Edited Transcript of MMEN.CD earnings conference call or presentation 27-May

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Edited Transcript of MMEN.CD earnings conference call or presentation 27-Maywww.shan-machinery.com

Q3 2020 Medmen Enterprises Inc Earnings Call RICHMOND Jul 17, 2020 (Thomson StreetEvents) -- Edited Transcript of Medmen Enterprises Inc earnings conference call or presentation Wednesday, May 27, 2020 at 9:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Thomas Jerome Lynch MedMen Enterprises Inc. - Interim CEO & Chief Restructuring Officer * Zeeshan Hyder MedMen Enterprises Inc. - CFO ================================================================================ Conference Call Participants ================================================================================ * Graeme Kreindler Eight Capital, Research Division - Principal * Jesse Pytlak Cormark Securities Inc., Research Division - Analyst of Institutional Equity Research * Matt Bottomley Canaccord Genuity Corp., Research Division - Analyst * Pablo Ernesto Zuanic Cantor Fitzgerald & Co., Research Division - Research Analyst * Scott Thomas Fortune Roth Capital Partners, LLC, Research Division - Director & Research Analyst * Vivien Nicole Azer Cowen and Company, LLC, Research Division - MD & Senior Research Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, thank you for standing by, and welcome to the MedMen Third Quarter Fiscal 2020 Earnings Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions) I would now like to hand the conference over to your speaker today, Zeeshan Hyder, CFO. Thank you. Please go ahead, sir. -------------------------------------------------------------------------------- Zeeshan Hyder, MedMen Enterprises Inc. - CFO [2] -------------------------------------------------------------------------------- Thank you. Good afternoon, and welcome everyone. Today, I'm joined by our CEO, Tom Lynch. On today's call, management will provide prepared remarks, and then we will open the call to your questions. Earlier today, we issued a press release announcing third quarter fiscal 2020 results ended on March 28, 2020. The press release, along with our financial statements and MD&A are available on the company's website and filed on SEDAR. 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 would cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. And certain material factors or assumptions were applied in drawing a conclusion or making a forecast in such statements. Forward-looking statements relate to, among other things, the business and operations of MedMen, our plans for new stores and factories, 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 shall not be relied upon as predictions of future events. Additional information about the material factors and assumptions forming the basis of the forward-looking statements and risk factors can be found in MedMen's annual information form dated November 8, 2019, and the earnings press release issued earlier today, all of which are available under the company's profile on SEDAR. During today's conference call, MedMen will refer to certain non-IFRS measures that do not have any standardized meaning prescribed by IFRS such as EBITDA, adjusted EBITDA, retail cash flow and corporate SG&A, which are defined in the earnings press release we issued earlier today. Reconciliations to IFRS 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. -------------------------------------------------------------------------------- Thomas Jerome Lynch, MedMen Enterprises Inc. - Interim CEO & Chief Restructuring Officer [3] -------------------------------------------------------------------------------- Thank you, everyone, for joining us this afternoon. On the call today, we'll discuss our operational highlights, financial performance and how we're thinking about the business moving forward. But first, I'd like to address the pandemic that we're living through. We understand this is a challenging and turbulent time for everyone around the world, and we hope everyone is staying safe and healthy. Here at MedMen, we are grateful to be deemed an essential retailer, and we are taking that responsibility extremely seriously. We're working hard behind the scenes to make sure our employees are safe and our customers and patients have a safe shopping experience and an ability to access safe, high-quality products. My sincere thanks to our employees who need to be in our stores, driving for delivery and working in our cultivation facilities and distribution center. They are leading the way for us and doing an unbelievable job to make sure adult users and medical patients obtain the product they need. I took over as interim CEO close to 2 months ago, and I'm proud of the way our entire team has performed despite the difficult and complex circumstances we find ourselves in. Faced with the global pandemic, executive turnover and industry-wide challenges, the team has come together, mobilized and executed in an extremely efficient fashion. I would typically want to take this time to recap the quarter ending in March. And while we'll discuss our quarterly results in detail, especially in the financial section of the call, I do want to catch everyone up on what we have accomplished as a team over the past 60 days. What we've done and the progress we've made will lay the foundation for the company for our next several quarters. As an outsider to the company, I've long admired the MedMen brand and firmly believe we have the best and most recognizable brand in the industry. That is an extremely valuable starting point to build any kind of cannabis platform. That being said, there was a lot of work to do to transition the company to profitability, strategic growth and transparency with stakeholders. There were 3 main objectives for me when I came in as interim CEO for this company. First and foremost, we had to establish a culture of strong leadership and pride of ownership across all levels of the company. This includes empowering the existing leaders within the company to drive strategic change and make key decisions, but also holding those same leaders to the highest levels of accountability and tying compensation for the entire company to clearly defined and aggressive performance targets. Over the past couple of months, I've already seen a significant shift in the overall decision-making process within the company. Instead of relying on intuition and feel, everything we do is based on rigorous data-driven analysis. We're also making progress in breaking departmental silos and connecting leaders across functions to get to the best possible answer. We've created thoughtful and detailed business plans for our assets in each market, looking at short-term, medium-term and long-term returns to determine our ideal footprint and asset base. We've looked at the entire supply chain and analyzed where the most margin-accretive areas are and how we can leverage our scale and footprint to access them. We've thoroughly reviewed our organization to determine the ideal structure to support our retail platform, the core of our business. Second, which may be obvious, is reducing the overall cash burn across the business. Many of these past decisions were in the spirit of growth at all costs. As the industry and capital markets evolve, we must evolve as well. This part has been straightforward. I've done this dozens of times at retailers across various stages of growth, and the progress we've made here in such a short period of time with everyone working remotely has been nothing short of remarkable. First, we looked at our overhead at corporate and in our retail and cultivation facilities. At corporate, we reduced overall headcount and executive compensation, generating almost $8 million in savings. At the stores, we reduced payroll by 30% through a more data-driven staffing process, which allows us to maintain our customer service but also reduces overstaffing during lower traffic hours. We've already seen a substantial increase in store-level profitability as a result of our staffing reductions, which resulted in our first full month of being cash flow positive across our retail footprint in the month of March. At the factories, we took down operating burn by almost $1 million a month through a ramp down in staffing and overhead in anticipation of a potential partnership. We also took a hard look at our rent and cash interest burden across the company. We asked our landlords and lenders to collaborate with the company as partners, and they delivered. We were able to successfully receive rent and cash interest deferrals, which allowed us to [maintain] additional flexibility with our cash during the coming months. The third and likely the most challenging objective is executing on the second objective while still preserving the tremendous upside and long-term growth trajectory of this business. We are still in the early innings of this industry, and MedMen has the potential to be the most valuable cannabis retailer in the industry based on its existing footprint, its retail experience and the strength of its brand in the most valuable markets across the U.S. As such, we maintained that leadership position through the turnaround without sacrificing customer experience and growth of our branded footprint. We can do this by leveraging our operating scale, focusing on high ROI initiatives and leaning into what areas we do best, which is retail. I'll provide a few examples. We're exploring joint ventures on certain capital-intensive projects to bring in highly qualified partners, which allow us to still maintain our retail presence without having to deploy upfront capital. We're looking at new customer acquisition tools to increase the top of the funnel and boost traffic and sales at our existing stores and our e-commerce platform. We are evaluating various third-party technology and software that could increase the returns of our existing tools. And most importantly, we are still looking to bring the MedMen retail experience to more and more customers across the U.S. We will continue to expand the MedMen retail footprint by opening new stores, which we believe will deliver returns immediately. We expect to open stores in San Francisco, Emeryville, Pasadena, the Fenway area of Boston, Chicago and Miami, all in the next 12 months, stores that could be at the top of the list in terms of performance. I took on this role because I firmly believe in the MedMen brand and retail footprint. But we've only scratched the surface in terms of maximizing value creation for all stakeholders. From our shareholders to our customers, to our employees we are a retailer, not a products company and not a technology company. Everything we do must support our retail stores and store managers to ensure that we are offering the best customer experience possible for our customers, from the locations we choose to the products we carry on our shelves, to the employees that we hire, to the technology and systems we use to guide the customer experience in purchasing. As part of this unwavering commitment, we will also look to go deeper in our core markets and double down in markets where we already have a leadership position. I'll give a quick update on those markets. Our primary market will continue to be California, where we remain the top retailer and where our stores, prior to COVID, generated 6x the revenue of the average dispensary. The strategy in California will be focused on maximizing cash flow from existing stores through gross margin improvements and cost reductions as well as expanding our footprint across the state. We have a big opportunity in Northern California, where we expect to have 3 new stores: Emeryville and 2 in San Francisco. Given our buying power in California, we've been incredibly successful in locking in favorable vendor agreements. We're also excited about the potential for our e-commerce and curbside pickup business in California. We already saw a 300% increase in overall transactions over the past several months and continue to draw more and more new customers into our loyalty program through this part of the business. Moving on to Nevada. While we saw a decrease in overall sales in this market, particularly given the impact that the pandemic has had on tourism into Las Vegas, we're encouraged about the recent decision to open up cannabis retail again and have already begun to see a steady ramp-up in revenue. In Illinois, we currently have 2 locations, Oak Park and Evanston, and are very encouraged by the ability to be a leader in the market based on their performance. Based on data from the state, we are performing almost 40% better than our competition in the market with our stores rivaling some of the best performers in California. We are also cautiously optimistic about having access to additional supply in the market, which would provide another boost in sales in this market with expanded store hours and greater product selection. We'll also look to remodel and expand these locations to reflect the MedMen retail experience that our customers and patients in other markets are accustomed to. Florida has also been another bright spot for the company. We've made substantial improvements to our facility in Eustis and saw revenue continue to increase from the beginning of the quarter. We ended the quarter on a run rate of close to $15 million. We made the decision to temporarily close 5 stores in the state to redirect the limited product to the higher traffic locations but fully intend to open those back up. We have 13 stores with minimal CapEx remaining that are ready to be turned on with additional supply. And lastly, New York. We've seen some regulatory delays in this market but are also encouraged by trends over the past couple of months. We saw our best weeks ever in that market towards the end of March and have seen sales continue to rebound back to those levels since. Before getting into the financial portion of the call, I'd like to call out a few metrics. We continue to see sequential quarter-over-quarter revenue increases despite the slowdown in new store openings and the headwinds toward the end of the third quarter. In the quarter, we produced a record $46 million in revenue while reducing overall SG&A by close to $15 million in 1 quarter. As mentioned earlier, we also accomplished a significant milestone for the company. We had our first full month in March of our retail stores being cash flow positive on an after-tax basis. While we expected to be here sooner, we now have a playbook for how to continue building off the progress being made to increase gross margins and reduce store-level expenses. Unfortunately, COVID has impacted our sales since the end of March. We were down in April overall but have seen a steady increase since. While we're still not back to our normal levels, pre-COVID, particularly in California, we're optimistic about our ability to recapture traffic as soon as stay-at-home orders are lifted. I look forward to continue leading this company through the next chapter, and we will continue to share updates as they develop. With that, I will hand it over to Zeeshan for the financial highlights. -------------------------------------------------------------------------------- Zeeshan Hyder, MedMen Enterprises Inc. - CFO [4] -------------------------------------------------------------------------------- Thank you, Tom. 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 third quarter of fiscal 2020. Before going into the results, please note that again for this quarter, we are classifying our Arizona operations as discontinued operations given that we disclosed our intention to sell our Arizona business. As such, all reported numbers exclude Arizona. With that, let's get into our results for the third quarter. System-wide revenue for fiscal third quarter 2020 was $45.9 million, up 41% from $32.5 million in the same period last year and up 4% sequentially. We'll get into the specific impact of COVID in the business unit reporting. Gross profit after fair value adjustments was $15.5 million, which represents a margin of 34% compared to $12.7 million or a margin of 29% in the prior year period. Operating expenses for the quarter totaled $53.8 million, a decrease from $69.1 million in the prior year period. Within operating expenses, G&A expenses, which totaled $38.0 million, declined from $52.6 million in the previous quarter, primarily driven by a 21% reduction in payroll across all facilities. We made significant improvements across other G&A items as well. Sales and marketing spend is down 71% sequentially, and T&E is down 64% sequentially. Overall net loss and comprehensive loss was $76.9 million for the quarter compared to $96.4 million in the previous quarter. Net loss from continuing operations was $68.8 million compared to $75.2 million in the previous quarter. Third quarter 2020 net loss attributable to shareholders of MedMen Enterprises was $39.9 million or $0.10 per basic and diluted share. Overall adjusted EBITDA loss for the quarter was $20.7 million compared to $35.1 million in the previous quarter. Let's now take a deeper look at the details around adjusted EBITDA and the buildup from our 4 operating units, which include retail operations, manufacturing, corporate SG&A and preopening expenses. This will help explain the delta between the loss in the third quarter compared to the previous quarter. Starting with our retail highlights for the quarter. Retail revenue, excluding Arizona, for the third quarter totaled $45.4 million, up 42% year-over-year and up 3% sequentially despite the impact of COVID in March. Through January and February, we were tracking to be up 49% year-over-year. With shelter-in-place in March in most of our markets and a shut down in tourism, several of our California stores took a hit on foot traffic early on. However, we are still proud to report the following. First, as Tom mentioned, March was our first full month of being cash flow positive on an after-tax basis at retail. We continue to fine-tune our staffing model and increase efficiency with delivery. And even with the sales impact from COVID, we are encouraged by our ability to demonstrate and grow profitability at our stores. Second, I'm extremely impressed with our technology team's ability to mobilize to expand our delivery platform, which has increased over 3x in sales since our initial launch, with total annualized run rate surpassing $15 million since the end of March. We made a significant investment in technology early on, and we've been able to leverage the infrastructure to quickly expand delivery and roll out curbside pickup. Third, in Illinois, despite shelter-in-place in COVID, our sales continued to trend up over the past few months. By the end of the quarter, we surpassed $30 million in annualized run rate revenue across the 2 stores despite the restricted store hours, limited access to adequate supply and limited footprint. In May, we have not seen a significant change in overall revenue from those March numbers. Looking at California alone, which represents approximately 64% of our retail revenue compared to 74% in the previous quarter. Retail revenue was $29.6 million, which was up 19% from a year ago. On a same-store basis, we had very exciting trends for our core stores. The Beverly Hills, Santa Ana, LAX, Abbot Kinney and Downtown L.A. locations were up 13%, 28%, 27%, 13% and 14%, respectively, compared to the same period last year despite the impact that COVID had on our company's retail operations in March. Since the end of March, we did see a slowdown in sales into our California stores due to the shelter-at-home orders and reduced tourism. Accordingly, we modified certain store operations and reduced staff. However, over the past few weeks, we've seen a steady rebound of sales with overall sales per week up over 20% versus the end of April. Turning to our retail margins. Retail gross margins for the third quarter were 47% versus 51% for the second quarter. The decrease was related to a onetime inventory adjustment we took during the quarter. Without the adjustment, overall gross margin for the quarter was 51%. And if you look at the month of March alone, our gross margin was over 53%, reflecting the impact of our new vendor agreements. We expect gross margin to continue to trend upwards given favorable [IMUs] with new agreements and a better, fresher assortment in Illinois, where the supply-constrained nature of the market has put a temporary cap on margin appreciation, which we think will change towards the back half of the year. In California, where we focused our vendor agreement efforts, our retail gross margins were 54% for the quarter with certain stores such as Beverly Hills, Venice Beach and West Hollywood above 55%, the highest they've ever been. This is a huge testament to our buying and purchasing teams who continue to negotiate favorable terms with our key vendors. Overall adjusted retail EBITDA was $2.3 million for the third quarter, representing a 5.1% margin for the quarter, a 13-point swing from the previous quarter in which we generated a 7.7% loss. The significant improvement in retail margins are related to: decreased payroll spend across our stores; a reduction in rent as a percentage of revenue given the increase in Illinois sales, where we have more attractive leases compared to the rest of our footprint; reduction in other G&A spend; and most importantly, a change we made with respect to local taxes. In February, we made the decision to pass local tax, which in California is around 10% of sales, to the consumer, which most of our competitors in our market do. We rolled this out in February and did not see any impact on sales. However, it was a massive boost to our bottom line. We understand how critical it is for our retail business to not just be EBITDA positive in a meaningful way, but more importantly, be cash flow positive on an after-tax basis given the unique challenging tax environment in cannabis. In March, we had our first cash flow positive month. This includes local, state and estimated federal tax for the month. The results in California were especially encouraging. Our 2 highest-performing stores, LAX and West Hollywood, produced a combined 15% after-tax margin in the quarter on a 28% combined adjusted EBITDA margin. This is a huge milestone for the company and a result of the significant work that has been done over the past few months. We are optimistic about the progress to date. And as we continue to refine our footprint, lock in new vendor agreements, open the top of the funnel on customer acquisition, continue optimizing payroll based on real-time metrics and reduce store-level G&A, we think there is significant value to unlock at retail. With our new turnaround plan and new leadership who have navigated companies through similar situations, I've never felt more bullish about the potential of our retail platform, specifically in California, which has been a challenging market for operators without the scale and buying power that we have. Our ability to produce significant free cash flow will allow us to plow cash back into the market for aggressive inventory buys, marketing, store remodels and expansion, further solidifying our market leadership position in the state. On to cultivation and manufacturing, while overall cash burn has come down significantly, for the quarter, we recorded an adjusted EBITDA loss of $12.9 million. These losses largely stem from our facilities in Florida, California and Nevada. As mentioned in the previous calls, we are still evaluating various strategic partnerships for our facility. With the company leaning more into its retail DNA and restructuring the company to support retail, we do not believe that nonmandated cultivation and manufacturing will be an emphasis going forward. We are exploring various structures here, and therefore, cannot comment too much further. But we emphasize, where possible, we are seeking to bring in expertise and partnership to enable a further focus on retail. We continue to see solid improvement in our vertically integrated states, Florida and New York. In Florida specifically, we've been able to ramp our supply, which has historically been a bottleneck for us in that market. As such, our revenue in Florida surpassed $18 million at its peak in March with the improved supply. We expect our Eustis factory to continue increasing its productivity with the ability to service all 13 stores at stabilization. This will allow us to continue opening additional doors in the state. As a reminder, we have a total of 13 stores close to being fully built out with only 3 open today. The 10 additional stores are in Tier 1 locations such as South Beach, Orlando, Daytona Beach and Jacksonville Beach. Despite the shift in our cultivation strategy, we still expect private label brands to be a key part of our strategy in core markets. We believe customer acquisition, retention and overall loyalty to the MedMen family of brands will all be enhanced through a strong private label platform, particularly as we create greater variety across price points to go after new sets of consumers. Next, I'd like to discuss reducing our corporate SG&A, which is our third reporting unit. For the third quarter, our corporate SG&A loss was $17.3 million, which represents a 35% decrease from the previous quarter and 51% overall decrease from the third quarter of fiscal 2019. During the fourth quarter, we executed additional layoffs and cost-saving initiatives led by Tom and Tim, which are not reflected in third quarter numbers. At the end of calendar 2019, we gave guidance that we'd reduce our corporate SG&A to under $65 million by the end of third quarter. In March, we achieved that target. And given the additional reductions in April, our true steady-state number will be far below that. The areas where we saw the largest sequential decreases were related to corporate payroll through executive departures and headcount reductions, marketing spend, legal spend and technology costs. Our fourth and final reporting unit is preopening expenses. For the third quarter, we incurred $4.4 million in preopening expenses, which included rent expenses for retail stores and factory not yet operational. A big focus for our next phase of restructuring will be reducing the cash burn from these leases. A number of our landlords have been constructive partners, and we have been able to receive rent deferrals in some concessions, which should help continue to drive this number lower. Let's now turn to our balance sheet metrics for the quarter. We ended the third quarter 2020 with $31.8 million of cash and cash equivalents. During the quarter, we closed an equity financing transaction of $20 million, of which $8 million was funded during the quarter. The remainder was funded in the second quarter. We also closed on $12.5 million of additional gross proceeds under tranche 4 of our Gotham Green convertible note facility. Details of the Gotham transaction can be found in our filings and press releases. In addition to new capital, we also closed on $17 million of proceeds through the transfer of our Hillcrest license, which we received the rights to through the termination with PharmaCann. We continue to work with our existing capital partners on additional funding as well as with parties on asset sales that are still pending. With the new turnaround plan requiring far less capital than before, our existing sources of capital [remaining] excited about our story and the market value of our noncore assets which we are working to sell, we are in a strong position moving forward despite the headwinds related to COVID. Given the uncertainty in the broader macroeconomic environment, we will continue to manage cash tightly for a variety of scenarios that may present themselves. We've also been working to defer out near-term liabilities to provide greater flexibility. As Tom mentioned, during the quarter, we closed on an amendment to our Stable Road/Hankey facility. The original maturity date was October 2020, which was extended to January 2020, providing the company greater runway to navigate through this next year. In addition to the balance sheet, I want to clarify our capital structure a bit as well. As of the end of the quarter, we had approximately 629 million shares outstanding. This includes both our Class B subordinate shares and our redeemable units. As a reminder, the next quarter, which is our fourth quarter of fiscal 2020, will be our first as an SEC registered company with GAAP financials since we are no longer deemed a foreign private issuer. This is a huge milestone for the company, and we look forward to going through this process. Given the evolving nature of COVID and the economic disruption it has caused, particularly on the retail sector, it is extremely difficult for us to predict with any certainty the projected results of the following quarters. As a result, we withdrew our original 2020 guidance on revenue, store count and EBITDA back in March. That being said, we are working diligently towards maintaining overall growth, reducing cash burn and attracting additional capital. We've created contingency plans in all of our markets. And while we are hopeful as the situation evolves, we are prepared as a company for any scenario that may present itself. To wrap, I, along with the rest of the team, am very optimistic and excited about what the rest of the calendar looks like at MedMen. With the revamped management team, new turnaround plans and additional capital, we are well positioned to execute on our strategic goal of being a leading cannabis retailer in the U.S. We will now open up the call to your questions. Operator? ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Your first question comes from Graeme Kreindler from Eight Capital. -------------------------------------------------------------------------------- Graeme Kreindler, Eight Capital, Research Division - Principal [2] -------------------------------------------------------------------------------- I wanted to follow up. You gave a couple of metrics in terms of the impact of COVID with respect to March and April. First off, I just wanted to qualify -- sorry, clarify. The 2 stores, the only 2 stores that were closed on a temporary basis because of COVID, those were the 2 in Nevada, Downtown Las Vegas and Paradise, correct? -------------------------------------------------------------------------------- Zeeshan Hyder, MedMen Enterprises Inc. - CFO [3] -------------------------------------------------------------------------------- Graeme, so I'll first answer your second question on the store count. So Seaside was closed during the quarter. And then there is the 2 in Nevada that were closed on a temporary basis. And then during the quarter, we also closed 5 of the 8 Florida locations. So where we sit now is 23 locations across the U.S. And then to answer your second question on the impact of COVID, I think Tom mentioned it and I mentioned it in my portion as well. I mean we have seen traffic decreases in both California and Nevada, as you would expect. These are 2 markets that, in general, over-indexed on tourism, especially the 2 cities that we have the highest density in, which is Los Angeles and Las Vegas. But I would say even outside of COVID, given some of the payment issues that we had early in Q3, we had inventory and assortment challenges that also impacted sales and leading to lower conversion. However, I think over the past 4 weeks, we've seen increases in both of these markets, both as a -- as the shelter-in-place orders are slowly phased out and with our assortment getting back to where we need it to be, we have seen a steady increase over the last 4 to 6 weeks. In terms of some of the bright spots though in California, I think despite some of the -- despite some of the traffic decreases early on, we've seen a huge pickup in our delivery business, which, as I mentioned, was up over 3x where it was when we initially launched. We also made a good amount of enhancements as it relates to our curbside pickup functionality, which we're really excited about, especially when you're looking at a post-COVID world. And then even outside of California, we were very impressed with what happened in Illinois and Florida. Our Illinois stores continue to do well. Not only have they withstood the impacts that COVID has had on that market, but they've continued to gain share, and now they're 2 of the best-performing stores in that state. And in Florida, we've also -- as we mentioned, with the increased product coming out of Eustis, we've been able to ramp those revenues up. And even if you think about going forward, I mean, post COVID, and obviously, a lot of this depends on when these stay-in-place kind of orders get phased out, but there's 2 kind of key areas that we're looking at in terms of revenue growth going forward. One, just in terms of same-store growth, we've been doing a lot of work over the past 4 weeks as it relates to opening up the top of the funnel through enhanced customer acquisition efforts. Our product assortment is a lot better now than it was 3 or 4 months ago as a result of our AP kind of levels going down. And then we're also looking at a few of our stores in terms of store expansions. A couple of good examples are LAX. That's one where in a post-COVID world, we're going to expand that, get the full street view of that store. In Illinois, as we get additional supply, we'll look to expand some of those store hours. Right now, those hours are still limited, and we're still able to do some of those revenues. And then as it relates to new stores, we'll take our time with this, but there are some pretty high ROI stores that are still in our pipeline. We have one great store at Emeryville that's going to open up most likely this year. We have 2 stores in SF that are going to be more 2021 initiatives, but we're going to start kind of working to build those out. And then we have the 2 in Massachusetts still, the Fenway Park and Newton. And then as Eustis gets to full capacity, we'll reopen those 8 in Florida. So just to summarize, I mean, I think COVID has impacted sales, especially in -- towards the end of March and in April. But we are still excited about our ability to rebound from that going forward. -------------------------------------------------------------------------------- Graeme Kreindler, Eight Capital, Research Division - Principal [4] -------------------------------------------------------------------------------- Okay. I appreciate that color. Just with respect to the ongoing efforts to optimize the retail portfolio, and you discussed about the temporary closure of 5 stores in Florida subsequent to the quarter. At this point in time, are you still assessing and look to potentially temporarily close any other stores? Or do you think you're at a point right now where you're happy with where the portfolio is given the current environment and your expectations for how things will develop in the short to medium term? -------------------------------------------------------------------------------- Thomas Jerome Lynch, MedMen Enterprises Inc. - Interim CEO & Chief Restructuring Officer [5] -------------------------------------------------------------------------------- Yes. That's a great question. Zeeshan, I'll take that. This is Tom Lynch. The answer is no. We don't anticipate closing any additional stores right now. I'm actually very pleased with the footprint that we do have. Florida is a good example that Zeeshan got into a little bit. But as we get -- it's a vertically integrated state. And as we get the supply up to a sufficient level, what we did when we closed those stores, as we mentioned in the comments, was simply -- we did that simply so that we could redirect to our highest-performing boxes. It was as simple as that. So as the production increases and with new management, we're seeing significant operational improvements there. As the supply increases, we will bring more stores online. We have 13 stores that are available that are to be brought online. So we're really, really excited about that market. We feel we're well ahead of the pack when it comes to that market. So it's now just about optimizing the assortment and supply. But no, I'm very pleased with where the portfolio sits right now. -------------------------------------------------------------------------------- Graeme Kreindler, Eight Capital, Research Division - Principal [6] -------------------------------------------------------------------------------- Okay. And then my last question here, and then I'll jump back in the queue. Just with respect to capital needs, and I guess I'll look at things on a short-term and then a long-term basis. On the short-term side, with respect to Arizona, you've been looking to monetize that asset there. Have things gotten easier or more difficult in terms of looking for a potential liquidity event for those licenses given where we've seen valuations go in the market and I guess a more focus on people keeping cash close to the chest? And on a longer-term basis, is there any sort of internal number you have in terms of what sort of incremental financing you would need to bridge yourself to a breakeven point? -------------------------------------------------------------------------------- Thomas Jerome Lynch, MedMen Enterprises Inc. - Interim CEO & Chief Restructuring Officer [7] -------------------------------------------------------------------------------- Sure. Zeeshan go ahead, and I'll jump in. -------------------------------------------------------------------------------- Zeeshan Hyder, MedMen Enterprises Inc. - CFO [8] -------------------------------------------------------------------------------- Yes, sure. So Graeme, I'll answer your question on Arizona first. From the beginning, we've gotten a lot of interest in our Arizona assets given some of the regulatory changes that are expected in that market. We're currently still working through a number of options there, and we'll have a lot more clarity in the coming weeks. Your answer -- your questions -- your question on valuations in that market, I would say the hurdle is definitely higher in this environment for deals in general to get done. But there are still a lot of cash buyers out there looking to get into the industry. And Arizona still checks a lot of boxes for markets that are worth paying a premium for. I think in terms of potential capital coming in, we'll take our time, and we're going to be patient. We want to get the number right on those assets. But for now, there's still a lot of interest in those particular licenses. And then on overall funding, I mean, I think what we can say on that is there's still a lot of moving parts, and the market is still very dynamic. We're going to be extremely strategic about how we deploy capital and the number of -- the cash needs that we need today are a lot lower than what we thought we needed 6 months ago based on a lot of the changes that have happened over the past couple of months. And all we can say really is we did announce something end of March about the expansion of one of our existing facilities, and we're optimistic that additional proceeds will get funded through that. -------------------------------------------------------------------------------- Operator [9] -------------------------------------------------------------------------------- Your next question comes from Scott Fortune from ROTH Capital Partners. -------------------------------------------------------------------------------- Scott Thomas Fortune, Roth Capital Partners, LLC, Research Division - Director & Research Analyst [10] -------------------------------------------------------------------------------- Yes. I want to follow up in kind of the stores in California and the vendor kind of restructuring and margin improvements you are looking for from your different vendors. You're targeting vendors that could produce 65% margins. Kind of step us through on that initiative going forward here. -------------------------------------------------------------------------------- Thomas Jerome Lynch, MedMen Enterprises Inc. - Interim CEO & Chief Restructuring Officer [11] -------------------------------------------------------------------------------- Sure. So when we -- this is Tom. So when we stepped in a couple of months ago, the assortment, quite frankly, on the shelves was thin. And you can see the results clearly reflected that, right? Retail is a pretty simple equation. We drive traffic. We have a good, smart curative assortment. We have a very good consumer experience, and the results tend to speak for themselves. In our case here, we were thin on product. So we've entered into conversations with all of our suppliers, existing and some new, and really started to build out an assortment plan with demand planning as the initiating point. And we're working very closely with them on what our margin goals eventually will be. As you understand, there is margin that's going to -- there's product that's going to work itself through the system. But we think as we've -- we really show the credibility, as the premier retailer in the space, that our sales space is quite valuable. And we've got a very good reception from our vendor partners as we do build our assortment. So we're pleased where we are right now. We still have some work to do to get to that margin goal. But I think we've made tremendous progress, tremendous progress on that front in the first 2 months. -------------------------------------------------------------------------------- Scott Thomas Fortune, Roth Capital Partners, LLC, Research Division - Director & Research Analyst [12] -------------------------------------------------------------------------------- Okay. And then just what about the new store opportunity in California? You mentioned expansion in San Francisco and Emeryville. And then the stores outside of the top stores in L.A., primarily from an improvement standpoint, how do you see that trending towards the end of the year? Kind of what's your expectation towards the end of this calendar year of the potential number of California stores if shelter-in-place is all starting to come off going forward from here in California? -------------------------------------------------------------------------------- Thomas Jerome Lynch, MedMen Enterprises Inc. - Interim CEO & Chief Restructuring Officer [13] -------------------------------------------------------------------------------- Yes. I'm going to let Zeeshan answer that question. I'll just say we're not going to speculate too much because I don't want to have to come back and correct myself here because of the uncertainty, right? This is a unique environment we're all in. So we are starting to get more clarity, all of us, you guys -- you folks included. But I'm still not completely comfortable telling you what December is going to look like. I don't think anybody in any business should be right now. But having said that, let's talk, Zeeshan, a little bit about the stores that we mentioned in the MD&A and our presentation. -------------------------------------------------------------------------------- Zeeshan Hyder, MedMen Enterprises Inc. - CFO [14] -------------------------------------------------------------------------------- Yes, sure, Scott. So on the store expansions and remodels, I mean, the one that comes to mind is LAX. That's one where the expansion is pretty much all the way done. There's a few things that need to happen, but we think that's going to happen in pretty short order here. And then the stores that are still in the pipeline, and like Tom mentioned, we don't want to commit to certain time lines on those openings, but the ones that we have a high degree of confidence that we'll open in the next 12 to 18 months are Emeryville up in Northern California. We have the 2 in San Francisco. And then we have the one in Pasadena. So I'd say those 4 are kind of the key ones in our California pipeline that are coming up. And then outside of that, I mean, we're always evaluating other opportunities to either apply for licenses or partner on licenses. So we'll provide those updates as they come. -------------------------------------------------------------------------------- Scott Thomas Fortune, Roth Capital Partners, LLC, Research Division - Director & Research Analyst [15] -------------------------------------------------------------------------------- Okay. And then one last question just to kind of follow up on that. What's your in-house product percent as far as Nevada and California from the retail level? -------------------------------------------------------------------------------- Thomas Jerome Lynch, MedMen Enterprises Inc. - Interim CEO & Chief Restructuring Officer [16] -------------------------------------------------------------------------------- Zee? -------------------------------------------------------------------------------- Zeeshan Hyder, MedMen Enterprises Inc. - CFO [17] -------------------------------------------------------------------------------- Yes. Scott, so it's relatively low right now in both Nevada and California. A big part of the partnership discussions that we're having for DHS and Mustang are around private label supply. So we still expect our MedMen Red brand to comprise a sizable share of our retail revenue. But as of now, they're still relatively low. -------------------------------------------------------------------------------- Operator [18] -------------------------------------------------------------------------------- Your next question comes from Vivien Azer from Cowen. -------------------------------------------------------------------------------- Vivien Nicole Azer, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [19] -------------------------------------------------------------------------------- Just wanted to start off with a housekeeping item. On the inventory adjustment that you called out, Zeeshan, I mean we're certainly used to hearing this in Canada because of excess supply and slower velocity. It's a bit more of a unique circumstance amongst U.S. MSOs. Can you expand on that adjustment a little bit, please? -------------------------------------------------------------------------------- Zeeshan Hyder, MedMen Enterprises Inc. - CFO [20] -------------------------------------------------------------------------------- Yes, Vivien, that adjustment is related to inventory waste that we took a write-off for in this quarter. And that was related to mostly retail inventory. -------------------------------------------------------------------------------- Vivien Nicole Azer, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [21] -------------------------------------------------------------------------------- Okay. That's helpful. And then just the bigger picture question for me. Obviously, an admirable job in terms of really reining in your G&A from kind of peak levels a little over a year ago. That being said, and I think you appropriately called it out during the prepared remarks, is that the gross margin is problematic because, despite all your cost savings, your OpEx is still running 3x ahead of gross profit. So can you talk -- and now you're not going to be vertically integrated, which means it seems like you're probably getting up some margin there, though you're saving yourself some of the overhang on D&A. So just help me kind of think through that balance. Like is it really just a function now of generating more operating leverage? You've got to push the sales mechanism harder. Hopefully, that helps drive down your gross margin, and you hold your SG&A constant. How are you thinking about that balance? -------------------------------------------------------------------------------- Thomas Jerome Lynch, MedMen Enterprises Inc. - Interim CEO & Chief Restructuring Officer [22] -------------------------------------------------------------------------------- That's a great question, Vivien. This is Tom. So on the gross margin side of that, the assumption that vertical integration would lead to higher margins, and probably in many academic cases, that may be the way. Here, it has not been. The execution really in the nonmandated facilities has not been great. It simply hasn't been. And the future here for the private label brands is going to have to involve a partner. It just is. I'm absolutely -- I'm just very optimistic about our ability to hit those margin numbers. Through the vendor base account that exists and others that we're starting to introduce into our ecosystem, the margins are there, right? So there's more work for us to do, obviously, on the expense side of the equation. We're not done yet, right? But we've made some significant strides, as you've seen. And we're going to continue to be more efficient as a retailer, right? So we're going to become incredibly efficient that way. I am very -- more -- I'm much more confident today in our ability to hit those margin numbers through what is available to us in the market, the supply chain, than I may have been slightly less than 2 months ago. I don't think it's necessary for us to be vertically integrated everywhere for us to do that, where we are vertically integrated, where it is mandated in Florida and New York. Because we've brought on new management, and we've seen some significant operational improvements, those equations are definitely going to help us. And that production is definitely going to help us. But that's going to have to ramp up pretty significantly in Florida. So there's a lot of focus there for us. But I think that with all of those pieces together and the new focus we have on those, I think that the gross margin numbers that we've stated are absolutely achievable. -------------------------------------------------------------------------------- Vivien Nicole Azer, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [23] -------------------------------------------------------------------------------- Got it. Last one for me. I believe you said that April was down, but unless I missed it, I don't think you quantified it. Can you quantify that, please? -------------------------------------------------------------------------------- Thomas Jerome Lynch, MedMen Enterprises Inc. - Interim CEO & Chief Restructuring Officer [24] -------------------------------------------------------------------------------- I don't know that we did. Zee? -------------------------------------------------------------------------------- Zeeshan Hyder, MedMen Enterprises Inc. - CFO [25] -------------------------------------------------------------------------------- Vivien, yes, we did not quantify how much we were down in April. We don't want to give any kind of mid-quarter actual results or guidance for the quarter. I mean a lot of things are still changing. But we did not quantify that. -------------------------------------------------------------------------------- Operator [26] -------------------------------------------------------------------------------- Your next question comes from Matt Bottomley from Canaccord Genuity. -------------------------------------------------------------------------------- Matt Bottomley, Canaccord Genuity Corp., Research Division - Analyst [27] -------------------------------------------------------------------------------- Maybe just picking up from the last question there. Understandable that you're not looking to provide any near-term guidance considering the volatility of overall markets. But just given some of the commentary on foot traffic in California, switching 5 stores off in Florida and then what's happening in Nevada, and then it seems like mid-quarter, there might be an inflection point back upwards, my read-through of that is it's likely going to be a down quarter on revenues. So maybe without getting into numbers, is there anything that maybe we should be considering as analysts that might be mitigating that that might be worthwhile talking through? -------------------------------------------------------------------------------- Thomas Jerome Lynch, MedMen Enterprises Inc. - Interim CEO & Chief Restructuring Officer [28] -------------------------------------------------------------------------------- Yes. I don't want to oversimplify, but just shelter-in-place being lifted. We're not only heavily concentrated in California, we have a heavy concentration in Los Angeles County. So while we see the statewide mandates beginning to liberalize and loosen up a little bit, we still have the municipal issues that we have to deal with. So the sooner that can happen, again, an obvious statement, but I think we are really well positioned with any return to normalcy to capture more than our share of the market. We have done, I think, a very, very good job of mobilizing the curbside part of our business, which is going to be part of the new normal, whatever that is, coming out of this. That's going to be a part of cannabis retailer. It just is. So curbside delivery -- I mean, curbside pickup and delivery. Our efforts there are robust. We're not dabbling in those. Those are robust and scalable. And I see them as a significant part of our future as consumers' purchasing habits change. So I'm very comfortable with that. As far as speculating as to what the quarter is going to look like, honestly, we just simply can't. I mean we've still got very, very restrictive rules and guidance in place in our largest market. So we're somewhat hamstrung by that, but that's -- that is what it is at this point. All we can do is continue to improve the operations. I think once that loosens up, we're going to be in a very good place. Zeeshan, anything you want to add to that? -------------------------------------------------------------------------------- Zeeshan Hyder, MedMen Enterprises Inc. - CFO [29] -------------------------------------------------------------------------------- Yes. So Matt, 2 other points just to note. The shelter-in-place orders are not having an impact in Illinois. As I mentioned, those sales continue to ramp up, especially as we get additional product in those stores. And then if you look at the Florida and New York revenue, those revenues are also, for the most part, insulated by what's going on right now. -------------------------------------------------------------------------------- Matt Bottomley, Canaccord Genuity Corp., Research Division - Analyst [30] -------------------------------------------------------------------------------- Got it. Very helpful. Can you also provide a little more color, particularly in California? So sequentially down, but obviously, you've explained a number of factors on this call. But in prior quarters, I don't know if it was last quarter, but in the past, you have given an overall estimate probably based on grossing up tax revenues on what your market share is at the retail level. And I think it was somewhere between 7% to 9%. So even if you don't have that number available, has your market penetration and share in the state been impacted by this at all? Or is it an overall decline throughout California? -------------------------------------------------------------------------------- Zeeshan Hyder, MedMen Enterprises Inc. - CFO [31] -------------------------------------------------------------------------------- Yes. Matt, that's a good question. California just released tax information yesterday, which showed a pretty big decrease from Q4. That being said, they did not receive a lot of the tax information from the operators or tax receipts from the operators. So I think that number is still to be determined. Once California puts out their final numbers, we'll be able to kind of back into our share. -------------------------------------------------------------------------------- Matt Bottomley, Canaccord Genuity Corp., Research Division - Analyst [32] -------------------------------------------------------------------------------- Okay. One more for me. Just going back to some of the commentary on last quarter, when you were talking more about core versus noncore. So just wanted to circle back on that and if there's been any changes because you have talked a little bit about Massachusetts and plans there. So can you give any guidance or clarity on certain markets where you plan on allocating nominal to 0 capital in the near term, even if that's just over the next 3 months? Obviously, we know you're core is California, Illinois, et cetera. But just curious on if there's been changes to what you consider core versus noncore and where capital is going to be allocated? -------------------------------------------------------------------------------- Thomas Jerome Lynch, MedMen Enterprises Inc. - Interim CEO & Chief Restructuring Officer [33] -------------------------------------------------------------------------------- Go ahead, Zeeshan. -------------------------------------------------------------------------------- Zeeshan Hyder, MedMen Enterprises Inc. - CFO [34] -------------------------------------------------------------------------------- Yes. Matt, on that question, in terms of the next 3 months, the one market that does stand out where there'll be limited dollars spent is Massachusetts. Those 2 stores, Fenway and Newton, are still far away from being open. And we plan to minimize burn there over the next 6 to 9 months. -------------------------------------------------------------------------------- Operator [35] -------------------------------------------------------------------------------- Our next question comes from Jesse Pytlak from Cormark Securities. -------------------------------------------------------------------------------- Jesse Pytlak, Cormark Securities Inc., Research Division - Analyst of Institutional Equity Research [36] -------------------------------------------------------------------------------- Just coming back to Nevada. I was wondering if you can maybe just give us a sense of maybe your fixed cost base or sort of what kind of rebound in tourism levels you probably need there in order to kind of get those stores back to a cash flow breakeven. -------------------------------------------------------------------------------- Thomas Jerome Lynch, MedMen Enterprises Inc. - Interim CEO & Chief Restructuring Officer [37] -------------------------------------------------------------------------------- Zeeshan, go ahead. -------------------------------------------------------------------------------- Zeeshan Hyder, MedMen Enterprises Inc. - CFO [38] -------------------------------------------------------------------------------- Yes. That's a good question on tourism. I don't think we're going to need the full rebound to tourism levels from before to get to breakeven. Since COVID, we've taken a number of steps to reduce burn at those stores. And even as tourism -- and I think in Nevada, it will take some time for tourism to rebound up, back up to stabilized numbers. Our goal now over the next 12 months is going to be minimizing burn there to the extent that we can. The one bright spot in Nevada is our Spring Valley location. That location isn't as impacted by tourism as our other 2 locations. That location targets the local residents in that market. And we'll take steps to boost sales there through a number of initiatives to offset some of the declines that we're seeing in the other 2 stores. -------------------------------------------------------------------------------- Jesse Pytlak, Cormark Securities Inc., Research Division - Analyst of Institutional Equity Research [39] -------------------------------------------------------------------------------- Okay. Got it. And then apologies if I might have missed (multiple speakers). -------------------------------------------------------------------------------- Zeeshan Hyder, MedMen Enterprises Inc. - CFO [40] -------------------------------------------------------------------------------- And one more thing to add on to that point is delivery is going to be a big part of our strategy in Nevada. We're getting a lot more efficient when it comes to delivery there. We're partnering with a few different players there to increase kind of customer acquisition on the delivery side. And then in terms of the cost side, those costs are still coming down. So it's a moving target at this point. -------------------------------------------------------------------------------- Jesse Pytlak, Cormark Securities Inc., Research Division - Analyst of Institutional Equity Research [41] -------------------------------------------------------------------------------- All right. Understood. And then just on Florida, can you -- and apologies if I missed this, if you said it earlier. But the -- kind of the expected timing of the production ramp and how that fits with being able to relaunch those stores that you just closed post quarter? -------------------------------------------------------------------------------- Thomas Jerome Lynch, MedMen Enterprises Inc. - Interim CEO & Chief Restructuring Officer [42] -------------------------------------------------------------------------------- Sure, Zee. Go ahead. -------------------------------------------------------------------------------- Zeeshan Hyder, MedMen Enterprises Inc. - CFO [43] -------------------------------------------------------------------------------- Yes. The ramp-up in Eustis, we're working on that now. We have a new management team to oversee kind of Eustis facility. There's been a lot of progress there over the last 3 months, as evidenced by the growing sales numbers for our stores there. We think we'll be at a much more stabilized point later this fall. And you'll start to see the new stores trickling back in at that point. But I wouldn't assume any additional store openings there for another kind of 6 months or so. -------------------------------------------------------------------------------- Operator [44] -------------------------------------------------------------------------------- (Operator Instructions) Your next question comes from Pablo Zuanic from Cantor Fitzgerald. -------------------------------------------------------------------------------- Pablo Ernesto Zuanic, Cantor Fitzgerald & Co., Research Division - Research Analyst [45] -------------------------------------------------------------------------------- Look, it's maybe a bit of a general and philosophical question. But has the brand suffered? And what I mean by that, if you're shutting down stores, you've been short to inventory, you have less staff, the experience is different from a consumer, right? I'm just thinking if I'm in Florida and my MedMen store is shut down, then I want to go to Trulieve. Again, it's simplistic. But has the brand suffered? Do you have any metrics that you could share with us? Because my main issue has been that yes, you have strong brand identity in Southern California, but outside, you still lack scale, right? And in those places where you open stores, perhaps you ended up disappointing your consumers with less staff, store shutdowns, less assortment. So give us some color on that, please. And then I'll have a follow-up. -------------------------------------------------------------------------------- Thomas Jerome Lynch, MedMen Enterprises Inc. - Interim CEO & Chief Restructuring Officer [46] -------------------------------------------------------------------------------- Yes. Pablo, this is Tom. So that's a very good question. So my experience has been exactly what you just said, right? It's intuitive. You provide a poor experience and then your brand is obviously going to suffer. This brand still has significant value. It's obviously identifiable. That can be a good and a bad thing. In this case, it's still good. But I think the discipline that we've shown in the first 2 months of coming in and shutting down stores, for instance, in Florida, I would rather close a store than have a store that's at 40% capacity. I'm making that number up, but just for the sake of example, right? So showed that discipline and rather having someone come in, see a weak assortment and be disappointed. I'd rather close those stores, redirect the inventory to the most profitable stores and deliver a premium -- or premier experience in those stores and then open when appropriate. I think that really the growth at any cost approach is how you spend a lot of money and you get the brand recognition. But then when you get to the next level and you haven't really gotten your execution plan down, right, and you've got -- perhaps you've overstaffed. So you say, well, we've got less people here. I would argue we have now the right amount of people here, right? So it's not less people in that we're impacting -- we haven't cut to the bone and that we're impacting the in-store experience. We're very, very cognizant of that, and we actually think we're actually at the right number for the consumer experience. So it's really about making all the necessary adjustments to do the very basic things, to drive traffic, optimize a very well thought out curative assortment and have a premier consumer experience for the consumers and patients. It's really as simple as that. And being able to bring the footprint to where it is today, focus on inventory procurement, getting the rest of the story in line, right, showing stability, making this a more attractive and investable platform, I think it's only going to go to grow our brand image. And I think that this is a story, this is the brand that matters to our industry. I think it's important that this brand persist and survive in this industry, and we're committed to doing so. -------------------------------------------------------------------------------- Operator [47] -------------------------------------------------------------------------------- That was our last question at this time. I will now turn the call back over to the presenters. -------------------------------------------------------------------------------- Thomas Jerome Lynch, MedMen Enterprises Inc. - Interim CEO & Chief Restructuring Officer [48] -------------------------------------------------------------------------------- I'd just like to thank everyone for joining us today. A lot more to come here. We've got a lot of work underway. Obviously, we've delivered the first couple of months' worth of really just rolling up our sleeves and operational improvements. We will continue to focus in a very direct fashion on every metric that you would expect from a premier retailer. And I look forward to telling you the story in the next quarter and quarters to come. So thank you for your attention, and thank you for the very thoughtful questions. -------------------------------------------------------------------------------- Operator [49] -------------------------------------------------------------------------------- Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.

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