Key Takeaways from MedMen’s First-Quarter Earnings

Cannabis retailer MedMen (MMNFF)(MMEN) reported its first quarter of fiscal 2020 earnings results yesterday after the markets closed. The stock has lost 64.4% since it reported its fourth-quarter earnings on October 28. Let’s see if its first quarter—which ended on September 28—was good or bad news.

MedMen reports higher revenue in Q1

MedMen reported a 105% year-over-year increase in revenue to $44 million. Sequentially, the company grew revenue by 5%. Notably, the company saw revenue growth across its business operations in Arizona, Nevada, New York, California, and Illinois. Strong supplier management led to an increase in MedMen’s gross margin to 52%, versus 50% in the prior quarter.

Also, MedMen reported a 21% decrease in selling, general, and administrative expenses to $30.6 million. The company cited its cost-cutting efforts and $31.6 million in annualized savings.

Despite the lower expenses, it reported an adjusted EBITDA loss of $22.2 million.

Management weighs in on earnings

Adam Bierman, MedMen co-founder CEO, said, “We entered Fiscal 2020 on a mission to build a more nimble and financially flexible MedMen. 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 the calendar year 2020.”

How did MedMen perform by state?

The company provided an update for its state operations in its Q1 press release. MedMen saw a 9% sequential increase in revenues in California to $30 million. Currently, MedMen has 13 stores in California that are fully operational.

Also, MedMen opened three new stores in Florida. It has four medical cannabis dispensaries in New York as well. The company also mentioned that it could successfully operate four recreational stores in Illinois in 2020.

Plans to achieve profitability

MedMen plans to attain positive profitability by the end of 2020. It has designed a five-part plan. The company stated, “The 90-day plan includes: 1) focusing on core markets while divesting non-core assets; 2) reducing corporate SG&A; 3) driving asset-level EBITDA; 4) limiting cash outlays for the next 12 months; and 5) reinvesting in the Company’s employees and culture.”

Also, MedMen made some cuts to its workforce to attain $10 million in annual cost savings. The company plans to achieve positive EBITDA by cutting down on its marketing and technology expenses.

Peer cannabis companies’ earnings

Major Canadian cannabis players reported their earnings report this month. Aurora Cannabis (ACB), Canopy Growth (CGC)(WEED), and Cronos Group (CRON) reported lower-than-expected earnings. As a result, all cannabis took a hit this month.

However, Curaleaf (CURLF) reported impressive third-quarter fiscal 2019 results. The company saw a 189% increase year-over-year in total revenue to $61.8 million. Also, Curaleaf’s management mentioned in its press release that its organic growth in Florida and New York—and its acquisitions in Arizona and Maryland—helped drive sales. Curaleaf also reported positive profitability of $9 million for the third quarter of 2019. To learn more about Curaleaf’s earnings, please take a look at Curaleaf Impressed with Strong Q3 2019 Earnings.

Lastly, Green Growth Brands (GGB)(GGBXF) reported its fiscal first-quarter 2020 results on November 25. The company reported revenue of $12.7 million, an increase of 77% quarter-over-quarter.

MedMen and peers’ stock performance

MedMen closed with a loss of 4.4% yesterday. Meanwhile, Aurora stock, Canopy Growth stock, and Cronos stock lost 5.1%, 1.8%, and 2.3% yesterday. Also, MedMen stock has lost 82.6% year-to-date.

After the results, Canaccord Genuity cut the target price for MedMen’s stock to 1 Canadian dollar from 2. Currently, out of the eight analysts covering the stock, one analyst is bullish on MedMen with a “buy” rating. Six recommend a “hold,” and one recommends a “sell.”

Cannabis stocks have suffered this month. However, the House passing of a marijuana legalization bill boosted stocks last week. To learn more about the bill, see Passed Legislation Is Driving Cannabis Stocks Today. And to learn more about the cannabis sector, see 420 Investor Daily.