MariMed Inc. (PNK:MRMD) Q1 2025 Earnings Call Transcript

MariMed Inc. (PNK:MRMD) Q1 2025 Earnings Call Transcript May 8, 2025

Operator: Good morning. My name is Constantine, and I will be your conference operator today. At this time, I would like to welcome everyone to the MariMed Incorporated First Quarter 2025 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I will now turn the line over to Mr. Kevin Compagna to begin the conference.

Kevin Compagna: Hello and good morning to you all. I’m Kevin Compagna, Head of Wholesale Sales at MariMed. I’ve been with MariMed for close to four years and joined the team after 20 years in beer and alcohol in various leadership roles. I’m very proud of the team that we’ve built and the success we’ve achieved in continually growing market share for all of our brands. I am honored to kick off today’s first quarter earnings for 2025. Joining the call today are Jon Levine, our Chief Executive Officer; Mario Pinho, our Chief Financial Officer; and Ryan Crandall, our Chief Commercial Officer. This call will be archived on our Investor Relations website and contains forward-looking statements. Actual events or results may differ materially from these forward-looking statements and are subject to various risks and uncertainties.

A discussion of some of these risks is in the Risk Factors section of our 10-K available on our website. Any forward-looking statements reflect management expectations of today and we assume no obligation to update them unless required by law. Additionally, we will refer to certain non-GAAP financial measures, which are reconciled in our earnings release. I will now turn the call over to Jon for his first quarter overview.

Jon Levine: Thank you Kevin, for the hard work you and your team are doing to help us become a leading cannabis CPG company. And good morning, everyone. Thank you for joining us today. Last night we reported our Q1 results. Our revenue for the quarter was essentially flat versus the same period last year, despite a dynamic environment. I continue to believe everything we’re doing today to build a brand powerhouse will ultimately deliver the enhanced shareholder value our investors demand and deserve. Our brands continue to capture more share across the markets we serve and we sold them into 70 new storefronts in the quarter. As a result, our wholesale revenue grew year-over-year sequentially and as a percentage of our overall business.

Wholesale now accounts for 44% of our revenue mix, up from 42% sequentially. That’s been our strategy and we expect to see the percentage continue to climb as we further leverage our brands as a primary growth engine for the company. Executing that plan to increase wholesale, sales is resulting in short-term impact on our financial performance that I wanted to discuss. We’ve always said that the ultimate winners in cannabis will be the companies with the most trusted and best-selling brands. I’m very proud that we’re well on the way towards that goal. We’re confident that ultimately our strategy will pay off with similar gross margins of 45% plus like traditional CPG companies such as P&G or Coca Cola deliver. To get there we need two things to happen.

First we need greater scale, both at wholesale and selectively at retail. That’s our focus right now, and I’ll share what we’re doing in a minute to keep expanding our brand distribution. Second, we need legislative reform that will enable significant operating efficiencies for companies like ours that will come with interstate commerce, e-commerce and other benefits. In advance of these catalysts, our margins are likely to lag behind other MSOs for the simple reason that they have a much larger retail footprint. The way we see it, though, the pendulum is going to swing in the other direction. With our strong wholesale performance, we were able to partially offset a soft quarter at our retail stores. Pricing pressures across all markets, new competition in Illinois and the general economic uncertainty, all contributed.

We’re mitigating the impact through a series of pricing, marketing, and cost reduction strategies to encourage more transactions, drive customer loyalty, and support margin expansion. Ryan will provide more detail in his remarks. We’re confident these initiatives will pay off over the long-term, when consumers’ confidence returns. An area where we couldn’t be prouder is how we’re doing in supporting the people and the communities we serve. Our in-house brands’ Help on the Homefront program is a great example. Through the program, we raised visibility about the challenges our nation’s veterans face in dealing with their housing costs. The issue has never been as important as right now, given the state of the economy. We’re thrilled to award thousands of dollars to worthy veterans to help defray the cost of their home expenses.

And we’re looking to build on the program later this year. Speaking of the economy let me spend a minute on tariffs, and their impact on our business. For the short-term, we shouldn’t see any significant impact. Beyond that, we’re monitoring tariffs like everyone else and assessing in real time how to approach the rest of the year. For example, we’re looking at alternative suppliers for certain inputs and hardware. That’s the disciplined approach that has been the cornerstone of how we’ve always operated the business. It’s what has allowed us to grow MariMed while maintaining a strong balance sheet. It’s that same approach—and our strong balance sheet—that enable us to implement two key strategic initiatives that will fuel long-term growth and profitability.

The first is what I call “Span the Brand,” which involves continuing to make our brands accessible to as many people as we can in both existing markets and new markets. It starts with investing in innovation to create additional new products that meet the needs of today’s increasingly sophisticated cannabis consumer. Ryan is going to share details of a product we’re launching in the next few weeks, and we’re very excited about it. Creating the product is half the battle. The other half is selling it. Our brands are already top sellers, but there’s significant opportunity to seize additional share. We believe that more acceptably aligned sales, marketing, and operations will help us make it happen. Ryan’s recent, all well-deserved promotion to Chief Commercial Officer is a key to that effort.

As far as new markets are concerned, we continue to be in M&A discussions with a number of operators to acquire assets that would enable us to immediately and profitably distribute our brands in new high-growth states. We’re making meaningful progress, and I’m hopeful we’ll have something more definitive to share in the months to come. The goal of any acquisition is to integrate the operation as seamlessly as we have with First State Compassion, in Delaware. We completed that transaction on March 1st. Our teams have been working together as we get ready for adult-use sales, which we expect to commence this year. We’re also looking to enter new markets through licensing opportunities. We have been negotiating with potential partners in several states where we’re confident our brands can capture significant market share.

The second initiative we’re focused on to fuel our long-term growth and profitability involves identifying new sources of revenue. We can’t just keep waiting for the federal government to help our industry anymore. We know reform will happen eventually — but “eventually” is not a growth strategy. So we are taking charge. Our team is assessing our best options to enter the hemp space. With our strong brand recognition and performance, consumers throughout the country tell us they like to buy our products in their states. So we believe entering the hemp space will help us generate new revenue, while staying focused on our strategy of expanding our brand distribution into new storefronts. The key for us will be to make it happen without taking the eye off the ball of our core business.

I will now turn the call over to Ryan for his update.

Ryan Crandall: Thanks, Jon and good morning everyone. As Jon said, wholesale penetration and the power of our brands continue to be the lead story for us. On our last earnings call, we said our brands are the moat surrounding our business. While the moat got a little wider during the first quarter, let me give you some highlights. Missouri is off to a very nice start for us with Betty’s, Bubby’s and Vibations entering the quarter in nearly 50 storefronts. Reciprocity is a real challenge in that market. So without any dispensaries of our own to buy our customers’ products, it’s been the incredible reputation of our brands that opened doors for us. In Illinois, we sold our products into more than 180 stores during the quarter, which was a 5% increase sequentially and 46% year-on-year.

All of the brands are performing well there, although Betty’s continues to be our lead horse in terms of volume. Betty’s is now number 5 up from number 7 last quarter. That’s not our only success in Illinois though. Vibations has climbed to the number 6 brand in beverages and Bubby’s to number 2 in baked goods. Keep in mind that this success was achieved in just over one year in a very mature Illinois market. Nature’s Heritage flower hit shelves right after the quarter closed, so it’s too early to provide market data. What I can tell you is that the testing of the product has been very strong and consumer feedback has been terrific. In Massachusetts, we saw modest growth in wholesale in a market that seems to have stabilized for us. Our brands continue to have strong penetration in the state with our products in 71% of nearly 400 dispensaries.

Our brand share is equally strong. Betty’s remains the number 1 edible in Massachusetts and our other brands are doing great as well. Bubby’s is number 3 among baked goods and Vibations number #7 among beverages. In Maryland, we’ve hit the trifecta with Betty’s, Bubby’s and Vibations all number 1 in their respective categories. For that matter, Betty’s remains the number 1 edible in Delaware as well. Turning to our dispensaries. The way we look at it we’re in a long game. As Jon said, we’re doing everything we can to deliver an exceptional customer experience in the face of today’s market challenges and we believe our initiatives across pricing, marketing and operations are working to offset the impact. We’re buying smarter which has enabled more competitive pricing options for our customers, as well as a decrease in days on hand inventory.

We’ve streamlined our labor in strong alignment with customer traffic data and we’ve unified and enhanced our customer loyalty program across all our markets. Looking forward, we’re excited about some of the positive things that are happening as far as new regulations in some of our markets that should provide us opportunities to grow our retail sales. For instance, Maryland just announced that they’re going to allow public cannabis events. Our Annapolis store has a great space to host such events. In Massachusetts, where home delivery has continued to gain traction as an option for our retail customers, a new regulation will enable us to have one driver in our delivery vehicles rather than 2. We’ll be able to put that cost saving into putting another vehicle on the road.

I’m also really excited about the innovative new products we’re bringing to the market. Our Betty’s Eddies caramel chew that we recently launched in Massachusetts is selling very well. Next up is an entirely new product format for us. In the next few weeks, we’re launching a brand that takes advantage of the fast growth of functional mushrooms that we’re seeing in the traditional CPG space. It’s called Microdose by Nature’s Heritage and will come in a convenient pill form that’s vegan. Jon has instilled in the company the mantra that we are going to win by becoming the leading consumer packaged goods company in cannabis. That is a highly achievable goal given the performance of our current portfolio. There are significant opportunities to continue growing market share, as we push the envelope on innovation marketing and execution.

That concludes my update and I’ll turn the call over to Mario.

Mario Pinho: Thank you, Ryan and good morning everyone. Last night, we reported first quarter revenue of $38 million, which was flat year-on-year and decreased sequentially 2.7% from $39 million. The sequential drop was due to an expected seasonal impact, partially offset by one month of revenues from FSC, which we acquired effective March 1st. Wholesale gross revenue increased 16% versus the prior year quarter and 4% sequentially driven by increased market penetration as Ryan noted. Overall, retail revenue was down 7% versus the prior year period due to the market challenges that Jon and Ryan alluded to earlier. On a gross revenue basis 44% of our Q1 sales were derived from the wholesale business in keeping with our planned focus on building our brand distribution.

Over the past four quarters wholesale share of product revenue has increased from 38% to 44% as we continue to leverage our brands to enter more doors in existing markets and enter new markets. As Jon explained this is a planned shift in our strategic focus and will naturally dilute margins. But we are mitigating the impact through product mix management and SKU rationalization, optimizing supply chain and sourcing and implementing operational efficiencies and automation. Non-GAAP adjusted gross margin for the first quarter was 41.3%, which was down from 43.8% in the same period last year and 43.3% in the prior quarter. The decline in gross margins was primarily driven by price compression along with ramp-up of costs related to our new cultivation facilities in Illinois and our new processing facility in Missouri.

In Missouri, especially, market entry has been slower due to reciprocity challenges in a nascent market where we recognized our first sale in December 2024. The company incurred a net loss of $5.4 million during the quarter. This compares to a net loss of $1.3 million in the same period last year and $8.3 million last quarter. Total operating expenses for the first quarter were $16 million or 42% of revenue compared with $14.5 million or 38% of revenue last year. The increase was due to a onetime write-off of miscellaneous receivables related to our retail business. Operating expenses excluding intangible amortization onetime deal costs and stock-based compensation was $14.9 million compared to $13.9 million in the first quarter of last year.

The increase year-on-year is mainly attributable to the onetime receivable write-off noted previously. If we exclude this write-off approximately 100 basis points of the sequential decrease is due to one month of FSC’s operations offset by cost-saving initiatives and further steps to streamline operations we commenced in the latter part of 2024. Adjusted EBITDA in Q1 was $2.6 million down from the $4.7 million a year ago and $5.9 million in Q4. This decrease was due to lower gross profit converting through to the bottom-line and higher compensation and benefit costs associated with higher headcount attributable to new assets in Illinois, Missouri and Delaware and the onetime write-off of a receivable balance. In response, disciplined expense management remains a top priority as we navigate today’s challenging environment and we continue to look for opportunities to reduce our cost structure throughout the company.

Turning to the balance sheet and cash flow. We maintained a strong balance sheet ending the quarter with $7.2 million in cash and cash equivalents and $2.7 million in working capital. We had no significant capital expenditures during the quarter as major build-outs were completed by the end of 2024. We generated $1.3 million in cash flow from operations versus the $3.2 million in the same period last year. Turning now to Q2. Based on our visibility today we anticipate an increase in second quarter revenue to be in the high single-digits compared to Q1. We anticipate the increase to be driven by a full quarter of FSC revenues modest contributions from our promotional activities and continued wholesale door adds. At the same time, we anticipate continued softness in retail.

That concludes our financial review. I will now turn the call over to Jon for his concluding remarks.

Jon Levine: Thank you, Mario. Before turning the call over to the operator I want to address our shareholders. Like our shareholders, we are frustrated that the public markets continue to lag behind the intrinsic value of MariMed. It’s not a matter of if it’s only a matter of when that turns around. This is a long game and we’ve built a very strong foundation to position the company as a thriving industry leader for a long-time to come. If not hyperbole, when I say, we’re driving towards building the best CPG company in cannabis and our innovation will continue to drive new brands to meet market opportunities. The best days for MariMed are in front of us. Finally, I’d like to thank our MariMed employees for their dedication to improve the lives of our patients and customers every day. Operator, open the lines for questions.

Q&A Session

Operator: Thank you. [Operator Instructions] Your first question comes from the line of Andrew Semple from Ventum Financial. Your line is now open.

Q – Andrew Semple: Good morning. Thanks for taking my question. So first one, just a housekeeping item. In the prepared remarks, you mentioned a revenue increase in the high single-digits in the second quarter. I just want to clarify whether that’s on a quarter-on-quarter basis or a year-over-year basis?

Mario Pinho: Hi, Andrew, it’s Mario. It’s a quarter-over-quarter basis. And most of the driver of that — sorry?

Q – Andrew Semple: I said great. That’s helpful.

Mario Pinho: Okay.

Q – Andrew Semple: I’ll move on. So latest expectations in Delaware, I’d love to hear what you’re hearing from that state in terms of first adult-use sales in that market, and when we might expect to see that launch?

Jon Levine: Good morning, Andrew. Thank you for joining the call. Thank you for the question. Delaware has finally found a lead of the cannabis program and we are told it could be a timing of anywhere from 60 to 120 days, before we see the first rec store open.

Q – Andrew Semple: Great. And then just on the bad debt expense in the quarter, the receivables balance that was written off. Maybe just would appreciate some more color into that, whether you think that’s going to be a onetime item for the year or given some of the balance sheet challenges, we’re seeing across the industry, whether there’s a risk that that might be something we could see again later in the year? I just want to get some thoughts around that and how you’re managing that risk?

Mario Pinho: Hi, Andrew, it’s Mario, here. Yes, that is a onetime item. I just want to clarify it does not relate to our trade receivables. It relates to a receivable from a vendor that we had to put a reserve up against. We’re obviously pursuing all actions to collect the funds. And I think, we ultimately will prevail. But for right now, we’ve put a reserve up against that balance.

Q – Andrew Semple: Great. that’s it for me. I’ll get back in the queue. Thanks again.

Operator: Your next question is from the line of Pablo Zuanic from Zuanic & Associates. Please ask your question.

Q – Pablo Zuanic: Thank you. Good morning, everyone. Look, the first question more on the area of innovation. You talked about these new hemp products. I don’t know, how much you can share with us right now, but are we talking about hemp drinks? Are we talking about Betty’s hemp-derived gummies? If you can give more color on the products you are thinking about and the distribution, just e-commerce through your own dispensaries only or also through C-stores, gas stations and other outlets? And by the same token — same question in terms of Microdose, very interesting product. You said functional mushrooms ,so we’re not talking about psychedelics I suppose. How wide distribution? I mean could you sell at Whole Foods and other places? Or is this just something you’re going to sell at your dispensaries only? Thanks.

Jon Levine: Good morning, Pablo. This is Jon. Thank you for joining the call. Yes, what I stated in the reading was that I was making the mention that we’re looking at all aspects to grow the business as our brands are very successful and that hemp, is another direction for adding additional revenue. We’re looking at all aspects. Our brand recognition is already there with our brands. We are looking at beverage and other lines, but we haven’t made the final decision on what we’re doing fully in the hemp, yet. We’re looking at making sure we make the decision that’s best for the company, without hurting our cash flow or earnings. As far as the Microdose, I’m going to let Ryan speak about that.

Ryan Crandall: Sure. Thanks for the question, Pablo. Very excited about Microdose. Microdose will not just be in Panacea stores. So that will be a widely distributed product across all our states. So very excited to bring Microdose to market. We feel it is an innovative product in the market. 1906 has had its day and done a really good job of showing that people will consume cannabis through a pill form. And I think we’re innovating beyond what 1906 has done here. So we’re really grabbing on to what we see as a trend in CPG around functional mushrooms, bringing effects-based functional mushrooms to bear within the product. And it’s a vegan product that’s calorie-free. So we feel really confident that it’s made really well and that it’s going to perform really well. Yes. And actually, it hit shelves this weekend actually in Massachusetts.

Pablo Zuanic: Right. And when you said Ryan in all your states but it would still be in dispensaries right third-party dispensaries? Or are you thinking of other non-cannabis outlets?

Ryan Crandall: So Pablo, I think that plays into the whole hemp strategy that Jon mentioned. So that’s still under evaluation. I think the real headline there is we’re looking at every opportunity to expand our brands.

Pablo Zuanic: Right. Okay. Understood. And then on the same topic, I think you’ve mentioned the opportunity for licensing your brands especially Betty’s. In New York, it’s a fast-growing market. How do you think about that? Or do you always want to have control over the supply chain and control your operation in the markets that you operate? Or for example, with New York licensing to someone there Betty’s would that make sense? How do you think about that?

Jon Levine: Pablo, good question. Thank you very much for asking. We have been working with other vendors in New York. We have a license that we applied for well over one year ago still waiting for word on that. But in the meantime, we are in discussions with a few groups in New York and other states to bring our Betty’s and our other products to that state or to other states. And that’s just another avenue for additional revenue. We’re not against finding it, but it’s finding the right partner that will put the dedication and time into doing what our SOPs require.

Pablo Zuanic: Okay. Just two more — two last questions. One, just an update on the second Maryland store. I think you closed on the acquisition. Is it open? Are you going to move the store? What can you — how is it doing? Can you share any color on that? And then separately, maybe try to help us quantify the upside from Delaware, right? Your estimates of the current size of the medical market. I think there’s only seven stores. It will take a while for new licensees to open stores. So that could be a great opportunity there. But just any tools you can give us to quantify the upside from Delaware? I realize it’s a small state, but only seven stores. So that should mean relevant upside? Thank you.

Jon Levine: Our Upper Marlboro store in Maryland continues to grow every month and we’re very excited about how well it’s doing and we continue to see positive there. In Delaware, yes, there presently is only seven stores, but they have already issued several adult-use licenses to social equity people that have started to build out their locations, even though there’s a delay on the final licensing. So we’re hopeful that our wholesale business will be able to start shipping earlier than later. As I said, you’re looking at 60 to 120 days before they’ll have that up and running. But we are ready. We’re excited and ready to go with all of our brands plus some additional brands that First State had already down there.

Mario Pinho: Yeah. And Pablo just to dovetail on Jon’s answer, we are — we have relationships with all open stores today and our team is actively creating relationships with all the stores to open doing that ahead of time. So we’re well-positioned when those stores do open.

Pablo Zuanic: That’s great. Thank you.

Operator: [Operator Instructions] Your next question comes from the line of Joe Gomes from Noble Capital. Please ask your question.

Joe Gomes: Good morning. I wanted to start off you mentioned that Missouri seems to have been a little bit more challenging than expected and I was wondering if you could provide a little more color and detail there?

Ryan Crandall: Sure, Joe. Thank you for the question. This is Ryan Crandall. I would say, Missouri is a market that doesn’t have a ton of companies that operate outside of Missouri. So they’re localized operators. And those localized operators as that market has grown have created a network amongst themselves that they buy and sell products from each other and they have full menu. So as new folks come into that market, there’s — I don’t want to say a protected menu at each location but there’s a good amount of breakthrough that has to happen. And there’s not just — you’re not just breaking on to their shelves, you’re breaking into a category that they’re already sharing with someone else. So I think some of that — what you hear reciprocity in the cannabis markets.

I think it’s very strong in Missouri. But I mean I do think we see that ultimately brands, and great brands and great products do win the day. And we are getting into more and more stores every month. So that is the name of the game. And then once we get into the doors, how do we expand and then how do we support the highest level of velocity that we can. So we have great teams, great processes to do all that. So I’m very confident that we’re going to be able to continue to grow in Missouri.

Joe Gomes: Okay. Thanks for that color. And then just looking at the income statement, marketing and promotion was down pretty significantly spending year-over-year. And I was just wondering was there something unusual in the first quarter of last year? Or what is behind the decline there in the marketing and promotion spend?

Mario Pinho: Joe, it’s Mario here. I guess as we’re looking at our operating expenses, obviously, we’re being a lot more thoughtful and smart in terms of where we’re spending our dollars. So that’s purely just a reduction in more of our programmatic marketing. We’re focusing more on like localized marketing and that’s purely why you see the decrease in the dollars there.

Joe Gomes: Okay. I think I have one more here. In Ohio, I know you had talked about possibly getting another retail location. Obviously, you’d like to get the full integrated operations there. I wonder if you could give us a little more of an update on where things stand in Ohio?

Jon Levine: Hey Joe. Jon Levine. Thank you for joining the call today. In Ohio, we have been looking for real estate and it has to be in an area where you can get a support from the local community. And with all the setback requirements and everything else, and also it’s whether we buy or we lease, those things come into making it a little bit difficult because of all the limitations with cannabis still even with local government saying yes and no, but more importantly the bank that we get our mortgages from making sure that they’re going to be fully comfortable with the valuation. We do have several people looking and we’ve looked at a couple lost a few bids. But we’re hopeful that we can get something done before the end of the year.

Joe Gomes: Great. Thanks for that. I’ll get back in queue.

Operator: There are no further questions at this time. This concludes today’s conference call. Thank you for your attendance.