Earnings Call: Q2 2021

Aug 12, 2021

Earnings release

Good morning, ladies and gentlemen, and welcome to the Trulief Cannabis Corporation Second Quarter 2021 Financial Results Conference Call. My name is Sarah, and I will be your conference operator today. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Ms. Lynn Ritchie, Director of Investor Relations for Trulieve. You may begin. Thanks, Sarah. Good morning, ladies and gentlemen, and thank you for joining us. On the call with me today are Kim Rivers, Chief Executive Officer and Alex is Amico, Chief Financial Officer. Following our prepared remarks, we will open the call to questions. Before we get started, I would like to note that today's call is being recorded for the benefit of investors, individuals, shareholders, the media and other interested parties. Please remember statements we make during this call that are not statements of historical fact constitute forward looking statements and that 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 are forecast, including the risks and uncertainties described in the company's periodic reports filed with the Securities and Exchange Commission and those related to the completion of our transaction with Harvest. 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 the 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 are truly 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 ks that we furnished to the SEC today and can be found in the Investor Relations section of our website. Lastly, at times in our prepared comments 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. This morning, we reported results for the Q2 of 2021. A copy of our earnings press release may be found on the Investor Relations section of our website, trulieve.com. In addition, a webcast of today's conference call will be available on our website later today. Now I will turn the call over to our CEO, Kim Ribbons. Thanks, Lynn, and good morning, everyone. It is an exciting time here at Trulyave, achieving a number of firsts and records for the company with 14 consecutive quarters of profitability, crossing the $500,000 mark in customers served, becoming the 1st medical cannabis operator to start planting in West Virginia and positioning the company to enter its 7th state with a win in Georgia. We exceeded consensus, achieving revenues of approximately 2 $15,000,000 and adjusted EBITDA of approximately $95,000,000 representing an EBITDA margin of 44%. On the back of our Q1 results, which represented a 15% quarter over quarter increase, our Q2 revenue reflects an increase of 11% and demonstrates strong continued growth. Yesterday, Harvest shareholders voted to support the transaction, and we are now fully focused on the next steps towards regulatory reviews and approvals. The closing of the Harvest acquisition will be a transformational event for Trulieve. Harvest's strong Q2 performance as reported on August 10 demonstrates and potential of the combined company. On a combined basis, 2nd quarter revenues would have been $317,600,000 And on adjusted EBITDA basis, Truly for Q2 would be the strongest performance of any public reporting U. S. Cannabis company. In addition, today, Trulieve and Harvest together would stand at 140 stores, which represents almost 30% more stores than our closest competitor, with 40 of those stores located outside of Florida. In order to support that footprint on a combined basis, we would have over 3,000,000 square feet of over a 1000000 square feet more than our closest competitor, exceeding their cultivation footprint by 50%. This capacity solidifies our position as a leading operator with true scale in the U. S. The Harvest deal will be the next step in the evolution of our organization as we execute on our regional hub strategy. The transaction will transform our Southwest hub in a very real and exciting way, most notably with substantial expansion into Arizona, additions to our Northeast Hub with Maryland and an increased market presence in Pennsylvania as well as supplementing our Southeast Hub in Florida. Neither company has slowed down since the May announcement. We continue to open stores in some of our strongest respective markets, complete tuck in deals and win applications. Since the time of our May announcement, the store footprint outlined for the deal has increased by 14 stores, including Harvest opening its 16th store in Mesa, Arizona. Congratulations to Harvest on the excellent quarter. We look forward to their continued strong performance in the back half of the year as they remain focused on operational efficiency and delivering profitability. The Q2 was also meaningful for Trulieve, celebrating the 5 year anniversary of our first sale on July 26, 2016. We've accomplished more than just incredible revenue and a profitable growth trajectory during those 5 years. To name just a few, we've grown from approximately 50 employees when we opened our first dispensary to approximately 7,000 employees today, expanded cultivation from our original 20,000 square feet in Quincy, Florida to over 2,200,000 square feet across the country, grown our patient base from under 800 to over 575 and increased our store footprint from our 1st store here in Tallahassee to 96 stores across the country. In addition, when looking at sales during our 1st 6 months of operations compared to the 1st 6 months of 2021, we were selling 2.4 milligrams of oil 2,400,000 milligrams of oil in 2016 compared to 2,200,000,000 with a B milligrams or 900 times more in 2021. For flower, we sold 72 ounces of flower as vaporizer cups in 2016 compared to 781,000 ounces or approximately 11,000 times more in 2021. We have a generational opportunity in front of us, and we believe this next chapter will be an exciting one, bringing our an ability to leverage our national scale and diversify across our combined platform to accelerate our growth trajectory and enter into additional adult use recreational markets, more to come. And speaking of more to come, this morning, I have Georgia on my mind. As we recently announced, the state of Georgia notified us of its intent to award Trulieve 1 of only 2 Class 1 production licenses available in the state. As the 8th most populated state in the nation, Georgia is an ideal location in addition to our Southeast hub. This license would allow us to grow and manufacture cannabis oil products, and we will also be authorized to open 5 dispensaries across the state. The registry is quickly growing with over 18,000 patients in the state already. It was a highly competitive licensing process with around 70 competing applicants. So Trulieve's success speaks volumes. We are thrilled to be positioned to enter our neighboring state to the north and are prepared to break ground and rapidly provide much needed relief to patients in Georgia. Much like in other states, Trulio thoughtfully selected a majority minority community, the city of Azelle, as the site for our production operation. Working closely with the city, workforce development partners and other stakeholders, we'll bring hundreds of promising new jobs and meaningful community investments to Adele and the surrounding South Georgia community. We also have established beneficial partnerships with higher education institutions like Morehouse School of Medicine, Organizations like the Greater Georgia Black Chamber of Commerce and the Georgia Minority Supplier Development Council and workforce development centers like the Wiregrass Technical Institute as well as dozens of small and diverse businesses. Given our close proximity here in the Panhandle, we already employ a number of Georgia residents and we look forward to broadening our job creation in the state. Our ability to act quickly to build our operations in Georgia has been demonstrated by our execution in our home state of Florida. In Florida, we continue to add dispensaries and aggressively add indoor cultivation capacity each month to stay ahead of the continued patient growth expected in the state. That patient growth has been explosive with over 134,000 new patients in Florida so far this year. Our commitment to serving the needs of every patient is evidenced by our dispensary additions. We currently have 87 dispensaries in Florida, which represents approximately 24% of the dispensaries across the state, while providing on average over 45% of the medicine our patients need. We have maintained our market share in the face of tight labor markets due to COVID factors, increased waiting periods for construction permitting and nationwide shortages of building materials. We have been very fortunate over the years to build a company in Florida. Our dedication to the production of safe quality products coupled with the authentic connections with patients we've nurtured in the state has earned us the strong customer retention rates and store outperformance numbers we continue to experience. We look forward to continuing the strong performance in our Northeast hub, where there has been a flurry of activity, expanding to the metropolitan Philadelphia area, commencing operations in West Virginia, welcoming Connecticut to adult use and opening our doors in Massachusetts. Let me briefly touch on each of those markets. In Pennsylvania, I would like to highlight the strong performance of our Pierpen and Tlevo operations. Pierpen wholesales to 100% of the Pennsylvania market and was the number 4 wholesale operator during Q2, achieving this with flower only making up 5% of sales. Our McKeesport, Pennsylvania cultivation and processing facility continues to grow and has recently more than doubled its capacity to 80,000 square feet. We are bringing more high quality flower to the state, positioning us for increased market share. As in Florida, our goal is always to be number 1. We also closed on the previously announced acquisition of Keystone Shops in early July. Keystone Shops immediately adds 3 dispensary in the Greater Philadelphia area to the Truly family. Pennsylvania is a state we remain excited about and is a key piece of our national expansion. In West Virginia, we executed a rapid cultivation build out and were first to get plants in the ground in the state. We are ramping now, building out our teams and moving forward with our first dispensary sites. Patients in the state continue to grow and we look forward our first dispensary and providing access to medical cannabis before year end. As many of you are aware, Connecticut signed a bill in June to legalize adult use. Our store in Bristol has given us great insight into the patients and brands in the state, and our existing operations will allow us to take advantage of the grandfathering provisions of the new legislation. Not only will we be able to begin adult use sales when it launches in the state sometime in 2022, but we will also pursue cultivation and production opportunities. We began our dispensaries operations in Massachusetts in June with the ribbon cutting at our Northampton store, and we look forward to opening our brand new Whistler dispensary this Saturday with a block party. We will be closing the street for the majority of the day and we'll have music, food trucks and partner tables as a way to meet community and start to quickly build relationships with consumers in the area. Worcester is the 2nd largest city in Massachusetts and we are looking forward to branching into this new community. We're also looking forward to opening our store in Framingham, which will be our largest store in the Bay State and in launching wholesale operations. We are quickly scaling up wholesale with the goal of matching our outperformance in Pennsylvania. Our wholesale strategy will allow us to spread the Truly brands in Massachusetts. Speaking of brands, we recently introduced new product lines, Momenta for Wellness, Muse for Creativity, Sweet Talk, which is our edibles line of chocolate and gummies and a fan favorite from Florida, our cultivar collection, which is premium hamstrim flower released in unique small batch strains. With the Canacarias to the Canaconna Sore in mind, these brands offer a variety of options to serve a spectrum of consumer motivations and need states. Cheerilee's brand center around the opportunity for customers to unlock their own potential through cannabis to live their best life. With that, let me turn the call over to Alex for more details on our Q2 results. Thank you, Kim, and good morning, everyone. Our focus in the first half of the year has centered on execution, expansion and integration and will continue to do so throughout the remainder of the year and into 2022. This spans across our external strategic initiatives as well as internal priorities such as our continued preparation for Sarbanes Oxley readiness. We are excited about launching in Massachusetts, expanding our footprint in Pennsylvania and ramping our operations in West Virginia and of course Georgia. As we enter the second half of the year, we remain highly focused on ensuring the successful integrations of our recently closed acquisitions and supporting the strategic vision for and the anticipated major integration of Harvest. We believe the Harvest acquisition will be transformational for both companies and the industry. We look forward to leveraging the combined capabilities of both organizations and setting the stage for an exciting year ahead. As Kim covered at the top of the call, we had record revenue of $215,100,000 an increase of 11% sequentially over the $193,800,000 of revenue achieved in the Q1. Our quarterly revenue was $94,400,000 higher than Q2 2020, an impressive 78% growth year over year. The company achieved gross profit of $144,400,000 or gross margin of 67% in the quarter compared to 135 $300,000 or 70 percent in the Q1 of 2021. Absent macroeconomic events related to pricing and tight labor markets, Gross margin would have been approximately 71%. Our margins in our core operations are in line with our plan in the first half of the year. As we have shared in the past, our gross margin in all markets can fluctuate a few basis points in either direction from quarter to quarter depending on inventory flow through and product In this regard, we benefited in Q1 by finishing the quarter with the largest volume of finished goods on hand that we ever had at the end of the quarter. During Q2, we capitalized on our leverage and scale to set market prices and maintain customer bases in our core markets. The leveraging of our ability to strategically increase discounts when necessary led to an approximate 2% reduction in margins in the quarter. As a result, We moved through finished goods at a faster rate than in Q1, ending the quarter with a higher amount of product and work in process, which carries a lower cost than finished goods. The timing of inventory flow through impacted margins by approximately 3% in the quarter. Contributing to this dynamic was the impact of tight labor markets with demand outstripping available candidates, which we experienced primarily in our processing centers. As you know, this is not specific to Trulieve spanning a number of companies and industries. We have responded and adjusted our hiring initiatives accordingly and look forward to improvements in the back half of Q3. These reductions were offset by an approximate 2% pickup in our new markets as cultivation and production ramped in the quarter. As a reminder, in general and not specific to a quarter or time period, there is downward pressure on gross margin as we enter new markets without full vertical integration as we have in Pennsylvania through the earn out period in 2021. Similar to the Massachusetts process, we are now ramping in West Virginia incurring expenses in advance of revenue. I will now turn to expenses. SG and A expenses in the 2nd quarter, excluding depreciation and amortization were $61,500,000 or 29 percent of revenue compared to $67,300,000 were 30% in the Q1 of 2021. We expect increases in the back half of the year as we ramp integration efforts in Pennsylvania and prepare to welcome Harvest. As a reminder, we typically add back transaction and integration costs in calculating adjusted EBITDA. Our operating income for the quarter was $76,300,000 a 5% increase over the $72,600,000 earned in the 1st quarter. Net income was $40,900,000 for the quarter compared to $30,100,000 for the Q1. We generated earnings per share of $0.31 on a fully diluted basis. Keep in mind that go forward net income and EPS will be impacted by transaction and integration costs, The increased depreciation on our aggressive CapEx ramps, increases in share based compensation, The fair value flow through of inventory from acquisitions and the amortization of intangibles from acquisitions. While these get added back to adjusted EBITDA, there is a downward impact on EPS. Turning now to adjusted EBITDA. We believe adjusted EBITDA, a non GAAP measure, provides valuable insight into our performance. Adjusted EBITDA excludes from net income as reported interest, tax, depreciation, amortization, non cash expenses, COVID related expenses, share based compensation, acquisition and transaction costs, fair value step up of inventory from acquisitions and other income. We report adjusted EBITDA to help investors assess the operating performance of our business. For the Q2 of 2021, adjusted EBITDA was $94,900,000 or 44% compared to $90,800,000 were 47% for the Q1 of 2021, where we exceeded plan. This is reflective of the margin dynamics discussed earlier, but is in line with first half expectations and guidance. Absent the macroeconomic margin impacts, adjusted EBITDA would have been approximately 48% for the quarter. We ended the quarter with a cash balance of $289,200,000 bolstered by our cash flow from operations through the first half of the year. In the quarter, we paid approximately $80,000,000 in federal taxes. As a reminder, cash flow from operations in the 2nd quarter is typically impacted by a double tax payment. As such, the best of you cash flow from operations on a year to date basis where we generated $49,200,000 through the end of the second quarter. Our strong cash position allows us to quickly leverage the foundation we have built to capitalize on expansion opportunities, organic growth and to go deeper in the states where we operate. At the end of the second quarter, we had a total of $112,600,000 of inventory. This compares to $103,900,000 of inventory at the end of Q1 2021. Company wide CapEx spend for the quarter averaged just over $22,000,000 per month, inclusive of all markets and was in line with the plan. We continue to build out stores and cultivation facilities and invest in new markets. We planted our initial cultivation in West Virginia and we'll be building out our facility there throughout the year. And in Georgia, we expect that we will be breaking ground and ramping up investments in that market. CapEx investments will continue to ramp throughout 2021 2022 to support our expansion efforts and add depth in the Southeast and Northeast hubs as we capitalize on the positive patient trends we are experiencing and prepare for future tailwinds. In closing, I would like to note that I'm proud of the flexibility we have shown across all functions of the organization over the past year, allowing us to quickly adapt to changing market conditions and capitalize on opportunities. We see a lot of the same strengths in the teams at Harvest and look forward to closing the acquisition and continuing our integration efforts and our national expansion as a combined organization. I would also like to recognize and welcome Markham as our new auditors. As previously announced in July. We thank our previous auditors, MMP, and want to note that our move to Markham reflect their substantial audit experience with U. S. Reporting companies. MMP served us well and Markham is ready to take on our accelerated growth profile, particularly in anticipation of the Harvest acquisition. With that, I will turn the call back over to Kim. Thanks, Alex. As a company, we have experienced tremendous growth over the last 5 years. We've developed from a small start up founded by a few nurserymen and a recovering lawyer to the most profitable publicly traded multistate operator in the U. S. Through hard work, strategic forethought, financial discipline and skilled execution, Truly this position is one of the leaders in our industry. But as I said earlier, our story is just beginning. We are in the midst of tremendous change. The recent political movement to decriminalize marijuana with the Cannabis Administration and Opportunity Act draft and cries from business leaders and politicians to move forward with the Safe Banking Act signals the readiness in this country to create a clear and supportive path forward for the cannabis industry. The American people's voices are getting stronger and regardless of what happens at the federal level, the states are not slowing down and neither is cannabis growth across this country. With this backdrop, the completion of the Harvest acquisition on the horizon, plus operating at an unmatched scale today, Trulieve is well positioned and financially prepared to leverage and execute on the changes coming. Trulieve is a story about future growth, strategic vision, execution and building shareholder value. Together, we're uniquely positioned to define the future of cannabis. Thank you so much for joining us today. And as I always say, onward. Operator, we can now open it up for questions. Thank you. We will now begin the question and answer session. The first question comes from Derek Dley with Canaccord Genuity. Please go ahead. Yes. Hi, good morning everybody. Congrats on a strong quarter. Kim, I just wanted to follow-up on a comment you made there just regarding pricing. I mean, it was pretty widely speculated that there were some aggressive pricing tactics by some of your competitors this quarter more so than in previous quarters. Did this change this mix the product mix or skew it more towards the value side or the premium side? And then was this aggressive pricing across All categories? Yes. Thanks, Derek. So certainly, we saw some increased very aggressive and pricing from the competitors. I would say that strategically, we are very thoughtful in terms of how we approach our product portfolio and how we think about brand and integrity of brand over the short and of course long term. And so we certainly did not nor would we want to match, for example, Week long 50% off discounts, etcetera. What we did do though is that we did become and I think this is a great exercise for us, right? We were able to look across our product portfolio, really analyze on a SKU level, where our products were that had 1, of course, demand and 2, depth and also, of course, good margin to really be more thoughtful in terms of how we were responding to those pressures. In terms of product mix, it's interesting. We really did not see large swings from on Category basis, if you talk about from value to premium, so we saw approximately the same On a percentage basis, sell through in both premium and value that we saw in the sorry, in those categories in the previous quarter. So that remains stable. We certainly are continuing to see the barbell effects that we've been talking about quarter over quarter. That remains true. We are seeing strength in both value and in premium categories. That remains true. And what I would say is that, I think that, look, the market share numbers and our strength speaks for themselves in terms of just last week, we had our Strongest flower day ever, right, with about 53% of the market in flower. We also, over the quarter, had a record day in oil So I think that our brands are maintaining strength and maintaining integrity. We did, as we mentioned, have a couple of points more on the discount front, but certainly nothing near what our competitors felt like they needed to do as they tried to, I think unsuccessfully, quite frankly, by long term market share in the state of Florida. Yes. Okay. No, that makes sense. And actually just one more if I could. Just in terms of you mentioned that the Truly brand and how strong it is, you called out cultivar in particular. When we think about Massachusetts and Pennsylvania, 2 markets that have wholesale obviously, I guess it's a 2 part question. 1, are you still seeing a big sort of under Supply in those markets where wholesale prices are quite robust. And 2, what is your target or what is your plan in terms of the mix within your own stores of Trulieve branded products versus 3rd party products? Yes. So it's interesting and I think that other folks have commented right on just really how it is absolutely challenging given the Checkerboard of regulatory regimes across the country to achieve continuity of brand from market to market. I mean that's certainly what we're all attempting to do. But where those challenges are, of course, therein lies the opportunity, as we like to say. And so with the launch in that recent press release of these Core brands that we will be looking to launch across the country and that will of course also be true in Pennsylvania and in Massachusetts. It's interesting in Massachusetts, Those brands have already launched. And so the cultivar collection, for example, is available in Massachusetts now. We're really excited about having a full Suite of those products available at our new grand opening this Saturday. I'm going to put a quick plug in in Worcester. If you're in the area, come join us. It's going to be a lot of fun, big block party. And so we're able to launch full catalog of products in Massachusetts, of course, with also having some shelf diversity with buying in other key brands in that market as well. In Pennsylvania, of course, a little bit of a different story because we purchased a company that already had really strong brand affinity and was successfully wholesaling products across the state. The opportunity there is that And we've been very successful there in the oil category. Great reputation for the higher end or premium oil sales there. And now we're looking to layer in and really plus that up with the addition of additional flower, which you heard me mention on the call. I should note that we're not done growing In Pennsylvania, we've got additional expansion projects underway there and that we will see our market share increase, I believe, through the back half of the year With the onboarding of additional capacity in that flower category, particularly and again, particularly focusing on that Higher end cultivar collection in Pennsylvania as well. And so we do believe that it's very important to have expertise in both Product segments in both branded derivative products and oil as well as flower. We don't think that especially on the high Again, that cultivar collection, premium flower, we don't believe that that's going away anytime soon and that that really is your quality calling card for customers and plan to have that calling card available in the states that we operate in, so where we can. So we're excited about Doing what we can to roll those brands out across the platform. And certainly, once we get Harvest integrated, we'll also be integrating some of their top brands into our portfolio so that our combined portfolio of products I think really will be second to none. That's great. Appreciate the color. All the best. Thanks. Our next question comes from Russell Stanley with Beacon Securities. Please go ahead. Good morning and congrats on the quarter. First question just around the Harvest transaction and obviously great to see a shareholder approval yesterday. I think one of the recent filings, HarvEst indicated an anticipated close about by February end of February next Just wondering, your thoughts as to whether that's a conservative timeline? Might we see it get done earlier? And Which approvals to the extent you could say which approvals are likely to prove the most time consuming especially in a COVID world? Yes. Thanks, Russ. We certainly, as I mentioned on the call, are very focused. We're all very focused on getting that transaction closed and of course are very excited about the strength of The combined company. It's definitely difficult to pin down exact timing. I can tell you that we Absolutely have had successful communication with every single one of our regulators in each one 1 of the markets that we'll be operating in. We don't see any major roadblocks in any of those markets. However, we do have to go through each state's very exacting process to make sure that we have, all of course, all of the regulatory require regulatory approvals in place to get to closing. As many of you know, part of the transaction in Florida is the Selling of a license in Florida that Harvest is and Harvest is quarterbacking that process. That's going through an auction process right now. So there is a couple more steps involved And the Florida Transfer, again, positive momentum on that front, though. And there are just some markets that take longer than others. So and As you mentioned, with kind of this second wave of COVID, we are, of course, not sure how that may or may not impact how we how quickly we're able to get those approvals to move forward. So we're all focused on it. I can I'm sure you have that and we're working very diligently on it and it's all of our intention is to get the deal closed as quickly as possible. That's great. Thanks for that. And maybe if I could just lob in a crystal ball question. I know they're favorites, but New Jersey, obviously, expected to open its adult use market either late this year or early next, depending on who you ask. Just wondering with Neighboring Pennsylvania legislature so far has been reluctant or opposed to even discuss it. Just wondering what your thoughts are on the potential for movement on that front. Obviously, there are some tax dollars at stake. So any thoughts on the possibilities there would be great. Thanks. Yes. Your guess is probably as good as mine, Russ. I mean, certainly, Pennsylvania, As I've mentioned, it's a key market for us. We are kind of I'll call it truly proper, if you will, is continuing to invest dollars there. We just opened another or Closed on another 3 dispensaries in Philadelphia area. We are very bullish on Pennsylvania as a market as it stands today. We are looking forward to combining with Harvest also for really that footprint to be A significant footprint in our portfolio. And so and like I said, we're going to continue to That's fair. So we do believe that Pennsylvania has a lot of growth ahead and that we'll be working diligently to ensure that we are in a Sure that we are in a pole position to take advantage of that growth. And certainly, sometime in the future, we believe it's a matter of if, it's not a matter of or it's a matter of when, not a matter of if. We'll be well poised to take advantage of a switchover to adult use when the time comes. That's great color. Thanks and congrats again. Thank you, Russ. Your next question comes from Andrew Parthenia with Stifel GMP. Please go ahead. Good morning. Thanks for taking my questions and congrats on the great quarter. Hey, Andrew. Thanks. Maybe starting off on Pennsylvania and continuing with a previous question and some comments you had around that. You mentioned that your market share capture in the quarter in that state was mainly on extracts. It drives with our headset data. But you also had a pretty big expansion in that state. And just wondering when could we see Some movement on flower, obviously, that's an attractive category for you that you guys haven't really tapped in yet. You also talked about some future expansion plans in that state. Should we be thinking about this first expansion was mainly to bolster your offering around extracts and then flower could come afterwards in the next expansion cycle Or should we still be expecting some incremental movement on flower with your doubling of capacity here recently? Yes. So, no, the flower expansion is coming through now. So, you should we should begin to see that come through in the numbers. I can I'll tell you in reality, that is coming through now. So, it has been very well received. And as you mentioned, there is, I think, a lot of demand around flower. And so we're going to continue to push more Right, through that channel. I think one thing we have to always be cognizant of, right, there is a demand on both for both. So, it's all about making strategic decisions in terms of what to put in what category, right? But we're seeing a lot of strength in which is look it's a great problem to have, right? So But certainly, as I've said, pretty consistently here for, gosh, I don't know, 6 months, that certainly has been a focus of ours is to get More volume through that flower category and that is beginning to happen. Definitely a good incremental opportunity for you given that you've grown so much just with extracts. Maybe switching gears and taking a step back thinking about overall strategy, you guys have done a couple of tuck ins. You've got the large harvest transaction, which is obviously transformational, but you're still looking at organic license wins. So just thinking about beyond what you guys already have now, How do you think about what markets you want to be targeting? Obviously, Georgia kind of looks like Florida at the beginning of its medical program. So just thoughts around that would be helpful. Yes. I mean, we are really excited about Georgia. It looks very, very familiar to us and very similar to Florida when it started. Actually, I think we're maybe in a little bit of a better space In Georgia than Florida, many folks don't remember that Florida started as a CBD only state. And so when Truly was first awarded our license. It was as a CBD license, and then it moved to a very, very limited end of life program under Right to Try. And so it was Georgia already, as I mentioned, has patients that have been building up. They have over 18,000 patients that are already registered in the Georgia program. And It's going to be a great, I think a really strong market as it develops over time. We continue to be very focused on executing on our hub strategy, and we evaluate markets based And through that strategic lens, we look at synergies to other markets. We look at our ability to leverage expertise as it relates to other markets. And then of course, we look at the licensing structure and the profile of an individual program. So certainly, we remain very focused on continuing our dominance in the Southeast. And then our continued focus also, of course, on the Northeast as we think about how we can leverage That hub that we've been very focused on over the last year. And then of course, with Harvest, That's going to be a game changer in terms of our ability to have a true hub in the Southeast, which we can then begin to build around and optimize as well. And so from us, again, there are a lot of factors when we think about expansion. But certainly, we have particular criteria and particular modeling that we do around ROI as well as around our ability to execute and execute quickly, because we do think that especially in an application environment, Getting it's not just winning, right? It's winning and then absolutely immediately executing and doing what we've done successfully in the past through organic growth. But we think that there remains to be, which I think Some folks maybe lose sight of, there is a lot of white space out there and a lot of opportunities that have yet to be realized that we plan to be certainly and take a leadership position in those markets as well. Thank you so much for that detailed answer. Congrats again and I'll get back in the queue. Okay. Thanks. Our next question comes from Matt Nick Immley with Needham. Please go ahead. Thank you. You mentioned macro factors centered around the price and labor is headwind to gross margin in the quarter. Can you expand on what you're seeing here? And it sounded like in the prepared remarks, it sounded like you thought that would improve in the back half. But if labor rates are structurally higher, why would that changed later in this year. And is labor availability actually impacting your inventory position or is it just the cost of the inventory that's being impacted here? Hey, Matt. We experienced the labor dynamics mainly in our processing centers. So it was really A movement from the work in process state into finished goods. Okay. And why would that change in the back half? We're just trying to bring in more folks, right? So tight labor market. And then we're increasing hiring practices Just to bring in more people? Yes. So Matt, what we've seen particularly in North I can speak to North Florida, which I Dan and appreciate that our dynamics around COVID may have been a bit different than the rest of the world in some respects. What we saw is we saw I mean we've got manufacturing jobs and look I think in a lot of industry other industries right there quite frankly were just folks that were choosing to not work and take advantage of unemployment as well as federal benefits that they were that they've been receiving. And we It's definitely adjusted some of our approaches, from a labor perspective and have seen improvements already and our ability to attract and also kind of reengage some of that workforce that previously decided to maybe not working. And for a lot of reasons, right? I mean, it's folks have children at home. And I mean, it's not I don't want to make it sound like There weren't justifiable reasons that FICC's made this decision. So, we've already started to see improvement on that, Matt, but we definitely had pressure, Particularly on where our processing center was located in that particular area of the state. So, and again, not unique to us. There were a lot of businesses that were in a similar geographic position, also in a similar wage Position that have faced the same issues. I can tell you that proactively also, we are opening Another production facility in Tampa, in the Tampa area, which is a completely different labor market and we think quite frankly an improved labor market for some for for a number of reasons. That facility is coming online actually this month. So again, having some diversification as it relates to as it relates to where we're pulling labor from. So there are absolute reasons why we believe, 1, we're already seeing it and 2, we're going to have in a diversity of labor pool that's going to come through in Q3 and certainly going into Q4. Thank you. And on the debt refinance for Harvest, one of the big milestones required to advance that deal is to refi that debt. So Do you have any thoughts on what if you would retire a portion of that debt or if it would make sense to refi the full amount to keep your cash balance if I'm trying to think through like what your cap structure look like whenever this deal closes? Yes. So that actually is not a milestone to the deal. I think that what you're referring is that there were some specific callouts in the documents around if Harvest chose to do and reposition some of that debt before closing, there would have been an impact to some of the ratios or the specifics in the deal, which is true. But that is only again triggered on if Harvest took some action prior to closing. So those are kind of 2 different things, right? And I think that, that speaks for itself in terms of the details as the deal documents reflect. I think that Your second question is really around what are we going to do, and how is that going to be positioned as a combined company. And what I can tell you is certainly what we believe and it's True, one of our strategic advantages in this transaction is that, of course, the Truly financial statements and our strength as a company, We will be able to reposition that debt on significantly better terms than what Harvest has. And then we also have the flexibility, of course, if we choose to do a combination of pay downs and or refinances and refinancing and or restructuring the debt. And Of course, our goal always is to make sure that we're maximizing the interest of both the company, of course, and the shareholders, which we fully intend to do. You'll get more details on that as we have more visibility there. But Obviously, we think that there will be a positive outcome for everyone as it relates to the restructuring and repositioning of that debt. Okay. Thank you very much. Our next question comes from Aaron Grey with Alliance Global Partners. Please go ahead. Hi, good morning. Thanks for the questions and congrats on the quarter. Hey, thanks. So first question And for me, Kim, I was going to talk about loyalty program. Given some of the pricing competition that you're seeing there, You had mentioned in previous quarters kind of a revamp of the loyalty program. So, would love to get some commentary on the progress of that potential timing and maybe amid This competition that you're seeing, maybe some tweaks that you're looking to that to kind of bolster up some barriers to kind of protect you guys on market share and brand? Thank you. Yes, sure. So, we absolutely are and you guys it's there are some things that you're going to start to see Finally from us here in the near term, we've been working on from a systems perspective, Being able to have additional transparency and visibility to segment more specifically and make all of our programs, including our loyalty program, more personal, which I think is a really that's a key strategic initiative for Trulieve, again, kind of on the back end, if you will, going into next year. So we certainly believe that And the folks that are going to win in cannabis and really in I think CPG in general, you have to get personal with your customer. We're certainly seeing that trend throughout other industries as well. And so we have been as opposed to just putting together kind of a slot together loyalty program that would be quite frankly pretty easy to do. We have taken a time out and have really looked at and been working on implementing systems and back end tech so that we are able to make it extremely personal in terms of our offerings and targeted to those consumers. So I'm very, very excited about what we're developing there and you can look for kind of We're beginning glimpses of that here very, very soon. The other thing that we've been focusing on is a complete Website revamp. We're also going to be doing some upgrades into our POS systems, which again really lead into that ability to capture at a more granular level the customer data that is then will then feed into that loyalty program so that we can make it meaningful and impactful. So, we are working on it, but we want to do it the right Hey, Erin. And I think initially we were focused on this tiered approach, which I think still has some validity. But within that tiering, we again think that it's critical for us to be personal and thoughtful so that, again that stickiness is and also the barrier to entry for someone to replicate it is more of a barrier as opposed to just an off the shelf solution. Thanks for that color. That's really helpful. Same question for me. I know that you guys have Pennsylvania close ramping up Massachusetts on the wholesale side. Just curious whether or not you can maybe provide some color on how much wholesale contributed to the quarter and maybe How you think about wholesale versus retail mix for the company in the near term excluding harvest coming into the fold? Thank you. Yes. Erin, we don't as I know that Alex has mentioned, currently, right, we don't segment out. And so we don't report that way. We hear you guys. We know that you all would like for us to Then went out into report wholesale versus retail. And so, what I can say is that we're going to be looking at how we report on those numbers, particularly, right, as it becomes more meaningful And particularly as we look at kind of Truly 2.0 post harvest. So what I would say is that, I mean, you could you No, right. I mean, obviously, in Florida, there's not there is no wholesaling allowed in Florida. So when you look at Florida compared to the rest of our current platform, Florida, of course, is a large part of that contribution. So compared to Pennsylvania, Pennsylvania, obviously, if you look at that market as a whole, And as a whole, wholesale is a large part of what we do in Pennsylvania and would be a significant contributor. But as you know and I know appreciate it varies market by market. But as we have more of a balanced mix, again post harvest, we will absolutely be talking about and also talking about with our auditors in terms of how and when we begin to break that out. Fair enough. Thanks for the color and congrats again on the quarter. I'll jump back in the queue. Thanks, Erin. Our next question comes from Vivien Azer with Cowen. Please go ahead. Hi, thank you. Good morning. Kim, I appreciated your commentary around kind of the nuanced COVID dynamics that currently exist in Florida Today. Yes, I recognize that things are quite dynamic, but things really have changed over the last 5 to 6 weeks. So I was curious if you could comment at all on how that's impacting customer foot traffic through your stores and any comment on any evolution in average basket because of the Delta outbreak? Sure. So I don't know that we haven't seen necessarily changes, Vivien, in an average basket in Florida specifically. Nor would I see that we've seen Foot traffic has been kind of interesting in general and that it really has been constant since the beginning of the year, which is different from what we saw previously with COVID, right? So that's something obviously that we've been monitoring. It's been about a fifty-fifty split between walk ins and pickup. And deliveries have declined, Not unusual because people are not staying at home in Florida really kind of at all. So now we'll continue to watch that, right? I mean one of the first things that happened in COVID in 2020 was that we saw That shift of between walk ins, pickups and delivery shift dramatically, right? Before COVID round 1, we had about 70% 70% to 80% of our business was walk in and about, call it, 20% or so was pickup and then the rest was delivery. COVID hit and literally almost overnight, right? Deliveries increased to 20%. We had pickups increase to 60% and all of a sudden that 70% share of walk in was down to 20%. So there was a really big shift in that walk in business, COVID-nineteen around 1. We have seen that pickup increase really stick. So that business, which is great because I mean in terms of efficiency and pressure on store and throughput, that's a great thing for us as it relates to how we can optimize our stores. But that pickup business really stuck. And we also implemented some technology solutions in terms of being able to Online and really make it a rapid pickup scenario. So our goal is folks are in and out of the store in 5 minutes. But it will be interesting to see with that walk in percentage of the business how or if or when that changes. Now we have Over the last 5 weeks, what we have done is we've come back in and re upped COVID protocols For our employees, we've reimplemented masking. We've reimplemented every other register In our dispensaries, we've reimplemented social distancing, sanitizing, cleanings, an hour that we set aside for immune compromised. And certainly, we'll continue to do those things as this round continues to heat back up. But hopeful, of course, as I know we all are, that this will start to see a flattening and then a decline. School starts this week in Florida. So, of course, it is top of mind for everyone. Absolutely. Thank you so much for that detailed color. Just following up then, with the stickiness presumably at least in the near term around pickup. Does that change at all the way that you're thinking about like new store acquisitions? 1 of your competitors called out heightened competitive landscape in terms of real estate acquisition costs. But if you're able to improve your throughput by maintaining a 50% mix of the high velocity pickup. Does that change how you think about expanding your geographic footprint in Florida specifically? Thanks. Yes. I mean, look, we're constantly evaluating our retail footprint in all markets, and we have a very dynamic and model that we look at very regularly. I can say that we feel very comfortable With that model and the results that it's given, we're still averaging $9,000,000 a store. We are still and that's consistent, Right. So it's not like we're seeing massive cannibalization, as it relates to new store openings, which is, of course, something that we look for as well very closely. So store productivity on a new store retail basis in Florida is very, very strong. It's remain strong. We have a very robust pipeline that we've developed over a long period of time in Florida, which I would Suspect puts us in a bit of a different position than maybe our competitors in terms of just the our systems and processes as well as just the fact that we've been in the market for a significant period of time. So we're continuing to execute on that pipeline and continuing to add to that pipeline. But our pipeline is 9 months to a year out. So this is what you're seeing come to market today are properties that were identified in some cases back in 2020. So that's remained constant to us Also over the last 5 years, so we haven't seen dramatic increases in lead times or any significant additional pressures in that area. Now what we have seen is certainly there have been like for example building materials which that's going to really affect us more On the back end, right, I mean a lot of our store most of our stores, not all of our stores are renovations. They're not Ground up build, there have been in some cases some longer lead times from a permitting perspective just because Again, staff availability and backups in those permitting offices that are still those bottlenecks still working through as it relates to COVID, right? We also all know that there's in a housing boom. There's a lot of activity that has happened over the last year in that in those Just areas that the department serves. So that's certainly true, but again nothing that's stopping us from meeting and our goals that we've set forth on the retail front. Understood. Thank you very much. Our next question comes from Camilo Lyon with BTIG. Please go ahead. Thank you. Good morning, everyone. I wanted to ask first on Pennsylvania, and maybe if you could help us think about How that market's margin progression should unfold, given that you're now going to that now you started selling flower, you've closed on these 3 Philly stores, Philadelphia Area Stores. And they're just going to be more vertical. I would assume that there should be a nice ramp on your margin profile in that state, but just wanted to get some context if you could provide that. Yes. I mean, I think that, look, Pennsylvania is going to continue to be a mixed market for us, Right. And we're going to continue to have also, as I mentioned a little bit a little while ago and hope to continue to have a very Strong wholesale presence in Pennsylvania, and that's going to continue too. So while certainly there Quite frankly, could be additional margin pickup as we move our existing Solivo and now Keystone Shop stores into more of a vertical position in 2022. Keep in mind that we also are going to be having we also will be Expanding our cultivation and processing facilities there and want to continue to move our wholesale market share up as well. And so, Of course, in a wholesale environment, you're not going to have quite the margin that you will on Vertical scenario and also, right, keep in mind that it's not going to be 100% vertical in Pennsylvania. That's just not what the market dynamics are. And first and foremost, it's very important that we listen to the customers. So yes, certainly there may be some improvement there, but again, you're going to also have Additional increase in our wholesale channel as well there. So Again, all good. And I think, look, just to level set here, right, you all, I mean, We're at 67% margin. I'm pretty sure last time I checked, we're doing okay as it relates to the industry. And we will continue, I believe, to be in a position to have industry leading margins across the board and as a whole. Got it. And then just one final one, if I could. On Harvest and any sort of learnings that you're gaining from the Arizona market, since you've announced the acquisition. I think they also talked about, some competitive pressures and promotionality in Arizona. Have you kind of unearth different practices in how you would go to market, just how you kind of would manage that upon closing? Yes. Well, I don't I think that everyone who is familiar with the Arizona market understands that there is some seasonality as it relates to Arizona, Particularly when you're talking about a recreational market and you're talking about tourists and you're talking about folks that are consuming. It's Extremely hot there right now when you're talking about someone who was born and raised in Florida. So there is some seasonality To Arizona, so I don't know that that's completely unexpected. I think that you do see a bit of a bit Q over Q there normally. I also would say that and we've been pretty transparent about this that we do believe that there's opportunities in Arizona specifically. We think that there's absolutely opportunities for investment in both the cultivation and the processing side of the business to expand their capacity there and to get not only Again, additional product through owned retail, 1st and foremost, which of course would lead to, as we just talked about, margin expansion that we There's some pretty low hanging fruit there, but also right to create a position as a wholesaler and have meaningful brands in Arizona across the broader platform. So We definitely think that there's opportunity in Arizona. I think all the teams are aligned. That opportunity exists and are looking forward to begin executing on that post closing. Thanks so much. Good luck. Thanks. Our next question comes from Eric De L'Oreal with Craig Hallum Capital Group. Please go ahead. Great. Thanks for taking my questions. So I'd like to focus on some of your Integration with Harvest. So integration, obviously, both highly important and highly difficult in this industry. You and Harvest have both developed strong brands, strong consumer loyalty. Trulieve, I know you guys have made big investments in your ERP systems, for example, and With Moxie, you have strong hydrocarbon extraction SOPs now. So I'm wondering, beyond Harvest's attractive footprint and brand, can you maybe provide some color What strengths of theirs you're looking to adopt from maybe a systems or SOP perspective? And then which of your systems or SOPs you're looking to implement in their facilities? Just Any additional color on the integration plans and maybe how long those might take would be great. Thanks. Sure. Well, I mean, I don't know that you Ever finished optimizing. So I'll maybe start with that. I think that and I think one thing I'll say and You just all have to forgive me that I can't help it, but I am a recovering lawyer. It's just one of those things that you never quite shake. So I can't until we close the deal, I really am not able to go into specific details around specific plans that we may have on an integration from an integration standpoint. What I can tell you is that we plan to absolutely adopt Best in class SAPs. So this is not an area where because we've been doing it at Trulieve, that's the way it's going to go. And absolutely, this is being looked at through a new co lens. It's being looked at who has got The best systems who has got the best protocol, who has got the best ways of working and that absolutely is what we will be looking to adopt on a go forward basis. And in some cases, it's that both companies sit down and share and then it actually is a new methodology that The combined methodology that comes out of that and that will be applied going forward. So, it's really been a and and will continue to be, I think, a very energizing and instructive exercise as we really dive into the details and is creating, I think, meaningful opportunity on a number of fronts that we're looking forward to taking advantage of again post closing. But I'll have a lot more to offer you on that question if you want to maybe keep it in your pocket for until The call that we have after our closing announcement and I'll have a lot more details that I'll be able to share with you then. All right, great. Will do. I'll try kind of one more on this integration here. I'm not sure if I may have missed it. But So in Pennsylvania, you guys will be over the limit for dispensaries. I'm not sure how regulators are looking at Both production facilities either. To the extent that you guys have received some color or you do have some idea of what that post acquisition footprint will look like. Can you just kind of comment on what you expect your dispensary count and production facility count to be when that acquisition closes? Thanks. Yes. I absolutely am not going to comment on that. What I can tell you, as I said before, we've And very favorable conversations with all of our regulators in every market that we're in and we expect and fantastic results from each of those conversations. And we do not anticipate any material roadblocks To being able to combine our companies and move forward with the closing as we've outlined in the deal. All right, fair enough. Thank you. All right. Our next question comes from Alain Zounis with Cantor Fitzgerald. Please go. Yes. Two quick questions. I know it's late already. Kim, can you comment on the slowdown in patient growth Florida, just context or perspective, I think we're running below 3,000 a week being added compared to 5,000, 6,000 2 weeks ago. Just some color on that, because we're getting to 3% of population penetration, right? Arizona was 4%, I get Oklahoma 7%, but it has slowed down significantly. Yes. Pablo, it's interesting. We look at that and obviously we're looking at the trends on on a very regular basis. And so I think what we saw, just as a reminder, in Q4, we were at about 2,700 patients a week of 20 2020. That's where we are now. So there's been a bit of a there was quite frankly, we slowed down in 20 kind of at the height of COVID when doctors' offices were shut down and whatnot. So not sure and obviously this is all speculation because We don't have anything other than the numbers that they print every week. But I think that a couple of things, right? One, I think folks Certainly, there were some pent up demand, as it related to COVID coming into 2021. 2, of course, we had continued availability of telemedicine under an executive order that was an emergency order that has now expired. And so I think that the other thing that you have to look at is you have to look The throughput on the doctors' offices, telemedicine, I believe, did allow physicians to be significantly more efficient with their time as they were able to get more patients through the quote office, right, during that telemedicine period. So we've normalized back to where we were before. So I don't know that it's I don't know that I would call it Any sort of reason for complete alarm, right? I think that again, you have some pretty reasonable reasons for that happening. Obviously, we're going to continue to monitor it though, to your point and certainly want to see that number continue to grow. I mean 2,700 patients a week though is still Extremely strong growth for a market, particularly a market that is now in its 5th year of existence. So I don't think that's something that's necessarily downplay. But yes, we had Exceptionally high growth, which I think was your point in Q1 and Q2. Yes. No, that's good. Thank you. And then one last one. Maybe I misheard, but in the case of Connecticut, you said that once the market goes right, you'll also be able to start production. I thought you only had a retail license there and there's no the grandfathering is only for the retail license. Can you elaborate on that? Thanks. Yes. So, yes, thanks Pablo. So, it is our understanding that there will be grandfathering allowed For folks that have retail licenses, one of the requirements before recreational will be officially released, if you will, is for there to be adequate production and cultivation. And one of the ways that, that can be achieved is through allowing existing retail operators to also have Cultivation and Production. So while the final regulations are not out, we are certainly in touch very much so with the regulators there and expect regulations to be coming through at any moment, drafts have been released, etcetera, and feel very comfortable that, of course, that we will be able to participate on the cultivation and production side of things there. We've got some sites identified. And once we are able to do that, we will be participating in that market. That's good. Thank you. Our next question comes from Kenric Tyghe with ATB Capital Markets. Please go ahead. Thank you and good morning. Kim, on the promotion activity and gross margin discussion, typically when competitors make those sort of price investments and they don't gain the traction that they expect. They end up wearing those investments in subsequent quarters given potential collateral damage to brand or positioning. So with that context, would it be reasonable to be looking at your Florida business and the like was potentially poised for a little bit of a snapback there in terms of margin profile because you did as good a job as you did defending against that promotional activity or more rational in it? I mean, irrational pricing, if it works, great, but if it doesn't, the people participating in it often will wear it. How should we think that evolution here just to better handicap the range of outcomes on gross margin through the second half? Yes, Ken, great question. I think that we are we're still so really the I will say that the Significant increase in discounting really started to pick up in the back half of Q2. And I think that you're still you saw still a little bit of that. It's interesting. We've seen kind of a reprieve of it. And then now we're starting to see a pickup back again. So it's almost like they're going to there's like a pause to evaluate and then you're starting to see it A little bit again. And by the way, not necessarily always from the same folks. So it's been Very interesting to watch and to evaluate for sure. I say that because I don't know that you're going to see an instantaneous snapback. I do think though as we move into Back half of Q3 into Q4, I think that you should start to see some of those effects play themselves out. I think you started to see them in Q2. And if you really dig into some folks' earnings, I think you You'll notice that they're there. But I think certainly it's something that we're watching and We're cognizant of and like I said, I think that our response is the right one and that we're being very strategic and very surgical In terms of how we approach it, maintaining competitiveness, of course, but also maintaining the really intrinsic value of our brand, which look that's more important to us than trying to force another a couple more points on the top line on a top line for short term gain. So we want to, of course, grow on the top line, but we want to do in a sustainable way. That's great, Kim. And then just to close-up the discussion in terms of my questions. The other piece of it would be is Yes. Typically, this sort of activity will work well either in newly recreational markets, so thinking Arizona or in markets where you have material Supply and balances are rather oversupply. But realistically across a number of your markets, the opposite is true where they're either Tied to relatively tight supply, which to my mind gives a pretty short tail to this Level of promotional activity or to people's ability to continue to do it in your more established markets recognizing it could be noisy in some of the newly recreational markets. Is that is a fair characterization to your mind? Absolutely. I also think that it's really interesting that folks You have this need to do such deep discounts when you are in a market that has the demand profiles that we have. And so I think that the other component of this, which we haven't talked a lot about, is really one that speaks to quality And it speaks to consumer preference, right? And the question that we ask is it's the why question, right? Why isn't something moving? Why is there what's off as it relates to the value proposition. There are many components to a value proposition, right? And of course, it's having the right product and the right shelf and the right price. I mean those are the 3 basic components. And again quality is an important component there. And so and we think that the quality and again having that consistent and repeat customer Who is bought into our value proposition is really the only way to win, again long term. And so I agree with you completely. I think that there's that's really, again, I think very, very short term way to Think about the business, but to each their own and we're just want to be thoughtful in terms of how we respond and and to ensure that we continue to produce the highest quality products available at the right value proposition to give our customers a good and repeatable experience. Our next question comes from Scott Fortune with ROTH Capital Partners. Please go ahead. Hey, good morning. This is Nick stepping in for Scott. Congrats on another good quarter. My first question comes on the product innovation side. You guys launched edibles last September. You're looking to develop powders, waxes and other SKUs. Just looking for some color on your upcoming 2.0 product launches, what you've seen so far on what's been rolled out and kind of what the competitive landscape on the 2.0 side looks like in Florida? Thanks. Yes, absolutely. So I mean, we have a full line of edibles currently. We also have a full line of concentrates, which include all of the products that you just mentioned, and we've had those products in our portfolio for at least the last 6 months. So There are certainly strong categories. We are still waiting in Florida for hydrocarbon rules come out. We're very excited about that being on the horizon. That Extraction methodology has been approved in Florida law. We're just waiting for actual rulemaking to come out. We keep hearing that it's right on the cusp of being released. So we, of course, have full facilities that have been just like we did with edibles already inspected, approved, etcetera. We have a full by lineup that we're excited to launch. As another analyst mentioned earlier, we of course have high end hydrocarbon extraction product line in Pennsylvania through our Pierpen partnership there that does extremely well in that market. And so We are anxious to bring that expertise here in Florida. In addition, of course, in Arizona, hydrocarbon production is also Certainly, what I would say is that on Truly 2.0, as you picked up on, we'll, of course, have a more robust catalog of concentrate products. So we're looking for that to be a growth category for us. In addition, we continue to innovate across other concentrate products. And we recently launched a Refine Creme product. We're actually waiting for approval on some other innovative products. And And I should also mention that our product lineup with our brand partner Blue River, which is a solventless company, who is a national brand partner for us, has continued to do extremely well And we're continuing to do a lot of innovation on the solventless front, which we do believe is an important category that is a growth category for us moving forward. The final thing that I'll say on innovation, which again I think sometimes gets overlooked is on the genetics front. We continue to invest heavily into our genetics portfolio. And Again, when people think genetics, I think folks think only the exotic strains, which certainly is true, as I mentioned, with our cultivar collection. But also, it's really important As we think about the landscape on a national level and how that might change or evolve, things like interstate commerce, for example, And which parts of the supply chain we may feel it's important to continue to be in control of. And And one of those is genetic profiles for specific products and sustainability of supply chain for genetic profiles for product. So what I mean by that is certain strains that have increased terpenes flavonoid structure requirements that better speed into particular product lines that we have developed and that are made specifically for those formulations, again, as as well as high end genetics from a flower perspective. So genetic focus is something that is important to us and that we will continue to work on as it relates to innovation as well. Great. I really appreciate that color. And then one more for me. Just kind of switching gears regarding your West Coast expansion, specifically California. You have your dispensary there and then the brand equity of Harvest in Arizona to potentially leverage in that region. What do you think needs to change or happen in California for it to become kind of a more compelling market opportunity? Thanks. Yes, absolutely. I mean, certainly we're watching California. I thought that what's going on with Glasshouse is interesting. I think we're keeping we're certainly keeping an eye on what's happening in California as it relates to real scaled and meaningful production and supply chain there. I think that it's Significantly improving state, I would say, in California as it relates to the ability to potentially anyway get True scale and get true distribution. I mean, that's what we're looking for really in any market, right? And California is no different. It's the opportunity to have Solid and stable supply chain where we can have reliable distribution through a market And that makes sense and that we're not overburdened from a tax or regulatory perspective so that we can run our business and we can, Again, provide our customers with quality products at a good value in in a repeatable way. So I think California looks better than it did, and we're keeping a close eye on it. This concludes our question and answer session. I would like to turn the conference back over to Lynn Ritchie for any closing remarks. Thank you for joining us today. We look forward to updating you again next quarter. Have a great day. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.