MedMen Reports Q3 Earnings Following Profiles by Politico and Patriot Act with Hasan Minhaj

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MedMen Enterprises yesterday announced its 2020 fiscal third quarter earnings, reporting just 4% revenue growth compared to the previous quarter.

In a press release, the embattled Los Angeles-based cannabis firm said revenue totaled $45.9 million in Q3, representing growth of 41% year-over-year.

However, the multi-state marijuana retailer – which currently operates in California, Nevada, New York, Illinois and Florida – reported nearly $40 million in net losses during the quarter, even as it slashed SG&A expenses by 35%.

Nevertheless, interim CEO Tom Lynch said the company “continued to make significant progress” in Q3, pointing to topline growth and a reduction in corporate overhead as the primary measures of overall improvement.

“We are encouraged by the steps the business has taken to focus on disciplined growth and profitability amidst a challenging and unprecedented global environment,” he said, referring to the COVID-19 pandemic. “Through the strength of the MedMen brand and the capital partners that continue to support the company, we are well-positioned to execute on our goal of being the leading cannabis retailer.”

MedMen eked out modest growth in its home market of California, where same store sales rose 5% compared to the same quarter in 2019. Retail revenue in California totaled $29.6 million, up 19% versus the same period last year.

Meanwhile, in neighboring Nevada, retail revenue grew 5%, to $4.7 billion.

However, it was a nascent Illinois market, where MedMen operates just two dispensaries, that helped buoy the company in Q3. Retail revenues grew to $6.7 million during the quarter, a 282% increase versus Q2. Recall that Illinois only began adult-use cannabis sales in January.

Overall, MedMen was hampered by the ongoing coronavirus pandemic, which forced the company to temporarily close dispensaries in certain markets.

“Despite being deemed as an essential retailer in its core markets, the company has experienced a negative impact on sales in certain markets as a result of shelter-at-home orders, social distancing efforts, caps on maximum allowable people within a retail establishment, declining tourism and required modifications to store operations,” MedMen wrote in its release. “Certain markets, such as California and Nevada, experienced a greater impact on sales due to reduced foot traffic in certain locations.”

Wall Street punished MedMen’s stock (OTC: MMNFF) on Thursday, as shares fell -23%, to 0.27, at the close.

The selloff could be tied to a recent spate of negative press surrounding MedMen and the company’s co-founder and former CEO Adam Bierman, who resigned in January.

In a lengthy investigative report entitled “Lavish Parties, Greedy Pols and Panic Rooms: How the Apple of Pot Collapsed,” Politico reporters Ben Schreckinger and Mona Zhang summarize MedMen’s meteoric rise and its recent downward spiral.

Published Sunday, the article chronicles MedMen’s ambitious expansion plans, challenges co-founders Bierman and Andrew Modlin faced while scaling the brand in new markets, and the recurring warning signs of corporate distress that investors repeatedly shrugged off, among other MedMen moments over the last decade.

A day later, Bierman was called out in an episode of Hasan Minhaj’s “Patriot Act,” which airs on Netflix, entitled “The Legal Marijuana Industry Is Rigged.”

A few minutes into the 22-minute show, Minhaj notes Bierman's resignation and chalks the move up to a series of poor decisions that ultimately led to his removal.

“It could be because he paid himself millions before the company was profitable, or because their stock tanked, or because he allegedly called an LA city councilman a ‘midget Negro,’” Minhaj said.

Then today, the Associated Press reported that the Nevada secretary of state’s office is looking into allegations that Bierman made illegal campaign contributions to Governor Steve Sisolak.

That allegation was detailed in a 2019 lawsuit against MedMen brought by former CFO James Parker, and it was also featured in the Politico piece.

Taken together, the string of news clips does little to help MedMen’s image as a bad actor in a still emerging industry working to legitimize itself.

“If you all think the MedMen/Adam Bierman case is rare in the pot industry, I have a bridge to sell you,” tweeted Kevin Sabet, the founder and president of Smart Approaches to Marijuana (SAM), an anti-legalization lobbying group.

Despite the less-than-stellar earnings, both Cantor Fitzgerald and Cowen maintained their respective “neutral” and “market perform” ratings on MedMen. Cantor Fitzgerald has a price target of $0.40, while Cowen set its per share price at $0.35.

Other notes:

  • MedMen appointed SierraConstellation Partners senior managing director Tom Lynch as its interim CEO (and “chief restructuring officer”) in March.
  • SierraConstellation Partners director Tim Bossidy was also named interim COO in March.
  • Former Whole Foods vice president Errol Schweizer was also appointed to the MedMen board alongside Mel Elias -- the former president and CEO of The Coffee Bean & Tea Leaf – and angel investor Cameron Smith.
  • Niki Christoff, who currently serves as senior vice president of strategy and government relations at Salesforce, was also named to the board effective May 26, 2020.

Additional information is available in the company’s press release.


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