MedMen Enterprises Inc. (CSE: MMEN OTCQX: MMNFF) reported a different quarter of heavy losses as the California-primarily based cannabis organization scrambles to suitable-size and stay clear of bankruptcy.
Grizzle was very first to lay out the correct scale of the troubles facing MedMen and warned investors in October that the organization was in a debt-fuelled death spiral with incredibly couple of approaches to escape.
This quarter did absolutely nothing to modify our thesis.
Medmen reduce the money burn down to $56 million from $95 million final quarter and has a different $115 million or so they can borrow, but with $11 million of quarterly interest expense against only $22 million of gross profit and adverse $30 million of cashflow, it is only a matter of time ahead of the bill will come due.
No matter how undesirable the losses, MedMen investors should really be cutting their losses and moving on. This stock is absolutely nothing a lot more than a speculative trading automobile from now till the organization runs out of funds.
Breaking Down the Quarter
The fiscal Q1 2020 period saw MedMen bring in $44 million in income — with $30 million of that quantity coming from California operations — up slightly from $42 million in income final quarter.
A recurring theme of MedMen burning by means of a lot more money than the organization is taking in continued in the period ending Sept. 28, having said that, with a loss of $48.9 million reported. That quantity is down slightly compared to a loss of $53 million in fiscal Q4 2019.
An adjusted EBITDA loss of $29.six million was announced for Q1 2020, down from the $39.four million loss in the earlier quarterly report.
MedMen ended the quarter with $42 million in money on hand but $53 million in accounts payable and a total of $129 million in liabilities.
Commenting on the target of reaching monetary stability for one particular of the most well identified cannabis providers in the United States, CEO Adam Bierman had this to say:
As we suitable-size our organization and implement a concentrate on totally free money flow generation, our organization will turn out to be a lot more effective, permitting us to superior serve our stakeholders. By way of the execution of these ambitions, we anticipate MedMen will be EBITDA optimistic by the finish of calendar year 2020.
While most of the company’s actions to move towards a optimistic balance sheet occurred immediately after the quarter’s finish, this newest period saw a incredibly slight decline in operating costs from $68.87 million final quarter to $66.13 million in fiscal Q1.
MedMen is now enacting drastic measures to move additional in that path. Most not too long ago the organization announced a program to let 190 personnel go, or about 20% of the total employee count, which is anticipated to save $10 million annually.
The organization also notably cancelled the previously announced PharmaCann acquisition in early October. Even though that axed deal sees MedMen forgiving $21 million in owed debt, the terms of the termination charge grant the organization an added cultivation facility and retail sale web site in Illinois.
MedMen’s positive EBITDA program in addition consists of decreasing corporate SG&A, dropping advertising and tech costs by $20 million going into the new quarter.
On the fundraising front, the organization is expecting to bring in a final $10 million tranche from the Gotham Green Partners investment by the finish of the month.
MedMen’s stock has lost 88% of its worth in the final 10 months, trading at $.44 a share this morning and down drastically from the higher of $three.62 back in January.