MariMed Reports Second Quarter 2022 Earnings – Technical420

marimed-reports-second-quarter-2022-earnings-–-technical420

MariMed, Inc. (“MariMed” or the “Company”) (CSE: MRMD) (OTCQX: MRMD), a leading multi-state cannabis operator focused on improving lives every day, today announced its financial results for the second quarter ended June 30, 2022.

“We executed on our strategic plan, growing revenue both year-over-year and sequentially,” said Bob Fireman, Chief Executive Officer of MariMed. “Our growth was driven by increased traffic in our dispensaries despite the headwinds facing the entire industry and inflation in the U.S. being at a 40-year high. We continue to report some of the strongest financial results in the industry1 and remain poised for reaccelerated revenue and earnings growth in 2023 and beyond.”

Financial Highlights2
The following table summarizes the consolidated financial highlights for the three months ended June 30, 2022 and 2021 (in millions, except percentage amounts):

Three months ended
June 30,
2022 2021
Revenue $ 33.0 $ 32.6
Gross Margin 45 % 60 %
GAAP Net income $ 1.9 $ 7.6
Non-GAAP Adjusted EBITDA $ 8.9 $ 13.9
Non-GAAP Adjusted EBITDA Margin 27 % 43 %
Working Capital $ 8.9 $ 13.9

1 Per company research of public filings of peer companies in the U.S. cannabis industry.
2 Please see the reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures and additional information about non-GAAP measures in the section entitled “Discussion of Non-GAAP Financial Measures” in the attached schedules.

CONFERENCE CALL
MariMed management will host a conference call on Tuesday, August 9, 2022, to discuss these results at 8:00 a.m. Eastern time. The conference call may be accessed through MariMed’s Investor Relations website by clicking the following link: MariMed Q222 Earnings Call.

SECOND QUARTER OPERATIONAL HIGHLIGHTS
During the second quarter, the Company executed on multiple facets of its strategic growth plan, including:

  • April 27: The Company completed the acquisition of Kind Therapeutics USA, a Maryland cannabis operator specializing in the cultivation, production, and wholesale sales of cannabis flower, concentrates, and other edibles from its 180,000 square foot facility in Hagerstown. MariMed is in the process of opening a dispensary in Annapolis, which will lead to the Company’s operations becoming fully vertical in the state.
  • May 5: The Company completed the acquisition and received final approval of an Illinois wholesale “craft grow” license transfer. MariMed subsequently acquired a facility in Mt. Vernon, Illinois and began construction on this new cultivation and processing facility, which will allow the Company to grow, produce and wholesale its award-winning branded products throughout the state of Illinois.
  • May 18: MariMed announced it was selected to receive a provisional dispensary license by the Ohio Board of Pharmacy, which allows the Company to build a medical dispensary in Tiffen, Ohio, which will be operational in 2023. Ohio marks the sixth state in which MariMed owns or manages cannabis operations.
  • June 29: The Company announced a licensing deal with a partner to sell its award-winning Betty’s Eddies fruit chews into the Maine adult-use cannabis market, beginning later this year. This licensing deal is in addition to a licensing deal already in place to sell Betty’s Eddies into Maine’s medical cannabis market with another partner.

OTHER BUSINESS DEVELOPMENTS
Subsequent to the end of the second quarter, the Company announced the following business developments:

  • July 12: MariMed announced the dual listing of its common shares on the Canadian Securities Exchange (“CSE”) under the stock symbol MRMD. Management believes a dual listing on the CSE allows easier access for institutional and retail investors in Canada and North America to acquire MariMed stock. The Company has already seen new institutional investors taking equity positions in the Company’s common stock.
  • July 18: MariMed announced the approval of its expanded state-of-the-art kitchen in Maryland. The nearly ten-fold expansion allows the Company to produce all its award-winning branded products including Betty’s Eddies fruit chews, Bubby’s Baked, Kalm Fusion, and Vibations drink mixes. The Company also introduced a brand-new line of gummies for the Maryland medical cannabis market.
  • August 4: The Company announced the launch of its new Betty’s Eddies ice cream in cooperation with Boston based Emack & Bolio’s® ice cream company. Betty’s Eddies ice cream is currently available in select cannabis dispensaries in Massachusetts offering both dairy and vegan choices.
  • August 8: The Company announced the acquisition of a conditional dispensary license in the central eastern part of Illinois bordering Indiana. Once open, it will mark the fifth Thrive branded dispensary the Company owns and operates in Illinois. MariMed currently owns and operates four adult-use dispensaries in Anna, Harrisburg, Metropolis, and Mt. Vernon.

UPDATED 2022 FINANCIAL GUIDANCE

MariMed remains committed to its proven strategic growth plan and continues to operate some of the best cannabis facilities with some of the highest margins and returns in the cannabis industry. The Company’s revised financial targets for 2022 are as follows:

  • Revenue of $135 million to $140 million versus the previous range of $145 million to $150 million.
  • Gross margin of approximately 50% versus the previous range of 54% to 55%.
  • Non-GAAP Adjusted EBITDA of $35 million to $40 million versus the previous range of $47 million to $52 million.
  • Capital expenditures of $18 million versus the previous target of $25 million.

“The second quarter brought some challenges to the industry and MariMed that were primarily outside of our control. We took assertive actions that drove additional traffic into our dispensaries and launched multiple new products that are increasing our sales within our wholesale business,” said Susan Villare, Chief Financial Officer of MariMed. “We are confident that the financial and operational decisions we are making positions us for accelerating growth in the near term and beyond.”

DISCUSSION OF NON-GAAP FINANCIAL MEASURES
The Company has provided in this release several non-GAAP financial measures: non-GAAP net income, Non-GAAP Adjusted EBITDA, and non-GAAP Adjusted EBITDA margin, as a supplement to Revenue, Gross margin, and other financial measures prepared in accordance with GAAP.

Management believes these non-GAAP financial measures are useful in reviewing and assessing the performance of the Company, as they provide meaningful operating results by excluding the effects of expenses that are not reflective of its operating business performance. In addition, the Company’s management uses these non-GAAP financial measures to understand and compare operating results across accounting periods and for financial and operational decision-making. The presentation of these non-GAAP measures is not intended to be considered in isolation or as a substitute for the financial information prepared in accordance with GAAP.

Management believes that investors and analysts benefit from considering non-GAAP financial measures in assessing the Company’s financial results and its ongoing business, as it allows for meaningful comparisons and analysis of trends in the business. In particular, non-GAAP adjusted EBITDA is used by many investors and analysts themselves, along with other metrics, to compare financial results across accounting periods and to those of peer companies.

As there are no standardized methods of calculating non-GAAP financial measures, the Company’s calculations may differ from those used by analysts, investors and other companies, even those within the cannabis industry, and therefore may not be directly comparable to similarly titled measures used by others.

Management defines non-GAAP Adjusted EBITDA as net income, determined in accordance with GAAP, excluding the following items:

  • interest income and interest expense;
  • income taxes;
  • depreciation of fixed assets;
  • amortization of acquired intangible assets;
  • Impairment or write-downs of intangible assets;
  • stock-based compensation;
  • legal settlements;
  • acquisition-related and other;
  • other income and other expense;
  • and discontinued operations.

For further information, please refer to the Company’s Quarterly Report on Form 10-Q for the three month period ended June 30, 2022 available on Marimed’s Investor Relations website, on the SEC’s Edgar website in the U.S., or on the Canadian securities regulatory authorities’ SEDAR website in Canada.

ABOUT MARIMED
MariMed Inc., a multi-state cannabis operator, is dedicated to improving lives every day through its high-quality products, its actions, and its values. The Company develops, owns, and manages seed to sale state-licensed cannabis facilities, which are models of excellence in horticultural principles, cannabis cultivation, cannabis-infused products, and dispensary operations. MariMed has an experienced management team that has produced consistent growth and success for the Company and its managed business units. Proprietary formulations created by the Company’s technicians are embedded in its top-selling and award-winning products and brands, including Betty’s Eddies, Nature’s Heritage, Bubby’s Baked, K Fusion, Kalm Fusion, and Vibations: High + Energy. For additional information, visit www.marimedinc.com.

IMPORTANT CAUTION REGARDING FORWARD-LOOKING STATEMENTS:
This release contains certain forward-looking statements and information relating to MariMed Inc. that are based on the beliefs of MariMed Inc.’s management, as well as assumptions made by and information currently available to the Company. Such statements reflect the current view of the Company with respect to future events, including consummation of pending transactions, launch of new products, expanded distribution of existing products, obtaining new licenses, estimates and projections of revenue, EBITDA and Adjusted EBITDA and other information about its business, business prospects and strategic growth plan, which are based on certain assumptions of its management, including those described in this release. These statements are not a guarantee of future performance and involve risk and uncertainties that are difficult to predict, including, among other factors, changes in demand for the Company’s services and products, changes in the law and its enforcement, and changes in the economic environment. Additional risk factors are included in the Company’s public filings with the Securities and Exchange Commission. Should one or more of these underlying assumptions prove incorrect, actual results may vary materially from those described herein as “hoped,” “anticipated,” “believed,” “planned,” “estimated,” “preparing,” “potential,” “expected,” “looks” or words of a similar nature. The Company does not intend to update these forward-looking statements. None of the content of any of the websites referred to herein (even if a link is provided for your convenience) is incorporated into this release and the Company assumes no responsibility for any of such content.

All trademarks and service marks are the property of their respective owners.

For More Information Contact:

Investor Relations:
Steve West, Vice President, Investor Relations
Email: ir@marimedinc.com

Media Contact:
Trailblaze PR
Email: marimed@trailblaze.co

Company Contact:
Howard Schacter, Chief Communications Officer
Email: hschacter@marimedinc.com

Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
June 30, December 31,
2022 2021
Assets
Current assets:
Cash and cash equivalents $ 7,911 29,683
Accounts receivable, net 5,297 1,666
Deferred rents receivable 737 1,678
Notes receivable, current portion 132 127
Inventory 15,889 9,768
Investments, current 525 251
Other current assets 3,059 1,440
Total current assets 33,550 44,613
Property and equipment, net 69,132 62,150
Intangible assets, net 9,898 162
Goodwill 8,079 2,068
Notes receivable, net of current 9,116 8,987
Operating lease right-of-use assets 5,071 5,081
Finance lease right-of-use assets 541 46
Other assets 491 98
Total assets $ 135,878 $ 123,205
Liabilities, mezzanine equity and stockholders’ equity
Current liabilities:
Mortgages and notes payable, current portion $ 2,734 $ 1,410
Accounts payable 7,624 5,099
Accrued expenses and other 3,473 3,149
Income taxes payable 10,001 16,467
Operating lease liabilities, current portion 1,201 1,071
Finance lease liabilities, current portion 180 27
Total current liabilities 25,213 27,223
Mortgages and notes payable, net of current 20,629 17,262
Operating lease liabilities, net of current 4,420 4,574
Finance lease liabilities, net of current 338 22
Other liabilities 100 100
Total liabilities 50,700 49,181
Commitments and contingencies
Mezzanine equity:
Series B convertible preferred stock 14,725 14,725
Series C convertible preferred stock 23,000 23,000
Total mezzanine equity 37,725 37,725
Stockholders’ equity
Common stock 339 334
Additional paid-in capital 139,951 134,920
Accumulated deficit (91,381 ) (97,392 )
Noncontrolling interests (1,456 ) (1,563 )
Total stockholders’ equity 47,453 36,299
Total liabilities, mezzanine equity and stockholders’ equity $ 135,878 $ 123,205

Condensed Consolidated Statements of Operations
(in thousands, except percentages and per share amounts)
(unaudited)
Three months ended Six months ended
June 30, June 30, June 30, June 30,
2022 2021 2022 2021
Revenue $ 32,986 $ 32,569 $ 64,268 $ 57,212
Cost of revenue 17,981 13,163 32,287 24,620
Gross profit 15,005 19,406 31,981 32,592
Gross margin 45.5 % 59.6 % 49.8 % 57.0 %
Operating expenses:
Personnel 3,382 2,058 6,424 3,785
Marketing and promotion 809 270 1,452 495
General and administrative 5,565 4,282 11,793 7,453
Acquisition-related and other 754 754
Bad debt 794 14 1,819
Total operating expenses 10,510 7,404 20,437 13,552
Income from operations 4,495 12,002 11,544 19,040
Interest and other income (expense):
Interest expense (440 ) (265 ) (753 ) (1,777 )
Interest income 318 36 481 70
Other (expense) income, net (727 ) (371 ) 275 (417 )
Total interest and other (expense) income (849 ) (600 ) 3 (2,124 )
Income before income taxes 3,646 11,402 11,547 16,916
Provision for income taxes 1,750 3,813 5,410 5,017
Net income 1,896 7,589 6,137 11,899
Net income attributable to noncontrolling interests 73 96 126 186
Net income attributable to common stockholders $ 1,823 $ 7,493 $ 6,011 $ 11,713
Net income per share attributable to common stockholders:
Basic $ 0.01 $ 0.02 $ 0.02 $ 0.04
Diluted $ 0.00 $ 0.02 $ 0.02 $ 0.03
Weighted average common shares outstanding:
Basic 337,497 324,267 336,137 321,741
Diluted 379,626 370,257 379,225 365,324

Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Six months ended
June 30, June 30,
2022 2021
Cash flows from operating activities:
Net income attributable to common stockholders $ 6,011 $ 11,713
Net income attributable to noncontrolling interests 126 186
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization of property and equipment 1,552 963
Amortization of intangible assets 425 346
Stock-based compensation 5,024 1,600
Amortization of warrants attached to debt 539
Amortization of beneficial conversion feature 177
Amortization of original issue discount 52
Bad debt expense 14 1,819
Fees paid with stock 274
Loss on obligations settled with equity 3
Loss on changes in fair value of investments 679 415
Other investment income (954 )
Changes in operating assets and liabilities:
Accounts receivable, net (3,554 ) (3,230 )
Deferred rents receivable 99 125
Inventory (1,795 ) (2,398 )
Other current assets (1,267 ) (1,373 )
Other assets (392 ) (17 )
Accounts payable 2,024 1,699
Accrued expenses and other 180 4,973
Income taxes payable (6,467 )
Net cash provided by operating activities 1,979 17,592
Cash flows from investing activities:
Purchases of property and equipment (7,854 ) (7,976 )
Business acquisitions, net of cash acquired (12,746 )
Purchases of cannabis licenses (330 ) (638 )
Advances toward future business acquisitions 73
Interest on notes receivable 119
Net cash used in investing activities (20,857 ) (8,495 )
Cash flows from financing activities:
Proceeds from issuance of preferred stock 23,000
Equity issuance costs (387 )
Proceeds from issuance of promissory notes 35
Principal payments of mortgages and promissory notes (611 ) (16,098 )
Proceeds from exercise of stock options 3 9
Proceeds from exercise of warrants 61
Repayment of loans from related parties (1,158 )
Principal payments of finance leases (102 ) (18 )
Redemption of minority interests (2,000 )
Distributions (184 ) (183 )
Net cash (used in) provided by financing activities (2,894 ) 5,261
Net (decrease) increase in cash and cash equivalents (21,772 ) 14,358
Cash and equivalents, beginning of year 29,683 2,999
Cash and cash equivalents, end of period $ 7,911 $ 17,357

Reconciliation of Non-GAAP and GAAP Financial Measures
(in thousands, except percentages)
(unaudited)
Three months ended Six months ended
June 30, June 30, June 30, June 30,
2022 2021 2022 2021
Non-GAAP Adjusted EBITDA
GAAP net income $ 1,896 $ 7,589 $ 6,137 $ 11,899
Interest expense, net 122 229 272 1,707
Income tax provision 1,750 3,813 5,410 5,017
Depreciation and amortization of property and equipment 850 501 1,552 963
Amortization of acquired intangible assets 285 169 425 346
Non-GAAP EBITDA 4,903 12,301 13,796 19,932
Stock-based compensation 2,553 1,244 5,024 1,600
Acquisition-related and other 754 754
Other expense (income), net 727 371 (275 ) 417
Non-GAAP adjusted EBITDA $ 8,937 $ 13,916 $ 19,299 $ 21,949
Non-GAAP Adjusted EBITDA Margin
GAAP net income 5.7 % 23.3 % 9.5 % 20.8 %
Interest expense, net 0.4 % 0.7 % 0.4 % 3.0 %
Income tax provision 5.3 % 11.8 % 8.5 % 8.7 %
Depreciation 2.6 % 1.5 % 2.4 % 1.7 %
Amortization of acquired intangible assets 0.9 % 0.5 % 0.7 % 0.6 %
Non-GAAP EBITDA margin 14.9 % 37.8 % 21.5 % 34.8 %
Stock-based compensation 7.7 % 3.8 % 7.7 % 2.9 %
Acquisition-related and other 2.3 % 0.0 % 1.2 % 0.0 %
Other (income) expense, net 2.2 % 1.1 % (0.4 %) 0.7 %
Non-GAAP adjusted EBITDA margin 27.1 % 42.7 % 30.0 % 38.4 %
Supplemental Information
Revenue Components
(in thousands)
(unaudited)
Three months ended Six months ended
June 30, June 30, June 30, June 30,
2022 2021 2022 2021
Product revenue:
Product sales – retail 23,087 20,552 44,528 35,776
Product sales – wholesale 7,958 8,178 14,020 13,903
Total product sales 31,045 28,730 58,548 49,679
Other revenue 1,941 3,839 5,720 7,533
Total revenue
$ 32,986 $ 32,569 $ 64,268 $ 57,212

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