Marimed - Earnings Call - Q4 2024

Executive Summary

• Q4 revenue was $39.0M, up 0.3% YoY and down ~4% QoQ; non-GAAP gross margin improved sequentially to 43.3% (from 42.6%) while GAAP gross margin compressed to 32.6% due largely to a $3.67M inventory revaluation. Adjusted EBITDA rose to $5.9M from $4.7M in Q3 and $5.2M in Q4’23.
• Wholesale remained the growth engine (Q4 +18% YoY; FY +29%), lifting mix to ~40% of revenue vs 33% in 2023, while retail declined amid pricing pressure and competition, especially in Illinois.
• Strategic catalysts: Missouri wholesale launched late December; Illinois cultivation commenced Q4 with Nature’s Heritage flower set to hit shelves; Delaware’s First State Compassion consolidation approved March 3, expected to be accretive as adult-use begins.
• Management met revised FY24 guidance (revenue +6%; adj. EBITDA down ~20%; CapEx ~$12M). Importantly, they discontinued formal forward guidance due to industry volatility, focusing instead on operational drivers and margin initiatives.
• Estimates from S&P Global (Street consensus) were unavailable at time of analysis; no beat/miss assessment to consensus can be made.

What Went Well and What Went Wrong

What Went Well

• Wholesale growth and brand strength: Q4 wholesale +18% YoY; FY +29%, with brands leading share in core markets (e.g., Betty’s Eddies #1 edible in MA and MD). “Our brands open doors and open them quickly … the MariMed moat.”.
• Sequential profitability improvement: Adjusted EBITDA rose to $5.9M in Q4 from $4.7M in Q3 driven by SG&A savings and cost initiatives; non-GAAP gross margin improved sequentially to 43.3%.
• Execution on growth projects: Began manufacturing in Missouri (late Dec), commenced IL cultivation in Mt. Vernon (Q4) with flower expected on shelves, and consolidated Delaware’s largest operator (FSCC) effective March, adding immediate top-line and profit contribution.

What Went Wrong

• Retail headwinds: Q4 retail revenue fell 7.1% YoY and 5% QoQ on price compression and increased competition in Illinois; management expects pressure to continue into 2025 despite mitigation via pricing strategy and AOV initiatives.
• Margin compression YoY: GAAP gross margin fell to 32.6% vs 44.5% in Q4’23, impacted by inventory revaluation and higher labor/packaging/compliance costs; reliance on third-party flower in IL/MA also pressured margins.
• Tax and working capital pressure: Federal income tax payable rose to $21.9M, contributing to working capital falling to $4.8M (from $12.1M in Q3). Management reiterated industry stance on 280E and intent to file returns reflecting broader deductible costs.

Transcript

Operator (participant)

Morning. My name is Angeline, and I will be your conference operator today. At this time, I would like to welcome everyone to the MariMed Inc Fourth Quarter 2024 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 star, then the number one on your telephone keypad. If you would like to withdraw your question, please press star, then the number two. Thank you. I will now turn the line over to Sara Rosenfield, Brand Director at MariMed, to begin the conference. Please go ahead.

Hello, Sara? Hello, Sara?

Sara Rosenfield (Brand Director)

Good morning, everyone. I'm Sara Rosenfield, the Brand Director for Betty's Eddies, which is now the number one edible brand in Massachusetts and Maryland. I joined MariMed in 2022, and I'm excited to kick off today's 2024 Fourth Quarter and Year-End Earnings Call. Joining the call today are Jon Levine, our Chief Executive Officer; Mario Pinho, our Chief Financial Officer; and Ryan Crandall, our Chief Revenue 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. The discussion of some of these risks is in the Risk Factor section of our 10-K 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 refer to certain non-GAAP financial measures, which are reconciled in our earnings release. Finally, our first quarter 2025 earnings release is tentatively scheduled to be issued after the markets close on May 7, 2025, and our analyst call is tentatively scheduled to be held the morning of May 8 at 8:00 A.M. I will now turn the call over to Jon for his fourth quarter and year-end overview.

Jon Levine (CEO)

Thank you, Sara, for your hard work driving Betty's to the top. Keep up the great work, and good morning, everyone. Last night, we reported our Q4 and full-year results. We ended 2024 with $39 million in revenue during Q4 and generated a record revenue of $158 million for the year. Our margins improved slightly from 42.6% to 43.3% quarter-over-quarter. We also improved adjusted EBITDA both sequentially and year-over-year. This was at a time our industry faced headwinds that aren't letting up. A lot of the credit of our top-line growth last year goes to the strength of our brands. We are building the strongest consumer packaged goods company in the industry. Our products must be differentiators in every one of our markets, and they are. We seized that competitive advantage to expand their distribution in 2024.

Our wholesale team delivered another strong year, growing 29% year-over-year. We sold our products into 80% of all dispensaries across Massachusetts, Maryland, and Illinois during the year, as well as we performed at wholesale. There is still a significant opportunity to continue gaining market share, which I will discuss further when I share our plans for 2025 in a few minutes. Our success at wholesale helped to offset a soft year at retail, with pricing pressures and more competition impacting our performance. Over the long term, we have proven that we know how to drive consumers to our stores and deliver an exceptional experience so that they keep returning. We are doing everything we need to do to ride out the current storm. Ryan will detail several strategies that we are working to increase our AOV and build traffic in our stores.

Looking ahead to 2025, let me share my outlook for the year and my vision for the company. It'll be focused on top-line growth by continuing to expand distribution of our brands in new and existing markets while continuing to improve our profitability. I couldn't be happier with the performance of our operations, sales and marketing teams. They've become a well-oiled machine, helping MariMed create one of the most powerful consumer packaged goods companies in cannabis and making our products accessible to as many customers as we can. We've grown our wholesale revenue by double digits every quarter, year-over-year, for the last 10 quarters, and we expect to continue delivering that type of performance. There's still significant opportunities to gain more market share by executing on our winning formula and continuing to leverage our innovation expertise.

On the R&D front, we expect to introduce new products in several categories very soon. All of these will help us take advantage of our increased production and processing capabilities. We completed the build-out and began operations of both our Missouri processing facility and our Illinois cultivation facility during the fourth quarter. We've now completed all 10 of the revenue-generating projects that we started a few years ago. We look forward to a full year of financial results from all of these facilities, which we believe will allow us to once again gain market share against the competition and improve our operating performance in 2025. Turning to M&A, we remain in serious pursuit of good deals. We still own one of the strongest balance sheets in cannabis, and we don't have any significant debt maturities in 2025.

We're interested in pursuing acquisitions that contribute to our profitability and to the expansion of our brand distribution. There are many good deals to be made out there, and we hope to complete a creative transaction this year. High on the list of targets are Missouri and Ohio, where we want to become fully vertical. In terms of new states, we're very interested in New York and New Jersey. Pennsylvania is also on that list because it looks like they'll be the next state to go adult use. That brings me to Delaware. We were thrilled to announce this week that we finally took ownership of First State Compassion Center. We will report their financial results and our earnings starting in March. First State was our first managed business.

They've got an awesome team, and today they're the largest operator in the state that estimates to become a $215 million annual market with adult use. Adding their wholesale and two dispensaries will immediately contribute to our top line and our profitability. Our brands are already top sellers there, with Betty's the number one edible and Vibations the number one beverage. Nature's Heritage is the number four flower brand after only being introduced in Delaware last spring. Wrapping up, we're gratified to come out of a dynamic year for the industry with higher revenues, great brands, and improved profitability. We have a number of levers to fuel our growth, including continued wholesale gains in Illinois, Missouri, and Maryland, with the addition of Delaware and potential M&A activity. I will now turn the call over to Ryan for his sales and marketing update.

Ryan Crandall (CRO)

Thank you, Jon, and good morning, everyone. As Jon said, we had another strong year at wholesale, growing net revenues 18% for the quarter and 29% for the year to nearly $63 million. Driving that performance is our brands, which are continuing to capture more market share in nearly every market where we operate. For those that look for the moat surrounding a business, there's no question in my mind that our brand portfolio and the R&D that fuels it is the MariMed moat. We all know this is an incredibly tough industry to compete in. To win, you need insight to identify opportunity, innovation to drive differentiation, and unwavering standards to deliver quality. I would put our capabilities in each of those areas against anyone in cannabis.

The bottom line: our brands open doors and open them quickly in new and existing wholesale markets, and we're seeing it in the results across our core markets. In 2024, our two primary focus areas across our brands were to increase brand awareness and brand distribution. On both fronts, I'm pleased to share we saw significant growth. From a brand awareness standpoint, according to Brightfield Group data, all five of our core brands increased their visibility across the markets we currently operate in. This was achieved through our various marketing initiatives, including an outstanding job by our brand ambassador teams that reached over 50,000 consumers this year, an increase of 37% versus 2023. To ensure our consumers could find our products at dispensaries, our sales team executed with precision in 2024, adding 281 new retail outlets or 87% growth to a total of 605 storefronts ending the year.

Our products were more widely available than ever before across these markets, and we anticipate continuing to increase these wholesale distribution numbers in 2025. In Illinois, we continue to expand our distribution, with sales again increasing sequentially by double digits. I'm very pleased that we finished with our brands in 190 stores, or about 80% of the dispensaries in Illinois. We think there's an opportunity to double our sales there as we continue to expand our product portfolio. For example, Nature's Heritage Flower should hit shelves later this month. In Missouri, we began selling our products at the very end of the year. We've put a great team in place there, and we're following the same launch playbook in Missouri that's working so well for us in Massachusetts, Maryland, and Illinois. I'm confident about our prospects to capture market share quickly in that market.

Together, these efforts delivered significant share growth, the ultimate measure of brand strength across all markets. As an example, I'm exceptionally pleased that in Massachusetts, Betty's Eddies' original market, Betty's has once again claimed the number one edible spot, joining our Maryland performance where we were already number one. Our strong and diverse portfolio has three significant brands in Betty's, Nature's Heritage, and InHouse, all of which grew share in leading segments such as flower, vape, and gummies in all of our core markets. We have two brands that I would describe as big fish in a small pond, with Vibations, beverage and 's in baked goods. Both of these brands have an over 60% share in their respective segments in Maryland, as an example.

At retail, Jon was right when he said 2024 was about improving the guest experience in our stores in the face of growing competition and decreased spending in our country. We're in the same boat as everyone else, with cannabis prices falling and consumers having less disposable income. What others might see as a challenge, we see as an opportunity to drive loyalty with our existing consumers and win new consumers over the long run. We've got several initiatives to hit these challenges head-on. For example, we're excited about the early results of a consumer-focused pricing strategy that's based on providing best localized pricing for the most popular products in each store. Combining this with strategies to encourage consumers to buy more units in each transaction, our early results are encouraging with respect to supporting AOV and margins. We're now rolling out the pricing program to all of our stores.

We've also expanded the payment options available to our consumers to include prepayment and other innovative solutions. We've identified a number of ways to decrease transaction times, and we've also optimized our menus and the functionality on our website to make the online shopping experience easier, faster, and more seamless. Lastly, and perhaps most importantly, we measure all of these efforts through Net Promoter Score, or NPS, which is the standard for measuring customer experience at retail. I'm pleased to report our customers are consistently rating us as excellent, with scores almost 20 points above the national average for retail NPS. What this says is that our strategy and the dedication of our local teams is working, and I'm confident that we will continue to outperform the majority of our peer set in the markets we compete. That concludes my update, and I'll turn the call over to Mario.

Mario Pinho (CFO)

Thank you, Ryan, and good morning, everyone. Last night, we reported fourth quarter revenues of $39 million, which increased slightly from $38.9 million year-on-year and down 4% sequentially. Our sequential decline was driven by a decrease in our retail revenue, primarily in Illinois, partially offset by higher wholesale revenues in all markets. On a full-year basis, we reported revenues of $158 million, up from $148.6 million in 2023, an increase of 6%. This increase was delivered by our expanding wholesale business, which grew 29% overall and grew in all markets in which we operate. This revenue increase was offset by a decline in our retail revenue, primarily in Illinois. As Ryan mentioned, our growth in wholesale was driven by increased demand for our products from third-party retailers, improved pricing strategies, and expanded distribution channels.

Our Q4 wholesale revenue was $16.2 million, holding steady compared to the previous quarter and up 18% year-on-year. On a full-year basis, wholesale revenue was $62.9 million, increasing by 29% from last year. Our Q4 retail revenue was $22.2 million, down 5% from the previous quarter and down 7.1% year-on-year. On a full-year basis, retail revenue was $91.5 million, down from last year by 4%. These declines were driven by pricing pressures and softer consumer demand. Competition from new dispensary openings, especially in Illinois, where we saw declines at all dispensaries except our new Casey location. We expect this trend to continue in 2025 as more competition enters the market, consumers continue to spend less, and prices for flower and products continue to drop. Despite these headwinds, we remain focused on driving growth through strategic pricing, targeted marketing, and optimizing our dispensary operations to enhance our customers' experience.

Our new dispensaries in Casey, Illinois and Upper Marlboro, Maryland, continue to outperform expectations, demonstrating the strength of our retail model in high-demand areas. Additionally, we are expanding our product offerings and loyalty programs to attract and retain customers. While the market remains dynamic, we are confident in our ability to adapt and position our retail business for long-term success. We reported non-GAAP adjusted gross margin of 43.3%, which increased from 42.6% on a sequential basis and down year-on-year compared to last year's fourth quarter gross margin of 45.6%. The sequential increase was due to cost savings we saw from our efficiency initiatives, both at our retail and cultivation centers, while the year-over-year decrease was due to price compression in our retail and wholesale revenue.

The year-over-year decline was primarily driven by our reliance on third-party flower to meet demand in Illinois and Massachusetts for our InHouse brand, while we continued our build-out to meet demand in those markets respectively. Additionally, increased labor, packaging, and regulatory compliance costs adversely impacted our overall cost structure. In addition, we have seen a shift in our revenue mix from retail to wholesale. Wholesale revenues were 40% compared to 33% in 2023. We expect wholesale revenues to make up even more of our overall revenues in 2025 as we expand our brands into more doors and partnerships. SG&A expenses were $56.4 million in 2024, or 35.7% of revenue, versus $48.3 million, or 32.5% of revenues in the prior year. The increase in expenses was attributable to higher headcount and related compensation costs as we ramped up our facilities in Illinois and added a new dispensary in Maryland.

On a quarterly basis, SG&A expenses were $13.1 million, or 33.6% of revenue, versus $14.2 million, or 36.5% of revenues in the comparative quarter. The decrease in absolute dollars and as a percentage of revenues was driven by savings we started to see in cost management initiatives implemented last quarter, including headcount optimization, operational efficiencies, and minimal expansion costs. We expect these initiatives to deliver more savings in 2025 and expand our EBITDA. We reported adjusted EBITDA of $5.9 million for the fourth quarter of 2024 compared to $5.2 million in the same quarter last year and $4.7 million on a sequential basis. The year-over-year increase was primarily driven by lower labor and operating costs and release of bad debt reserves, offset by lower gross margins.

Sequentially, adjusted EBITDA improved due to a reduction in G&A expenses just mentioned and lower marketing costs as we implemented operational efficiencies and leveraged our brand ambassadors to reach our customers locally. These savings were partially offset by continued investment in growth initiatives I just mentioned earlier and the impact of lower gross margins. For the full year, we reported adjusted EBITDA of $19.6 million, a decrease of $5 million, or 20% from the prior year. This decline was largely attributable to margin compression, which flowed directly to the bottom line, along with increased operating expenses and strategic initiatives aimed at positioning the company for long-term growth. Now, turning to the balance sheet and cash flow. We ended the quarter with $7.3 million in cash and cash equivalents, down from $9.8 million at the end of the third quarter and down from $14.6 million at the end of 2023.

The decrease in cash year-over-year was due to the capital projects mentioned earlier. Our working capital was $4.8 million, which decreased from $12.1 million in the third quarter of 2024. This decrease was primarily attributable to an increase in our federal income tax payable due to the application of Section 280E of the Internal Revenue Code, which we recorded for GAAP purposes. MariMed's current federal income tax payable balance is now $21.9 million. Like our peers, the company does not believe that it owes taxes applicable to the application of this section and intends to file its tax returns on that basis. For the year, we generated $6.8 million in cash flow from operations, a 14% decrease versus the $7.9 million in 2023. This decline is due to inventory increases and an increase in other assets. Looking to 2025, we plan to make capital expenditures of $5 million.

The majority of this amount is earmarked for facility improvements and process automation at our cultivation and processing centers. Currently, we have no plans to add to our dispensary footprint. Our immediate focus will be on integrating the Delaware operations, which includes two new dispensaries to us. Lastly, a final word on the strength of our balance sheet. We ended the year with $78.9 million in debt, consisting primarily of mortgages. We have no significant maturities in the next two years, providing us with financial flexibility to execute on our growth strategy. I am pleased to report that we successfully met our revised revenue and adjusted EBITDA 2024 financial target. Revenue growth of 6%, which aligned with our revised guidance range of 6%-8%. Adjusted EBITDA declined by 20%, landing at the high-end of our expected range.

CapEx totaled approximately $12 million, which was $1 million higher than guidance. Before I turn it back to Jon, I want to discuss a change in our approach to providing forward guidance. As we continue to navigate a dynamic and evolving industry landscape, we have made the strategic decision to discontinue providing formal financial guidance. This decision reflects the ongoing regulatory shifts, market volatility, and broader macroeconomic factors that can create short-term variability in our results, growth, supporting profitability over time. That said, we remain committed to transparency and will continue to provide meaningful insights into our performance, key operational drivers, and strategic initiatives. Our focus remains on executing on our growth strategy, optimizing margins, and maintaining financial discipline to drive long-term shareholder value. We appreciate the continued support of our investors and look forward to keeping you updated on our progress each quarter.

I will now turn the call over to Jon for his concluding remarks.

Jon Levine (CEO)

Thank you, Mario. Before turning the call over to the operator, I just want to reiterate how excited we are for 2025. We have a number of catalysts to fuel our revenue and EBITDA growth. We already own one of the strongest brand portfolios in the industry, which, as Ryan said, is our moat. I'd like to personally thank our shareholders for all their support, and I'd like to thank our MariMed employees for their dedication to improve the lives of our patients and customers every day. Operator, you may open the line for questions.

Operator (participant)

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 received. Please be prepared to ask your question when prompted. Once again, if you have a question, please press star one on your phone now. Our first question comes from Andrew Semple with Ventum Financial. Please go ahead.

Andrew Semple (Equity Research Analyst)

Hi there. Good morning. Thanks for taking my question. I'm glad to see the momentum in the wholesale segment for yet another quarter. The trend behind that business remains excellent and the continued traction of your brand and products and markets. However, the retail segments, as you've noted, are under some pressure despite some new store openings in Q3 and the launch of Ohio adult-use sales. In the prepared remarks, I caught that you mentioned that you're expecting to increase sales and drive growth in brand and product distribution in 2025. I didn't know if that necessarily included at the retail level. The question being, do you expect to grow retail sales in 2025 without opening any new stores, or should we expect the existing trends in that segment to continue?

Ryan Crandall (CRO)

Andrew, thank you for the question. I do think that we are doing everything within our power to change that trajectory. I think overall, the retail environment is going to continue the trend, and we'll do everything we can to buck that trend through the pricing strategies that we have, through trying to internalize more of our own products and improve our margin. Ultimately, we're laser-focused at retail on improving the guest experience and making sure that the customers that visit us come back to us and that we're engaged in programs to bring as many new customers into the store as possible.

Andrew Semple (Equity Research Analyst)

Great. That's helpful. Maybe turning to Delaware, just looking for some additional color on that market and your announcements on March 3rd of receiving approval to take ownership of that asset. First, was there any consideration paid when you took ownership of the Delaware operations? Second, in your opinion, how well prepared is that business for the launch of adult-use sales, which is expected later this year?

Jon Levine (CEO)

Morning, Andrew. Thank you for joining the call, it's Jon. Great question. We are very excited today about Delaware finally being rolled up into MariMed. As everybody knows, that was our very first start in the industry under MariMed, and we're very happy that that's finally rolled in and that we get to record their earnings and expenses on our book. It's going to be very accretive to our reporting in the next 2025 numbers with increases in all. This is an opportunity that we're going to help grow the company and their business as they become adult use. As for the cost, as we filed in our earnings report, it's all part of the Omnibus where we've put money in in the past to build out and support Delaware over the years, and that was the cost that we had to pay for the consolidation.

Andrew Semple (Equity Research Analyst)

Great. Understood. One more, if I may. It sounds like you're off to a good start in the Missouri market, given the brand traction you mentioned in your prepared remarks. I'm just wondering if you have maybe internally a revenue target for that state, whether it's this year or long-term, that you'd like to achieve where you know that you found success in that market. What's kind of the key performance metrics you're hoping to achieve in that state, given the start that you've had?

Mario Pinho (CFO)

Hi, Andrew. It's Mario here. Thanks for the question. As we noted in our prepared remarks, we're not providing guidance. As you know, that asset kind of went live at the end of last year. We definitely see significant revenue coming out of there into 2025, primarily on the wholesale side. We will keep you abreast of kind of the performance in that market as we report in our future quarters.

Andrew Semple (Equity Research Analyst)

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

Operator (participant)

Thank you. The next question comes from Pablo Zuanic with Zuanic & Associates. Please go ahead.

Pablo Zuanic (Managing Partner)

Thank you. Good morning, everyone. Look, just to join maybe a bigger picture question in terms of how you plan to expand in 2025. You talked about M&A. Is that in the current environment? Is that easier or more difficult when you're thinking of New Jersey, New York, Pennsylvania? Are you buying pretty much assets or ongoing companies? How do you think about that? Related to that, how do you think about licensing some of your brands like Betty's Eddies, or you'd rather keep control of your brands and own the assets in those states? Just trying to understand that side of the growth plan. Thanks.

Jon Levine (CEO)

Morning, Pablo, and thank you for the question. Yes, this is Jon. The expansion in 2025, as I said, we're looking to expand to become fully vertical, but additional states that we're looking at being New York and New Jersey and a little bit in Pennsylvania because of the ability to go adult use there. We're also looking at trying to license our products into additional states. In terms of New York and New Jersey and PA, we're looking at opportunities of either expanding through the licensing or a partnership of our brands or trying to find an asset where they're already in operation, where we can go in and expand the business with our know-how and management to bring our brands into a new state and get the expansion through the addition of a cash-flowing business versus buying paper licenses and building from the ground up.

We're concentrating on quick-turn revenue versus the build-out and wait.

Pablo Zuanic (Managing Partner)

Right. On the same line of question, in terms of stores, for example, in Maryland, is there an opportunity to add more stores? What about Ohio? Given the difficulties in retail, that's something you're going to shy away from?

Jon Levine (CEO)

I appreciate the question. In Maryland, there's a moratorium of, I believe it's four more years that we have to wait before we can add additional stores. In Maryland, we're at our two stores presently. In the state of Ohio, to answer you, we want a second license with the transfer to adult. We found a location that fell through, but we're looking for a new location that we hope to find in the next few months and try to get that open in 2025, but it could be beyond that. Other than that, we're really only looking at retail if there's an opportunity to expand us into fully vertical, but unless there's a creative position for additional retail that would bring us dollars in a state that we're not in.

Pablo Zuanic (Managing Partner)

Understood. Thank you. Look, just one last one trying to unpack a little. I know there's no guidance, but trying to unpack the levers you have. As you said, flower in Illinois only started now in the first quarter, I believe, in March. Missouri processing products, I don't know if you started sales yet or not, if you can remind us of that. Is it just edibles, or are you selling vape or other products? Are you consolidating that, or is that MSA revenue? Related to the same question, in the case of Delaware, just remind us so we can model, right? You talked about if it's REG, $250 million market, I think you said. How many operators are there? How big is your operation compared to other peers? If you can talk about that. That's it. Thank you.

Ryan Crandall (CRO)

Thank you, Pablo. This is Ryan. I can talk to the Missouri opportunity that we're currently partaking in. In Missouri, we're making our branded products outside of flower today. Everything edible, vape, gummy, tablet-related. Betty's Eddies is there, InHouse is there, Bubby's Baked, and Vibations. All of our edible brands are in Missouri and starting to have some real good traction in that market, and we're gaining stores literally every day. Jon, do you want to take the second half?

Jon Levine (CEO)

Yeah, I'll take the Delaware question for you, Pablo. In Delaware, there's presently in the medical piece, there are four competitors. We've all applied, and I've heard that all four of us are converting into the adult use. We are the largest operator in the state of Delaware, and we're going to continue that. They're adding in additional licenses, but they haven't given out all the licenses yet, so we don't know how many there's going to be. We are already built out in our growth capacity to the state limit. We are the only grower in the state that already is up and running at full capacity when the state says go to be able to operate in the state.

Pablo Zuanic (Managing Partner)

That's great. Thank you very much.

Operator (participant)

Thank you. The next question comes from Joe Gomes with Noble Capital. Please go ahead.

Joe Gomes (Senior Research Analyst)

Good morning. Thanks for taking my call. Questions. Can you hear me?

Jon Levine (CEO)

Yes.

Joe Gomes (Senior Research Analyst)

Oh, okay. Sorry about that. I just wonder if you might give us some more color on Maryland wholesale. How would you characterize the current market dynamics in that market, and how are the MariMed brands performing there relative to other core states?

Ryan Crandall (CRO)

Thank you, Joe. This is Ryan. Appreciate the question. Yeah, Maryland, the Maryland market is a great market for us. We've got an incredibly strong sales team and marketing team down there. We've got great distribution of our brands. We have market-leading positions in the edible category and multiple kind of categories within edibles with baked goods and with Vibations being drink. We feel very, very good about our position in that market and our ability to continue to grow. We are in a position where we are selling to almost every store in the market and continuing to increase what we're selling month-over-month in that market. We feel very good about our capacity there as well as our opportunity to continue to capitalize on it.

Joe Gomes (Senior Research Analyst)

Okay. Great. On the 280E, there has been a lot of discussion here lately. Some are talking about not going to or going to keep 280E and extend it, and the whole rescheduling is all up in the air again. Jon, I just wanted to get your kind of viewpoint of where we stand today and kind of where you see that roadmap going here, at least in the near term in 2025.

Mario Pinho (CFO)

It's Mario here. Thanks for the question. As you know, at this point, the IRS has taken a position that the application of 280E still applies just to cost of sales, right? We have been very conservative and not, from a GAAP perspective, not taken the kind of position that a lot of our peers have taken and recorded a reserve for that tax benefit. It is a wait-and-see attitude, obviously. We are looking at our options, and we will be filing our tax returns with the considering additional costs that we can take. We think we have a case and it meets the threshold of more likely than not. I think it is just a matter of time at this point. I think we are not alone. It is kind of an industry kind of view on this.

Joe Gomes (Senior Research Analyst)

Okay. Great. Thanks for taking my questions. Appreciate it.

Jon Levine (CEO)

Thank you.