Marimed - Earnings Call - Q2 2025

Executive Summary

• Q2 revenue of $39.6M declined 2.0% year over year but rose 4.4% sequentially; GAAP gross margin was 40.5% and Adjusted EBITDA improved to $4.9M with a 12.4% margin, driven by stronger wholesale and a full-quarter contribution from Delaware.
• Retail revenue decreased YoY, but wholesale grew; management emphasized execution in Massachusetts, a full-quarter from Delaware, and indicated they were cash flow positive in Q2.
• Management highlighted H2 catalysts: Delaware adult-use commencement, Pennsylvania entry via a management and licensing agreement, and expanded wholesale distribution; METRC migration issues in Illinois are “behind us” and Missouri is “under active review”.
• Wall Street consensus (S&P Global) for revenue and EPS was unavailable at time of retrieval, so beat/miss versus estimates cannot be assessed (see Estimates Context).*

What Went Well and What Went Wrong

What Went Well

• Sequential acceleration: revenue up to $39.6M from $38.0M in Q1 and Adjusted EBITDA nearly doubled to $4.9M, with management citing strong execution in Massachusetts and a full-quarter from Delaware.
• Wholesale strength: wholesale revenue rose to $17.1M vs $15.9M YoY (Q2’24), supporting mix resilience as retail softened.
• Strategic expansion: concrete H2 catalysts include Delaware adult-use launch, a Pennsylvania MSA/licensing agreement (12.5% management fee on Standard Farms’ gross revenue), and Maine expansion of Betty’s Eddies into the medical channel—supporting brand-led growth.

What Went Wrong

• Top-line softness YoY: total revenue declined 2.0% YoY; “Other revenue” fell sharply YoY ($0.04M vs $0.95M), and retail declined ($22.4M vs $23.6M).
• Continued net losses: GAAP net loss was $(1.27)M with diluted EPS of $(0.00), pressured by interest expense ($1.76M) and taxes ($0.69M).
• Margin compression YoY: GAAP gross margin slipped to 40.5% vs 41.8% in Q2’24; Adjusted EBITDA margin 12.4% improved sequentially but remains below recent peaks (e.g., 15.2% in Q4’24).

Transcript

Speaker 1

Good morning. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the MariMed Inc. Second Quarter 2025 Financial Results Conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. I will now turn the line over to Jake Dean, Director of Research and Development. Please go ahead.

Speaker 4

Hello and good morning, everyone. I'm Jake Dean, Director of Research and Development at MariMed Inc. I'm very proud of the contributions my team has made in supporting the growth of our company. We work hard to identify new and innovative product opportunities and make sure all of our products are consistent, delicious, and meet our very high standards for quality. I'm honored to kick off today's 2025 Second Quarter earnings call. 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 in 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 and 10-Qs available on our website. Any forward-looking statements reflect management's expectations as 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 second quarter overview.

Speaker 5

Thank you, Jake. You and your R&D team are the drivers of the innovation that sets our product apart and are contributing to achieving our goal of becoming a leading cannabis CPG company. Good morning, everyone. Thanks for joining us for today's earnings call. We reported last night that during the second quarter, we achieved growth and expansion across our business. Our wholesale and retail revenues increased sequentially. We achieved a substantial increase in EBITDA. We were cash flow positive, and we continued to maintain a healthy balance sheet. Our team was relentless in their commitment to our vision, and we can't thank them enough for their hard work and dedication. To be clear, there still is a lot of near-term uncertainty in our industry. Pricing pressures, market saturation, and the lack of federal reform still pose a challenge that we will continue to navigate.

Our Expand the Brand strategy is working. At the same time that more customers are choosing cannabis, consumer sentiment for legalization has never been higher, and industry sales continue to increase nationally, while alcohol and tobacco sales continue to decline. As a reminder, Expand the Brand focuses the company on making our products accessible to as many customers as possible. During the second quarter, we once again grew our wholesale revenues sequentially and year over year. Our products, including our premium brands, Betty's Eddies, Nature's Heritage, Bubby's Baked, Vibations: High + Energy, and InHouse, have really hit their stride with consumers and continue to maintain a significant share of the market. I was generally pleased with our continued wholesale growth during the quarter. We opened new doors and had a particularly strong quarter in Massachusetts. That said, our performance in Missouri has not met our expectations.

We're looking at our options in order to improve overall company profitability. Turning to retail, we had one of the best quarters in terms of our sequential growth. A series of pricing and marketing strategies we rolled out late in Q1 worked to defend our turf at some stores and grow sales at others. This was also the first full quarter where we were able to report the revenue of our Delaware operations, including sales at our two dispensaries there. Speaking of Delaware, I want to thank our team for being ready to take full advantage of adult-use sales when they began last weekend. We made a bet on expansion of the program a long time ago by investing in our facilities, our brands, and our people. We were fully prepared to leverage our leadership position in the state, both retail and wholesale.

It has only been a few days, but we are very pleased with the results. Looking ahead, our focus will continue to be squarely on our expand the brand strategy. Our North Star is for all our brands to be top sellers in their categories nationally in the next five years. To achieve that goal, we must supplement our organic growth with M&A and licensing to bring our brands to new high-growth states. We took a significant step forward last week with the announcement of our Managed Services Agreement to manage Seltz Cultivation and Processing facility in Pennsylvania. That agreement will immediately contribute to our top line and our margins starting September 1. Pennsylvania is on everyone's radar as the next major state that is likely to add adult-use sales. We also entered into a licensing agreement, which will enable us to distribute our product in the state.

We are hopeful to have as many of our brands approved by the state of Pennsylvania and distributed during the first half of 2026. Also, on the licensing front, we announced a deal with a new Maine partner last month that will expand distribution of Betty's Eddies to both rec and medical customers. Maine doesn't get much national attention, but it's a huge tourism market. It's also one of the few states that generates similar sales volumes for both adult and medical. We are also talking to partners in other states where we know our brands would succeed. It's no secret that there's a general malaise that engulfs cannabis the past year or two, but I believe it may finally be turning the corner. If you listen to our calls over the years, you know that I've been among the most cautious CEOs in predicting federal reform.

I feel like all the chatter we've seen recently is more credible than I've seen before. I'm growing more optimistic about the prospect of rescheduling. Taken together with our second quarter results, the opening of adult-use sales in Delaware, our move into Pennsylvania, and the continued growth of our brand, we are on the way to delivering the shareholder value our investors deserve. With that, let me hand it to Ryan.

Speaker 2

Thanks, Jon, and good morning, everyone. As the person responsible for top line revenue of the company, I'd characterize the second quarter as extremely positive. That said, there are still several opportunities to improve performance in the second half of 2025. Market share growth for our brands remains a critical KPI for us, and our products continue to grow or maintain their share in key markets. Betty's Eddys remain the top selling edible in Massachusetts, Maryland, and Delaware, and continue to be among the top sellers in Illinois. Vibations: High + Energy also continue to perform very well. THC beverages are having their moment, and our decision to capture white space with a powder drink mix rather than the cluttered ready-to-drink category is paying off. The brand is top 10 in all of our core markets.

Our dedication to continually bring to market high-quality products filling consumer needs is what drives the development of Vibations: High + Energy, our Betty's limited-time offer products, and broadly all of our innovative products. Our R&D team has now developed another winner with Microdose, a pill that combines the best of THC and other cannabinoids with functional mushrooms. We rolled out the brand in Massachusetts during Q2, and sales have exceeded our expectations. We are now executing our plans to bring Microdose to other wholesale markets. Speaking of wholesale, our sales and brand ambassador teams continue to punch way over their weight quarter after quarter, and it's not by accident. We've built a MariMed culture that rewards hard work, merit, and doing the right thing by our customers. We are proud to say the formula is paying off.

We continued to grow our wholesale revenue in Q2, although the gains were partially offset by the challenges we're facing in Missouri, as well as the metric transition in Illinois. Jon shared what's happening in Missouri. In Illinois, our shareholders may not know that in June, the state implemented a change of the seed-to-sale platform that tracks all cannabis products. For a few days during the month, shipments from operators were adversely impacted. The transition is complete, but it took a bite out of our Illinois wholesale revenue for the quarter. Since then, sales have quickly returned to their pre-disruption levels. Turning to retail, last quarter, I discussed several initiatives we implemented across pricing, marketing, and operations to offset the challenges of price pressure and competition we've been experiencing. Our efforts paid off in Q2 with an increase in both sales and transactions.

Among the most notable contributors was our loyalty program. Our Thrive Perks members delivered a higher AOV than the average customer during the second quarter. Growing this program is critical to our success. The last quarter, we grew loyalty membership 6% across all our markets. Over 40% of our transactions now occur online. Enhancements we made to our retail websites to make our shopping experience easier and quicker also contributed to our growth. Those enhancements were part of our transition to one national retail brand. Last quarter, our three dispensaries in Massachusetts were all changed to the Thrive name. We did the same in Delaware last week in advance of adult-use starting. All 13 of our stores now operate as Thrive, which, of course, will help us in terms of building brand equity. It will also help our bottom line, delivering efficiency in both dollars and time.

Jon has instilled in the company the mantra that we are all going to win by becoming the leader consumer packaged goods company in cannabis. This 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.

Speaker 4

Thank you, Ryan, and good morning, everyone. Last night, we reported second quarter consolidated revenue of $39.6 million, representing a 4.4% increase sequentially and a 2% year-over-year decline. The quarter-over-quarter growth was driven by gains across both our wholesale and retail channels. Starting with wholesale, wholesale revenue grew 2% sequentially and 8% compared to the same period last year, which represents approximately 43% of our aggregate product revenue. The sequential growth was primarily driven by a 5.6% increase in our wholesale revenue in Massachusetts. This growth in Massachusetts was fueled by expanded market penetration, with our products now reaching 74% of retail doors, up from 71%. These gains were partially offset by declines in Missouri and Illinois, as previously discussed. Our retail revenue increased 8% sequentially and declined 5% compared to the same period last year.

The sequential growth in revenue was driven by growth in top line across most of our dispensaries. On a same-store basis, we saw increased revenue at nine of our 13 dispensaries. We are especially pleased with the sequential traffic growth at our Tiffin and Upper Marlboro dispensaries, which increased 23% and 36% respectively, signaling momentum from targeted marketing efforts and expanded product offerings. On an aggregate basis, traffic increased 8.4% sequentially, or 4.7% if we exclude our two Delaware dispensaries. The year-over-year revenue decline was largely attributable to reduced performance at our Metropolis dispensary, where sales were impacted by increased competition from two new dispensaries that opened in close proximity over the past year. Despite this decrease, Metropolis still remains our biggest store in terms of revenue and one of the top performing stores in the state.

Excluding the impact of Metropolis, retail revenue increased approximately 14% year-on-year due to the scaling of our Quincy dispensary, our new Tiffin, and Upper Marlboro dispensaries, along with contributions from our two Delaware dispensaries. Non-GAAP adjusted gross margins for the second quarter were 41.9%, up from 41.3% quarter on quarter, but down 100 basis points from the same period last year. The sequential improvement principally reflects scaling efficiencies at our cultivation facility in Illinois. The year-over-year decline reflects the shift in revenue mix following our consolidation of FSC, which resulted in the loss of high margin management services revenue and the ramp-up cost of Missouri, which is still scaling its operations. On a GAAP basis, the company generated a net loss of $1.3 million during the quarter.

This compares to a net loss of $1.6 million in the same period last year and a net loss of $5.4 million that we reported last quarter. This improvement reflects higher revenue, better gross margin performance, and lower non-recurring expenses compared to Q1. Total operating expenses for the second quarter were $13.8 million, or 35% of revenue. This compares to $15 million, or 37% of revenue in the same period last year, and $14.9 million, or 39% of revenue in the first quarter. The addition of $2.3 million in revenue from a full quarter of our FSC acquisition contributed to overall growth, while operating expenses increased by only $200,000 sequentially after adjusting for the one-time write-off of a non-trade receivable in Q1. This modest increase reflects the success of our integration plan and disciplined cost management.

Incremental expenses related to our Delaware operations were largely offset by reductions in payroll and general operating costs driven by the cost-cutting measures implemented earlier this year. Adjusted EBITDA in the second quarter was $4.9 million, an increase of $2.3 million sequentially and $541,000 year-on-year. This growth was driven by the factors previously mentioned. Turning to the balance sheet and cash flow, we maintained a strong balance sheet, ending the quarter with $6.1 million in cash and cash equivalents and $38.5 million in operating working capital. We had no significant expenditures during the quarter. We generated $297,000 in cash flow from operations, compared to $3.2 million in the same period last year and $1.3 million in the first quarter. The decrease in operating cash flow was driven by inventory buildup in Delaware in anticipation of adult-use and to meet the demand for our products in our other growth markets.

Importantly, our day sales outstanding remains strong. Unlike many of our peers, we are not experiencing significant write-offs of trade receivables, which reflects our disciplined credit policies and active oversight of customer payment behavior. In summary, we are pleased with the progress made in the quarter, despite some operational and market-specific challenges. We were resilient through disciplined expense management, strong execution in our core markets, and continued margin expansion. Our balance sheet remains healthy, supported by strong operating working capital, positive cash generation, and prudent credit practices that set us apart from our peers. Looking ahead to the second half of 2025, our focus will be on driving top line growth and profitability while executing against several key catalysts, including, first, expansion of wholesale distribution in Illinois and Delaware, where we are adding new retail accounts, increasing order frequency, and scaling demand for our branded products.

Second, the launch of adult-use sales in Delaware, which will broaden our customer base and amplify retail and wholesale revenue. Third, executing on our new partnerships in Maine and Pennsylvania. At the same time, we are actively evaluating the path forward for our Missouri operations to ensure they support our long-term financial objectives. That concludes our financial review. I will now turn the call over to Jon for his concluding remarks.

Speaker 5

Thank you, Mario. Before we take questions, I'd like to thank our MariMed employees for their relentless dedication to improving the lives of our patients and customers every day. We are on our way to building a powerful cannabis CPG company, and we couldn't do it without them. Operator, you may open the line for questions.

Speaker 1

Thank you. If you would like to ask a question, please press star one on your telephone keypad now. You will be placed into the queue in the order you received. Please be prepared to ask your question when prompted. Once again, if you have a question, please press star one now. We will take our first question from Andrew Semple at Ventum Financial.

Speaker 6

Thank you. Good morning. Thanks for taking my question. I'll start off with Delaware. Given it's the first time we're seeing Delaware fully consolidated in the results, would you be willing to provide what the contribution was in the first three months of that business being consolidated?

Speaker 4

Andrew, hi. It's Mario. Good morning. We don't provide results at the state level, but, you know, from an adult-use perspective, sorry, from a consolidation perspective, are you looking more from a revenue perspective or gross margin contribution?

Speaker 6

From a revenue perspective.

Speaker 4

Yeah, I would say it generated about $2 million on a quarterly basis.

Speaker 6

Great. That's helpful. I guess, since the quarter ended last week, we've seen adult-use sales commence in the state. Just looking for an update on how that's going. I saw the regulator having an announcement that sales are up prior to the medical run rates, but they didn't really disclose kind of percentage gains there. Just wondering if you have any color on how the early days, the adult-use market is going and where kind of the bottlenecks are to further advance growth in that state.

Speaker 2

Sure. Andrew, this is Ryan. Very excited about the Delaware launch of adult use so far. We are seeing increased growth at both retail and wholesale, as expected. We do foresee additional growth in the market as awareness becomes higher over the coming months. We are very, very well positioned, from a cultivation standpoint, from a finished goods product standpoint, to capitalize on the lead that we have in that market. We are very excited.

Speaker 6

That's great. Maybe, moving over to Pennsylvania, good to see MariMed establish a foothold in that market. Just a couple of questions on that. First is, how, you know, maybe how big of a presence Tilt has there today, and where do you think the big improvements are that the MariMed team can bring to that business? Second, you know, Tilt probably doesn't have among the stronger balance sheets in the business. How are you managing the potential credit risk in collecting payments for your management services agreements in that state? That would be helpful.

Speaker 5

Andrew, thank you very much. This is Jon Levine. I appreciate you being on the call this morning. Yeah, we're very excited about expanding our brands into as many states, and this opportunity came up to be able to manage the services in Pennsylvania. Tilt at this time has very little of a branded product presence in Pennsylvania. With our brands, we feel that we can get in there before the adult-use and expand it even more with adult-use when it does happen, which gives us the opportunity to build a bigger market with our brands in one of the top states in terms of revenue for cannabis. We are very excited about that opportunity. As far as collection of our management fees, we've never had a situation where we haven't been able to collect any of them.

We just did the final conversion of First Aid Compassion into our business in March of this year, which got rid of the collection of management fees and rent and put them on our reporting. We've never had a problem of collecting, and we feel that with the cash flow that we'll generate for Tilt, that we'll still be able to get our current payments of management fees.

Speaker 6

That's great and very helpful. I'll turn the call over. Thanks for taking my questions.

Speaker 1

will move next to Joseph Anthony Gomes at NOBLE Capital Markets Inc.

Speaker 0

Good morning. I apologize. I got dropped from the call, so I missed most of Jon's and all of Ryan's comments before they could get me back on. If I ask a question that's been answered, I apologize in advance. I just want you to give us a little more detail here on Missouri. What seems to be the issues? You talked about your looking to maintain profitability company-wide. What are the range of options here, sale, exit of the state? Is this a state operation where you think you can turn them still around? Some more color would be greatly appreciated.

Speaker 5

Joe, good morning. It's Jon Levine. Thank you for joining us, and I apologize that you fell off the call. That's a very good question on Missouri. Missouri, we have been building that operations up. It hasn't been building as fast as we would like to be able to get rid of those losses that we have to carry. We are looking at all opportunities, whether it's to expand in the state, to get more reciprocity, or to sell or close in the state. We have to make the decision that is best for the shareholders and for our profit and loss statement.

Speaker 0

there any timing on that of when you think a decision is made? Is that, you know, third quarter or year end?

Speaker 5

I would hope that we would have something before the end of the year.

Speaker 0

Okay. Thank you for that. I know one of the other markets you've been looking at is New York, and I'm wondering if you have any update on the potential for the New York market.

Speaker 2

Hey, Joe. This is Ryan. Thank you for the question. We are actively pursuing New York. We're excited about the opportunity in that market. We think our brands will play very well. Nothing to announce yet, but certainly working in that direction diligently.

Speaker 0

Okay. Ryan, in the last call, you talked a lot about the issue of some hemp products. I apologize if you talked about it when I was off the call, but I was looking for maybe a little update on how that is progressing.

Speaker 2

Sure, Joe. What I would say there is that we are still evaluating options, still staying very close to developments as they happen at a federal and a state level, and evaluating options. Nothing to announce there yet.

Speaker 0

Okay. Great. Thanks. I'll get back in queue.

Speaker 1

As a reminder, if you do have a question, please press star one. We'll go next to Pablo Ernesto Zuanic at Zuanic & Associates.

Speaker 3

Good morning, everyone. Can I just follow up on Delaware? If you can comment in terms of how many stores are actually selling rec right now, how many do you expect to be selling rec by the end of the year based on licensing? If you can remind us of the wholesale picture, you know, how many wholesalers are there out there? Do you have a big lead? How big are you versus other wholesalers? That would be helpful. Thank you.

Speaker 2

Hey, Pablo. Thank you for the question. Yeah, in terms of Delaware, 13 stores are licensed to be open for rec at the time, and those are all existing owners of dispensaries that have expanded to new stores. That's the presence, and we do expect some more stores to come online, likely before the end of the year. Wholesale will be blossoming for us over the next several months.

Speaker 3

Right. Can you give more color in terms of how many wholesalers are there in the market right now? I understand it's only two or three, or am I wrong? Do all the 13, or do all the incumbents pretty much have wholesale operations? I'm just trying to understand in terms of share, right? How big are you versus others? If you can talk about that. Thank you.

Speaker 2

There are four other wholesalers in the state presently. As you know, Pablo, I would add that we are the largest today in the state. I think we have the largest opportunity to provide the most product to everyone at this point.

Speaker 3

Right. No, that's great. Thank you. In the case of Pennsylvania, just to be clear, I think I understand we've seen so many MSA agreements out there, so I think I understand how they work. I'm just trying to understand whether you get involved on the cash burn side of things, right? You are collecting a fee for the MSA for managing the operation. You're also going to collect a licensing fee for the brands that are going to, for your brands being sold there. In terms of, if that's, let's say, a cash burning operation, do you get involved in that? Do you get involved in taking credit risk? Do you get involved in generating expenses from running that business? If you can give more color on the Pennsylvania MSA. Thank you.

Speaker 5

Good morning, Pablo, and thank you for joining the call. This is Jon. Yes, when we look at going into a facility as a Managed Services Agreement, we're bringing in our expertise of cost controls, risk management, and expansion of brands into every state that we go into. In most of the states, we started from the ground up. This is our first opportunity to go into a facility that is a cash flow positive right now facility and that we feel that we can make some improvements. Tim Shaw, our COO, has great experience of taking operations and making them more efficient.

Ryan, with the lead on the sales and the expansion of our brands into that state, we feel that we can not only grow the revenue, but fix the cost so that we can expand their margins and be able to afford our fees that we're charging, as well as pay their bills.

Speaker 3

Understood. In terms of stores, I believe that operation had the right to open three stores, but that license or that right was sold to someone else. How are you thinking about the potential for MariMed to obtain licenses to have stores in Pennsylvania, or are you going to focus just on wholesale? Thank you.

Speaker 5

Pablo, again, we're just going in as a Managed Services Agreement. We're going to operate this as a wholesaler, expanding our CPG of our cannabis brands into the market of Pennsylvania. That's the next state that we see going adult use. We're not concentrating on them being a full vertical. We're concentrating on the wholesale and expansion of our brands.

Speaker 3

Right. Thank you. Maybe one last one, Mario. If you can just, I mean, obviously, MariMed has one of the best balance sheets out there, but just a reminder in terms of maturities coming up, whether you're in the market to refinance anything, just some color there would be helpful. Thank you.

Speaker 4

Yeah. Pablo, I think you're aware of the one maturity we have coming up in February. We are in active conversations with them. At this point, we really don't have anything to share with you, but we're actively managing that.

Speaker 5

All of our other expiration dates for renewals aren't for years because we have long-term mortgages that don't expire for nine years, I think, is the first one.

Speaker 3

That's right. Okay, thank you very much.

Speaker 1

This concludes the question and answer session. I would like to turn the conference back over to management for closing remarks.

Speaker 4

Thank everybody for joining us on the call today, and we'll speak to you next quarter.

Speaker 1

This concludes today's conference call. Thank you for attending. You may now disconnect.