Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- MariMed Inc (MRMD, Financial) reported both year-over-year and sequential revenue growth, with a notable improvement in EBITDA and net income.
- The company's wholesale business experienced double-digit growth, marking the ninth consecutive quarter of at least 20% year-over-year growth.
- Betty's edibles brand achieved significant success, becoming the number 7 ranked edible brand in Illinois within 10 months.
- MariMed Inc (MRMD) expanded its brand into new and existing markets, contributing to revenue growth and early signs of improved profitability.
- The company has a strong balance sheet and access to low-cost capital, positioning it well for strategic acquisitions and growth opportunities.
Negative Points
- MariMed Inc (MRMD) faced macroeconomic and industry headwinds, impacting retail revenue and consumer spending.
- The company's non-GAAP adjusted gross margin declined year-over-year due to inflation on input costs, labor, and startup costs.
- Adjusted EBITDA decreased compared to the previous year, primarily due to lower gross margins and increased spending on growth initiatives.
- Pre-opening costs for new assets were higher than expected due to regulatory and construction delays, affecting gross and EBITDA margins.
- The cannabis sector's depressed stock valuations present challenges, although they also offer potential M&A opportunities.
Q & A Highlights
Q: Can you talk about how you think about expanding Betty's, particularly in terms of licensing in other states?
A: Jon Levine, CEO, explained that while licensing is a more challenging growth strategy due to the need for reliable partners, MariMed is actively pursuing licensing in states where they are not currently present. They are also looking to expand into additional states through acquisitions or partnerships, aiming to introduce all their top brands, not just Betty's.
Q: How do you value Betty's, and what type of comps are you looking at?
A: Jon Levine noted that Betty's revenue from retail sales in three states is over $40 million, which could value the brand at $200 million to $250 million. This valuation is considered conservative, especially with potential growth in additional states over the next 12 to 24 months.
Q: Can you remind us of your stance on 280E and the potential cash flow benefits if it goes away?
A: Jon Levine stated that MariMed has been aggressive with their 280E stance, benefiting from being more wholesale than retail. The elimination of 280E would provide millions in additional cash flow, supporting further growth.
Q: What is your approach to M&A in the current market environment, given the depressed valuations?
A: Jon Levine emphasized that MariMed is in a growth phase with a strong balance sheet, allowing them to pursue strategic acquisitions at realistic valuations. They are actively looking at deals and hope to close several in the next year.
Q: Can you discuss the revised EBITDA guidance and visibility into the fourth quarter?
A: Mario Pinho, CFO, mentioned that the startup phase for new assets is over, reducing margin drag. This should allow MariMed to leverage new assets and expand margins in the fourth quarter and beyond.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
