Go ahead and get started. N ext up, we have Trulieve, which I think to most in this room, we don't really need much of an introduction, for those who might not be familiar with the company, it is a multi-state, vertically integrated cannabis operator.
Over 4 million sq ft of cultivation, over 200 dispensaries, 30% of them located outside the state of Florida, but very much a strong presence within your home state of Florida, and very much a great company to have in here to get a good landscape or idea of what's going on in cannabis. T hanks for showing up. We have Christine Hersey, who is Vice President of Investor Relations. Christine, maybe we'll start overall before we get into the cannabis-specific or industry-specific developments.
One thing that we've been asking all of our consumer companies is just, what are you seeing with the consumer today? I mean, you and Kim have spoken about in the past, there being these trade-down dynamics. Has that gotten any better? Has it worsened? Where does things stand today, your perspective on the consumer?
Sure. A s you mentioned, we have 206 retail stores in the U.S., so in several states, so we have a pretty good idea of what's happening in cannabis retail. As we mentioned on our call last week, Q2, we had traffic up 3% company-wide, and basket was down 1%, which is pretty normal.
In the first half of the quarter, we saw a continuation of what we had seen really since last December, which was customers having a little bit more flex in their wallet, more willingness to spend a little bit more to try a new or unique product. Also, more willingness to participate in basket-building promotions, buy more, save more, or bundling for premium products. In the back half of the quarter, we did see some normal seasonality.
Two of our largest markets are in Arizona and Florida, and it gets pretty hot in the summertime, and we normally see a slowdown in traffic that's, you know, seasonal. We have not seen anything so far that is outside of normal seasonality, we are very closely monitoring retail trends and customer behavior right now. We've listened to all the same macro information that everyone else has, we have not seen anything out of the ordinary for this time of year, so far.
Relatively stable then. It's, it's fair to say. You guys are also in the early days of rolling out your loyalty program as well which I imagine would be a pretty solid tailwind as far as customer retention and maybe driving spend as well.
We completed the company-wide rollout of our loyalty program in early June. We've had great adoption. It's exceeded our plan so far. We have over 325,000 customers signed up, and 80% have already made a first purchase since signing up. I t's, it's been, you know, better than we expected. It is a great retention tool, and so far, it's, it's been a really great rollout.
It's been, as far as being able to get a better understanding of your consumer base as well, because I think that that may have been something in certain markets you wouldn't have necessarily known more about, as much about your consumer as you would've liked.
Now, with this loyalty program, you do get more access to that data, and we know how important that is for Trulieve. F or most companies in the space, but Trulieve in particular, to better understand, better target, have targeted personalization as far as offers go, that sort of thing.
In our adult-use markets, we do have, a little bit more of a barrier to data collection versus a medical-only market, where everyone is a registered patient, and so you have greater data collection. T he loyalty platform is a tool. The new program has fully stackable points, and they're portable across markets. I can earn points in Arizona and cash them in in Maryland, or any of our other markets, so it definitely helps with data collection.
Right. A dult-use markets, Ohio has been very topical, as you can imagine, of late. It's very early days, I appreciate that, but what have you seen so far? Has it been in line with expectations?
It's been a great rollout. This was a situation where our teams were prepared and waiting all summer
Like the other operators, we found out on Friday that we were launching on Tuesday. I n classic cannabis fashion, everyone rallied together, and we got it done. Our stores were open for extended hours. We had folks come in from other states and help pitch in.
We've had lines at our stores. We've done a great job keeping service levels high for our medical patients who've been with us, you know, for the past year, while meeting these new adult-use customers. F ar, the demand has been great. A lot of people are very enthusiastic about the program. It's always fun when you have a market where people voted for something
They come in, and they share their stories about how they waited years for this, and what it's like to finally come in and be a piece of history. S o far, it's been fantastic.
Well, and we'll definitely talk a little bit about, more about that when it comes to Florida as well, in a little bit. I can imagine there'd be a slew of people who would be, have the same sort of story coming in in Florida as well.
It's, always that way .
A lot of people have waited a long time or, you know, have had to have barriers. We had a woman in Arizona, who was a schoolteacher, and her physician would, kept advising her not to get a medical card for her arthritis, and then, you know, she went, and she voted for it twice.
The second time it passed, and then, you know, she came into our store and told us the story. T here are a lot of stories like that where, you know, helping pull down these barriers and repeal layers of prohibition is, it's a meaningful thing for a lot of people.
It is. I n coming back to Ohio, so there was, I think, concern from some operators that I know that the timing of the rollout was not in line with what the initial expectation was. It was brought up a little bit, which is a positive, but then on the other side, there was maybe a risk that there might not have been, might not be enough supply in order to serve that market when the market itself opened up. So have you seen that play out on your front? Has there been supply shortages? Has pricing gone out of whack relative to expectations?
We haven't had any supply shortages yet. We're actually still offering daily specials for our medical patients. Y ou know, we have ample product for our adult use customers at this time. O ur team did a great job just coming together, knowing that this was coming at some point, and procuring enough products. We do have a partnership with a tier one grower-processor, and we do expect to have our own truly branded products in our stores by year-end.
All right. As far as the, you know, the evolution of the adult use market, what we see today as far as the rules and regulations in Ohio, that's not what will be in effect as of, you know, by year-end, or not even by year-end, within a month, right?
Right now, the way this program has rolled out, we're able to sell to adult use customers, but it's under the rules and regulations that were in place for a medical-only environment. September, by September 7th, we should have adult use specific rules, and that should allow for a couple of things.
One, more direct contact and outreach with adult use type customers. We should be able to expand our rewards program to include more product types, and also we'll be able to have, I guess, more robust celebrations, if you will. They were very specific about not having food trucks or DJs or music outside or ribbon cuttings-
Ribbon cuttings, yeah. Right.
All these things. Y ou know, hopefully, we'll be having balloons and DJs and all the fun things.
I can't believe they didn't let you guys have that before. It's kind of shocking. Well, okay, that'll be good. Yeah, they can change that. B efore, we're obviously gonna touch on Florida, but before we do, Pennsylvania, what has been interesting to us is it seems like pricing has to have stabilized there. s that what you guys are seeing, and what's your view on why exactly that is?
Pennsylvania is an interesting market. It is a market that does have a lot of multi-state operators in the market. A lot of us did the same thing, I would say exiting 2022, where we took a closer look at current demand versus our production, our inventory levels, and we adjusted our production to more closely match what current demand was, and I think all of the other operators did that as well at the end of 2022 and into 2023.
R ight now, I would say the market just has a healthier level of supply relative to current demand in the medical-only environment. We have seen pricing stabilize, and then for us specifically, we've been really focused on getting our own brand of products sold through our retail doors.
Right. I f we go back, it was four years ago, I think, that you bought PurePenn and Solevo to get into the market.
How has your wholesale market share grown over time? O f course, everyone's prioritizing branded products through branded retail, and totally understand that, but given what's going on with the supply and being brought back down, like, where's wholesale market share? How has that trended since initially getting into the state?
I think you just touched on it. I nitially, Trulieve, we've had done an acquisition of a wholesale company as well as a retailer, with a relatively small footprint in the state, and then, through an additional acquisition with Keystone and then the Harvest acquisition, we now have 21 stores in the state of Pennsylvania. There has been a shift in the strategy.
A lot of our production is slated for our own 21 stores. In the last two years, we've really pushed the launch of Roll One and Modern Flower, which are our value tier and mid-tier products, in getting those brands into the market, as well as partner brands like Khalifa Kush.
The priority has been our own retail doors. H aving said that, I think there's also a little bit of a shift in, you know, what we're offering in the wholesale market as well. I t has definitely evolved, but I think, you know, right now, we're still really focused on that branded product through branded retail strategy as a first priority.
That makes sense. And then switching gears to Florida, so I think probably what most, if not all, people in the room want to know or have some sense of where, you know, how you're feeling is... I mean, clearly, November 5th, it's, it's months away.
I think everyone has this tendency to want to read too much into some of the polling that they're seeing, but how are you feeling about the polling that's come out, your own polling? There have been some other individuals that have joined the opposition campaign. I don't know how, just where do things stand from your perspective?
Everyone wants to know exactly what's gonna happen on 5 November which no one can tell you exactly how that's gonna turn out, but we are 83 days away
We'll know soon enough. R eally for us, it's come together as we expected. Y ou know, the polling that we have and what's public and what we have internally has been consistent with mid-60s to high 60s support, which is enough to pass. It meets the 60% threshold. We have done a lot of work on the campaign side.
We did targeted ad buys in May and into June, testing specific marketing messages and outreach in different areas, and then continued with more ad buys in July. The campaign has about 70 public endorsements, including the original Pot Daddy, John Morgan, who's pretty influential in Florida. I saw one of his ads here on Boston News last night.
Oh, nice.
He's influential everywhere. We've had a number of elected officials, bipartisan support from both sides of the aisle. We always expected that there would be some opposition, right? You're not going to have push for change without having some opposition.
So far, it's come together as we expected. We are doing everything that we possibly can to try and help raise awareness, educate Florida voters about the benefits of Amendment 3, and just make sure that people turn out. Really you can have polling and data, but who shows up and who votes in November is really gonna dictate the result. But so far, it's been as we expected.
The natural extension on that, it's a binary decision, you know, what happens on 5 November . Of course, November sixth, you're gonna wake up and realize we're gonna go down path A instead of path B, depending on what the outcome is. But in light of that, I mean, you.
You've ramped up Jefferson, JeffCo, for 750,000 sq ft facility, for everyone in the room that's not familiar, state-of-the-art. Y our cultivation footprint seemingly is in a good spot today. Would it be sufficient to be able to support growth in adult use should we get a favorable outcome on 5 November ? Or are you thinking maybe there's incremental investments, but that might need to be made in order to serve that market?
In thinking about what it would look like with adult-use in Florida, both on production and on retail side we do have idle capacity in both. W e have a number of cultivation campuses, if you will, in addition to the one in Jefferson. We name them after the county that they're located in, so we have a number of facilities in the Panhandle.
The way that they're designed is really designed for modular expansion. O nce you have a large site and you have utilities, power, water, everything that you need, we can add additional buildings in a relatively short period of time and get those planted.
That 750,000 sq ft building has been operating at full capacity all year, and has performed well above plan. J ust in terms of yields, in terms of potency, and then cultivation costs, you know, it's been a great, great investment for us.
I would say, you know, we do everything in a strategic and a thoughtful way, and so as this Florida adult use opportunity becomes more and more de-risked, .e, 83 days from now you know, we will obviously put certain plans into motion, but we do have the ability to turn on additional idle capacity that we have today supporting our stores and our growth for this year. As well as you know, some examination of what would be needed if the market goes from, call it a $2.2 billion or $2.3 billion market to a $6 billion market
That's a significant.
It's pretty massive, yeah.
Increase in growth. And the same thing on the retail side. We have 142 stores in Florida, not all of them have every point of sale in use today. We also have different things that we can make modifications design, express pickup, those sort of things, to try and keep wait times and transaction times low, while serving an increased volume of customers.
I think it's pretty. W hen I went and visited one of the dispensaries, there was, I think, three or four active terminals, but there's room for 12. I t's very easy for everyone to see the capacity, the operating leverage that you'd be able to generate on those sort of assets, if and when we get adult use. If we get adult use, I going to be careful.
W hen it comes to capital allocation then, so I think everyone recognizes this is the single biggest opportunity that you have in front of you, is Florida adult use. If that lands, you let me step back. You're gonna wanna spend every incremental dollar making sure that you're in the best opportunity to get a favorable outcome on 5 November . Everyone understands that. Beyond that, though, what's next, I guess? Or what else is on that list of capital allocation?
I think you're exactly right. I n the very near term, our focus is on the campaign, supporting the campaign, making sure that we're doing everything that we possibly can do to have a successful outcome on 5
November . We do not wanna wake up on November sixth and think of five more things that we could have done in order to get a positive vote. T hat's where our primary focus is. I would also say it's very likely that by 5 November , we'll have a much clearer picture on rescheduling
If you just think about our company, our balance sheet, we had $356 million in cash at the end of Q2, and $481 million in debt. If you think about the opportunity set that we have ahead of us, there are different pathways with a yes vote in Florida, and with rescheduling, if that becomes final, right?
The removal of a 280E tax burden is going to really change the complexion of our cash generation permanently and would afford us even more flexibility. R ight now, in the short term, we're focused on the Florida campaign, which is really the lever that we can pull the hardest on in order to, you know, dictate our future, if you will.
Once we have clarity on those two major things, which again, should be this November, hopefully you know, we'll be able to look out at the broader landscape. W e have debt that's due in October of 2026.
Which is at 8% interest. We also have other things that we could do, investments for growth, either in other markets, or other opportunities, as well as potentially share buyback. There are a lot of different things that we could do, but the cash generation for our company in the back half of 2025 has two very different outcomes. You know, depending on that vote in November, and then potentially even more so, with rescheduling.
Right. 100%. Well, so going back, I should have asked this as well for Florida: so let's assume we get a favorable outcome the night of November fifth, what does the adult-use market look like on May fifth? We get a lot of questions from investors saying, "Hey, is there gonna be forced decoupling, like forced... You don't need to be vertically integrated to operate within the state. Is there going to be restrictions on what municipalities can opt in or opt out of the program?" That sort of thing. What does the environment look like?
The way that the initiative is written, it basically takes the existing medical marijuana treatment center program and piggybacks off of that. T he existing program that we have would be expanded to allow existing operators to sell to adults over 21, and then adults over 21 could also have the ability to purchase and consume personal cannabis in Florida. T he state legislature has the ability to come in and create additional rules in an implementation bill, if you will.
They could do that at any time. I f we had a successful vote in November, they could call a special session and address that topic specifically, or they could do it during the normal session, which would be March, early March to early May of 2025. And they can implement a whole number of rules, including, you know, requirements for packaging, different dose requirements for certain product categories, like edibles
We've seen that in other markets, it's pretty common. So, they have the ability to create new license categories or issue new licenses if they want to, but it seems unlikely that they would do a forced, I don't, reversal- vertical integration.
Something like that .
If you will. They could have special licenses for delivery only or for retail only something like that, if they chose to. That will be determined in that session. The only way to get on the ballot is to have a very narrow, single-subject topic. I n order to pass court approval. A ll of those additional program details would be set by the state legislative body prior to launch.
That makes sense. Well, the last question, and then we'll, we'll open it up for, for Q&A. And I think this does tie back into the capital allocation discussion, but I'll ask it just because we've, we've been inundated from, from investors with this question as well. What are your thoughts on Hemp-derived THC, that market in general? Are you thinking about maybe getting into that? Because other larger players in the industry are. What's your view?
I think it's a very interesting opportunity, right? The ability to have direct outreach to customers without all of the rules and restrictions that we have in you know, cannabis today, it, it looks like a wide open opportunity. You know, having said that, for Trulieve, our focus right now really is on, you know, the biggest opportunity in cannabis that we have in front of us here.
You know, at the beginning of the year, you know, we've had said there's almost no opportunity that we can think of that we wouldn't be able to enter later in 2025 or in 2026, if we get the Florida opportunity right.
Y ou know, there's, that applies to pretty much every single opportunity. L ike everything else in cannabis, we're watching it, we're evaluating j ust like, you know, you know, listing on different exchanges or, you know, international markets, all of these other opportunities.
We're always watching, and doing our own analysis, but we've always been very strategic and thoughtful about kind of where we enter markets and how we do it. We've passed on a lot of opportunities, as you know, just the timing or the market itself weren't right for us. Y ou know, never say never, and we'll definitely see how this plays out, but, we'll see how everything goes.
Great. Any questions in the room?
I think Trump had mentioned in one of his Q&As that he might be saying something on the news on the ballot. Is that just something y ou know, or do you think he's impacting his making a decision?
No, he is a Florida resident, and he will be voting. And so he did indicate that in the future he will give his opinion or stance on Amendment three. I t will be interesting to see. As I mentioned, we've had bipartisan support, we have a Florida state senator who's come out very publicly in favor.
We've had some folks who've come out very publicly against, and so, you know, it seems to come down to, you know, the personal candidate and what their viewpoint is. I t will definitely be interesting to see what his position is, and I would imagine he'll, he will address it at some point.
Can you walk us through the, like, sort of the path and the timeline he would take if he won a positive vote?
Sure. It's actually explicitly stated in the amendment that adult-use sales will be permitted six months from voter approval.
Right.
5 November to 5 May is six months. I n that timeframe, existing operators would be allowed to sell to customers over 21 years.
Great! We'll leave it there. Thanks for joining us.
Okay. Thank you.