Executive Summary / Key Takeaways

• MariMed is strategically transforming into a branded cannabis consumer packaged goods (CPG) leader, leveraging vertical integration and a strong portfolio of top-selling brands like Betty's Eddies and Nature's Heritage to drive wholesale expansion.
• Despite facing industry-wide headwinds like price compression and soft retail demand, the company achieved flat revenue year-over-year in Q1 2025, primarily due to robust double-digit growth in its wholesale segment (up 15.7% year-over-year), which offset a decline in retail sales.
• The recent completion of a multi-year build-out phase and the acquisition of First State Compassion in Delaware position MariMed for future growth, with Q2 2025 revenue anticipated to increase in the high single-digits sequentially, driven by a full quarter of FSC results and continued wholesale penetration.
• While profitability metrics like gross margin and Adjusted EBITDA saw pressure in Q1 2025 due to market dynamics and ramp-up costs from new facilities, management expects margins to improve as new assets mature and operational efficiencies, including planned CapEx for automation, take effect.
• MariMed maintains a strong balance sheet with manageable debt maturities, providing financial flexibility for targeted M&A opportunities aimed at acquiring operational businesses ("cash flow day one") to accelerate brand distribution in new, high-growth states.

Setting the Scene: A Strategic Pivot in a Dynamic Industry

MariMed Inc. is a multi-state cannabis operator navigating a complex and rapidly evolving industry landscape. Historically rooted in property acquisition and managed services, the company has strategically pivoted to become a vertically integrated player with a sharp focus on developing and distributing a portfolio of premium, branded cannabis products. This transformation is central to MariMed's ambition to become a leading cannabis CPG company, a strategy management believes will ultimately unlock significant shareholder value.

The cannabis market, particularly in the U.S., remains fragmented and subject to varying state-level regulations, intense competition, and macroeconomic pressures. Within this environment, MariMed's strategy centers on leveraging its cultivation, processing, and retail assets to build brand equity and expand distribution, with a clear emphasis on growing its wholesale business as the primary engine for future growth. This approach contrasts with some peers who rely more heavily on a vast retail footprint, positioning MariMed to potentially capitalize on future market shifts, such as potential interstate commerce.

Building the Foundation: Operational Expansion and Vertical Integration

MariMed's journey has involved a significant multi-year capital expenditure cycle to build out its operational footprint. This culminated in late 2024 with the completion of ten key revenue-generating projects, including expanded cultivation facilities in Maryland and Illinois, new processing capabilities in Missouri, and the addition of new retail locations through organic development and targeted acquisitions.

This extensive build-out has established MariMed as a vertically integrated operator in its core markets, controlling the seed-to-sale process from cultivation to consumer. This control is crucial for ensuring the quality and consistency of its branded products, a key differentiator in a competitive market. While this investment phase required substantial capital and, at times, faced delays due to regulatory hurdles and construction challenges, the completion of these assets provides the necessary infrastructure to support the company's strategic shift towards high-volume brand production and distribution.

The Power of the Brand: MariMed's Competitive Moat

At the heart of MariMed's strategy lies its portfolio of award-winning cannabis brands, which management views as the company's competitive "moat." Brands like Betty's Eddies, Nature's Heritage, Bubby's Baked, Vibations, and InHouse have demonstrated significant traction and market leadership in key states.

Betty's Eddies, the company's flagship edible brand, is a prime example, holding the number one edible position in Massachusetts, Maryland, and Delaware. In the highly competitive Illinois market, Betty's Eddies rapidly climbed to the number seven edible brand within ten months of its relaunch, leapfrogging 104 competitors. Bubby's Baked dominates the baked goods category in Massachusetts and Maryland, while Vibations holds a leading position in the beverage segment in Maryland. Nature's Heritage is a top-selling flower brand in markets where it's available.

This brand strength directly fuels the company's wholesale growth. In Q1 2025, wholesale revenue increased by a robust 15.7% year-over-year, reaching $16.8 million, and grew sequentially, demonstrating continued market penetration. Wholesale now constitutes 44% of total revenue, up from 42% sequentially, reflecting the deliberate strategic focus on expanding brand distribution through third-party dispensaries. Management expects this percentage to continue climbing, leveraging the strong brand recognition to enter more doors in existing and new markets.

Retail Operations: Navigating Headwinds and Enhancing Experience

While wholesale is the primary growth engine, MariMed also operates a retail footprint. This segment has faced headwinds, with retail sales declining 7.0% year-over-year in Q1 2025 to $20.8 million and a 4% decline for the full year 2024. This softness is attributed to broader market challenges, including price compression, increased competition from new dispensary openings (particularly in Illinois), and reduced consumer disposable income.

Despite these challenges, the company is actively working to enhance the retail experience and drive performance. Initiatives include implementing strategic pricing based on popular products, encouraging multi-unit transactions, expanding payment options, streamlining transaction times, and optimizing online shopping interfaces. These efforts aim to drive customer loyalty and increase traffic, evidenced by consistent double-digit year-over-year transaction growth in prior quarters. The company's retail Net Promoter Scores (NPS) consistently rank as excellent, significantly above the national retail average, indicating a strong focus on customer satisfaction despite market pressures. New dispensary additions, such as the fifth adult-use store in Illinois (acquired April 2024) and the second in Maryland (acquired April 2024, reopened August 2024), contribute to the retail footprint, although the focus remains on leveraging these for brand distribution rather than solely as retail profit centers in the current environment.

Financial Performance: Growth Investments and Margin Pressures

MariMed's financial performance in Q1 2025 reflects the ongoing strategic investments and prevailing market conditions. Total revenue was essentially flat year-over-year at $38.0 million. While wholesale saw strong growth, this was offset by the retail decline and a significant 64% decrease in other revenue (to $0.4 million), primarily due to the acquisition of businesses (like FSC) from which the company previously earned management fees and rental income.

Gross profit decreased to $15.1 million in Q1 2025 from $16.5 million in Q1 2024, resulting in a gross margin of 39.9%, down from 43.4%. This margin pressure is attributed to price compression across markets and ramp-up costs associated with bringing new cultivation and processing facilities online in Illinois and Missouri.

Total operating expenses increased to $16.0 million in Q1 2025 from $14.5 million in Q1 2024. This rise was primarily driven by higher personnel costs related to increased headcount from recent acquisitions and facility expansions, as well as a notable $1.4 million bad debt expense, including a $1.3 million write-off of a receivable from a credit card service provider.

The combination of lower gross profit and higher operating expenses resulted in a loss from operations of $0.9 million in Q1 2025, compared to income from operations of $2.0 million in Q1 2024. Net loss for the quarter was $5.4 million, compared to a net loss of $1.3 million in the prior-year period. Adjusted EBITDA declined to $2.6 million in Q1 2025 from $4.7 million in Q1 2024, reflecting the lower gross profit and increased operating costs.

Despite the Q1 pressures, the full year 2024 saw revenue grow 6% to a record $158 million, driven by the 29% growth in wholesale. Q4 2024 showed sequential improvement in Adjusted Gross Margin (43.3%) and Adjusted EBITDA ($5.9 million), indicating that cost management initiatives and the completion of build-outs are beginning to yield benefits. Management anticipates margins will improve going forward as new assets mature and operational efficiencies are realized.

Liquidity and Capital Allocation: Fueling Future Growth

MariMed maintains a relatively strong balance sheet for the industry, ending Q1 2025 with $7.2 million in cash and cash equivalents and $2.7 million in working capital. While cash flow from operations in Q1 2025 ($1.3 million) was lower than the prior year ($3.2 million) due to increased operating expenses, the full year 2024 generated $6.8 million in operating cash flow.

The company's debt structure, totaling approximately $74 million in mortgages and notes payable at March 31, 2025, is primarily long-term, with no significant maturities in the next two years. This financial flexibility, coupled with access to capital through relationships like Needham Bank, positions MariMed to pursue strategic growth initiatives, including potential accretive M&A. Capital expenditures are planned at $5 million for 2025, focused primarily on facility improvements and process automation to drive further efficiencies.

A notable item on the balance sheet is the $21.9 million federal income tax payable at December 31, 2024, resulting from the application of Section 280E. MariMed, like many peers, intends to file tax returns not applying this section, reflecting an industry-wide challenge and potential future catalyst for improved cash flow if federal tax laws change.

Competitive Landscape and Strategic Positioning

MariMed operates in a competitive U.S. cannabis market alongside larger multi-state operators like Curaleaf Holdings (CURLF), Green Thumb Industries (GTBIF), and Canopy Growth Corporation (CGC), as well as numerous smaller regional players. While precise, directly comparable market share figures for all niche competitors are not publicly detailed, MariMed's performance in specific product categories and markets indicates a strong competitive standing, particularly in branded edibles.

Compared to larger peers, MariMed may have a smaller overall scale and potentially slower R&D cycles in certain areas. However, its focus on operational efficiency, particularly in its vertically integrated facilities, and its asset-light approach in some early phases (like managed services) have contributed to relatively strong profitability margins compared to some competitors who have struggled with high overheads from rapid expansion. MariMed's Gross Profit Margin (34.54% TTM) and Operating Profit Margin (0.25% TTM) reflect the current market pressures and investment phase, but management's focus on efficiency aims to improve these. Its Debt/Equity ratio (5.94 TTM) indicates higher leverage compared to some peers like GTBIF (0.30 TTM) or CURLF (0.99 TTM), though its debt is primarily long-term mortgages.

MariMed's strategic positioning centers on its brand strength and wholesale distribution capabilities, aiming to capture market share through product differentiation and accessibility rather than solely relying on a large retail footprint like CURLF. The company's targeted M&A strategy, focusing on acquiring operational businesses for immediate cash flow and brand expansion, is a direct response to the competitive environment and depressed valuations, allowing it to grow strategically without overpaying for assets.

Technological Edge and Innovation

MariMed emphasizes technological differentiation and innovation as key components of its brand strength and competitive edge. This includes developing proprietary cannabis strains and formulations used in its precision-dosed products. The company's R&D efforts are focused on creating innovative new products that meet evolving consumer preferences and needs.

Recent examples include the launch of Betty's Eddies Caramel Chews, infused with a blend of THC and CBG, and the planned launch of Microdose by Nature's Heritage. The Microdose product represents an entirely new format for the company, combining full-spectrum cannabis with functional mushrooms in a plant-based, vegan pill form. This innovation targets the growing trend of functional wellness products and demonstrates MariMed's ability to develop differentiated offerings.

While specific quantifiable metrics like yield improvements from proprietary strains or cost savings from formulation technology are not publicly detailed, the strategic intent is clear: these technological capabilities enhance product consistency, quality, and innovation, contributing to brand loyalty and market share gains. Investments in process automation, such as packaging automation, are aimed at improving operational efficiency, saving time and money, which directly supports margin expansion. This focus on product innovation and operational technology is crucial for maintaining a competitive edge in a market where product quality and cost efficiency are increasingly important.

Outlook, Catalysts, and Risks

MariMed's outlook is characterized by a focus on executing its strategic plan to drive revenue and EBITDA growth, despite acknowledging ongoing market challenges. The company anticipates a high single-digit sequential increase in Q2 2025 revenue, driven primarily by the inclusion of a full quarter of First State Compassion's results and continued wholesale door additions.

Key catalysts for future growth include the expected commencement of adult-use sales in Delaware (anticipated within 60 to 120 days), which will significantly boost revenue and profitability from the recently acquired FSC, the largest operator in the state. The ramp-up of operations in new facilities in Illinois and Missouri is expected to increase supply and support further wholesale expansion. Potential accretive M&A, targeting operational assets in new high-growth states, remains a strategic priority, leveraging the company's strong balance sheet. Longer-term catalysts include the potential elimination of Section 280E, which would substantially improve cash flow, and potential entry into the hemp space as a new revenue stream.

However, the company faces significant risks. Market headwinds, including price compression and soft retail demand, are expected to continue impacting performance. Competition remains intense across all markets. Regulatory uncertainty, particularly regarding federal reform and state-level changes, poses ongoing challenges. Execution risk exists in integrating new acquisitions, ramping up new facilities to full capacity, and successfully launching new products and entering new markets like hemp. The one-time bad debt write-off in Q1 2025 highlights potential risks in accounts receivable, although management stated this was related to a vendor and is being pursued for collection.

While formal financial guidance has been discontinued due to market volatility, management remains committed to providing insights and believes the completion of the build-out phase and strategic initiatives position the company for improved profitability and cash flow in 2025 and beyond.

Conclusion

MariMed is undergoing a strategic transformation, shifting its focus to become a leading branded CPG company within the U.S. cannabis market. The company's investment in vertical integration and its portfolio of strong, market-leading brands are central to this strategy, driving robust growth in the wholesale segment even as the retail environment faces significant headwinds.

While recent financial results reflect the costs associated with this growth phase and challenging market dynamics, the completion of major operational build-outs and the strategic acquisition of First State Compassion in Delaware provide a solid foundation for future expansion. MariMed's strong balance sheet and disciplined approach to capital allocation position it to pursue accretive M&A opportunities, further accelerating brand distribution and market penetration. The company's commitment to product innovation and operational efficiency, supported by investments in technology, is crucial for maintaining a competitive edge and driving margin improvement over time. Despite facing risks inherent in the cannabis industry, MariMed's focus on building a powerful brand portfolio and expanding its wholesale reach presents a compelling narrative for investors looking for exposure to a company executing a clear strategy for long-term growth and value creation.