Good evening and thank you for joining us. During today's call, Kim Rivers, Chief Executive Officer, and Alex D'Amico, Chief Financial Officer, will deliver prepared remarks on the financial performance and outlook for Trulieve. Following the prepared remarks, we will open the call to questions. Steve White, President, will also be available to answer questions. This afternoon, we reported results for the Q3 of 2022. A copy of our earnings press release and PowerPoint presentation may be found on the investor relations section of our website, www.trulieve.com. An archived version of today's conference call will be available on our website later today.
As a reminder, statements made during this call that are not historical facts constitute forward-looking statements, and these statements are subject to risks, uncertainties, and other factors that could cause our actual results to differ materially from our historical results or from our forecasts, including the risks and uncertainties described in the company's filings with the Securities and Exchange Commission, including Item 1A Risk Factors of the company's annual report on Form 10-K for the year ended 31 December 2021. Although the company may voluntarily do so from time to time, it undertakes no commitment to update or revise these forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. During the call, management will also discuss certain financial measures that are not calculated in accordance with United States generally accepted accounting principles or GAAP.
We generally refer to these as non-GAAP financial measures. These measures should not be considered in isolation or as a substitute for Trulieve's financial results prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures is available in our earnings press release that is an exhibit to our current report on Form 8-K that we furnished to the SEC today and can be found in the investor relations section of our website. Lastly, at times during our prepared remarks or responses to your questions, we may offer metrics to provide greater insight into the dynamics of our business or our quarterly results. Please be advised that we may or may not continue to provide these additional details in the future. I'll now turn the call over to our CEO, Kim Rivers. Please go ahead.
Thanks, Christine. Good evening, everyone, and thank you for joining us today. We are pleased to report Q3 results and provide an update on our business. Before I discuss our results, I would like to briefly address Hurricane Ian and Tropical Storm Nicole. First and foremost, I would like to say a special thank you to all of our employees who worked tirelessly during Hurricane Ian to serve patients and restore our business operations, especially those who contributed to recovery efforts despite being personally impacted by the storm. Our team's experience in disaster preparedness plans, coupled with our sophisticated logistical and technological capabilities, contributed to the effective management of operations before, during, and after the hurricane. Cross-functional teams assembled to monitor storm developments and dispatch response efforts.
We deployed mobile tech and operational units to provide cell service, deliver power generators and fuel, and make necessary repairs to get stores back online to serve patients with minimal disruption. Through the hard work and commitment of our team, within 6 days, we were able to reopen 59 of the 64 stores that were closed, resulting in a $3.3 million impact to revenue in the Q3 . In support of recovery efforts, we rolled out several initiatives, including a roundup campaign and a volunteer program to aid communities across Florida and an assistance fund and supply relay program to support employees. Trulieve has committed to matching contributions from both programs. We are fortunate to be in a position to provide resources to our employees and the communities we operate in during this time of need.
As we sit here today, Tropical Storm Nicole is making landfall on the East Coast of Florida. We closed 16 locations earlier today in advance of the storm and will be working diligently to restore normal business operations while prioritizing employee safety. Updates on store closures and reopenings can be found on our blog available at Trulieve.com. Moving on to last night's midterm elections, we would like to extend congratulations to the citizens of Maryland for successful passage of recreational cannabis. We are looking forward to serving recreational customers in the state through our vertical operations, which include 3 retail stores showcasing our full suite of internal brands. Turning now to our Q3 results. Trulieve achieved Q3 revenue of $301 million, up 34% year-over-year.
Revenue decreased by 6% sequentially, impacted by macroeconomic conditions, foregone revenue due to the strategic shuttering of non-core assets, regulatory changes in Florida, and the impact of Hurricane Ian. Q3 adjusted gross margin remained relatively flat quarter-over-quarter at 57.1% compared to 57.6%. Adjusted gross margin remained strong despite lower revenue due to increased utilization at our new Florida indoor cultivation facility and flat promotional activity company wide. Adjusted EBITDA was $99 million or 33% margin, representing our 19th consecutive profitable quarter. Operating cash flow was -$22 million in the Q3 , an improvement of $23 million compared to the Q2 . We anticipate operating cash flow will be positive in the Q4 , and we will generate free cash flow in 2023. We exited the quarter with $114 million in cash.
Trulieve's strong financial profile remains a key differentiator within the cannabis industry. In the current environment, access to capital at attractive rates is a strategic advantage. Trulieve is in an enviable position among peers with term debt at a weighted average interest rate of 8.3% and no significant current debt maturities. We recently secured a commitment for $70 million in real estate-backed financing at a favorable rate compared to our existing debt. We expect this financing will close before year-end. Even with greater access to capital versus peers, we will continue to exercise restraint with prudent allocation of capital in accordance with our long-term strategy. We have clearly demonstrated our ability to safeguard capital by avoiding costly investments in markets like New York that offer little line of sight to delivering returns.
At the same time, we are willing to divest duplicative and cash dilutive assets where appropriate to maximize long-term cash flow. We will continue to focus on executing while tuning out the noise. Looking ahead, we are prepared to uplift to a U.S.-based exchange once allowed. We are nearing our two-year anniversary as an SEC-registered company with financials prepared in accordance with U.S. GAAP, having completed an F-1 registration in early 2021 and then advancing to an F-3 registration earlier this year. In addition, we believe our diverse board of directors with expertise across a variety of sectors, including beverage, consumer, and hospitality, is well equipped to provide sage advice as we navigate the transition to a U.S. exchange. We expect the U.S. listing would afford Trulieve significantly greater access to capital, increased liquidity, and broader reach among investors. Moving to our retail operations.
During the Q3 , our industry-leading retail platform grew to 176 locations with market-leading positions in Arizona, Florida, Pennsylvania, and West Virginia. We opened 11 new stores in Arizona, Florida, and West Virginia and relocated one Florida dispensary. We closed two underperforming locations in California permanently and closed one dispensary for relocation in 2023 in Pennsylvania. We are on track to meet our guidance of 25-30 new store openings and up to six store relocations in 2022. Retail sales declined by 5% sequentially to $284 million, accounting for 94% of Q3 revenue. Generally, trends observed exiting the Q2 continued with tightening economic conditions influencing retail results in different ways across our markets. Retail performance in Florida faced outsized pressure this quarter due to a number of factors.
First, lower net patient growth, followed by the implementation of rolling dosing limits, and finally, Hurricane Ian. Net patient additions declined to approximately 1,500 per week in the Q3 , bottoming at the end of July and rebounding somewhat at the end of the quarter. Decelerating patient growth reflects the reversal of COVID-related trends, where program enrollment spiked due to greater access through telemedicine, coupled with an increase in consumption hours and household income bolstered by stimulus dollars. We estimate the total cost to obtain a medical card through renewal or initial entrance is approximately $200, which may be high given the current inflationary pressure on household spending. Since quarter end, net patient growth has since rebounded to approximately 2,100 patients added per week. Second, at the end of August, daily dosage and 70-day supply limits took effect.
While only a low single-digit % range of patients were estimated to be affected in practice by these limits, patients adopted a scarcity mindset, pulling back on purchases to reserve supply capacity for the future. Following the implementation of the new limits, Trulieve rolled out an online tool to provide patients with real-time data showing available milligrams under each category as items are added to online shopping carts. We also worked with physicians to ensure that they understood the new limits and how to set exceptions to limits for patients where appropriate. Slower patient growth and rolling dosage limits added pressure on volumes dispensed in early September on top of an already stressed economic backdrop. In response to the market slowdown, several competitors began aggressively discounting to drive traffic, offering mass discounts of 50% and higher store-wide.
Initially, Trulieve also increased promotional activity, but as a result of our ability to mine data and glean insights from customer behavior, we quickly adapted our approach. Data revealed areas for improvement to our strategy, and we were able to quickly incorporate this data feedback, doubling down on brand and product segmentation to reinforce our value proposition in lieu of indiscriminate store-wide discounts. We reset our focus on delivering clear and consistent messaging for each product tier while maintaining a disciplined approach to discounting. For premium customers who are interested in new and innovative products, we push information on the timing and availability of new and exclusive product drops. Within our mid-tier segment, we pulsed promotional activity, offering periodic discounts on specific products to highlight brands or move inventory.
For value customers, we offer high-quality products at everyday low prices, affording customers consistency without having to hunt for deals or wait to time purchases. As an example, in September, we reintroduced Roll One indoor flower with an everyday low price of $20 per eighth. Utilizing this multilayered strategy, we are able to meet value customers where they are while preserving brand integrity for mid and premium-tier products. At the same time, we improved the overall customer experience with greater transparency on quality and pricing. Following these changes in mid-September, our retail performance began to stabilize and improve. Just as these changes were beginning to yield positive results, Florida was hit by Hurricane Ian. As I noted at the top of the call, our advanced capabilities and depth of experience allowed us to quickly reopen stores closed due to the storm.
While our team was working to restore operations, we provided timely updates on store openings, modified business hours, and alternative store locations specifically to customers in affected areas utilizing targeted messaging. Subsequent to quarter end, our retail performance has been steady in Florida, aided in part by improved patient growth, patient and physician acclimation to new supply limits, and our refined promotional strategy. We are currently positioning for the holiday season, which historically has seen larger volumes and high promotion, higher promotional activity. Within the current macroeconomic environment, visibility is limited into year-end. Trulieve has garnered an outsized market share in Florida with an average of 50% market share in flower over the past 3 years.
While our size and exposure in our home state of Florida negatively impacted Q3 results, we expect our market-leading presence to be a major driver of outperformance in the years ahead. Florida remains the largest growing medical market in the U.S. with tremendous future potential. Including adult use consumption, Florida is poised to be the largest legal U.S. cannabis market with 22 million residents and 130 million tourist visits per year. Trulieve remains an active supporter of the Smart & Safe Florida campaign to add an adult use initiative to the November 2024 ballot. The campaign has already gathered over a quarter of the total signatures required, which once validated by the Florida Division of Elections, will trigger a review by the Florida Supreme Court prior to ballot placement. Signature gathering efforts are ongoing and thus far have tracked ahead of anticipated timelines.
Assuming success, we estimate the Florida market could reach up to $6 billion following expansion to include adult use sales. Given our unrivaled scale in production and retail footprint, we are poised to retain our leadership position in this massive market. Turning now to Pennsylvania. As we highlighted during our Q2 call, our customers continue to shift towards value products. In the Q3 , sales of premium products were flat while mid and value tier units increased. Throughout this year, we have been increasing our production of branded products, including several value products with the Roll One brand. With these efforts, branded products revenue almost doubled in the Q3 compared to the Q1 of this year. We will continue to expand our distribution of branded products through branded retail in Pennsylvania and expect to realize improved performance as these brands gain traction in the market.
Finally, in Arizona, Q3 retail results declined sequentially due to both a seasonal slowdown and pricing pressure across the market. Over the hot summer months and into the Q4 , Trulieve increased promotional activity to sell through legacy inventory within this challenging backdrop. We successfully depleted the bulk of legacy inventory, and promotional activity has been reduced in time for a seasonal uptick in traffic ahead of the holiday season. Concurrently, we began a broad initiative to increase the sale of internally produced products through our retail platform. Since August, we have opened three new Trulieve-branded dispensaries. Early performance at these new locations has been encouraging. Recently, we rebranded a dispensary in Glendale and will continue to rebrand Arizona retail locations and launch branded products over the next year.
In wholesale, revenue declined 24% sequentially to $16.5 million, continuing declining trends from the Q2 . During the Q3 , we made the strategic decision to exit wholesale operations in Nevada, where the footprint was not efficient and the previous harvest operation was cash dilutive. Wholesale markets generally remained under pressure as weaker trends persisted throughout the quarter. Consequently, wholesale customers are carefully managing working capital and inventory levels due to softer market conditions. We will continue to manage production mix and product allocation to the wholesale channel across key markets such as Arizona, Massachusetts, Maryland, and Pennsylvania. Focusing now on supply chain. Distribution across our retail and wholesale network is supported by over 4 million sq ft of cultivation and processing capacity. In Florida, none of our cultivation, manufacturing, or processing operations were affected by Hurricane Ian.
During the Q3 , we continued to ramp production at our state-of-the-art indoor 750,000 sq ft cultivation facility. We expect the facility will be fully planted at the start of the year, with initial harvest and optimization efforts continuing into the spring. As we ramp this new lower-cost production facility, we have begun to pull older and less efficient capacity offline. This banked capacity will remain available to ramp again as needed to meet future demand. During the Q3 , we produced 9 million finished good units, compared to 10 million during the Q2 . During the Q4 , we are further lowering production and capacity utilization across markets to match current demand more closely and reduce inventory.
Given the lead time required for changes in production to take effect, we expect the majority of these efforts will be realized downstream in Q1 and Q2 of 2023. In Maryland, we are well positioned to serve recreational customers without significant capital expenditures. We continue to make progress expanding our branded product portfolio in Maryland with the re-launch of Roll One concentrates and Modern Flower vapes in the Q3 . In September, Trulieve was awarded one of only two Class 1 production licenses in Georgia. Production commenced following receipt of the award, and we expect to complete our first harvest within the next few weeks. We look forward to opening dispensaries and serving patients in early 2023. Just last week, we were awarded a cannabis cultivation license in Connecticut, which allows for two adult use dispensaries.
We plan to expand our operations in Connecticut in 2023, including the relocation of our Bristol dispensary ahead of recreational sales. Looking ahead, as the industry matures, we believe the strongest companies will continue to separate from the pack. We believe the next industry phase, which we call Cannabis 2.0, will be triggered by regulatory reform and defined by a more open and diverse competitive landscape, spurring the need to build meaningful and lasting customer relationships. We expect these changes will provide an opportunity for Trulieve to differentiate itself within a more robust industry ecosystem. Operators with scale, distribution, and technology will be better positioned to meet the needs of an increasingly sophisticated marketplace. Trulieve has been preparing for this next phase of industry development for several years. Our regional hub structure, anchored by leadership teams within cornerstone markets, provides a solid foundation.
Our experience building scale and depth has yielded best practices to achieve lower production costs and greater efficiencies throughout our supply chain and retail operations, as evidenced by our 750K facility, which we began designing in 2019. Trulieve's expansive distribution network, anchored by our industry-leading platform, provides an opportunity to directly connect with the customer, create brands, glean valuable insights into customer segmentation, and test methods to define and perfect the customer journey. Our technology platforms and scaled solutions are essential to strategic growth initiatives, including developing omni-channel capabilities and enhancing digital platforms. One concrete example includes our successful implementation of SAP in 2020, a world-class ERP system that we are continuing to optimize while adding modules for warehouse management, integrated business planning, and human resources.
We will continue to expand these capabilities with the advent of Cannabis 2.0 in mind. While the Q3 presented various challenges, our team was able to adapt as necessary to course-correct and stabilize the business headed into year-end. Despite short-term headwinds in the economy and core markets, we believe the long-term prospects for cannabis have never been brighter. With increasing mainstream support and meaningful regulatory reform on the horizon, tremendous growth opportunities lie ahead for legal cannabis in the U.S. As our industry continues to evolve, I believe our long-term strategic focus and commitment to investing in Cannabis 2.0 will further differentiate Trulieve among peers. With that, I'll turn the call over to Alex for more details on our Q3 results.
Thank you, Kim, and good evening, everyone. We recently celebrated the one-year anniversary of the closing of the Harvest acquisition, the largest U.S. cannabis deal completed to date. Since the deal closed, we have been working to optimally position the business. During the Q3, we made additional progress on these efforts, exiting duplicative and non-core assets in California, Florida, and Nevada, ramping lower cost production capacity, and further refining our approach in wholesale markets. As we move through year-end, we are continuing to execute on our strategy, streamlining operations, working down inventory, and adjusting our production output as needed to better position the company for 2023. Turning now to Q3 results. Our team effectively managed the challenging economic environment while remaining focused on our core operating plan.
Q3 revenue of $301 million increased 34% year-over-year compared to $224 million during the Q3 of 2021. Q3 revenue decreased 6% sequentially compared to $319 million. Macroeconomic pressure on household income, foregone revenue, and Hurricane Ian impacted Q3 top-line results. Q3 GAAP gross profit was $168 million or a gross margin of 56% compared to 58% during the Q2 of 2022. GAAP gross margin declined sequentially due to packaging costs related to the integration and resulting discontinuation of select brands, product mix, and the favorable impact in Q2 of the vape recall reversal, partly offset by increased utilization at the new 750K indoor facility and greater sales of internally produced products.
We expect to further lower production costs as the new facility fully ramps into 2023. Excluding non-recurring charges, Q3 adjusted gross profit was $172 million or adjusted gross margin of 57%. We expect gross margin will continue to fluctuate quarter to quarter depending on product and market mix and inventory flow-through. SG&A expenses in the Q3 were $114 million or 30% of revenue, compared to $109 million or 34% during the Q2 . Q3 expenses included approximately $22 million of transaction, integration, and non-recurring charges, inclusive of $10 million contributed to the Smart & Safe Florida campaign. Excluding these charges, Q3 SG&A was $92 million or 31% of revenue, flat on an absolute basis compared to $92 million or 29% in the Q2 .
Q3 expenses also included higher new store opening costs, with 11 new stores coming online compared to 6 in the Q2 . As we continue to invest for future growth, we expect quarterly fluctuations in SG&A expenses as investments are made ahead of increases in revenue. Trulieve continues to pay taxes owed in a timely manner with $57 million in cash taxes paid in the Q3 and $162 million in cash taxes paid year-to-date. Net loss was $115 million for the Q3 compared to net loss of $22 million for the Q2 . Q3 net loss included $26 million of transaction, acquisition, integration, and other non-recurring charges, and $93 million in asset impairments, disposals, and discontinued operations, primarily associated with the strategic repositioning away from margin-dilutive and cash flow-negative assets.
Excluding non-recurring charges and asset impairments, net income would have been $4 million. Q3 loss per share from continuing operations was $0.41 compared to loss per share of $0.11 in the Q2 . Excluding non-recurring charges, Q3 net income per share would have been $0.02. We anticipate non-recurring charges will continue to impact reported EPS through year-end. For the Q3, adjusted EBITDA was $99 million or 33% compared to $111 million or 35% during the Q2 . Margin performance reflects higher expenses associated with store openings and fixed retail operating costs against lower revenue in the Q3, partly offset by streamlined operations and greater efficiencies. Moving on to our balance sheet and cash flow.
We ended the Q3 with $114 million in cash and $553 million in debt. As Kim highlighted, we expect to close an additional $70 million dollar financing at a rate below our current cost of debt at 8.3%. Q3 operating cash flow was negative $22 million, an improvement compared to the Q2 . We expect to realize positive operating cash flow during the Q4 . We anticipate free cash flow generation next year will be driven by improved operating cash flow and reduced capital expenditures. In the Q3, capital expenditures totaled $38 million. The majority of expenditures year to date were comprised of investments in supply chain and retail assets. We currently expect Q4 investments to be lower sequentially.
We are at the tail end of a multi-year investment cycle, having completed significant investments in supply chain capacity and infrastructure across several markets, including Arizona, Florida, Maryland, Massachusetts, Pennsylvania, and West Virginia. As Kim mentioned earlier, as our new 750K indoor grow in Florida continues to ramp, we have the ability to pull legacy capacity offline temporarily. As demand increases in the future, we have tremendous flexibility to quickly ramp back supply chain capacity. In 2023, we expect capital expenditures will be at least 40% lower compared to this year. Finally, our outlook and guidance for 2022. We expect Q4 results will be influenced by factors including holiday retail performance. With limited visibility into year-end, we have a stretch target of 2022 revenue of $1.25 billion and Adjusted EBITDA of $415 million.
In summary, we delivered another solid quarter while managing through challenging conditions in the broader economy. We are committed to meeting customer needs, improving performance in core markets, and managing cash wisely while streamlining operations across the organization. We have ample runway to prepare for future growth. I am so proud of our team, and I look forward to expanding upon the progress we've made thus far. With that, I'll turn the call back over to Kim.
Thanks, Alex. The US cannabis industry continues to garner attention as mainstream acceptance increases. The recent directive by President Biden to issue pardons and reexamine the Schedule I status of marijuana sent a strong signal, reinforcing our view that meaningful reform is on the horizon. As the layers of prohibition are repealed, Trulieve is incredibly well-situated with its regional hub strategy, proven ability to build depth and scale, distribution capabilities, and technology infrastructure. Recent midterm election results demonstrate the increasing popularity of cannabis across all demographics, with successful pro-cannabis ballot initiatives in Maryland and Missouri, and victory of pro-cannabis governors in Maryland and Pennsylvania. With the elections concluded, we believe the short-term focus can now turn to the passage of SAFE Banking. We're hopeful that strong bipartisan support and demonstrated needs of state legal cannabis operators will propel SAFE Banking across the finish line before year-end.
Irrespective of any federal reform, we are committed to our strategy and disciplined approach to profitable growth and long-term shareholder value. The legal U.S. cannabis market size is expected to triple by 2030, reaching an estimated $75 billion in annual sales. This impressive growth forecast does not fully include new market expansion. Only 21 states have legalized cannabis for both medical and adult use, and most of these states are located in the Northeast and the West. A majority of states have yet to legalize cannabis, leaving significant white space and catalyst ahead. We remain especially bullish on operations in Southeast markets such as Alabama, the Carolinas, Tennessee, and Texas. Given our strength and track record in the Southeast, Trulieve is well-positioned to expand in many of these markets as new programs develop.
Our focus on serving customers remains our guiding light while we are building a sustainable and scalable company designed to thrive in an integrated commerce environment. Trulieve is poised and ready to define the future of cannabis. Thank you for joining us today, and as I always say, onward.
At this time, Kim Rivers, Alex D'Amico, and Steve White will be available to answer any questions. Operator, please open up the call for questions.
Thank you. If you'd like to ask a question, please signal by pressing star one on your telephone keypad. If you're using speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions. We will go first to Derek Lee of Canaccord Genuity.
Yeah. Hi. Thanks, everybody. I just wanted to touch on that CapEx comment. On our math, you know, CapEx next year will be in and around the sort of $120 million level. Can you just comment on where the bulk of that is gonna go towards? Sounds like you're, you know, you're fully confident, fully built out in Florida. Maryland sounds like you do not need much more there. I'd imagine Arizona, you know, West Virginia, potentially Connecticut would be areas of growth.
Hi, Derek. Yeah, we will definitely be investing, of course, in our new market of Georgia, which will be coming online, of course, through 2023. In addition, we will of course continue to complete our build-out, as we mentioned, that award in Connecticut, and that positioning ahead of and with the, you know, incorporation of recreational sales in Connecticut. We've got both supply chain expansion there as well as retail. Then, you know, there will be, I think some investment remaining in retail across our markets.
We're gonna obviously continue to be very strategic in terms of the number and placement of those, of that retail footprint, but certainly we think that there is still some room on the retail growth front into next year.
Okay, great. I'm gonna just ask you one on pricing, and I'm sure you're gonna get a lot on this, but you know, what are you seeing in terms of the premium end of the market? I know it sounds like you started to discount it, then you know, looked at your data and realized perhaps the better strategy was to kinda hold your prices and seems like that's what you're doing going forward. Is that sort of the plan, is to really you know, push that sort of quality that Trulieve offers on its premium and mid-tier brands? In the outlook, there's a comment about increased promotional spending around the holidays.
Is that, in particular focused on Trulieve, or is that just what you expect from your competitors, or both?
Sure. We'll take them in order. You know, in terms of what we saw and what we're seeing from a trend perspective, as we break it down between, you know, segments of a category between premium, mid, and value product lines. There are some differences in customer behavior market to market, certainly as it relates to our pricing strategy. We as I mentioned on the call, as it relates to our premium products, we believe, and the results show that those can stand on their own. It's important for us, of course, to message very directly and specifically to those customers who, and those customer profiles who, are premium shoppers.
We're able to do that through our data platforms by specifically, again, letting them know when exclusive drops and certain products are coming into markets and into dispensaries that they're closest situated to. As it relates to mid-tier, you know, our mid-tier category is the category where we are able to speak in pulse promotions. We use that category to really, again, attract those folks who are mid-tier shoppers, but who may be looking for specific promotional activity or deals, if you will. We have those on a regular cadence. Again, though, able to target in and lean into to folks that have certain profiles or certain customer, you know, certain customer profile in our system.
Finally, our value category, which we've seen certainly growth across most markets recently, and being able to speak to quality of product, but of course, at more of an everyday low price, which we have found has resonated with folks really across all markets. You know, our pricing and our, again, our tiering, our tiered strategy has gained traction and certainly is resonating, it appears, with customers. Moving to holiday. This has been consistent for us year-over-year. It increases in general in the market, and then it also historically has been our most promotional quarter, of course, with Green Wednesday and Black Friday coming in November and then the holiday period at the end of December. We would expect that to continue.
As it relates to, you know, competitor activity, we certainly continue to see high levels of promotion across markets in Florida in particular. I think over Halloween, there was somebody who had 60% off the entire store. We're still seeing that in market, although again, our portfolio and our pricing strategy has held up.
Okay, great. Appreciate all the color. All the best.
Yep.
We'll hear next from Matt McGinley with Needham.
Thank you. My first question is on inventory. You noted that you produced 1 million fewer units, and I think your plant count was down by 27% in Florida, but you still had that $30 million build in inventory quarter over quarter. What do you think an ideal inventory days or inventory dollars would be when your inventory is better aligned in the first or Q2 of next year? Are you heavy with inventory in any given state? Should we assume that inventory drops into year-end, even as you noted, you don't really get this problem fixed until 2023?
Yeah. Thanks, Matt. Definitely should see improvement into Q4. Ideal inventory just, you know. Again, it's obviously gonna have nuances and vary by product category and, you know, market specifics, but just high level is approximately 2.5 months. Again, 2 to 2.5 months, I should say, depending on more specifics. As you pointed out, you know, we were successful in terms of, you know, bringing down that plant count. There is a bit of a. We're caught a little bit right now in this moment of transitioning, right?
Particularly in Florida, where we have the 750K ramping up, where we wanted to make sure that was and continue to wanna make sure that that's stabilized by phase as prior to decommissioning or bringing down other less efficient capacity. That has happened again, and it will continue to happen in phases. The first impact of that should pull through in Q4 with a ramp into Q1. We think that based on our internal estimates where we sit today that the inventory kind of normalization, if you will happen exiting Q1, early Q2.
Got it. On the gross margin, your adjusted gross margin held up pretty well this quarter relative to the sales decline. Given what you just noted with promotion and trying to get these inventories down, should we assume that the gross profit rate would be down in the Q4 , or is there enough benefit from that facility ramping in Jefferson County that those pressures will largely be offset?
Hey, Matt. Thanks. Yeah, I think, you know, I think the margin holding in the quarter was a real win for us, and I'm happy about that. We had, you know, I think more important than the one-offs in the quarter are what we were doing structurally and strategically. We progressed on our strategic plan. We had the ramp in the 750K facility. We pushed higher volumes of internal product through internal retail. And I think when you look going forward, that's what we lean into, right? Even if there is increased pricing pressure from holiday, et cetera, we look for a margin to hold in the next quarter, given those improvements we made structurally and strategically.
Okay. Thank you.
We will go next to Pablo Zuanic of Cantor Fitzgerald.
Just two questions, Kim. One, maybe help us think in terms of modeling Connecticut. I mean, is that going to be a market like Arizona that, you know, we didn't see that much significant growth from medical to rec? Compared to, say, New Jersey. Just help us think through that. Then the timing of the three stores and when you're gonna be ramping up on cultivation. That's for Connecticut. The second question, I'm sure you've been following, you and your team have been following the Canopy Growth proposal, Canopy USA and the discussions with Nasdaq. In your opinion, if Nasdaq were to approve the Canopy USA structure, would that mean that Trulieve would have the right to uplist in Nasdaq? Thanks.
Thanks, Pablo. Let's take those questions in order since they're somewhat different in topic. As it relates to Connecticut, as you know, we are in Connecticut today with our Bristol dispensary, and we are in process of a relocation of that dispensary and expect that to be finished in time for, or certainly our goal is to have that finished in time for the announcement of recreational sales and to be an early participant in through that store in the recreational market there. As it relates to, obviously, I just, you know, our partnership as it relates to the cultivation facility and the two stores. We just were awarded last week.
We certainly have been, you know, investing ahead of award in anticipation of award and, we'll be working quickly to get that facility stood up. We do believe that it will be very important in Connecticut to have supply as it is, as is not atypical in some of these markets, when recreational, you know, comes to fruition, that really, supply chain is a key driver of success in those markets. We'll be working to get that facility stood up as quickly as possible. Through our lens, that's probably one of the more important, you know, points of focus, for success in Connecticut through next year.
would have the two stores, the additional two stores, you know, come online at, hopefully in alignment with that supply coming online. As it relates to volume and market, obviously it's a little early to say. We think that it will be a contributive market for us. You know, I wouldn't expect that it would be the most significant market that we have in our portfolio.
On the second question?
Oh, on the second question, what I can tell you is that based on our conversations, internally and externally, you know, we do know it to be true that any structure that is formally approved by Nasdaq would be available for other companies. I think that where we sit, we certainly believe that we are and would have a strong preference for a direct, you know, Nasdaq listing. I think that, you know, again, we would and are advocating very, very specifically for inclusion in the SAFE Banking Plus of a safe harbor language that would also include protection for exchanges that we believe would give them comfort to allow for direct uplisting.
As I mentioned, in the prepared remarks, we are absolutely prepared to take advantage of that immediately, if that were to occur, given our status as an S-3 filer, and we think would be viewed positively, with respect to a conversion of current status to a Nasdaq-listed company.
Can I ask you a quick follow-up? I mean, based on the results of the election last night, did your views on the probability of SAFE Plus improve or decline?
I think that it was somewhat what I was expecting, you know, to a certain extent. I think that the tension created between a close, you know, from a partisan perspective, a close on the Senate and a Republican-controlled House, along with a Democratic president, I think that tension actually sets up nicely as it relates to cannabis. I think that, you know, the folks in the House are certainly going to be passionate about getting legislation passed during the end of the year.
I think that on the Senate side, again, I think that tension actually potentially plays in our favor. I will tell you that all indications are that it is absolutely under serious consideration and in negotiations currently.
That's great. Thank you.
We'll go next to Spencer Hanus of Wolfe Research.
Good afternoon. Thank you for taking the question. If I could go back to CapEx for a minute, can you remind us how much re-
Spencer?
We'll get Spencer back.
Okay.
On the line in one moment.
No, it's okay. Let's just move on to Russ, and he can dial back in.
We'll go to Russell Stanley with Beacon Securities.
Hello. Good afternoon. Thanks for taking my question. First, maybe around Georgia, and you've indicated plans for retail launch there in 2023, and Kim, you've mentioned on prior calls how you see parallels between Georgia now and where Florida was, I guess several or so years ago. Just wondering, I guess what efforts might be underway to encourage, you know, an opening of that medical market, be it relaxation of THC caps or other changes that would help accelerate growth there, and just understanding how fast you expect this market to develop relative to Florida's trajectory.
Sure. So, you know, as a reminder, right, those awards again just happened, and we have not yet been through a legislative session where the program has been launched. That will be a first for us coming up this spring. We're very excited to participate in a more direct way with the legislature during that time. We certainly are encouraged by continued increased patient growth in Georgia, even in advance of us actually having stores opened. The patient numbers continue to climb. Just as a reminder, the way the program is structured, that number of stores is tied back to the patient growth numbers.
We believe that we already have enough qualified patients for an increase in the number of stores that we'll be able to build. Again, continued positive momentum in Georgia, even in advance of us actually getting open. You know, we'll be able to give you more color, Russ, as we continue to operate there and we get open and we see where the potential, you know, push and pulls are that are specific to that market. Every market is a bit and can be a bit nuanced as it relates to, you know, where friction is, you know, created. But we are and remain very excited about opening in Georgia.
We're looking forward to getting products to patients there as quickly as possible. They've been waiting a long time.
Great. Maybe if I could ask one question around Virginia. It's a small state, but you've opened, I think you're up to 9 stores there now, with tenth on the way, and that's a fairly rapid build out there given the market size. Just wondering how those operations are performing and whether the market itself is developing at a pace that's more or less in line with your expectations.
Sure. Yeah, it's West Virginia, just to be clear. You know, the market is performing in line with expectations, is what I would tell you. We think that there are some additional opportunities in West Virginia, again, to make some, you know, to have conversations with legislators and continued conversation with regulators around some potential, you know, structural changes that would, we think, also be helpful.
You know, in addition, certain lawmakers there have signaled the willingness or openness to begin having conversations about a potential adult use introduction, which in a state like West Virginia, we do believe would be a meaningful contributor to a tax revenue base and, you know, could be a legislative conversation. You know, we like our position in West Virginia. Again, we're looking to open our tenth store there going into early part of 2023.
That's great. Thanks for the color. I'll get back in the queue.
We'll go back to Spencer Hanus with Wolfe Research.
Guys, sorry about that. Hopefully you can hear me now. Just on your CapEx and in terms of where you guys are in the investment cycle there, how much revenue do you think you could support with the existing cultivation that you have in place today? Then how are you prioritizing building out new stores in Florida to sort of fortify your position in the state as other operators come looking for your market share there?
On the CapEx and revenue support, I'll say this. A good portion of our CapEx for 2022 went towards 2023 initiatives and growth plans. We feel adequate about where we are vis-à-vis what we're looking at in 2023 in terms of CapEx. We obviously won't comment on a number now, but you'll hear more about that from us at year-end.
Yeah. As it relates to our retail positioning strategy, Spencer, as you know, we are very specific in terms of the information that we review, as it relates to store placement. You know, we do a deep dive and look at customer trends. We look at certainly physician trends as well. Then of course, information that we're able to glean not only through our registers, but also again through our data, our data analytics and data platforms. We think we have a pretty, you know, three-dimensional, four-dimensional view in order to do our analysis as it relates to store placement. I think it's important to note that also built into our retail platform in Florida is optionality.
There are a number of locations that we have that have expansion capabilities already built in, where we can add additional points of sale, as demand. We can ramp up or ramp down basically as indicated or dictated by demand. I would tell you in addition, there are certain stores that are strategically placed, already, in advance of an adult use initiative coming to fruition. Example is of course our store on Duval Street in Key West. That's fine as a medical store, but we think will be an incredible store once recreational hits. Similarly, a store outside of, you know, Daytona International Speedway as another easy example to point to.
increased, you know, we have optionality built into current store footprint, but again, continuing to analyze, you know, data all the time to make sure that we're optimally positioned.
Got it. That's helpful. You mentioned you contributed $10 million to the Smart & Safe Florida campaign. Do you expect to make additional contributions there to get that initiative over the line? Are you expecting sort of help from some of the other MSOs in the state? I guess where are you tracking versus your expectations from a signature standpoint for that campaign?
I mean, look, when you're talking about the advent of a $6 billion market where we have close to 50% market share, certainly there is, in our view, a strong investment case for support of that campaign. You know, I would love for everyone on this call to call our peer set and make the case as to why they too should be contributing in a market with this much growth potential. I think it has the single most growth potential against any other single market as it relates to a medical direct flip.
I'm hopeful that others will, you know, especially those that are looking to invest in Florida more, in a more robust fashion going into a recreational initiative will contribute alongside of us. We are tracking, as I said, ahead of expectations as it relates to signatures. They have actually received over a quarter of the signatures required in total, which once validated, the supervisors of elections have been a little busy, recently. We expect that the validation rate to increase pretty dramatically here over the next months. Once those are validated, there will be an automatic trigger of Florida Supreme Court review. At that point, signature gathering will not stop in the interim.
Again, it's pacing ahead of what we anticipated at this point.
Great. Thank you.
We'll go to Eric Des Lauriers of Craig-Hallum Capital Group.
Great. Thank you for taking my questions. Focusing on the 750K sq ft facility, and banking the smaller production facilities. Obviously this is, you know, an efficiency play versus a growth play. Are you still looking to match production growth with patient growth in Florida? Are you anticipating any, you know, change to, you know, production per patient, as you know, sort of go and complete this process? Then just on the same lines, can you talk about the expenses associated with, you know, sort of substituting these, or banking these smaller production facilities with this larger one? Does that impact these, you know, discontinued operation expenses? Thanks.
Yeah. You know, our strategy as it relates to matching supply with demand remains unchanged on a go-forward basis, right? Right now, again, we're in this a bit of a transition as those less efficient facilities come offline and the more efficient facility comes online. We have, again, we believe an incredible strategic position in that we can quickly ramp back up those other facilities in the event that demand increases, i.e., in advance of a Florida rec turn on. We think that certainly there's you know, a strategy play as it relates to that on both sides, right?
On the front side, us getting increased efficiencies through a large, you know, fairly automated, and those are meaningful efficiency gains through that $750K. Also coupled with the ability to have CapEx as we've already invested in, that we could turn on quickly, in advance of increases in demand.
At this time, I would now like to turn the call back to Christine Hersey for final comments.
Great. Thank you, everyone. We appreciate your time today. We look forward to sharing additional updates on our progress during our next earnings call. Thanks again, and have a great night.
This concludes today's call. Thank you for your participation. You may-