Exhibit
99.2
 |
|
FINAL
TRANSCRIPT |
MariMed
Inc.
First
Quarter 2021 Financial Results
May
18, 2021 — 9:00 a.m. E.T.
Length:
30 minutes
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Corporate
participants
Bob
Fireman
MariMed
Inc. — Chief Executive Officer
Jon
Levine
MariMed
Inc. — Chief Financial Officer
Conference
Call Participants
Glenn
Mattson
Ladenburg
Thalmann & Co. — Analyst
Christopher
Santos
Beacon
Securities — Analyst
Scott
Stagg
The
Benchmark Company — Analyst
PRESENTATION
Operator
Good
morning and welcome to the MariMed Inc. First Quarter 2021 Earnings Call. With us on today’s call are Bob Fireman, CEO of
MariMed, and Jon Levine, MariMed’s Chief Financial Officer. Today management will review the highlights and financial results
for the first quarter and will give a business and operational update. Following management’s prepared remarks, there will
be a Q&A session. During the Q&A portion of today’s call we ask that you kindly limit yourself to one question and
one follow-up. A reminder that today’s conference is being recorded.
I
would also like to remind everyone that during today’s call, management will discuss business outlook and make forward-looking
statements. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned
in the filings with the SEC. These comments are made based on predictions and expectations as of today and, other than as required
by applicable securities laws, the Company does not assume any obligation to update or revise them to reflect new events or circumstances.
Now,
at this time, it is my pleasure to introduce Bob Fireman, MariMed’s CEO. Bob, the floor is yours
Bob
Fireman — Chief Executive Officer, MariMed Inc.
Thank
you, operator, and thank you to everyone joining us on the call today. I’d like to start this morning’s call with
selected highlights of our Q1 2021 performance and then provide an update on the continued execution of our previously announced
growth strategy and recent company develops. After that, I’ll pass the line to Jon to review our financial results in more
detail.
First
off, I am thrilled to report that we achieved our highest ever core cannabis revenue and profitability in Q1 and are on pace with
the 2021 guidance we provided. Our core cannabis business revenue increased 230% to $24.6 million for Q1 compared to $7.5 million
for the same period in 2020. We achieved EBITDA of $7.6 million for the quarter, which represents the 764% increase over the $883,000
of EBITDA in Q1 2020. The core drivers contributing to the strong financial results in Q1 2021 included:
First,
the consolidation of the Massachusetts and Illinois cannabis business units, which allows us to report, in our public filings,
revenue and earnings from these top industry states, which have both adult use and medical cannabis programs
Second,
increasing recreational cannabis sales in all three of our Illinois recreational dispensaries as well as our recreational dispensary
in Massachusetts in Q1 2020. The third Illinois dispensary in Mount Vernon opened in late Q3 2020 and the Massachusetts dispensary
in Middleborough obtain recreational approval also at the end of Q3 2020. Both have been expanding their customer bases since
then. We recently opened a fourth dispensary in Illinois in Metropolis, the home of the Superman Museum and a region of tourism
on the Ohio River at the border of Illinois and Kentucky. While the store opened after the first quarter concluded, we expect
this dispensary to be a major contributor to our future financial performance.
The
third driver in Q1 2021 was the ramp up to almost full capacity of our 70,000 square foot New Bedford, Massachusetts cultivation
and manufacturing facility, which has increased production and in turn revenue in the robust wholesale Massachusetts market.
Our
fourth drivers is the success of our Company’s award-winning cannabis flower, product mix, and favorable customer experience,
which have all contributed to the increased patient and customer counts at our owned and managed dispensers.
As
previously reported, MariMed has been working diligently on its core cannabis business and the valuable licenses we’ve developed
in multiple states. We implemented a consolidation strategy to roll these business units and establish the company as a vertically
integrated seed-to-sale profitable MSO. The consolidations of Massachusetts and Illinois were important first steps in the execution
of that strategy that has contributed significantly to our strong financial performance in Q1 2021.
We
continue to work to consolidate our managed clients businesses that our team has organically developed in Maryland, Delaware,
and Nevada, all subject to state approvals. We will report on this activity when appropriate. In the interim, under our management,
these businesses continue to have sustained revenue growth, which in turn contributes to MariMed’s revenue for management
fees, percentage rents, supplies, and brand licensing fees.
We
have continued opportunities to seize market share in our home state of Massachusetts, especially when we factor in two additional
licensed dispensaries that are currently in various stages of development. Our New Bedford, Massachusetts cultivation and manufacturing
facility commenced production in early 2020 and continued to ramp up throughout 2020. It was not until Q4 that this facility reached
this target of cultivating approximately 1,000 pounds of cannabis per month. With this level of production, we continue to increase
wholesale revenue of our top-selling flower and infused product brands in the state. This has contributed favorably to our Q1
2020 performance and should continue to increase throughout 2021.
In
our CapEx budget, we are planning on expanding our cannabis facilities cultivation and processing capabilities in Delaware and
in Maryland in the near term and eventually in Massachusetts. We plan to add more canopy, new GMP compliant kitchens, additional
testing and lab equipment, and new automated technologies to increase efficiencies, volume, and quality, while lowering our production
costs to improve profitability.
MariMed’s
proprietary brands of cannabis products continued to be leaders in their respective markets during 2020 and 2021. Betty’s
Eddies fruit chews continues to win awards as one of the most popular and top selling products in the country. Our Nature’s
Heritage brand flower and concentrates are performing exceptionally well in Massachusetts and Maryland. In the Massachusetts wholesale
marketplace this year, we launched our own Kalm Fusion and Bourne Baked Goods brands, along with our partners’ brands, Tropizen
Pique, a popular Caribbean infused hot sauce, and Tikun Olam, the world-renowned cannabis genetics from Israel. We are poised
to license our brands in other states to qualified companies that share our values on best practice and consistent quality.
During
the quarter we added a new Smashin Passion flavor to the Betty’s Eddies lineup and recently increased distribution of the
brand to Maine. The brand, which was recently named Best Edible as part of the Sparky(sp.) Awards, a New England cannabis consumer
poll, is now available in six states and Puerto Rico. Having strong operating assets and a portfolio of products that consumers
love are critical components of our strategic plan.
The
other element to creating a solid foundation for our future growth was improving our balance sheet. We accomplished this in Q1
with the closing of a $46 million equity financing from Hadron Capital. As reported, MariMed used some of the initial funds to
retire substantially all of its non-real estate secured debt and to improve our liquidity. The balance of funds from this transaction
are available to upgrade and expand our owned and managed cannabis facilities as well as providing us with the capital required
to further complete the consolidation of our existing clients’ businesses as part of our strategic plan.
Having
a financial partner like Hadron, who is committed to the long-term growth of MariMed, is a great resource. MariMed is now positioned
been ever before for sustained growth and to pursue strategic acquisitions, where they make sense. We are at an exciting inflection
point in our Company’s history with a strong platform of assets poised for continued growth. We are confident that, as we
continue to execute our strategy and expand our revenues and earnings base, we will drive strong, long-term value creation for
our shareholders. MariMed is committed to best practices, diversity, and fair governance. We are pleased with our performance
in every market in which we operate and even more so of our local market teams. They are dedicated experts at what they do and
truly at the heart of what makes MariMed a special company.
Now
I’ll pass the call on to Jon Levine, who will review the financial results of the quarter. Jon, take it away.
Jon
Levine — Chief Financial Officer, MariMed Inc.
Thank
you, Bob, and morning, everyone. Today I’ll provide a brief overview of our first quarter 2021 financial results.
Like
Bob mentioned, in Q1 2021 our core cannabis revenues increased 230% to $24.6 million compared to $7.5 million for the same period
in 2020. Gross profit on core cannabis revenues increased by 171% to $13.2 million for Q1 2021 compared to $4.9 million for the
same period in 2012. There were a number of factors that contributed to the improvement in revenues and earnings in Q1, including
the continued ramp up of the New Bedford mass cultivation manufacturing facility resulted in an increase in wholesale sales; increased
output and sales of the branded products in Massachusetts resulting from the introduction of new automated production equipment
in New Bedford; increased recreational sales at are dispensary in Middleborough, Mass, which started selling recreational in September
of 2020; substantial same store sales growth from the company’s Anna, Illinois and Harrisburg, Illinois dispensaries as
the locations continue to attract increased numbers of recreational customer visits during Q1 2021; increased recreational sales
from the Company’s dispensary in Mount Vernon, Illinois, which opened in September 2020 and continues to expand its customer
base; an increase of 108% in the management fee revenue in Q1 2021 versus Q1 2020 from the continued success of the Company’s
managed cannabis license clients in Delaware and Maryland.
Operating
expenses for the first quarter of 2021 were $6.1 million compared with $3.8 million in the same quarter of 2020 contributed to
the year-on-year increase with the growth of dispensary operations to support additional revenue. As a result of these factors,
EBITDA for the first quarter 2021 grew to $7.6 million or 31% of revenue compared with an EBITDA of $883,000 or 12% of revenue
for the same period in 2020.
Net
income for Q1 2021 was $4.3 million compared to a net loss of $2.3 million in Q1 2020. Our cash position strengthened significantly
during the quarter where we generated $6.8 million in cash from operations compared with cash used in operations of $0.4 million
in Q1 2020.
In
the current quarter, we closed the first $23 million tranche of a $46 million equity financing commitment from Hadron, which enabled
us to retire $16.6 million in non-real estate debt and provide capital to help fund the expansion of Delaware and Maryland operations,
as previously mentioned. As a result, our working capital increased to $17.1 million at the end of Q1 2021 compared to a negative
working capital of $2.2 million at the conclusion of Q1 2020. This includes $12.3 million cash on hand at March 31, 2021 compared
to $3 million at March 31, 2020.
For
further information on financial and operating performance I encourage you to review the Company’s 10-Q, which has been
filed and is available at www.sec.gov.
On
the strength of our Q1 results, we are tracking to our announced 2021 revenue guidance of $100 million and an EBITDA guidance
of $30 million. We continue to execute on our strategy and plans and we are confident that the remainder of 2021 will deliver
on the positive momentum we have seen in MariMed revenues and earnings this quarter and throughout last year.
This
concludes our prepared remarks now, and I’d like to open the call for questions. Operator, go ahead.
Q
& A
Operator
Thank
you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star
followed by the one on your touchtone phone. You will hear a three-tone prompt acknowledging your request. If you are using a
speakerphone, please lift the handset before pressing any keys.
The
first question comes from Glenn Mattson at Ladenburg Thalmann. Please go ahead.
Glenn
Mattson — Analyst, Ladenburg Thalmann & Co.
Hi.
Nice speaking with you and congrats on the results in the quarter. Curious about just the outlook as far as your consolidation
strategy goes, you know, whether or not you’re fully funded to complete that now once the second tranche of this capital
raise comes through or what kind of headway you have there and, if there’s extra room above that, where else would be your
priories for that capital.
Bob
Fireman — Chief Executive Officer, MariMed Inc.
Thank
you, Glenn, and thank you for calling and you’re interest in MariMed.
The
Hadron financing, the balance of the $23 million in reserves is designated for further consolidation of the four states we’ve
targeted and built and manage or looking elsewhere. So we’re fully funded. The other thing is we now have a tremendous positive
cash flow and accumulating cash month after month. So I think we’re fully funded for the next two consolidations and we’re
in discussions to have those. Some of those are subject to change of (inaudible), as two of those dates are medical only, not
for profit, but we’re working on that and the others and we have the capital to close as soon as possible. So we’re
very excited. And once we do that, when we can report those the cannabis revenues from those states, obviously that will go into
our public reporting, financial reports, and we’ll probably, at that point, improve our guidance to the public.
Glenn
Mattson — Analyst, Ladenburg Thalmann & Co.
Right.
Great. And then margins were quite good in the quarter, as you kind of referenced there, so can you just give a sense, maybe you
broke it out and I missed it, but what was the breakdown just between the retail and the wholesale and, you know, which side of
that equation are you leaning more towards as you push forward in the future and what the mix would look like and, you know, some
time here that you’re comfortable guiding, to 12 months or 24 months or something like that.
Bob
Fireman — Chief Executive Officer, MariMed Inc.
Jon,
you want to answer that?
Jon
Levine — Chief Financial Officer, MariMed Inc.
Yes,
I just about to answer it, Bob. We did not break out, Glenn, the difference between retail versus wholesale. Our business concentration
levels are increasing at the retail with the additional retail stores. The wholesale business in Massachusetts, as we expand into
other markets with wholesale, then that business will also increase, but right now we’re concentrating on the increase of
the retail sales. I can give you a more detailed breakdown, if you’d like, at a later time.
Bob
Fireman — Chief Executive Officer, MariMed Inc.
And
I would add to that, Glenn, that, obviously, having a vertically-integrated business in the states some people feel is a more
sustainable model than just retail alone. But the revenue from retail has been good and if our friends in Washington ever pass
this banking act and take away 280E, it could be even better. We also look for long term growth in the licensing of our brands
to different partners in different states where we don’t operate. So we think those three revenue streams are growth and
the marketplace and the law will determine which one we focus on.
Glenn
Mattson — Analyst, Ladenburg Thalmann & Co.
Great.
That’s very helpful. Thanks. I look forward to following up.
Operator
Thank
you. Ladies and gentlemen, as a reminder, should you have any questions, please press star one.
Next
question comes from Christopher Santos at Beacon Securities. Please go ahead.
Christopher
Santos — Analyst, Beacon Securities
Hi,
guys. Firstly, thanks for taking my question and congratulations on executing in the quarter. I’ve just got a question about
Illinois. So, with respect to Illinois, can you talk about the wholesale supply environment you’ve faced for stocking your
dispensary shelves? And with the capacity brought on by the other, has consistency and variety of product supply improved and
are there any areas of shortage?
Jon
Levine — Chief Financial Officer, MariMed Inc.
I’ll
take this one, Bob, if you don’t mind. Thank you for the question, Chris.
In
Illinois, I know that the market was very tight with suppliers being able to supply products to the dispensary. We have been very
fortunate that the relationships that we have in Illinois, that the suppliers have been very dedicated to making sure we have
a good mixture and supply level at each one of our dispensaries. We just have the grand opening at our Metropolis location and
we were very well stocked there with quite a selection of different products. I do feel that, with the expansion of each of the
suppliers having built out more grow in production space, that we’re seeing some improvement across the board, but we have
been very fortunate with our relationships to have a consistency of supply and options of what the customers have.
Christopher
Santos — Analyst, Beacon Securities
Perfect.
Thank you. And with respect to the craft grow license you’ve applied for, do you have any color on when the state may issue
those given the delays?
Bob
Fireman — Chief Executive Officer, MariMed Inc.
You
know, with every state, Chris, it’s hurry up and wait. Okay? We heard a few weeks ago that it was up coming up quickly,
but we haven’t seen anything in the last few weeks.
Christopher
Santos — Analyst, Beacon Securities
Appreciate
it. Thanks, guys. I’ll jump back in the queue.
Bob
Fireman — Chief Executive Officer, MariMed Inc.
Thank
you so much and thanks to all the friends at Beacon.
Operator
Thank
you. Next question comes from Scott Stagg at Benchmark. Please go ahead.
Scott
Stagg — Analyst, The Benchmark Company
Hey,
guys. Very nice quarter. Nice to speak to you again. I had a question regarding Massachusetts wholesale. You do break that out,
you provide some specificity as it relates to wholesale. You mentioned $5.4 million of revenue from the New Bedford facility.
And I’m just trying to back into the number of wholesale pounds you sold for the quarter. It looks like, in very general
terms, at $4,000 a pound, that’s about 450 pounds, I believe, for each month, and you guys have mentioned that you can do
1,000 pounds a month. So I’m wondering what you expect the ramp up to be in Massachusetts on the wholesale side.
Bob
Fireman — Chief Executive Officer, MariMed Inc.
Thank
you, Scott, for the question. It’s good to speak to you again. The wholesale market in Massachusetts was slowed a lot by
the testing process. The labs were very far behind. Since they’ve added a few more labs near the end of the first quarter,
we have been getting test results much quicker, which will help turn the 1,000 pounds a month into revenue and we’ll see
an increase in the revenue there monthly as we build up. The products also have to be tested and, again, we’re turning the
oils around and then we still have to get the test results, which was slow for a period of time. But with the increased testing
sites in Massachusetts, we’re having a much faster turnaround and we hope to be able to show those increases in Q2 and beyond.
Scott
Stagg — Analyst, The Benchmark Company
Okay.
Fantastic. And then the last question I had relates to litigation in Maryland and I’m wondering what the status is there
as relates to either the acquisition or, ah, I see from the increase in management revenues that you seem to be including Maryland
there. So just wanted to get an update with that.
Bob
Fireman — Chief Executive Officer, MariMed Inc.
So,
Scott, the litigation continues, notwithstanding we think it’s in everyone’s interest to settle. Based on a eight-day
hearing, on a preliminary injunction hearing in 2020, the court issued an order providing, ah, validating MariMed’s management
agreement, our lease, and our licensing agreement, in essence, put us in operational and financial control in January of this
year, in the first quarter. So we began seeing revenue from management fees and rent and licensing fees that are actually being
paid. The matter is pending a trial sometime in March of 2022 and…
Jon
Levine — Chief Financial Officer, MariMed Inc.
(Inaudible)
update through our 10-Q of where we are with the trial.
Scott
Stagg — Analyst, The Benchmark Company
Okay.
Okay. All right. Fantastic. Thank you and congrats again on a very nice quarter.
Bob
Fireman — Chief Executive Officer, MariMed Inc.
Thanks
for reaching out, Scott.
Operator
Thank
you. Next question is a follow up from Christopher Santos at Beacon Securities. Please go ahead.
Christopher
Santos — Analyst, Beacon Securities
Hey,
guys. Thanks again. Just a question about Massachusetts. You guys mentioned two licenses in various stages of development. Do
you have any kind of timeline on opening those dispensaries or anything like that that you could provide to us?
Bob
Fireman — Chief Executive Officer, MariMed Inc.
Jon,
you want to answer?
Jon
Levine — Chief Financial Officer, MariMed Inc.
We’re
basically in negotiations on a license that we are hoping to get transferred over in the next six or less months and then be able
to have that open and operating hopefully before the end of the year. The other license, we’re still working on the host
community agreement and hope to have that wrapped up, but can’t put a timeline on the state or the towns.
Christopher
Santos — Analyst, Beacon Securities
Perfect.
Thank you. That’s great. And then just a follow-up on Massachusetts. So you mentioned the cultivation facility is performing
extremely well. Congratulations. Can you envision any need to expand that facility in the future? Is there any visibility on that?
Bob
Fireman — Chief Executive Officer, MariMed Inc.
Yes.
The company owns 137,000-foot building in New Bedford. The dispensary is in 70,000, or about half. We’ve asked, the tenant
is leaving, and as soon as he leaves, over the course of the next year, we’re going to expand into the additional approximately
70,000 feet. We’re also looking for an additional—the building was allowed for an additional 100,000 square feet,
so we’re looking to expand our labs and our kitchen as fast as we can.
And
the good news in Massachusetts is that our flowers is the top seller and our branded products are top sellers. If we could get
through some of the lab testing, we could expand our revenue in both categories, as we’re in great demand.
The
other thing is, now with this over 80 dispensaries opening and the program is expanding, the opportunity for additional revenue
is substantial and we want to make sure we have enough flowers and oils and concentrates to supply to that marketplace. So Massachusetts
is going very well.
Christopher
Santos — Analyst, Beacon Securities
Perfect.
That’s exactly what I wanted to hear. I appreciate it, guys. Thank you very much.
Bob
Fireman — Chief Executive Officer, MariMed Inc.
Thank
you.
Operator
Thank
you. There are no further questions. I will now turn the call back over to Bob Fireman for closing comments.
Bob
Fireman — Chief Executive Officer, MariMed Inc.
I
am pleased to have delivered significant top-line growth, together with improved earnings, to our shareholders in Q1. Our strategic
growth plan is working, with assets and brands led by an experienced management team. I’ve never been more confident in
our ability to become a leading MSO with 2021 shaping up to be another strong year for MariMed.
I’d
like to thank everyone again for joining us on today’s call and for your continued interest in MariMed. I’d also like
to take a brief moment to thank the MariMed team for their continued hard work and dedication. We look forward to updating you
on our continued progress. Thank you all and have a great day.
Operator
Ladies
and gentlemen, this concludes your conference call for today. We thank you for participating and we ask that you please disconnect
your lines. Enjoy the rest of your day.
