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After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, D. Sean Hyder, Chief Financial Officer. Thank you. Please go ahead.

Thank you. Good afternoon and welcome, everyone. Today I'm joined by our CEO, Tom Lynch. and COO, Tim Bosley. On today's call, management will provide prepared remarks, and then we will open the call to your question. Earlier today, we issued a press release announcing first quarter fiscal 2021 results for the period ending September 26, 2020. The press release, along with our financial statements and DNA, are available on the company's website and filed on both EDGAR and CDAR. Before we begin, I'd like to remind you that the comments on today's call will include forward-looking statements, which by their nature involve estimates, projections, goals, forecasts, and assumptions, and are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statement. Forward-looking statements relate to, among other things, the business and operations of MedMen, our plans for new stores, our financial and operational expectations, and our expectations as to future sources of funding. These forward-looking statements speak only as of the date of the conference call and should not be relied upon as predictions of future events. Additional information about the material factors and assumptions forming the basis of forward-looking statements and risk factors are provided in the company's report filed with the United States Securities and Exchange Commission and Canadian securities regulators, including the company's press release which was issued earlier today and is available under the company's profile on both EDGAR and CETA. During today's conference call, MedMen will refer to certain non-GAAP measures that do not have any standardized meaning prescribed by GAAP, such as EBITDA, adjusted EBITDA, and corporate SG&A, which are defined in the earnings press release we issued earlier today. Reconciliations to GAAP measures are contained in the press release and our MD&A. Please note, all financial information is provided in U.S. dollars unless otherwise indicated. Now with that, I'd like to turn the call over to Tom.

Thank you, everyone, for joining us this afternoon. We hope everyone is staying safe and healthy during these unprecedented times. On the call today, we'll review our first quarter, provide an update on the company's turnaround progress, including recent operational initiatives, and then discuss our financial performance for the first quarter. From a macro perspective, this past election season saw still more jurisdictions join the growing chorus of states that have legalized adult use of medical cannabis. Additionally, a full 67% of the country, a bipartisan majority, now support legalization. And we saw the historic passage of the Moore Act in the House of Representatives just last week. We're optimistic that 2021 will continue to bring good news for the cannabis industry and will continue to work towards a world where cannabis is legal and regulated. In addition to states legalizing adult use of medical cannabis, we're excited about the local progress in our core market in California, where several new cities that are in close proximity to our existing footprint approved cannabis measures. This week, we're also pleased to announce the addition of Tracy McCork to our executive team as our new chief revenue officer. She will lead the omnichannel marketing strategy, as well as the company's buying, merchandising, and business intelligence efforts. A leader in pioneering customer experience management for over 20 years, Tracy has developed in-store and online sales, product and marketing strategies for leading brands, including Skechers, Guess, Murad, President of Hollywood, and most recently, Zappos.com. Her unique experience and success in customer targeting and retention will be invaluable to MedMen as we move into this next chapter of our business. Tracy is a tremendous hire for MedMen, and it speaks volumes to not only where MedMen is as a company right now, but the exponential potential for our company in the future. Our ability to attract and retain exceptional talent will continue to be a differentiator for MedMen against our competitors. With that, let's jump into discussing our fiscal first quarter, which was a transformative one for the business across a number of fronts and puts us ahead of schedule with respect to our turnaround plan. The primary goal of the turnaround plan was to improve the financial profile of the business, particularly in our core retail business. While we made significant progress over the past six months, external factors such as COVID and the rioting which led to store closures last quarter impacted the timing of achieving our turnaround milestones. This quarter was a much different story for us and surpassed even our internal expectations. We were excited to announce that during our first quarter, we generated $36 million in revenue, representing a 30% increase from the previous quarter, driven by a strong quarter in California where revenues grew by 34%. In addition to growing revenue, we were able to see the fruits of all the hard work with respect to our optimization efforts. Our retail gross margin surpassed 54%, and while we're not quite there yet on the company-wide positive adjusted EBITDA, we're able to achieve a $12 million improvement from last quarter, bringing our adjusted EBITDA loss to approximately $12 million, the best quarter ever for the company. This is also the first quarter in which we achieved positive cash flow after tax across our retail footprint, a significant milestone for the team. In addition to optimizing our retail model, right-sizing our corporate infrastructure was the next biggest task. At its peak, the company's corporate-related SG&A was approximately $160 million. Over the past several quarters, we've continued to chip away at that, and I'm excited to announce that our corporate SG&A this quarter was just over $40 million. We've done all of this while improving overall efficiency, upgrading talent across the organization, and maintaining our growth prospects. The next big priority was to strengthen the balance sheet of the company by first deferring as many cash commitments as possible, and then attracting capital from both new and existing capital partners. During the quarter, we executed lender and landlord support agreements to defer $32 million in interest and rent over the next 12 months, while also modifying certain covenants for additional flexibility. Further evidence of the belief our capital partners have in the long-term value of the business. The next step was to raise additional funds. During the quarter, we announced $20 million in new financing commitments across a few different facilities. Our investors later upsized this commitment to $26 million because of the positive developments during the quarter. While there is still work to be done on strengthening our cash position, we believe we are more investable than ever with a true line of sight to profitability. Lastly, while this is a turnaround situation that requires a standard turnaround playbook of right-sizing the cost structure, eliminating liabilities, and narrowing down the focus of the company. The most exciting part about this role for me is being able to evolve the turnaround story into a growth one. We've been able to build the most recognized brand in the industry. And while we've had to hit pause on new store openings and expansions into new markets, We are well positioned to begin planning for an acceleration of growth in existing markets such as California and Florida, where we have a number of high-profile stores set to open over the next 12 months, as well as new markets like Massachusetts, where we have some of the best locations in the state. We're pleased with how much we've been able to execute in a short amount of time and also understand the urgency in which our shareholders and capital partners expect us to turn the company around. We take this responsibility extremely seriously, and I appreciate the patience. I look forward to continuing leading this company through the next chapter and will continue to share updates as they develop. With that, I will hand it over to Tim Bossidy, our COO, for operational highlights.

Thank you, Tom. First, I, like Tom, am incredibly excited about the progress we continue to make here at MedMed. Our first quarter results are a testament to the tireless work put in by each team here. We are building a foundation for sustainable growth and continue to execute on the turnaround plan. As Tom mentioned, our focus is on driving retail profitability. We do not want this to be interpreted as the only place we focus operationally. We have the same laser focus across the business. But improving and removing complexity from our supply chain and our cultivation facilities shows up in our primary KPI, retail cash flow. Generating significant cash flow from our retail footprint and then expanding our footprint in a disciplined manner will not only limit the financings and dilution required to cover our corporate overhead, but will begin to generate capital to invest in new store openings and additional marketing efforts. Retail cash flow will be what spins the flywheel and accelerates the growth of the MedMed brand. With respect to retail revenue, there are a number of initiatives we put into place over the past several months, which were drivers of some of the revenue growth we saw this quarter. As mentioned last quarter, we've made significant changes to how we think about marketing to our customers, and we continue to focus on high ROI customer connection. Over the past several months, we have been extremely disciplined on allocation of budget to marketing while we redefined our assortment and learned about our changed customer base. We continue to learn, and as we do, we will grow our budget in a targeted manner. As we mentioned last call, MedMen had shied away from third party listing services that represent a jumping off point for millions of cannabis consumers and patients. This past quarter, we successfully integrated a number of these services into our POS systems and have successfully boosted awareness of local customers. Return on this spend and these immigration efforts are starting to appear. Our local customer base has also benefited from the changes we've made with respect to our curation and buying process. our emphasis is on having the best product and improving availability of high turning speeds for our customers which in turn is boosted in short conversion with respect to one of our key medical markets florida we are shifting our focus to educating physicians on how our products are the safest and highest quality to recommend to their patients that plus our increase in cultivation yield and higher flower quality has resulted in average revenue per box of $3 to $4 million, representing continuing double-digit growth rates month over month. As a management team, we are highly confident in our ability to continue scaling revenue. It is our firm belief that as the economic environment improves and the pandemic is better managed and controlled, Our improved assortment, customer experience, and marketing initiatives will drive continued revenue growth during the remainder of fiscal 2021. Turning to our main retail cost drivers, I'll discuss four key initiatives that we were able to achieve during the quarter. The biggest improvement we made was related to our sourcing of products. Our gross margins at retail surpassed 54%, the highest they've ever been. We've been able to secure best-in-class pricing and terms with our key vendors through improved communication, transparency, and partnership. We believe it is a mutually beneficial relationship. Our vendors are thrilled by our revamped buying and allocation process, but more importantly to them, our stores are a place for discovery and for the highest quality products. So for our partners, our shelves provide an appreciable lift to their brands. In terms of payroll, our second biggest four-wall cost The dynamic staffing model we discussed on the last call continues to provide cost savings, with payroll as a percentage of revenue down approximately four points from the previous quarter, with California leading the way. Through our efforts from the start of the turnaround plan, we've been able to save over $15 million on an annualized basis. In addition to payroll optimization, we are also undergoing a number of other enhancements to our stores that have chipped away at our retail cost structure. including changes to payment processing and sourcing of store supplies. In aggregate, our continued execution on our four-wall efforts has enabled us to achieve our first full quarter of being cash flow positive on an after-tax basis and an adjusted retail yield at a margin of 19%. Next, I'd like to spend some time providing an update of progress in each market, starting with our recreational markets. As an update for California, While we continue to operate some of the best stores in the state, we plan to enhance our footprint further with two new stores in San Francisco, a new store in Emeryville, and a new store in Pasadena. We've also nearly completed our LAX store expansion, already our highest grossing and most profitable store in the state. Moving over to Nevada, we saw a 192% increase in revenue this past quarter as tourism began to return without the impact of state-mandated closures due to COVID-19. As we look ahead, we will continue to evaluate new store opportunities in the broader Las Vegas market, given the tremendous brand synergies between Southern California and Vegas. With the tightness in the Nevada wholesale market, we also expect that the various cultivation partnerships we are working on will show up in improved revenue and margin in the coming quarters. In Illinois, our Oak Park location continues to perform extremely well. This location is the best-performing store in the national portfolio in terms of revenue. During the quarter, we made the tough decision to sell our Evanston location. While we were excited about the prospects of the Illinois market, given capital needs to the turnaround plan, the ability to bring in $20 million of cash proceeds in short order was highly attractive to us. We still expect to expand the net market as we evaluate the additional location associated with our Oak Park license. Our final recreational market is Massachusetts. We've made significant progress here on the licensing front. We recently announced that the Massachusetts Cannabis Control Commission voted in favor of granting us a provisional adult use license in both our Fenway and Newton locations. Moving on to our medical markets, we are especially excited about Florida, which we believe can grow to be the second largest state for MedMed. We are proud to say our Shrink to Grow plan continues to drive results. The current team at Eustis is doing a fantastic job improving both plant yield and quality. Yields continue to improve within our existing canopy, and testing results with improved genetics are showing significant gains. While we have always prided ourselves on producing the safest and cleanest flower available in Florida, we are now also showing THC levels well into the 20% range, and had a recent test over 30%. We will also be rolling out co-manufacturing agreements to add to our momentum at Eustis that will be additive to our assortment, revenue, and patient experience. I want to spend a second here on the growth pipeline in Florida as well. We believe that with a CapEx investment of under $5 million, we will be able to extend Canopy MS to power up to an additional 10 locations opening in calendar 21. And as a reminder, most of these stores are ready or almost ready to go. We have five locations currently mothballed and another four ready to go with minimal incremental CapEx dollars. In our other medical market, New York, we continue to operate four store locations, including our Fifth Avenue location, as well as our cultivation and manufacturing operation in Utica. We've seen an uptick in revenue and profitability across the New York asset as well, which is, again, reflective of a cohesive operational improvement that shows up in our retail profitability and cash flow. last update i will provide is on our cultivation and manufacturing strategy going forward during this first quarter we announced we had landlord support to pursue partnerships in our california and nevada facilities dhs and mustang we are close to the finish line of an agreement to pair with a strong cultivation partner that would take operational and financial control of these sites and provide significant value to our retail stores through vendor agreements and marketing agreements, in addition to supply agreements for our MedMen Red private label offering. This will be a highly synergistic partnership that we hope to share additional updates on shortly. And now I'll turn it to Zeeshan.

Thank you, Tim.

As a reminder, as of June 28, 2020, The company no longer met the qualification as a foreign private issuer as a result of more than 50% of the company's outstanding voting shares being held by residents of the U.S. We are now considered a U.S. domestic issuer under the rules of the SEC. As such, our financial statements for our first quarter of fiscal 2021, just as they were last quarter, were prepared in accordance with U.S. GAAP. Let's jump into the financials. Consistent with prior quarters, all the figures on today's call are in U.S. dollars. In addition, I'll refer to our top line performance in terms of system-wide revenue, as we believe that is the best representation of our economic progress. You can find further information on these financial measures in our MD&A for the first quarter. At a high level, this quarter is the best one we've had in terms of company-wide and retail profitability, and we are excited to share details. System-wide revenue for our fiscal first quarter was $35.6 million, of 31% from $27.4 million in the previous quarter. Gross profit for the quarter was $16.1 million, leading to a gross margin of 47%, a seven-point increase over gross margin in the previous quarter. We continue to right-size our cost structure at corporate and at our stores and facilities. General and administrative expenses, which totaled $31.7 million, declined by 41% from the same period last year and 21% from the previous quarter. The improvement in G&A expenses was primarily driven by significant reduction in corporate-related expenses, including payroll, professional fees, and deal costs. Our first quarter adjusted corporate SG&A totaled approximately $10 million, a 66% decrease from the same period last year when we were at $30 million in quarterly corporate SG&A spend. Even compared to the previous quarter, we saw a 29% decrease. While there are other additional optimization opportunities, we believe our corporate costs, which now sit at approximately $41 million on an annualized basis, are at the appropriate levels for both managing our existing asset base and supporting the growth we expect over the next 12 to 18 months. Turning to profitability, we were able to cut our overall adjusted EBITDA loss in half this quarter, coming in at $11.7 million compared to the previous quarter's loss of $23.3 million. In the same period last year, our adjusted EBITDA loss was $32.4 million. As revenue continues to rebound from the early days of COVID-19, and as we move our cultivation and production partnership discussions at DHS and Mustang along, we believe there is a clear path to achieving break-even EBITDA, especially considering the retail profitability we were able to achieve this past quarter. which I'll get into shortly. Overall net loss and comprehensive loss attributable to shareholders of MedMen was $21.9 million or 6 cents per share compared to $33.1 million or 15 cents per share in the previous year. Let's now take a deeper look at our retail business. Retail revenue for the first quarter totaled $35.3 million, up 29% sequentially. This increase in revenue was driven by our California footprint, which was up 34% this quarter over the previous quarter. Our flagship stores such as LAX, Beverly Hills, and West Hollywood were up 56%, 39%, and 31% respectively during the quarter. Several factors contributed to the sequential increase in California. First, the lifting of shelter-in-place orders earlier this year resulted in increased store traffic into our stores. Second, In the last quarter, we temporarily closed most of our California stores due to social unrest and rioting in May, which had a sizable impact on revenue. And third, our product assortment and quality has vastly improved over the past six months, which has been well received by the customers. It's important to note that for this quarter, we're only recognizing partial revenue for our Evanston retail store because of our agreement to divest the license to a third party. Our pre-announced revenue number for this quarter of $37 million included a full quarter of Evanston revenue. Moving down to retail gross margin, we recorded our best quarter ever, 54% nationally and 56% in California. By consolidating our product portfolio, we've developed extremely strong relationships with our key vendors in each of our markets on pricing and payment terms that are very favorable to MedMen. Even with all the progress over the past six months, there is still significant opportunity to expand margins. In Illinois, we are still hovering around mid-40s. As that market normalizes, we expect to reach our gross margins north of 50%. The same holds true in Nevada, where margins still have room for improvement. And as our Mustang partnership discussions move along, we anticipate our supply deals with a potential partner will allow us to move these margins up. In addition to retail gross margin, we made significant improvements in overall retail EBITDA as well. Our adjusted retail EBITDA jumped to positive 19% this quarter from breakeven in the previous quarter, primarily driven by further payroll optimization and reductions in our store operating costs, such as payment processing. Even when factoring in federal, state, and local taxes, we were cash flow positive for the quarter across the retail for the first time in the company's history. We are thrilled with the progress in our retail footprint and believe that as Popeye normalizes and our growth smarts continue to tick up, we will put ourselves in a great position to cover our corporate costs and growth initiatives through the cash flow we are producing across our stores. Moving on to the balance sheet, we ended the quarter with $10 million in cash and cash equivalent. There were a number of capital raising transactions we completed subsequent to the quarter end, including additional capital coming in under our unsecured convertible facility as well as an upsizing of our senior secure term loan. We continue to work closely with our capital partners to continue funding the business as we enter the home stretch of our turnaround plan. A quick note on our cap table as well. Given our multi-class structure, as of December 3rd, we had approximately 500.3 million subordinate voting shares and an additional 147.8 redeemable shares, which are convertible into subordinate voting shares on a one-to-one basis. To wrap up the prepared remarks, I, along with the rest of the team, are very optimistic and excited about what the rest of fiscal 2021 looks like for MedMen. We've made tremendous progress over the past year, and while there is still more work to do, with a revamped team and board, a renewed focus on our retail business, and additional capital, we are well positioned to reach profitability this year and return to growth as a leader in cannabis retail within the U.S. We will now open up the call to your questions.

As a reminder, to ask a question, you'll need to press star one in your telephone. If you wish to withdraw your question, press the pound key. And your first question comes from a line of Vivian Acer from Cowan. Your line is open.

Hi. Good evening. Thanks for the question. So first one, Zeeshan, just a housekeeping item. Given that your reporting cycle is happening so late, can you give us a more real-time update on what your cash balance looks like?

Hey, Vivian. So in terms of what we announced post the quarter end, so we announced as of the end of September, we had roughly $10 million or so on our balance sheet. Subsequent to the quarter end, we announced a couple different financings. One was the increase under the Stable Road banking facility, which was around $7.7 million. And then we drew down additional proceeds under our unsecured convertible facility of another couple million or so. So that's kind of what we announced post-quarter end. And then we're also kind of working on a few financing things right now with our existing capital partners to bring additional funds in.

Okay, that's helpful. And then my real question, as you guys kind of think about, you know, the operating landscape over the next few months, I mean, just today, I guess, stay-at-home orders went back into effect in Los Angeles and some other jurisdictions in California. So how are you guys thinking about the impact on consumer demand? Thanks.

Sure. This is Tom.

Absolutely. So I don't think there's any getting around the fact that reducing store capacity in California from 50% to 20% will have some impact on our in-store sales. But I think the positive thing to take out of this is that because we've built a foundation where we think we have an unbelievably good delivery operation, especially now with the addition of scheduled delivery and with the success that we've seen from curbside pickup, that we think we'll be able to weather through this and come out in pretty good shape. But there will be, you know, there would absolutely be a store impact just from capacity in the stores. But again, I think we're really well positioned with delivery and curbside pickup.

Understood. Thanks very much.

Your next question comes from the line of Scott Fortune from Roth Capital Partners. Your line is open.

Good afternoon, and thanks for taking the question. Kind of with your cash flow positions, and you want to grow for next year, 2021, what are your prioritizing resources in your capital allocations in 2021? You know, you have two stores in Massachusetts, four in Florida, potentially a second one in Illinois. Can you just step us through the near-term plan and timeline of that allocation, capital allocation of providing growth going forward here?

Yeah, Tim, why don't we take through those markets again?

Yeah, absolutely. So as discussed, I think our highest ROI dollars are going to be allocated to expanding our canopy within Florida, just given how attractive our store footprint is already in that market and how many stores are ready to go. So that's going to be our top priority in terms of allocation of CapEx dollars. And then after that, we've got minimal capex dollars to go again to open up our emeryville location which we're incredibly excited about and then as far as the two san francisco stories and the two massachusetts stores uh here part of that will be timed in in uh parallel with uh the regulatory pieces of getting those up and running um but those are also incredibly high roi opportunities on our list but they'll come right after allocating dollars to the florida canopy expansion

Okay, and then real quick, what's the follow-up on kind of the asset sales? You know, the one in Illinois, you took an opportunity there. Arizona and the other states that you're looking at, and, you know, with the favorable M&A market that's starting to occur here with the new legal rec states coming on board, any additional thoughts on your assets and the positioning for potential sales there?

go ahead so i mean i think we'll the way that we look at our portfolio right now is that We're going to continue to focus on what we view as our highest value markets where our brand resonates the absolute most for further expansion. And we'll continue to be disciplined about what other opportunities are out there from a cash standpoint and from a delivering the balance sheet standpoint. But for where we sit right now, you know, we think we're really well positioned with our current portfolio.

Okay. Thanks for the color. I'll pass it on.

Again, if you'd like to ask a question, it is star 1 on your telephone. And there are no further questions at this time. I will turn the call back over to our presenters for some closing remarks.

Well, I appreciate everyone taking the time to join us today. We're pleased with the progress that we're making, very pleased, despite the headwind, the macro headwind that we're all facing. We just hope that everyone stays safe and healthy, and we look forward to speaking with you all again. And thanks for taking the time. Take care.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.