1,423,351 |
|
||||
Share-Based Compensation |
|
6,411,409 |
|
|
11,183,536 |
|
||||
Other Non-Cash Operating Costs |
|
15,821,803 |
|
|
1,279,634 |
|
||||
Total Adjustments |
|
23,253,134 |
|
|
13,886,521 |
|
||||
Adjusted Net Loss (Non-IFRS) | $ |
(59,382,325 |
) |
$ |
(52,609,702 |
) |
||||
Net Loss (IFRS) | $ |
(82,635,459 |
) |
$ |
(66,496,223 |
) |
||||
Add Impact of: | ||||||||||
Net Interest and Other Financing Costs |
|
11,248,707 |
|
|
2,410,032 |
|
||||
Provision for Income Taxes |
|
7,970,304 |
|
|
1,408,658 |
|
||||
Amortization and Depreciation |
|
17,941,429 |
|
|
2,720,708 |
|
||||
Total Adjustments |
|
37,160,440 |
|
|
6,539,398 |
|
||||
EBITDA (Non-IFRS) | $ |
(45,475,019 |
) |
$ |
(59,956,825 |
) |
||||
EBITDA (Non-IFRS) | $ |
(45,475,019 |
) |
$ |
(59,956,825 |
) |
||||
Add Impact of: | ||||||||||
Transaction Costs & Restructuring Costs |
|
1,019,922 |
|
|
1,423,351 |
|
||||
Share-Based Compensation |
|
6,411,409 |
|
|
11,183,536 |
|
||||
Other Non-Cash Operating Costs |
|
15,821,803 |
|
|
1,279,634 |
|
||||
Total Adjustments |
|
23,253,134 |
|
|
13,886,521 |
|
||||
Adjusted EBITDA (Non-IFRS) | $ |
(22,221,885 |
) |
$ |
(46,070,304 |
) |
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