MariMed Inc.
Q4 2020 Earnings Call Transcript

Published: 24 Mar 2021

[Operator:]

Good morning and welcome to the MariMed, Inc. Fourth Quarter and Year-End 2020 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 fourth quarter and year-end as well as recent developments and 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 our 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.

[Bob Fireman:]

Thank you, operator, and thank you to everyone joining us on the call today. I’d like to start with selected highlights of our Q4 and fiscal 2020 performance, and then provide an update on the continued execution of our growth strategy and recent Company developments. After that, I’ll pass the call on to Jon to review our financial results in more detail and to provide 2021 revenue and earnings guidance. 2020 was a transformative year for MariMed. The execution of key elements of the Company’s strategic consolidation plan produced record revenue and earnings. Our cannabis business platform is well-positioned for continued corporate growth and success in 2021 and beyond. It was also a good year for the cannabis industry in general. Notwithstanding the backdrop of the COVID-19 pandemic, where millions of people and small businesses faced many challenges, the cannabis industry thrived in 2020. The industry was deemed essential during this difficult time and flourished in an environment where many people were forced to remain home and have limited social interaction. To help meet the challenges of the pandemic, our Company took actions to enhance the efficiency and workflow of our operating business units. With limited staff and cautious customers, we implemented curbside and home delivery services. It has been remarkable to see the team develop and execute protocols to protect the safety of our employees and customers, while expanding operations and increasing sales. I’m incredibly proud of these teams, and thank them all for their dedication and commitment to the success of our Company. During 2020, MariMed worked diligently to focus on its core cannabis business and valuable licenses we developed in multiple states. It was our goal to implement our consolidation strategy and reestablish the Company’s image as a vertically integrated seed-to-sale, profitable multi-state operator. I am pleased to report that we are well on our way to achieving these goals. The consolidation of Massachusetts and our Illinois businesses were an important first step in the execution of our strategy. The revenue and earnings from these top industries states with both adult-use and medical cannabis program is now reflected in our 2020 results. We continue to work to consolidate our managed clients and their businesses we have organically developed in other states. In the interim, under our management, these businesses continue to have sustained revenue growth, which in turn increases MariMed’s revenue from management fees, percentage rent, supplies and brand licensing fees.

[Jon Levine:]

Thank you, Bob, and good morning, everybody. Today, I’ll provide you with a brief overview of our fourth quarter and fiscal 2020 financial results, as well as a 2021 revenue and earnings guidance. I’d like to remind everyone that for comparative purposes in the following remarks, the results for the 3 months and 12 months ended 12/31/2019 have been adjusted to eliminate the impact from the one-time sale of hemp seeds during the comparative period of 2019, in order to present a meaningful comparison. After removing these items, the resulting numbers may commentarially relate to the Company’s ongoing core business. During Q4 2020, our core cannabis business revenues increased 292% to $20.4 million, compared to $5.2 million in the same period of 2019. The primary drivers of the revenue growth for the quarter were consolidation of the Company’s licensed cannabis clients in Illinois and Massachusetts, as well as the expansion of adult-use market in those states. Specifically, the 2020 performance reflects the results of the Illinois consolidation for the full year of 2020 of two dispensaries with a third coming on-board in Q3. The existing two dispensaries in Anna and Harrisburg saw revenue increase during 2022, with the introduction of adult-use in the state effective on January 1, 2020. In Massachusetts, the New Bedford cultivation and processing facility reached full production by Q3 2020, which led to increased revenue in addition to Company’s Middleborough dispensary was approved for adult-use in September of 2020, which resulted in increased revenues in Q4 and for the year compared to 2019. Gross profit on core cannabis revenues increased by 377% to $13.4 million for Q4 2020, compared to $2.8 million for the same period in 2019. Operating expenses for the fourth quarter of 2020, were $3.6 million compared to $21.4 million in the same period of 2019. The decrease was largely a result of write-downs in 2019 of certain assets related to the core cannabis business totaling $17.1 million. Excluding these onetime items in 2019, the operating expenses relating to the core cannabis business were down in 2020, due to the lower G&A costs in the quarter, which was slightly offset by the increased cost, primarily as a result of the consolidation of the Illinois and Massachusetts operations.

[Operator:]

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. First question comes from Russell Stanley at Beacon Securities. Please go ahead.

[Russell Stanley:]

Good morning, and congratulations on introducing 2021 guidance. First question here is, just wondering around the implied EBITDA margins. They look, I guess, somewhat conservative against recent numbers. I guess, what are your thoughts behind that? Is there upside to those -- to that number, or are there reasons to believe that those margins may see some improvement in 2021?

[Bob Fireman:]

Jon, I can start. Thank you, Russell. So Russell, I think, the guidance we have is what we believe we are on a path with not much additional change to the Company. We should surpass it when we open the additional dispensaries and we make any additional consolidation. Being our first guidance, we wanted to be real conservative. But, I think, showing that we’re predicting doubling 2020, I thought was a good indication of telling our shareholders and the market that we’re heading in a great direction.

[Jon Levine:]

In addition, Russell, as Bob has stated, the conservative approach on the revenue and margin, I feel that we’ll succeed on bypassing both and that the growth of the Q4 and further beyond, we will see those numbers achievable and exceed.

[Russell Stanley:]

Great. Thanks for that. And maybe just my follow-up relates to Illinois and your dispensaries. Wondering if you can -- given their geographical location, wondering if you could comment, I guess, as to what share of revenue is coming from out of state customers. And secondarily, if I could tap it on, what you’re seeing with regards to product supply, given the shortages that we saw through most of 2020? Thank you.

[Jon Levine:]

I believe that you’re talking about our Illinois operations. I do not have those numbers in front of us in terms of out of state, in state. I’ll be happy to provide them if you’d like, in the future, if you just send us a message. However, the inventory supply, we have been very fortunate with -- working with the vendors that are the producers and growers in Illinois to maintain a steady level of inventory through the tight times. And with our fourth dispensary opening up shortly, we’ve already got a commitment from the vendors to help supply that additional dispensary with adequate supply. As for Massachusetts, the majority of our customers are within state, and we’re hoping, as summertime comes, as more people will hear about our dispensary and pick up a lot of our tourists.

[Bob Fireman:]

And just to enhance, Jon, I mean, we positioned our dispensaries in the southern part of Illinois, and we are drawing people from Indiana, Kentucky, and Missouri. The new one in Metropolis is on the river across from Kentucky, and the influx into Illinois has been significant. However, they’re all well-positioned on major highways, and we get a very big draw from Illinois residents as well.

[Russell Stanley:]

Excellent. Thanks for the color.

[Jon Levine:]

Thank you for the question. Hope to see you soon.

[Operator:]

Ladies and gentlemen, this concludes today’s Q&A session. I will now turn it back over for closing comments.

[Bob Fireman:]

So, I’d like to thank everyone again for joining us on the call today, and for your continued interest in MariMed. We look forward to updating you on our continued progress. As we head into 2021, with so much possibility and hope ahead, on behalf of the entire MariMed leadership team, we want to wish everyone good health and wellness. Thank you all for participating today and following our Company, and have a great day.

[Operator:]

Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Enjoy the rest of your day.