MedMen Enterprises Inc (CNSX: MMEN) announced their Q2 financial results on Wednesday. Despite significant increases in sales and other financial metrics, analysts remain worried that the company’s significant financial losses continue to grow as the business struggles to become profitable.
The company reported that its revenues increased by 39 percent to $29.9 million, partially driven from the Californian market with eight retail locations boasting a combined revenue of $23.7 million. Overall profit margins increase by 8 percent, growing from 45 percent to 53 percent over a single quarter. Other developments for MedMen included the appointment of Michael Kramer as CFO alongside the acquisition of facilities in Arizona and California.
“Our strong second quarter results support MedMen’s commitment to drive strong retail and sales performance, while efficiently scaling the Company and executing on our growth strategy,” said Adam Bierman, MedMen co-founder and CEO. “As we emphasized last quarter, we are in a new phase of growth, one focused on continuing to operationalize our industry-leading retail footprint and increasing our profitability. We are confident in the team we’ve built to drive our success.”
Despite the positive figures for the most part, there is one concerning metric that has analysts worried. Overall, the company had $65 million worth losses over the quarter, burning a startling amount of cash. The December quarter had seen the company’s free cash flow in the negative with $110 million in losses as opposed to the $80 million loss seen in the September quarter.
Overall, the company’s expansions have come from issuing additional shares to acquire new facilities, but by lacking a profitable core business to support this strategy, the business has been losing money at an increasing rate as it’s forced into selling off assets to cover these declines.
MedMen’s problems also come from other areas. The company’s former CFO that departed has now filed a lawsuit against the business alleging insider enrichment without transparent disclosure, a claim that sounds similar to the scandal Aphria Inc (TSE: APHA)(NYSE: APHA) found itself in months ago.
Court filings have revealed that the executives of MedMen earned $10 million collectively as the company, and from an outside perspective, looks quite bad when combined with the fact that the company has looked into hire a crisis management consultant.
Earlier this month, MedMen was asked to resign from the New York medical marijuana free trade group. While there were a number of allegations, including that CEO Adam Bierman used some inappropriate racial slurs, the group added that they would expel MedMen if it refused to resign. While this doesn’t necessarily matter to the financial results of the business, some have seen this as a potential warning sign to be taken into account with other concerns.
In response to the news, MedMen shares stayed roughly the same, inching up only half a percentage point as some analysts expectations over the company remain mixed.
MedMen Company Profile
MedMen Enterprises is a leading cannabis company in the U.S. with assets and operations across the country. Based in Los Angeles, MedMen brings expertise and capital to the cannabis industry and is one of the nation’s largest financial supporters of progressive marijuana laws. – MedMen