Hello, and welcome to the 19th Annual Needham Tech, Media, and Consumer Conference. I'm Matt McGinley. I'm the analyst who covers cannabis here at Needham. In this panel, I'm joined by Christine Hersey, who's the head of IR at Trulieve. Trulieve is a, you know, we'll get into what Trulieve is, but it's a very large company based out of Florida that sells cannabis with operations across the U.S. As a quick housekeeping note, you can ask questions by submitting them in the question box on your browser, and I'll provide a few minutes at the end to address them if there are any. So with that, Christine, appreciate you joining us here today.
Why don't you give us a quick, kind of, high-level description of the company, your strategy, and tell me about Trulieve as if I were an investor that just started looking at the cannabis space, and kind of what's unique about your footprint and, and why are you quite different from many of the other MSOs?
Yeah. Okay, sure. Thanks for having me today. So Trulieve is a multi-state operator. I would say a couple of our differentiating points, we are very heavily invested in our high-conviction markets. So we've made a choice, from the very beginning, to go deep in markets like Florida, our home state, and build up scale and depth in production and retail, in markets where we have high conviction and longer-term potential. So our cornerstone markets are Florida, Arizona, Pennsylvania, where we have leading retail positions, backed by significant production. And our core strategy for long-term brand building really has been selling our own branded products through our branded retail network. So today, we have the largest retail network in the U.S., with 197 stores.
We, you know, are fully vertically integrated in the state of Florida, and then have varying degrees of integration in other markets. But really, we try and sell our own products through our own retail stores, so that we can control the customer experience from end to end. So not only do we produce our own products, and control the branding, the pricing, but we also control the customer experience, not only when they shop with us, but we offer a no-questions-asked return policy. And the goal is to really build a large, loyal customer base that will continue to shop with us year after year.
Excellent. So I don't know if you heard about this, but the DEA is perhaps gonna reschedule cannabis, and it's sort of a big, you know, big news item in the industry. Can you kind of, you know, walk us through what that means for Trulieve? And what are your thoughts on kind of the timing about how that will play out? Do you think that'll be something that can get done this year, and when would 280E, do you think, completely be, you know, kind of off the books?
Yeah, so yes, we have heard of this. We've been following this process since it began in 2022. So our understanding, based on the same information that I think everyone else has, is that right now, we're awaiting a proposed rule to be published in the Federal Register. Once that happens, it would initiate a 30- to 60-day public comment period, which would also be followed by a public hearing. And then, at some point, those comments and that hearing information would be incorporated into a final rule, which would be published in the Federal Register. So there's still time to get that done. I know this is an election year, and cannabis is a very populist issue, so it's possible that it could be done before the election.
It's also possible it could be done by the end of the calendar year. Our base understanding is that once cannabis is rescheduled to a Schedule III, by definition, 280E would no longer apply. The majority of the opinions that we've heard have said it would probably be applied to a full calendar year. So if it were done this year, it could be applicable all the way back to January 1, 2024. But we don't know that for sure, so, you know, that would be something that would, that would play out. So it could, it could mean that 280E doesn't apply for 2024. If it happens, you know, next year, it could mean that it doesn't apply for 2025 or, you know, it may turn out that it's, it's a proactive application, and it's, it's prorated for the year.
We don't know. This is kind of an uncharted territory from that standpoint. But if we were to move to a Schedule III, you know, by definition, it would no longer apply, as it's only for Schedule I and II.
Yep. Excellent. Another big catalyst for you, and this is probably the single biggest catalyst for, I think, probably any that has been in this industry ever, would be the potential conversion of Florida to adult use. Obviously, that's gonna be on the ballot here in November. Requires a 60% approval rate to pass, which is a high hurdle, but, you know, we've seen other states, like New Jersey and Maryland, that have been, you know, gone recently, that have had those votes, and they've gotten, you know, well over 60%. So high hurdle, but, you know, it seems like it's, you know, capable of passing. I guess, what are you doing individually?
Now, Trulieve, I should say, funded most of the ballot collection to get the signatures that were required to get it on there. I don't know if that was exclusively you, but it was, like, probably 95% you. That's my number, not yours, but it was a heavy lift by Trulieve to get that done. But now there does seem to be more of a collective effort from the people in the industry to kind of get that and pull that together to make sure it can get past the finish line.
Kind of, what's the industry doing right now, and what's the—I guess, what do the contributions look like from everyone to make sure that the word gets out and that, you know, is advertised or, you know, you do a Rock the Vote type thing here in the fall to make sure that people come out and vote for that?
Yeah, absolutely. That's right. So, you know, we got the decision that we're on the ballot on April 1st. The vote is November 5th. We have seen other industry operators contribute to the campaign. The campaign is called Smart and Safe Florida. If you are a Florida voter or you know anyone who's a Florida voter, it's smartandsafeflorida.com. It's Amendment 3, and so, you know, we've seen players come in and start to support the campaign. Most of the activity is probably gonna ramp up in the last two and a half months into the campaign. But the campaign itself launched an ad blitz on Tuesday with four different ads that are appearing in different markets across Florida. A part of that is to really collect data, test and learn, see which messages resonate.
As you mentioned, there are different types of voters. There's likely voters, there are those who will show up and support adult-use cannabis. There are those who need to be reminded that they need to show up and support adult-use cannabis, and then there are a section of persuadables who need some information and awareness and education, and who can be persuaded to vote in favor of adult-use cannabis. So there are different groups that the campaign is targeting. Trulieve continues to support the campaign. Our CEO, Kim Rivers, has been on local TV in all the major markets here in, you know, Jacksonville, Orlando, Tampa, Miami. She's been doing radio. We've been talking to other operators, as has the campaign, about doing different fundraisers or different events to just help, you know, voter registration and awareness, again, drive turnout in November.
We are doing everything we physically, humanly can possibly do between now and November. As you mentioned, 60% is a little bit of a higher hurdle. It's we think it's achievable, and our polling data suggests that, you know, it's achievable, but we're not taking a single vote for granted. So we've come this far. This campaign launched in August of 2022, so-
we've been working at this for a very long time. And we just need to make sure that we don't let up at all, you know, into November. So, there's a lot of work that's being done now, and I'm sure that that activity level is gonna ramp up significantly into the fall.
Yep. It's one of the great things about Florida, is that whenever they want to do something and put it in place, they do it relatively quickly, and there's not a lot of dilly-dallying like you see in some other markets. So that market, if it does pass in November, would be operational by January first. The legislature, I think, would have to put that in place in that short three- or four-month window where they're in session. What would you look to from them in terms of how they would potentially change the industry structure?
And do you think that wholesaling would open up in that market and in the inception of it as an adult-use program, or do you think that that's something that could happen a few years down the road?
Yeah, I mean. So you're right. The way that the ballot language is written, it's actually self-enacting, so it kicks in on its own, six months after voter approval.
So it'd be about May of 2025, existing medical marijuana operators would be permitted to sell to adults over 21. Any additional rules or, you know, a process for implementation would be driven by the state legislative body. You know, we would imagine they would put those rules into effect probably in Q1 of 2025. They would probably focus on some of the standard rules, like no smoking in public, you know, and create some standards there. We don't know exactly what they would do on the licensing side. It's possible that they could add some licenses for delivery only or for cultivation only. But the existing vertical nature of the medical marijuana licenses would not change, and those would be grandfathered in, in this process.
So, you know, in other markets, we've seen some rules on packaging, or, you know, child-proof sales bags, if you will, or some restrictions on dosing for edibles for adult-use customers. We may see some things like that, so. But we don't expect any changes to the existing medical operators or the vertical nature of that. So it may come down the road. You know, Florida isn't a market like some of the other markets that are really inclined to issue a ton of licenses or open up a lot of other type of licensing programs. So I do think, you know, things would stay very highly regulated here, and it, age-restricted access would be very tightly controlled.
Yep. If that did convert, so you have a massive growing operation in Florida. You have a very large, very efficient, highly automated facility in Jefferson County that's, I think, 750,000 sq ft. Then you have a ton of these 24 modular-type grow rooms that I'm not even sure how many of those you have. And then in the past, you've some hoop houses or sort of outdoor grows that are also something that you could lean into and use. If that did convert over, I'm assuming you would still add more stores to meet the demand of the market or the adult-use market. But how would your cultivation footprint need to change if that did pass in November?
Yeah. So right now, we do still have some idle capacity, even today. So, as you mentioned, you know, we spent the last 18 months or so ramping this, 750,000 sq ft indoor cultivation building in Jefferson County. While that was ramping, we pulled some other capacity offline, to make sure that we were able to absorb everything that we were producing. In the fourth quarter, we brought some of that idle capacity back online to help meet demand, just in the medical market alone. And so, you know, we would anticipate with an adult use scenario, we would bring idle capacity back. We don't run any hoop house, or greenhouse, structures at this time. We would have that as sort of a last resort, if you will.
But the capacity that we're talking about is all indoor, whether it's that standard 24,000 sq ft building, you know, or our 750 is fully ramped at this point in time. So we have multiple campuses that have a lot of those pop-up buildings, if you will, and we can turn those on, just replant them, pretty readily. So on the cultivation side, you know, we can definitely add capacity there, and processing as well. We have a large edibles facility in Tampa. We could add more production lines. We could run more shifts. We could definitely increase throughput at that facility. And then, as you mentioned, for retail, we're opening 25 stores this year, and we've opened five stores in Florida year to date. So one of those stores that we're opening is our 21st affiliated location in Pennsylvania.
The majority of the stores that we're opening are in Florida this year, and those would be to serve, you know, medical-only market or, with higher throughput in adult-use market as well.
Yeah. Would you need to build, like, another Jeffco type facility, or, or is it- is there enough-
Um
with a 24, is it?
It's something that's on the table, right? Because long term, right, the cost that we realize, there, that it's about 30% lower cultivation cost versus-
the standard 24K building. So I think the answer that Kim gives to that question is maybe. And so it just depends. So we would expect, you know, as this year progresses, as we get closer to the vote, as we see how things are shaping up and how the competitive landscape is shaping up as well, you know, that's something that we could do. That type of a facility, you know, has a longer lead time, obviously, right?
It's an enormous building. But having gone through it once, you know, we would expect the time would be shorter than the first time.
Yep, first time I saw that facility, I'd like to think of it as a Death Star. It's like a gigantic, gigantic building. All right, in Pennsylvania, I guess, what are your thoughts on the timing of that? What are you looking for for milestones there with the legislature? Obviously, the governor supports it, but I guess, what are you, what are you doing to see that that initiative passes in Pennsylvania? And then on the cultivation and capacity side, you guys made a lot of investments in Pennsylvania, kind of earlier in the medical cycle there. And everybody had, you know, a lot of capacity was added, and then it sort of, like, was mothballed.
Is that a similar story about what you can do with the 24K rooms in Florida, where there's not really a need for much CapEx out of the gate if the state does convert?
Yeah, I think that's the right way to think about it. So in Pennsylvania, we have, as I mentioned, 20 stores. We'll be opening our 21st dispensary this year, and then we operate three grower-processor facilities. One is smaller; it's more like a craft-sized grower, if you will. And then a medium facility, which is about 46,000 sq ft, and then a larger campus in McKeesport, which is a former U.S. Steel building. So we have the ability to re-ramp and turn on idle capacity there. We wouldn't expect a major CapEx push if adult use were to launch in 2025. At this point, bipartisan legislation has been introduced in both chambers.
But, you know, it is an election year, and both sides will need to come together, and work out the finer details and get something over the finish line. So the budgeting in Pennsylvania runs July to June, fiscal year, and then since it is an election year, you know, we would expect folks to, at some point, kick into campaign mode. So, you know, if we don't see something in the next several months, you know, it's probably gonna be picked up again next year. I think the good news is, though, the conversations are happening, the education is happening at staffer level and, you know, with the elected officials, and, you know, they're keenly aware that the neighboring states are all converting to adult use and collecting that tax revenue-
and really benefiting from having a regulated marketplace. So I think if it doesn't happen this year, there's a greater likelihood it'll happen next year, and so on. So at this point, it feels like it's just a question of when, and not if.
Yep, and that concentrated exposure is like... I mean, it would be, and these are my numbers, not yours, and I know you guys don't give, you know, estimates of what the states would be, but I'd estimate that if Florida did convert over, it would be more than a double of your existing revenues in that- and not just in the state, but double in overall revenues. And then Pennsylvania is, you know, I think I had it at, like, 20, probably high teens% of, of overall revenue. If that converted on the revenues you would do last year, this year, it would probably be about a 20 to 25 to 30% increase in, in overall revenue for Trulieve.
So it's a big, big, concentrated exposure that would be, you know, supersize your, your revenue in those states and would likely create a lot of operating leverage. But one state where you don't have a ton of operating leverage, maybe this is the smallest one, is Ohio. You have a pretty small footprint there. That's obviously gonna convert over, but this is like... I mean, if, you know, if that's- if these other things are just gigantic opportunities, this is like a, a thimble full, given you, you know, you, you don't really have that much in Ohio, but you do have two. And previously, you guys had said you would potentially work- based on when the regs came out, you would potentially work to get to the five.
Those, I don't know if they have to be JV or not, or if you could, you know, get additional licenses, but I guess, what are your thoughts on Ohio now that that's likely to convert here in the next couple of months?
Yeah. So it looks like, with the rules that are coming out, they will open in the application process for existing medical operators to convert to a dual license on June seventh, and then they'll begin approving those licenses and allowing adult use as soon as June twenty-fourth. Subject to change, of course, asterisk, it's still in process, but that's the latest that we know. So Trulieve does have one dispensary in Columbus, Ohio, that we operate, which we will be applying to convert to dual use. And then we have a pending settlement that came over through the Harvest acquisition that is under regulatory review now.
And so as soon as that settlement is final, we would share additional details, but we would expect to get additional dispensaries and companion license opportunities, potentially, you know, when that settlement agreement is finalized. So-
you know, more to come on that. You know, hopefully, that'll be resolved, you know, in the coming days here.
Yep. Got it. All right, in the retail footprint today, you had noted 25 stores. I think most of those are gonna be in Florida this year, but what are the other stores that you said, one in Pennsylvania and kind of the majority would be in Florida?
Yeah, I think the majority will be in Florida. We do have one other license, which is coming back to us through a kind of an ongoing process with the state, actually, at the end of the year, but I think that'll open probably in 2025. So the majority of the stores will be opening in Florida this year, and most of them will be our standard store layout. We did open one express pickup store at the end of December, and then another one in March. And it's a different concept where it's express pickup only, so all the ordering for the store is done online. And then you just come in, grab your order, pay for it, and leave.
So it's a smaller store footprint, and it has, you know, obviously lower operating costs and lower labor. And we've been using that store concept in areas where it's maybe some white space in Florida where it wouldn't support a full store, but we're able to still cover that market and, you know, save someone from driving 40 minutes to go to a store, but with a lower cost to operate. So we've been very pleased with those two stores so far. But we're testing those concepts out as well.
Yep. So for the past, like, two years, up until about two or three quarters ago, your kind of you had, you had exposure to these states that were under pricing pressure, like Florida, Pennsylvania, and Arizona. None of them had major catalysts ahead of them, and, you know, some of the other companies had New Jersey or some. You know, you had smaller exposure to Maryland, and you got little, little bumps from places like that. But, the revenue has stabilized for you in the past couple of quarters. Now, kind of, you know, I wouldn't say it's massive growth up and to the right, but you're, you're now growing again.
But the efficiency gains that you've seen in both production, which was partly driven by the transition of that facility that you mentioned, the Jeffco facility, but your store labor model seems to have changed pretty drastically as well, where you've gained a tremendous amount of efficiency. What has changed with your model compared to what we saw at Trulieve two years ago versus what we've seen over the past few quarters? And I guess, how would that labor model change if you did have these states that would convert over? Would the economics just improve, or would it require a lot of incremental investment to make sure you can monetize the revenue gains that you would have in those states?
Yeah. I do think, you know, our approach to staffing in retail and our labor model has changed and evolved over time. I mean, this is a growth industry, and, you know, a lot of, a lot of us have been building at a pretty fast speed at certain points in time, and sometimes it takes a minute for our systems and our processes to catch up to where we've grown into. And so over the last year or so, we've really upgraded our planning and staffing models for labor, really tying those to traffic patterns and order patterns, making sure that not just we have the right expense for a store, but that we're marrying when, you know, workers are in the store and ready to-
Yep
serv e, you know, certain traffic patterns. And so that has become a lot more sophisticated. And so it's working really well, and we also just, you know, focus on that week to week. We can see exactly which stores are on plan or off plan, or what happened and why, and then recalibrate those models and pull them back. And so, you know, if we have any major adult use conversions, basically, we would deploy those same type of modeling approaches, but just on a larger scale, right? And so the inputs to those models would change because traffic patterns would change and expand, but the incremental cost on a percentage of revenue basis would probably come down, right?
The variable cost that you would need to serve that much more throughput through your store is not gonna increase at the same pace. So there is operating leverage that can be gained there, in incremental contribution margin, just from having higher economies of scale. So yeah, it's part of, you know, part of what we've been doing, the unsexy part of our business the last couple of years, not only evaluating all of our sites and assets and deciding where to pull back from and where to invest more in, is also just putting a lot of these foundational building blocks in place on the system side, making sure that we're able to operate more efficiently today, and then, you know, set the stage for potential further step-ups in traffic and in customer flow, so.
Yeah. I saw a lot of that, too, the efficiency improvements came from corporate as well. Like, what improvements were made there? And, you know-
Yeah
I assume that could be even a greater point of leverage because you probably wouldn't need that many more people that were running, you know, production planning or things like that at the corporate level, that, you know, to monetize those opportunities.
No, I think that's right, and I think, you know, having been around just for a couple of minutes in this industry, right? When you're in a hyper growth mode, like we were during COVID, and, you know, double-digit growth quarter-over-quarter, sort of the, you know, the answer to every problem that you have is more, right? We need more people, more contracts, more services, more product, open more stores, do more of everything. You know, and then when we go through, you know, a period where we're reassessing all of these processes and contracts and service providers and all of those things, you can really drill in and say, "Okay, how do we do more with less? How do we become more efficient with this?
Do we really need these things?" You know, and part of the benefit of divesting from states where you're not, you know, fully scaled or deriving a lot of financial benefit, is that you have more attention and time that you can spend on the other states, which are more impactful. And so I would say, you know, just having the bandwidth to focus more on the states that matter. To your point, you know, in a market like Florida, we have one license that we operate under.
Yeah.
right? Which you renew every two years. So it's not, you know. It's pretty easy to maintain some of these things once they're already in place and you have systems in place, and then we would just be adding on to that, without a lot of additional expense, on that front. Really, where the extra effort comes in is just making sure that the systems are there. So part of what we've talked about this year is revamping our entire website architecture, you know, underneath, so that we can have these increases in traffic and have no change to the customer experience on their side. They won't know that all these things were done behind the scenes to prepare for, you know, greater use and greater traffic on there.
Things like that are where most of the preparation investment would go.
Yeah. Would your brands change materially? So, I mean, you were there for the Arizona conversion when that went from medical to adult use. You're obviously have major medical exposure in Pennsylvania and Florida. Would the brand structure need to change materially, or how would you reposition yourself as a adult use market provider rather than one that is mainly exposed to medical at this point?
Yeah, I mean, I don't think there would be. Each market is a little bit different. So in Arizona, when they converted to adult use, really the only restriction was on the edible dosing. So they put a limit for adult-use edibles at 10 milligrams per serving and 100 milligrams per package, but the rest of it was pretty much the same. Florida is probably not going to change that much. Our brand architecture is really good, better, best, right? So value, mid-tier, premium tier. And then we have product offerings and SKUs across those, those brand tiers. We do still have medical, health and wellness-driven brand in the Momenta brand, you know, which is really driven on more of the medical side with tinctures and topicals and RSO syringes, that type of thing.
But it wouldn't really change that much. I think, you know, really it, it's about just, taking what the customer is telling you and incorporating that data and making sure that you're putting the right products in the right places. So we went through a similar transition, you know, in 2022, when we noticed a shift in our customers were trending more towards value products. And so we had to produce more of those products and have them more readily available. But I think, you know, typically, adult-use customers aren't that different, from medical customers from a brand perspective. So we haven't really seen any major shifts in a market like Maryland, for instance-
Yeah
you know, which launched last year.
Yeah. Maybe back on the gross margin for a minute. So you had this, you know, I think you bottomed in gross margin, I think in the second quarter of 2023. You did about a 51% gross margin. Last quarter, you did 58.4, so massive increase over three quarters that drove tremendous amount of EBITDA growth and better cash flow conversion. So there's obviously well, in my mind, there's two big dynamics. One is the Jeffco facility is now up and running, and you have, as you mentioned before, 30% lower production costs there, but there's also likely less compression in pricing than what we saw, you know, two years ago, and probably smarter promotion overall from the operators.
I guess, how would you rate that rate of compression today versus what we would have seen a year ago? Where is that still ongoing, and what do you do today to offset that? Or how do you not act in maybe a detrimental manner, as you may have in the past, that you know, hurt your margins when it comes to either reacting or pricing?
Yeah, I would say definitely we've seen, you know, less pricing pressure in the last two quarters, in particular, so in Q4 and in Q1, right? So we talked about Trulieve specifically, had largely completed our inventory wind down plan in October of last year, right? So we converted $83 million worth of inventory into cash in 2023. So, you know, we weren't alone in that. A lot of other operators were realigning their production to more accurately meet current demand, as well as, you know, reducing excess inventory. And so I think across the board, the industry is in a much healthier place, and you don't have that additional pressure from inventory wind down activities. For us specifically, you know, we've become a lot smarter on the promotional side.
So we used that data that we collected last year, you know, throughout the year, and then also during our inventory reduction promotions, to really learn, you know, where the outer boundaries are, you know, for pricing for certain product categories. And really, you know, there's a point where, you know, you're just giving away margin. You're not actually driving new traffic or gaining new customers, but you're just giving away margin. And so really being disciplined in how we're approaching our spending, and then having some boundaries around our brand tiers and holding those lines, has really made a difference for us. Q4 is always more promotional with the holiday periods. And so in Q1, normally you would have lower traffic, and then you would pull back on discounting because you're outside of the holiday period.
For us, this year in Q1, we pulled back on discounting, but we also had, company-wide, a 3% increase in traffic and a 3% increase in average basket. So some of this is just a timing issue. You know, some of the consumer wallet pressure that we've seen in 2022 and 2023 has started to alleviate. We've talked about customers being more willing to trade up and try a new product, or participate in a bundled promotion or buy more, save more. It just feels like there's a little bit more flexibility, for customers, what they're spending. Whereas, you know, there was a point in 2022 and probably the first half of 2023 where there was no flexibility, you know, really for spending at all. So-
Yeah.
Part of it is the consumer's healthier, and then we're driving our own promotional strategy in a very targeted way, and we're not reducing any inventory, which also, you know, helps with margins as well.
Yep. Okay. In 2022 and 2023, you guys did a lot of, I would call it, like shrink to grow type activity, where you exited a couple of markets. Like, you had a. And this is partly a function of the M&A that happened, and you were part of the acquisition, too, of Trulieve. But not that you were acquired as a human being, but you were there when it was acquired.
I'm still here, so I guess I was acquired.
Yep, and now you're a Florida woman. Yep. But you had like a handful of assets that weren't, like, really meaningful. You had stuff in California. You had, like, a little wholesale business in Nevada. Massachusetts, like, you relate to, and it just never made sense. You exited some of those markets. Obviously, that is probably another factor that improved your profitability. But I guess in other states that you're in, why is it critical to be in a state like Ohio? If you have two stores, and you can only get to five, is that critical?
Even in these, you know, kind of small markets like West Virginia or Georgia, where they're very early stage medical markets, that they're, you know, they're probably not very profitable or not profitable at all, why is it important to remain in markets like that? Is shrink to grow activity something that you guys would do on a go-forward basis, or is the state footprint of where you're at right now kind of the right footprint you'd like to see?
Yeah, I mean, it was definitely a lengthy exercise that we went through in 2022, and again in 2023, where we continually looked at not only different markets, but individual sites and assets, and said, you know, a couple of things. One, how is this performing today? Is it a drag on cash? Is it a drag on profit? And then, what do we think is going to change in this market, if anything? Or what would it take in order to reach some level of scale that would make this operation profitable? And so when we looked at those markets that you mentioned that we exited, we didn't see anything that was going to change structurally or open up a pathway for us to justify investing dollars to reach scale and make those markets work, if you will.
We can look at some of the markets that you mentioned. Ohio, Trulieve organically won a license there in Ohio, and as I mentioned, we expect to add a couple more assets, you know, through a settlement. That was part of the Harvest acquisition. And so combining those two together should be good. If you think about that part of the country, so we're in Maryland, Pennsylvania, Ohio, West Virginia. It's a nice, you know, little northeastern block that we have there for markets where, you know, we think we can do pretty well. West Virginia is earlier stage. We were first to operate in West Virginia. It's still a medical-only market, but we have 10 stores there.
We sell—you know, the majority of the products that we sell there are our own brands that we're pushing through that retail base. I do have a bet with someone that West Virginia will go adult-use before regular Virginia. We'll see if that actually plays out in real life or not. And then, you know, Georgia is a longer-term play, right? Right now, it's still a low-THC, oil-only market. You know, we have five stores there. We are producing our own products there under the Trulieve brand, and then also the Momenta health and wellness line. So it's really—it's tinctures, it's topicals. We have a nasal spray for pediatric epilepsy. Those are patients who have a true unmet medical need. You know, no one is experiencing any highs or euphoria.
off of those products, right? They're addressing a need that they have. But, you know, these markets all go through a similar process, although some take longer than others, where you have a medical program that's introduced, people become accustomed to it. Through word of mouth, people start to realize the benefits of these, and it impacts somebody's lives, a friend, a neighbor, a family member. And eventually, they become more open to the idea of, you know, cannabis as, as a viable health and wellness tool in their state. So eventually, that market will open up, there will be more form factors that are available. Right now, Georgia has 18,000 patients, you know, and it's growing, so it's, it's early, early days there. So that's a longer-term play.
But when we look at that market, it's early stages, but there's still a lot of potential to come in the future, whereas when we, some of the other markets that we exited, there were no more unlocks or regulatory changes that were coming in the future. Yeah.
Got it. So I think it was the end of the second quarter, you guys announced that you were gonna be challenging your status under 280E, and you had filed for refunds back to 2020. And I think and a surprise to many, most of all me, maybe not you, but you actually received refunds from the IRS under 280E, of which I think so far it's been over $100 million in refunds. That I don't think is a done matter because it's an uncertain tax position and will likely be challenged by the IRS at some point. But you're absolutely flush with cash right now because you received refunds, and then you are no longer paying 280E. You're just paying your normal statutory taxes as a normal filer would.
So you're building up these bigger, you know, kind of uncertain tax liabilities, but, that you may or may not pay at some point in the future, but that's, you know, not for us to decide here. That'll be probably a court case or something that'll, that'll decide that. So I guess, one, what do you do with that cash as you sit on it right now? Is it-- do you just let that build there and sit, until this matter is decided? And I guess, what, what would be the ongoing kind of capital needs? And this is maybe a secondary question on, on sort of CapEx. You, you spent, you know, I think, $40 million last year, $70 million this year. The big part of the CapEx cycle seems to be over with, like, the bigger facilities you built. You, you don't need to...
As you mentioned, like in Florida and Pennsylvania, there's not a whole lot you need. How much do you need on a go-forward basis, and where would you look to deploy that either incremental cash flow or this capital that you have sitting on your balance sheet right now?
Yeah. So, you're correct. We ended Q1 with $327 million in cash. Our next major debt maturity is in October 2026, so we have some runway there. We are building cash through this tax approach. And as Kim mentioned on the call, we're not treating it as restricted cash, so we are treating it as cash on hand that could be deployed. The way that I think about it is, six months from now, we're gonna have a much clearer picture on some major, major events for our company, in particular, right? So Florida adult-use is a binary outcome. We'll know on November fifth if we're going to be launching adult-use sales or not.
Then my personal view is that we will have a much clearer picture on rescheduling by the election as well, whether the administration's gonna change hands, whether the incumbent's gonna remain. Maybe they get the process completed before the election, there's a lot that can happen in the next six months. And those two outcomes are very meaningful and have the ability to dramatically change the cash position and profile of our company, right? So if we had a rescheduling event in 2024, and we know that permanently 280E no longer applies, that would effectively put a bookend on the amount of time that we are arguing with the IRS over whether or not 280E applies.
Sure.
Right? So there would be a finite amount of money that we would be arguing over, and then the rest on a go forward would be building. So the other piece of it, obviously, if Florida goes adult use, like we mentioned, it would dramatically change our financial performance. And if, you know, we're able to get the double word score on that, and both of those things come through, then that would be an even higher level. So I think, you know, for the moment, we're focused on really running our core business and pushing this campaign effort on the Florida adult use side, and just continuing to build out the building blocks of our business.
But I would think, you know, in six months we would be in a much stronger position to make some more, bolder decisions, if you will, in terms of what we're doing with our cash.
But we definitely, you know, think about cash and timing of cash flows and how we're allocating our capital and making investment decisions, you know, all the time. That's an everyday ongoing event here, for sure.
You, you have a lot of bimodal outcomes that can impact 2025, but I look at your valuation, you still trade cheaper than the group, even though you have all these things that potentially could massively... And that's on 2024, you know, EBITDA and earnings. So somewhat odd. But Christine, we're out of time. Appreciate you coming here today, and thanks for all your insights.
Yeah, absolutely. Thanks for having me.