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MI

MARIMED INC. (MRMD)·Q4 2024 Earnings Summary

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 .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Revenue ($M)$38.899 $40.591 $39.002
GAAP Gross Margin (%)44.5% 41.3% 32.6%
Non-GAAP Gross Margin (%)45.6% 42.6% 43.3%
Diluted EPS ($)$(0.03) $(0.00) $(0.02)
Adjusted EBITDA ($M)$5.233 $4.676 $5.941
Adjusted EBITDA Margin (%)13.5% 11.5% 15.2%

Segment revenue mix and trends:

Revenue Components ($M)Q4 2023Q3 2024Q4 2024
Product – Retail$23.877 $23.384 $22.177
Product – Wholesale$13.738 $16.310 $16.212
Other Revenue$1.284 $0.897 $0.613
Total Revenue$38.899 $40.591 $39.002

Balance sheet and cash flow (year-end snapshot):

MetricFY 2023FY 2024
Revenue ($M)$148.598 $157.964
Adjusted EBITDA ($M)$24.674 $19.649
Cash from Operations ($M)$7.910 $6.785
Purchases of Property & Equipment (CapEx) ($M)$(20.130) $(11.960)
Cash & Equivalents ($M)$14.645 $7.282
Total Assets ($M)$196.123 $206.989
Total Liabilities ($M)$107.209 $128.113
Income Taxes Payable ($M)$14.434 $21.922

Context and drivers:

  • Sequential revenue decline (~4%) driven by softer retail in Illinois, partially offset by higher wholesale across markets; non-GAAP gross margin improved sequentially on efficiency gains, though YoY margin compressed on price/mix and inventory revaluation .

Guidance Changes

FY2024 guidance evolution and outcomes:

MetricPeriodPrevious GuidanceRevised Guidance (Nov 6, 2024)Outcome / Current Status
Revenue GrowthFY 20245%–7% (Aug 7) 6%–8% Achieved ~6% growth; met revised guidance
Adjusted EBITDA GrowthFY 20240%–2% (Aug 7) (18%)–(20%) Declined ~20%, at high end of revised range
CapExFY 2024~$10M (Aug 7) ~$11M ~$12M actual; ~$1M above revised guidance

FY2025 guidance policy:

  • Formal forward guidance discontinued as of Q4 call, citing regulatory shifts, market volatility, and macro uncertainty; management to provide qualitative updates on drivers, margin optimization, and discipline going forward .
  • No formal guidance for margins, OpEx, OI&E, tax rate, or dividends was provided.

Earnings Call Themes & Trends

TopicQ2 2024 (Prior-2)Q3 2024 (Prior-1)Q4 2024 (Current)Trend
Wholesale momentum & brand distribution8th consecutive quarter ≥30% YoY wholesale growth; Betty’s #1 edible in MA; strong IL and MD wholesale 9th consecutive ≥20% YoY wholesale growth; IL wholesale +19% seq; Betty’s #7 edible in IL (Oct) Q4 wholesale +18% YoY; FY +29%; products sold into ~80% dispensaries in MA/MD/IL Improving scale, broadening distribution
Retail headwinds & pricingRetail transactions +8% seq; margin improvements in IL stores; still growth-phase drag Slight retail decline; macro pressures on AOV; cost actions under way Retail down 5% seq and 7.1% YoY; rolling out localized pricing/AOV programs; NPS ~20 pts above retail average Persistent pressure; mitigation in progress
Market expansion (IL, MO)IL cultivation pending; MA Quincy adult-use; MD cultivation expansion; MO processing near approval Continued buildouts; inventory ramp to support markets IL cultivation commenced (Q4) with flower expected imminently; MO wholesale launched late Dec Execution milestones achieved
Delaware consolidation & adult-useExpect to consolidate FSCC in 2025; #1 share in DE Reinforced plan to consolidate pending adult-use DE ownership approved Mar 3; largest operator; expected accretive as adult-use begins Catalyst now active
280E / taxPotential elimination would yield “additional millions” in cash flow; stance aggressive historically —Federal tax payable $21.9M; will file returns taking broader costs; “more likely than not” position Regulatory-dependent
Cost control & automationPackaging automation to improve margins Expanded focus on process improvements; OpEx management SG&A down QoQ; more savings expected in 2025 Ongoing efficiency gains

Management Commentary

  • “We’re pleased to report record revenues and improved adjusted EBITDA… Our brands continue to gain market share… Betty’s Eddies is the top-selling edible in Massachusetts and Maryland.” – CEO Jon Levine .
  • “Wholesale revenue grew 18% for the quarter and 29% for the year to nearly $63 million… our brand portfolio and the R&D that fuels it is the MariMed moat.” – CRO Ryan Crandall .
  • “We successfully achieved our revised 2024 financial guidance for revenue growth and adjusted EBITDA… positioned to leverage our brands and talent to drive continued top-line growth and further enhance profitability in 2025.” – CFO Mario Pinho .
  • “We have made the strategic decision to discontinue providing formal financial guidance… [but] remain committed to transparency on operational drivers and strategic initiatives.” – CFO Mario Pinho .
  • “Adding [Delaware FSCC] will immediately contribute to our top line and profitability.” – CEO Jon Levine .

Q&A Highlights

  • Retail outlook: Management does not expect retail category conditions to improve near term; focus is on localized pricing, driving AOV, increasing own-product penetration, and enhancing experience/loyalty to buck the trend .
  • Delaware consolidation: Consideration tied to historical omnibus support; FSCC expected to be accretive as adult-use begins; MariMed already at state grow capacity limits .
  • Missouri ramp: No specific revenue targets provided; expect “significant revenue” in 2025 primarily wholesale; portfolio includes edibles, vapes and tablets under Betty’s, InHouse, Bubby’s, Vibations .
  • Expansion strategy: Prioritizing accretive M&A to achieve vertical integration and rapid revenue contribution; exploring licensing in select states (NY/NJ/PA) to extend brands .
  • 280E stance: Will file returns reflecting broader deductible costs; believes position meets “more likely than not” threshold; GAAP still shows $21.9M federal income tax payable .

Estimates Context

  • Street consensus (S&P Global) for Q4 2024 Revenue/EPS/EBITDA was unavailable at the time of analysis due to data access limits, and coverage on MRMD appears limited. As a result, we cannot present a statistically robust beat/miss versus consensus for Q4 2024. Management did state they met revised FY24 internal guidance (revenue +6%, adj. EBITDA down ~20%) .

Key Takeaways for Investors

  • Wholesale-led growth remains intact and is scaling across markets; share leadership and expanded distribution underpin a durable growth flywheel despite retail pressures .
  • Sequential profitability inflection: Q4 adjusted EBITDA improved QoQ with SG&A savings; further efficiencies targeted into 2025, suggesting operating leverage as new capacity ramps .
  • Near-term catalysts: Illinois flower introduction, Missouri wholesale scaling, and Delaware consolidation into adult-use should support top-line growth and mix/margin benefits in 2025 .
  • Risk watch: Retail competition and price compression (especially IL), YoY margin pressure, and 280E uncertainty (working capital and tax cash outlays) remain key constraints to valuation multiple expansion .
  • Strategic stance: Management is prioritizing accretive, cash-flowing M&A and selective licensing to expand brand distribution quickly without overextending the balance sheet .
  • Guidance withdrawal reduces headline risk but increases the importance of quarterly operational KPIs (wholesale distribution, AOV/mix, non-GAAP GM, SG&A as % sales) to gauge trajectory .
  • With project buildouts complete and capacity online, the setup favors operating leverage if retail stabilizes and wholesale gains continue; Delaware adult-use onboarding can be a notable upside driver .

Other relevant press releases during Q4 2024:

  • Commenced cultivation operations in Mt. Vernon, Illinois; first harvest expected Q1’25 .
  • Commenced manufacturing operations in Missouri (Oct 30) and launched wholesale (Dec 23) .

Prior quarters’ context:

  • Q3 2024: Revenue $40.6M; adjusted EBITDA $4.7M; non-GAAP gross margin 42.6%; revised FY24 guidance to rev +6–8%, adj. EBITDA –18–20%, CapEx ~$11M .
  • Q2 2024: Revenue $40.4M; adjusted EBITDA $4.4M; maintained initial FY24 guidance at that time .