MedMen Reports 13% Year-over-Year Quarterly Revenue Growth

Q1 2022 Highlights

  • First quarter revenue from continuing operations increased 13.4% year-over-year
  • Total Retail Revenue including New York increased 17.6% year-over-year
  • During the quarter, Company announced transformative capital raise and restructuring of senior secured convertible note facility

MedMen Enterprises Inc. (“MedMen” or the “Company”) (CSE: MMEN) (OTCQX: MMNFF), a premier cannabis retailer with operations across the United States, today released its consolidated financial results for its first fiscal quarter of 2022, ended September 25, 2021. All financial information in this press release is reported in U.S. dollars, unless otherwise indicated.

“The past quarter we were able to deliver solid increases in year-over-year revenue despite sequential softening in the overall macro environment,” said Tom Lynch, Chairman and Chief Executive Officer of MedMen. “On the top-line, we outperformed Headset industry data in the majority of our markets, and we generated positive retail adjusted EBITDA for the fifth consecutive quarter. Additionally, shoring up our balance sheet during the quarter – and attracting strong partners in Tilray and Serruya – allows us to focus on executing our growth plan in the coming quarters, including plans to continue increasing our store footprint during fiscal 2022.”

Continued Lynch, “MedMen’s mission is to be the best-in-class cannabis retailer, and we are positioning ourselves to achieve this goal through focus, experience, improved financials and continuing to deliver the industry’s premier in-store experience. Over the next several quarters, we plan to both accelerate our growth and improve EBITDA profitability as we leverage our national brand recognition into opening new stores in Florida, California, Massachusetts, Arizona and Illinois.”

First Quarter Financial Highlights:

  • Revenue 1: Net revenue across MedMen’s continuing operations in California, Nevada, Illinois, Arizona and Florida was $39.8 million for the first quarter, a 13.4% increase year-over-year.
  • Gross Margin Rate and Retail Gross Margin Rate 2Total Gross Margin Rate was 43.9% in the first quarter, compared to 46.9% in the year ago period, driven by increased promotional activity during the quarter and an inventory write-down of $0.9 million at one of the Company’s cultivation and manufacturing facilities. Total Retail Gross Margin Rate was 52.0% in the first quarter, compared to 53.8% in the year ago period.
  • SG&A Expenses: General and administrative expenses were $37.2 million in the first quarter, a 22.2% increase from the same period last year.
  • Corporate SG&A 2Corporate SG&A excluding store pre-opening costs totaled $14.6 million in the first quarter, a 42.6% increase from the year ago period. The increase was largely driven by a $3.9 million increase year-over-year in professional fees as a result of litigation costs associated with previous officers of the company.
  • Net Loss: Net loss was $55.3 million compared to a net loss of $21.9 million in the year ago period.
  • Retail Adjusted EBITDA Margin Rate2: Retail Adjusted EBITDA Margin Rate from continuing operations was 17.3% compared to 15.1% in the year ago period.
  1. The Company executed definitive investment agreements to complete a majority investment in New York, subject to regulatory approval. New York operations are classified as discontinued operations. Arizona was reclassified to continuing operations during the fourth quarter of fiscal 2021.
  2. Retail Gross Margin Rate, Corporate SG&A and Retail Adjusted EBITDA Margin are non-GAAP financial measures as described below.

Balance Sheet:

As of September 25, 2021, the Company had total assets of $531.9 million, including cash and cash equivalents of $78.2 million.

Capital Markets and Financing:

  • Equity Private Placements: During the first quarter, the Company announced that investors, led by Serruya Private Equity, purchased $100.0 million of units, which consisted of 416,666,640 Class B Subordinate Voting Shares and five-year warrants to purchase 104,166,660 Class B Subordinate Voting Shares at an exercise price of $0.288 per share. Proceeds from the private placement will allow MedMen to expand its operations in key markets such as California, Florida, Illinois, Arizona and Massachusetts, and identify and accelerate further growth opportunities across the United States.
  • Senior Secured Convertible Financing: During the first quarter, a newly formed limited partnership established by Tilray, Inc. and entities affiliated with Serruya Private Equity acquired a majority of the outstanding senior secured convertible notes (the “Notes”) and warrants of MedMen previously held by certain funds affiliated with Gotham Green Partners, LLC and other funds (collectively, “GGP”) pursuant to a senior secured convertible facility (the “Facility”). In connection with this transaction, the parties to the Facility extended the maturity date of the Notes to August 2028, eliminated any cash interest payable and instead provided for paid-in-kind interest, eliminated certain repricing provisions that apply to the Notes and the warrants, eliminated and revised certain restrictive covenants and amended the minimum liquidity covenant, all of which provide MedMen the flexibility to execute on its growth priorities and explore additional strategic opportunities.

Operations by Market 1:

  • California: California Revenue across 12 store locations totaled $24.6 million during the quarter, an 18.8% increase year-over-year.
  • Nevada: Nevada Revenue across three store locations totaled $4.0 million during the quarter, a 16.6% increase year-over-year.
  • Florida: Florida Revenue across six store locations totaled $3.1 million during the quarter, a 40.7% increase year-over-year. During the quarter, the Company opened a new store location in Orlando. Subsequent to the end of the quarter, the Company re-opened its store in Tallahassee.
  • Illinois: Illinois Revenue at the Company’s flagship store in Oak Park totaled $4.3 million during the quarter, a 10.8% decrease year-over-year. The Company’s second location in Morton Grove is expected to open in the spring of 2022.
  • Massachusetts: The Company expects to open its Fenway Park store during the fiscal second quarter, subject to regulatory approval, and continues to progress towards opening its Newton location.
  • Arizona: Arizona Revenue at the Talking Stick store increased 130.1% year-over-year to $2.5 million for the first quarter. Arizona Wholesale Revenue increased to $1.2 million from $0.5 million in the year ago period.
  • New York: The Company previously announced a definitive investment agreement with Ascend Wellness Holdings involving all four New York MedMen locations where, subject to regulatory approval, MedMen will no longer hold a controlling interest in its New York operations. Currently MedMen operates these four medical dispensaries in the state.

(1) Except as noted for Arizona, revenues reported by state consist of all revenue generated from retail operations in that state. Arizona Wholesale Revenue consists of sales from the Mesa cultivation facility.

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