Leaked Letter Reveals a Leaner MedMen

In a leaked internal memo written earlier today by CEO Adam Bierman to employees at MedMen Enterprises (CSE: MMEN) (OTC: MMNFF) and obtained by New Cannabis Ventures (full letter below), Bierman addressed the topic of attrition, noting that approximately 100 employees have left MedMen year-to-date. To those who have read the company’s filings or who listened to the last quarterly conference call in February, the reduction in staff shouldn’t be a surprise. In fact, in early April, MedMen’s monthly Form 7 revealed that 87 employees had left the company in March alone.

The memo acknowledges the turnover and explains that it is part of a process that involved bringing in an experienced CFO to help improve operating efficiency so that the company can move towards profitability as it ramps up its operations across Arizona, California, Florida, Illinois, Michigan, Nevada and New York.

We are getting leaner, in front of a background that includes almost tripling our store count, continuing to grow our already leading market share in California, launching our in-house brands, including [statemade], across the country and entering the Florida market.

Adam Bierman, MedMen CEO

We reached out to Bierman to better understand his motivation for sending the memo and for an update on the cost-cutting efforts that the company has been implementing. Most recently, MedMen announced several departures of senior members of the management team, but Bierman didn’t provide any additional comment on the news release from April 19th detailing the exit of the COO and the General Counsel. Bierman pointed out that the attrition has been mainly at MedMen’s headquarters in Culver City and is consistent with the company’s goals to reduce corporate SG&A by at least 10% in absolute spending over time. He indicated that the overall head-count at MedMenhas been stable, as the company has been hiring in customer-facing roles and that it will continue to aggressively add to its staff as it opens up stores across the country, with four planned in Florida in the near-term.

According to Bierman, he wrote the letter because many employees are “looking for clarity,” as external media has been at odds with progress the company has made in its operations. Bierman pointed out that the departed employees were a combination of layoffs, resignations and terminations. In 2018, MedMen hired in excess of 1000 new employees, but as it focuses on improved profitability, the company has streamlined management and has also used technology to help reduce corporate overhead. Bierman pointed to two recent initiatives, including the adoption of software to help manage the accounts payable process and the implementation of its Global Security Operations Center to help manage its security operations across its entire footprint.

MedMen has continued to advance its top-line growth, with the company indicating that fiscal Q3 revenue for the quarter ending March 31st will be $36.6 million, up 22% from the prior quarter. On a pro forma basis, with the inclusion of revenue from pending acquisitions, the company’s quarterly revenue would be almost $55 million. MedMen will be hosting a conference call on May 29th to discuss the financial results, and, according to Bierman, the company will discuss the progress with its cost-cutting efforts with investors in more detail.

Full Letter

I am writing this letter from Las Vegas as I have just wrapped up two “Why Not” presentations and I feel compelled to put down on paper the rush of thoughts flowing through me. This “Why Not” tour has been more powerful than I think any of us imagined it would be and I’m grateful and humbled with the interactions I’ve had; the stories people have shared and the honesty that has been core to making it all work.

The final part of the “Why Not” presentation has morphed into a story about what’s next…for MedMen, for our customers and for our society, as a result of our work. And the conclusion is that the execution it will take to get the company to what’s next rests squarely on our ability to Achieve Excellence as a team.

We must keep up with the fact that we are building an industry while we build a company in order to achieve our goals. That goes for me the same way it goes for every one of you. Even if you think you are excelling at your job today the challenge is to Achieve Excellence tomorrow. We are evolving as a company every day and each one of us needs to keep up!
It’s so important to start with the facts.

REALITY

  • We are the most recognized Marijuana Brand on the planet
  • We generate the most revenue in ALL of U.S. cannabis
  • Our customer experience is best-in-class
  • We have the premier retail footprint in U.S. cannabis now and ONLY 23 out of 82 are operational MedMen stores

We have put ourselves in the ultimate driver’s seat to welcome society to the future of cannabis. A future where cannabis and its use are normal, destigmatized and accessible to every adult in the country, making our society safer, healthier and happier.

The toughest part of what I need to do as CEO for the MedMen of tomorrow is to be willing to put what’s best for the company before anything, even when it means making hard decisions. Now, in order to fulfill my responsibilities to you, my family, I need to protect what we’ve built as much as ensure we continue to grow successfully.

On our November earnings call, I announced that we had turned the page to the next phase of our business and began a march towards profitability. We have entered a stage where we must create operational efficiencies, leverage all the scale we have built, access technology as a way to become better at what we do and leaner while we do it.

A few months ago, we were fortunate enough to have Michael Kramer join us as CFO. What a validation of all the work and persistence to have one of the Fathers of Apple Retail decide he wanted to be one of us because, as he told me, he believed “this would be his final chance at making a dent in the universe.” I hired Michael because he is a rock star, and we need one in a CFO.

Michael has been leading the effort as we recognize that, as a result of the explosive growth we experienced last year, we have become inefficient in some areas of the organization and now we need to shed. We can’t Achieve Excellence while being inefficient. In some instances, there are too many layers. And to be more effective we need to access enhanced systems and technology in place of inefficient headcount. As a result, we’ve separated from approximately 100 corporate employees. This is normal for companies that see rapid growth like ours. While there is no debate this is what must happen, it’s been tough, nonetheless. The explanation above leads to the most difficult of outcomes; we are separating from people in our family. For those that have left us, I thank them with everything I am for their commitment and service.

As we create greater efficiencies we will also be growing like crazy. This aspect is fairly unique to MedMen. Corporate initiatives to become more efficient are rarely paired with explosive growth like ours. This is the most exciting part of where we are as a business. We are getting leaner, in front of a background that includes almost tripling our store count, continuing to grow our already leading market share in California, launching our in-house brands, including [statemade], across the country and entering the Florida market.

Our company has never been healthier and more dominant while having so much opportunity to get better and grow even more. I appreciate your trust and support and look forward to sharing this next chapter with you all.

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Breaking News by Alan Brochstein, CFA
Alan Brochstein, CFA
Based in Houston, Alan leverages his experience as founder of online communities 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email

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