This is a copy of the June 2nd edition of our weekly Newsletter, which we have been publishing since October 2015.
The accountants at MNP must be enjoying the weekend! As we had suggested, earnings season went out with a bang this week. We are still catching up on all the press releases, conference calls and filings, but we were encouraged by what we heard. Revenues are soaring, companies seem to be controlling costs better and the outlooks from many of the companies are quite robust.
While the concept of “pro forma” revenue reporting isn’t new, we noticed that its use accelerated this quarter. We have heard from some readers who are not clear what the term means or why companies are using it, so we wanted to provide some background as well as to share some perspective.
Pro forma is a Latin term meaning “as a matter of form”, which isn’t very helpful to those who use a search engine to look it up. When it comes to financial reporting, companies are providing an alternative perspective to the actual revenue they report, taking into account pending or recently closed transactions. It’s not uncommon for companies in other industries to provide pro forma accounting, as it helps investors better understand what the combined entities will look like. We are seeing it used so frequently in the cannabis industry because the mergers and acquisitions activity has become so extensive. The use of pro forma revenue reporting helps investors to understand what the company’s revenue might be if all pending or recently completed acquisitions had been closed for the entire reporting period.
MedMen was one of the first companies to begin discussing its pro forma revenue after it announced the pending PharmaCann acquisition. Just looking at the company’s recent Q3