Earnings call transcript Q3 2022

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Operator

Good morning. My name is Pam, and I will be your conference operator today. At this time, I would like to welcome everyone to the MariMed Third Quarter 2022 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. Instructions] [Operator

would Steve turn Investor West, go I over conference Relations. like ahead. Mr. to Vice now you. the to call Please Thank President of

Steve West

call. MariMed’s everyone, quarter welcome morning, to Good XXXX and conference third

Chief Joining me on and our Jon call today Susan Shaw, Villare, our Tim Operating Financial Executive Officer. Fireman, President; are Levine, Chief Officer; Bob the our Officer; our Chief

Investor and Relations being This recorded will be on call at website our ir.marimedinc.com. is archived

date, and statements those the subject in that to risks Today’s other call uncertainties them applicable securities to from factors including filed SEC, may Form cause our expectations Any risks, by materially and contains forward-looking and results and most actual with forward-looking our other be documents no discussed could required various These forward-looking today’s uncertainties XX-Q. differ we to are statements. obligation than Form the assume statements as update recent XX-K reflect laws. of management’s as

this financial supplemental slides, our In earnings website. the well in addition, available in we as applicable on release, included non-GAAP will as information which financial call. are to present our measures Relations Investor on GAAP are Reconciliations

after future March analyst scheduled quarter is fourth For to be purposes, held closes will X, call November market XXXX release XXXX. be of earnings scheduling your XXXX, X, our and subsequent issued the on tentatively our morning the

to Bob. over call the turn now will I

Bob Fireman

MariMed had quarter and morning, pleased solid good report everyone. another Steve, you, that financial am Thank results. and I of operational to

year-over-year the consecutive are positive for reporting increase XXth Our we revenue adjusted continues and quarter-over-quarter. both importantly, Most to quarter. EBITDA

include third our milestones. our during to on execute significant plan and assets to milestones company’s earnings. revenue and several advancing increase resources the We continued further These quarter, growth successfully strategic

and price our the result are headwinds the markets, We in quality war that have our products our and off our is inflation excellence all we sales the as not of of key services This as growth course. in MariMed of from our the culture Ukraine, outperforming compression the taken well team. competitors in COVID, of are the terms of pleased

hopeful that senior will in access more improve statement cannabis This policy company list to institutional on other will the are market We new investors the allow our success. initiatives President U.S. federal to at exchanges. Biden’s cannabis level capital and participate

MariMed discipline, of in up is the to next poised to grow operational $XXX a to sheet, and in continue with profitable. clean MSOs as is years strong million balance financial one few excellence, revenue few the

shareholder be transformational well positioned improved and participant. Rest MariMed suggest story. you M&A all watching keep accretive seriously assured, We value. as considered are a I MariMed’s must any transaction the

to me Let you. now it turn Thank over Jon.

Jon Levine

Good everyone. morning,

Bob quarter. said, had we solid another As

Baked. completed First, kitchen sell, in manufacture, Bubby’s expansion including the we Betty’s distribute products, our Eddies to which and award-winning allows our and state-of-the-art Maryland, of us

eastern dispensary which Illinois. completed acquired to license Once Second, will the we in in will dispensary open, of in and approved the be the part be state near fifth Illinois, thrive border. our it Indiana

in Eddies in-house under Maryland, Third, a In Heritage of launched Nature’s we Also very launched which ice brand. LIVE are Betty’s cream selling we we gummies new three Massachusetts, products. Flower, our well. both and launched line

We with that needs. innovate and consumer brands continue products to address new

will and market. today. We to processing ballot at partnered wholesale manage initiative Missouri the pass of the Missouri state-of-the-art a Fourth, use in holder sell edibles develop to kitchen in adult polls award-winning and with a we our produce hope license voters all

sales the Eddies has XX% our future, award-winning dispensaries. XXX manufacturing currently we degrees about extensive Betty’s XX for will an with entered brands fifth, fruit Michigan, force degrees. XX the leading dispensaries of And into our wholesales contract intention Degrees of sell other to with juice in distributor expanding Michigan A and into include XX a in

our first remain Maryland brands focused financial of quarter, fourth the building executing vertical and in the state. achieved and into full officially continues our momentum dispensary strategic discipline, we maintaining integration our We Our in on opening plan. announced great as that recently growth

Our business momentum gaining core flower to pressures. pricing and retail is strengthen despite our continues wholesale business

overall great and at operating challenged, industry remains will and outstanding are we focused service, to delivering the outperform by continue While on wholesale, the customer industry. we retail

I the that, With will for call over Tim to update. turn operational

Tim Shaw

Thank morning, Jon, everyone. good you, and

grew with retail second our begin me quarter. compared Let X% by operations to revenue review where the we sequentially

to a by was average negative able slowing the historic compared in inflation was second this The understatement. the growth to growth third country sequential ticket. are is say growth, nearly program offset overjoyed which quarter an in To we trend of buck in cannabis quarter. every comprised XX% or was Our decrease with transaction where a part the experiencing reported on MariMed that state is

a approved extremely regulators services, right new more premium worked these of fight our balance hard hours, launches, We and dispensary. delivery and Annapolis value and few to when ago are advertising weeks the news extended of the Maryland product paying off. received offerings, great opening We initiatives

While still approval optimistic awaiting our coming will in we Massachusetts, open it in months. are for we the are regulatory dispensary

to Under which also XX% Maryland, positive growth. Massachusetts, XX% to increased performance wholesale, sales sequential our compared increased the reported second In which sequentially, our primarily due quarter. in

it in Massachusetts compression of signs to seen in Maryland compared flower have showing stable last and but We remains wholesale is stability. price year,

our Baked Eddies, faster than the as in line of and launched produce edibles offset account second shortly This a launched sales. Bubby’s we to XX we that after The Maryland, compression includes can Maryland them. branded most XX% In in-house our price which about selling we late able for vapes literally gummies. by introducing such milligram total our in-house branded are we’re quarter products, where good is Betty’s value of news now of our

our the been significantly a week, we’re day, increasing per result, production has a shifts days a year to in run As staffing while Maryland. for wholesale difficult this multiple seven

edibles. place sales have our the in ramp for We meet and ability demand and the parts quickly production to up to unprecedented

I’d extracting in us to hydrocarbon and begin allows approvals We which derivative sauce. extracts produce received and own live resin our finish, diamonds butter Massachusetts, share as news. recently and state exciting necessary to some to I such local like Before the

Heritage branded also begin which live available by in will be producing select We sauce dispensaries and will carts, year resin end. Nature’s

the Jon as want finally, cannabis address what to wants. and edibles front, to and that mentioned, specific their us products products today’s continue customer we consumer And they Data innovate develop benefits. on showed that deliver feedback

stress some couple weeks favorites now as the others Just some adding custom improved unchanged. products, Betty’s a help selling others. formulated fan basic relief, improving increased such libido, and sleep, better Every keeping Eddies chew by a address of to ago, our top needs we lineup while new relief, is pain

will confident the will cannabis, are we in win be brands and Great among ours long-term champions.

our operations the now financial I my review. will concludes results. transfer who to Susan That go will over call

Susan Villare

million Thank by which was This Tim, income start $X I wholesale increased everyone. like nearly Total lower our $XX.X and fees. of is management about by our you, and and results. X% to brief sources a morning, financial revenue other sequentially. from million, would operations, driven third partially revenue good offset for recap rental quarter such dispensary both as

while Maryland. sales market upon. in Tim being I we third data sequentially this Massachusetts, load the that in reports both want touched and External some states within declining the Illinois to show briefly operate quarter that provide more

quarter I quarter. these trends the single testament MariMed’s second the dispensaries and positive at market to dispensary dispensary every for know is unfavorable consecutive MariMed’s pleased saw to outperformance against flat award-winning brands. traffic am for previous a growth versus

Moving to gross margins.

wholesale in margin compared of the increased our gross our XX% non-GAAP and improvement quarter. products sales margin last was Our primarily branded gross Maryland Massachusetts. was markets XX% to The attributable to of

watermark low believe was continue margins we We and our our to to improve second gross a continue and quarter to stabilize. expect margins

Moving to operating non-GAAP expenses.

We very continue disciplined our with to spending. be discretionary

third This plan million to increases and sequential increase $X.X million support Our our both marketing the strategic expenses programs non-GAAP in quarter. to was in operating initiative. increased growth to personnel sequentially $X.X due

represents which Our a sequentially XX% adjusted EBITDA was EBITDA expenses. due plan quarter This operating our down margin. second increases versus was in a of XX% $X.X margin adjusted to million,

the versus to of of and with to due cash $X.X cash ended continued We $XX.X second which flow quarter balance balance quarter third generate sheet. our positive turning operations. to increased million our from the million ability cash equivalents, Now

increased the capital of Our from to million end quarter. the million networking at second $XX.X $X.X

to MariMed as flow strength illustrated from generate of remains by positive year-to-date cash operations. core Our our ability a cash

We cash remain for the track year. flow be positive to on full

that Now, since open until with now new respect adult-use has to assuming in our will our to dispensary been Beverly, not are XXXX. Mass, which full year guidance, XXXX ready we the early on open summer,

optimistic in they that delays, We resolved term. the be face will regulatory to we but continue remain timing near

which represents the in X% $XXX we Accordingly, pricing on we year-over-year assuming retail revenue to rate the to million growth pressure in the wholesale expect be year full states we Additionally, that of will million, front. and XX%. both $XXX are to range operate, the continue of a where

is slightly guidance outlook which full with our XX% Our lower margin year due the deleverage the of XX% between associated to unopened and gross from XX%, delayed than revenue dispensary. previous non-GAAP our is

between non-GAAP is Our EBITDA adjusted $XX million million. and forecast $XX

$XX is million. full be and to between our million CapEx Finally, year spend $XX estimated

I like his to my concludes at now for this the to back would call comments. And That concluding prepared remarks. time, turn over Jon

Jon Levine

Susan. Thank you,

financial in the delivering of another operational of industry. quarter We the incredibly results, remains are some and strong proud strongest of which

finally a the passing. positive I will the federal closing, President’s domino the cannabis at of level. progress reform Hopefully, momentum acknowledge of seeing announcement Before safe are effect want towards have banking we to the recent

In will to executing continue we strategic growth our meantime, the on attention plan. our focus

businesses. earlier, in As and both U.S., wholesale sales to the trends we our facing we continue consumers the headwinds in noted improving despite significant retail report

about ahead, be Looking and to continue very next a bullish year, XXXX remain year. foundational we

in completed. anticipate just to retail, accelerated new wholesales, expect In expect Annapolis, we Massachusetts, come assets XXXX help new addition kitchens dispensaries Ohio, we production in we and online we to our In to opening growth. Maryland Illinois Missouri drive be to In dispensary in and several Illinois. opened in

cultivation Illinois become in cultivation also new in Massachusetts expanded facility our We operational and to expect XXXX. our in

remain acquisitions. and we in additional for accretive To very growth success. active long-term solid continued we and And financially summarize, for are poised discussions

to at trends and both wholesale retail in We improve sales continue states. our key our

growing assets us flow continue to foundation of to further positive great producing Our our sheet. generate revenue strengthen allow cash and organically balance will

their extremely and thank found making MariMed employees us of MariMed’s for best I financially prospects run to XXXX. excited dedication, companies. about We’re hard cannabis would of all for work like the and one our

questions. open may for you line the Operator,

Operator

comes Global first Alliance Grey Your Please Instructions] with question [Operator you. Partners. from go Thank ahead. Aaron

Aaron Grey

and the Hi, thank for you questions. good morning,

believe back some commentary for the stabilization. remarks to So first just me I into I some want prepared regarding question go about Massachusetts. you talked on

I think wholesale there. you’re talking market about the

there, So I we’re get to retail just pricing further pressure some level. at continuing to the because color wanted see

soon? sales whether thoughts going of terms So you that or dynamics? if states of else adult the stabilization some with know your differentiate And going is that particularly of with to in not strains want sustainable, Rhode on just your I with be something genetics those on starting commoditization that’s to use Island it’s strains because Thank neighboring some in of that, in think think the with you and own, or more dynamic more Connecticut, you. other there’s

Tim Shaw

Great were a stabilization, The Thanks, yes, company. Tim. brand Aaron. question. This we and true bullish we’re is really

brand value a to with of Our premium to has in-house our in rest above trend. trends the compete at Nature’s brands to at continued stay market the grown We those wholesale premium and in-house adds. brought has top all Heritage level buck and value really help we’ve the needs keep our and

Aaron Grey

brands recently growth. just thoughts launched Thank guys pricing we’ve a great. where that And volume one It’s just color. some also that what pressure, there, then Michigan by of for you your market? on kind much another seen of turning some of lot Okay, you their very of to

timing that into looking are Thanks. and more So of when thoughts a market, you Michigan of being just pricing of one the given, enter were pressure? market, what dynamics the and lot of the in your the the seeing terms

Jon Levine

market our Betty’s very with much it’s a already. Yes, went others. But into retail that lot call Yes, to went for in that expand future, market that morning. this of agreement state, very we with our award-winning you the we’re very good flower distributors Eddies excited we big in morning, knowing and to joining a Aaron. and Michigan, brands Thank into brands, there the our bring which

target – if become could we is So out we’re feel the what try even opportunity. before to we market concentrating an on to figure we area that have if vertical, we the like first

Aaron Grey

color. I’ll for the into Thanks the great. queue. jump Okay, back

Operator

ahead. question with next Andrew comes Capital go Your Semple Echelon from Please Markets.

Andrew Semple

taking for you Thank morning. Good my question.

generally with off, products of to should of compare the XXXX? more – ask products, want maybe on with tier and profile be that mix, how margin in First premium how the these on the making of impacting it margins just value gross margins your the more gross do revenue how kind line, you do product thinking we

Tim Shaw

the is again. Thanks Tim for this Andrew, question.

the sure things costs BDS same Our cut Heritage attain corners Brand and products margins some cutting that saying We’ve came Nature’s Nature’s actually. value those and actually and just we the really are it’s really, on on of great just margins out helped data to make Massachusetts. Heritage has our

in one share. sales and number market We’re both dollars

been flower really to of our exchange. it’s accretive So entire the portfolio

Andrew Semple

in that, for hoped Tim. flower demand product side, you for for? on how, maybe on of received bit Has give market? pricing line? has Conversely, And thanks more that the product premium that it of the premium to been update could a had Okay, received you why build the continue an that does

Tim Shaw

sorry. I’m didn’t catch beginning part I the that question, Andrew. of

Andrew Semple

has has hope build for demand the Flower for that line? product, demand that and product And Sorry. to LIVE for? achieved building, is market that does been you’d in pricing continue the how

Tim Shaw

Yes. is we’re all a We’ve a off rolling LIVE we releasing getting and dispensaries. with it out. Actually soft own premium along It you. with our consumer there’s started Being other. Got getting the they’re are Flower, spending piece into dispensary roll and steady they’re to into understands that goes what other why slowly exactly more. make an it sure education that above

is – it it’s gaining So traction.

Andrew Semple

questions. back into Thanks for my get taking I’ll Great. queue.

Operator

question next comes with Jon BTIG. Decourcey go ahead. Your from Please

Jon Decourcey

for quarter question. another Hey here. the on guys, thanks Congratulations execution

and talk you quick production more talked Can that more that to me. and a of Can of opportunity if couple kind cultivation provider. the scale you decide? a timing little questions for be You ramp about Just Maryland when wholesale to to you bit you provide color? a about initiative out have and

Jon Levine

all our Thank Jon. for Jon supply us in speaking. brands very joining of of good you allowed has Maryland, more to kitchen, our in with heavily call much the expansion completed Yes, our which our brands. Yes, efficient market of have produce morning, we this the to all a Levine way morning.

We use voting expand which state, have we’re that in as adult on that to ability pass. the also flower will our the rooms approved becomes today. And hopeful they’re

now So the concentrating on right brands. we’re

flower going and expands. wholesale have up forward market. earlier, been the that we We into we’re that The the look wholesaling market has as to plenty we as of continuing reported

Jon Decourcey

thinking a small within speaking, generally mentioning by M&A Okay. current Bob case transactions, footprint? existing states from And are but about then the I’m targeting more think tuck-in just you sure or it’s basis, – I was just case further acquisitions are your we guys expansion beyond

Jon Levine

looking we operating similar. is opportunities is make Bob of This that others, very culture we’re accretive our which us for brands. states at expand like-minded as to and Jon award-winning again. look when we to philosophies with mergers to sure that’s culture, we’re said, But with Yes, have is distribution a very looking important for our

Jersey Georgia, come states to Virginia to our We’re looking, each expanding into like looking they in new that to also available. New at in we’re as get we’re expand in New and but state, limits the states of York,

Jon Decourcey

a opportunities? – it’s consider operator the No, just or like-sized interesting. would And with kind again, partnership that’s of only Okay. it a is smaller you

Jon Levine

in just merge. No, discussions found have quality philosophy looking to haven’t we’re make culture we sure that we’re of just and right the that for that the we and

Jon Decourcey

XXXX. for great. you’re guys me, color then of you from Jon, Okay, is gave bullish lot a on And why question last

does and in that With required of opening out CapEx the and expansion, the look What’s assets of a those to states remaining terms standpoint? wholesale key some dispensaries from spending? build what like

Susan Villare

for is joining This Susan call. Villare. am sure. the Thanks I

certainly acquisitions. flows, point, the operations that our flows do these extent cash can year. we flow from currently to we that, able at build given using with to cash we financing find To build but next we on very based haven’t would fund CapEx favorable So this some to transformational We our outs. were existing But look have today. we at our for strong guidance are out cash those

Jon Decourcey

guys. That’s right. All great. Thanks, Okay, for me. it

Susan Villare

Thanks.

Operator

Your ahead. Tom Please with go Research. next question Stansberry from comes Carroll

Tom Carroll

Hey, for question. Good morning. Thanks guys. the

about my done would safe lame-duck guys you’ve have answered. it’s of that during the you. dug work if little day much anything passed all but specifically chat it’s election if the part? know recently Thank kind bit plus think any you I plus session. questions a being I crazy you have on been pretty a question, I into wonder given on

Jon Levine

State in can that Well, we of Act a with that’s lobbying, still the the trying push with been through basically don’t President do working a sorry, the states that we’re lot help lot but get hopeful we’re very through. of we’ve politicians, the and in Banking local to that

Tom Carroll

Okay, thank you.

Operator

with comes Craig-Hallum from go next Des Group. Eric ahead. question Instructions] Capital Lauriers Your [Operator Please

Eric Des Lauriers

markets, Thank Great. of past your has more evolved at given try for any months the dynamics your about on talk Thanks sort just taking your pricing evolving how consistent looking basis looking in Are my would premium you pricing consistent Could wholesale you evolving to or color is just on the your across be strategy any this you of strategies sort pricing to just maintain sort of margins, drive a questions. for here? market-by-market over great? brands few

Tim Shaw

And Eric, with question. world right, the team. Tim market It’s Thanks the market at wholesale Shaw about strong our buyers by here. for working frontline wholesale we industry, hodgepodge people, relationships. is each consumers. in that dispensary as are sales it the with they is Working with working our very This are important. the sales

really stay service the best possible. market, giving to to in the all efficient continue in couple all And provide to quality sure of attention the that’s efficient making end delivery details. and paying button highest just above of highest the the us helped easy our notches folks in a things work to the and them keep are rest and the brands that care regard we take hard we these So in and the back the

Eric Des Lauriers

guys Yes, the question certainly for that operations route? entertain Or brand Thanks. own to have of that past. way. you’re here. Can from forward? of appears priority done is those your thinking a to just I that Is you you how opportunities. licensing of know you talk potential you or two build going in going sort for of wondering that the would versus all about and me pathways? guys strategic Last just a sort the out different look Just more licensing brand that you kind would something bit sort

Jon Levine

morning, opportunities morning. Levine. but Yes, call questions for find and move stated that through for the can own we other many looking to, we’re MIP doing, I’ve doing done looking Jon licenses as can for [ph] Eric. sorry, forward. for we expand licensing, this the and This the states to for to that attention get license in you We’ll but look joining expand. we’ve products is if something brands license the right to Missouri. the at Expanding opportunities opportunity better as a states now both always Michigan processing is we’re opportunities paying Good it’s in as the and we and into Thank earlier, are is our in

Eric Des Lauriers

Thanks.

Operator

and for please this your disconnect concludes do you a day. Have lines. gentlemen, you Ladies today. ask conference thank that call great for and participating your We

MariMed (MRMD) 8 Nov 222022 Q3 Earnings call transcript