Trulieve Earnings release and provided guidance for 2021:

• Guidance for 2021 incorporates a full year of operations from Trulieve’s Pennsylvania operations, continued growth in Florida as well as the Company’s Massachusetts, Connecticut, and California locations. Based on Trulieve’s markets, current regulations, and foreseeable store growth, the Company estimates 2021 revenues in the range of $815 million to $850 million, and $355 million to $375 million in adjusted EBITDA.

The guidance represents a Sales increase of +56% and EBITDA increase of +54% from F2020.

At the first quarter pole: They are tracking easily to lower end sales guidance and are 8% behind low end of EBITDA range with three quarters to go.

If you ever wanted to have the debate as to whether TRUL was an MSO prior to Harvest acquisition… straight from MDA:

• As of March 31, 2021, substantially all of our revenue was generated from the sale of medical cannabis products in the State of Florida.

A moot point with Harvest acquisition incoming but…

Open up the fins and MDA and follow along. I note the MDA offers very little QoQ information.

Income Statement Drivers & Breakeven Sales: Trend

Trulieve operates in: Florida, Massachusetts, California, Connecticut and Pennsylvania, and are entering West Virginia. 

With Harvest acquisition they will be adding 15 dipos in AZ, 9 in PA (bringing them to the 15 limit), 3 in MD and 4 in CALI.  They will likely have to divest the 6 FLA and cultivation.  Net addition will be approximately 31 dipos and two new states.

Store count: 82 +7 QoQ, FLA 77 +7 QoQ, CA 1, CT 1, PA 3 +3 QoQ, 0 in Mass and WV.

82 dispensaries opened versus 75 last Q and 61 the Q prior.  Average dispensary revenue was $2.5 million on the Q no change QoQ.

Sales are up 15% to $194 million, after a 24% +$32 million increase last Q, with 7 more FLA dispensaries opened in the Q and 82 total across footprint.  The FLA market continues to grow and the addition of flower, and more recently edibles, has certainly propelled Trulieve well. 

Pennsylvania allows wholesale, so we will start seeing how TRUL does as a supplier.  I do note they now have an Account Receivable of $2.3 million on the balance sheet after a small A/R last Q. 

TRUL provides no segmentation on sales by state nor by retail versus wholesale.

Retail Revenue: Peer and Trend

TRUL does not break out wholesale yet, so we will keep it all in retail.

Interestingly they have $6 million more sales than CURA and they get there with 20 less dispensaries. Efficiency.

 Annualized Sales $ per (PPE + Goodwill/Intangibles)

What I have done above is annualize the last Q’s sales and divided it by the aggerate of PPE and G/I to see how much sales are being generated and what the trend is. I added PPE and G/I to try to normalize the companies that have gone an organic path (TRUL and CWEB until their new acquisition) versus the more acquisitive (Cura and GTII).

They reverse last Q’s step back under this metrics at $1.47 versus $1.40 last Q. The addition of $135 million in G/I was the culprit in the previous Q.  We will see where this metric settles with a full Q of PA in the future.   

This is the most efficient in peer group AND if you consider that over 50% of their current PPE ($209 million) is construction in progress, this metric is heavily understated.  It will be interesting to see what they can do when those assets go into production.

Income Statement Drivers & Breakeven Sales: Peer

Trulieve is no longer the sales leader as CURA took that crown.

Gross Margin

Gross Margin declines to 70% the second minor QoQ decrease in a row from a record high of 75%. Part of this is a $2.5 million step up in acquired inventory being sold through, but without same they still dropped to 71%. 

Absolute GM is $135 million up +$15 million from $120 million, fully due to sales increase.

Annualized Gross Margin $ per (PPE + Goodwill/Intangibles)

This is our attempt to normalize the companies growing organically from the roll ups.  We have annualized the gross margin and divided that by aggregate of PPE + G&I.

This metric did take a step backwards the previous two quarters before increasing this Q from $1.00 to $1.03.   This metric will reduce with Harvest being onboarded in a few Q’s.

Gross Margin: US Peers

TRUL is at #1 spot. Being vertically integrated and with little wholesale is the differentiator.

Gross Margin: North American Peers

SGA & SBC: Trend

Selling expense increased by $5 million to $45 million and stayed stable at 23% of sales.

Combined G&A increased by $4 million in the Q and increased as % of sales to 6% +1% QoQ.  The new stores and PA are likely the reason.

They have $0.7 million in SBC.  They also have Super Shares so SBC is not a huge factor.

Depreciation rounds out Opex at $5.4 million +$1.4 million QoQ on the non-production assets.

Total Opex was $63 million at 32% of sales versus $52 million at 31% last Q.   

SGA & SBC: Peer

Trulieve is no longer the US leader in combined SGA and SBC as GTII is now less than them, as is TER and AYR.

Net Operating Profit Breakeven: US Peers

NOP under GAAP was $73 million versus NOP of $68 million last Q.  The pick-up was the +$15 million in GM was offset by Opex increase of $10 million. Remarkably, this figure has increased QoQ since March 31, 2019.

Other Income and Expenses: Total other expense of $8 million this Q versus $38 million last Q.

• Transaction costs of $4.7 million on PA versus last Q versus nil this Q. (they do have $2 million in transaction costs not broken out from income statement as add back on EBITDA).
• Interest expense of $7.9 million versus $3.7 million QoQ
• Other expenses of $30 million last Q versus nil this Q.  Looks like the previous Q was warrant driven tied to appreciating stock price. “As of December 10, 2020, the June Notes converted to equity as per ASC 815-40, at an expense of $25.5 million which is included in other (expense) income on the consolidated statement of operations and comprehensive income.”
• Income Taxes was $35 million versus $27 million last Q.

Net Income for the Q was $30 million versus $2 million last Q.

Net Operating Profit Breakeven: North American Peers

The leader by far on this measure.

EBITDA: Trend and Peer

They improved their Adj EBITDA by $5 million to $82 million on the quarter from $77 million last Q. An enviable figure.

Their Adj EBITDA has $3.8 million covid costs, and a $2.5 million inventory step up, and $2 million in transaction costs that are not itemized anywhere in their financials.  I did not back these out.

Cash provided by

• Operating Activities was a Source of $60 million versus a Source of $26 million last Q
• Investing Activities was a Use of $53 million versus a Use of $113 million last Q
• Financing Activities was a Source of $8 million (largely warrants) versus Source of $40 million last Q.

Net increase in Cash was $16 million.

+EBITDA Breakeven: US Peers

The cost structure that comes with focusing largely on one state, coupled with their market dominance in FLA, allows Trulieve to be EBITDA positive at 39% of existing sales, a slide from 36% last Q. 

Interestingly, AYR and GTII (this Q) slid in front of Trulieve. 

+EBITDA Breakeven: North American Peers

Net Operating Profit + Non-Cash Expense – Interest – Taxes: $ Thousands of Dollars

Here is our new metric.  It is meant to show how much cash went into the bank account from operations after Interest and Taxes are serviced.  Essentially EBITDA without the I + T added back. 

Trulieve took a rare step backwards in this metric as interest + taxes increased by $11 million to $42 million whereas EBITDA increase only $5.8 million.

Net Operating Profit + Non-Cash Expense – Interest – Taxes: % of Sales

As a percentage of sales, this metric back slid QoQ for third Q in a row as Sales outpaced the cash generated.

Balance Sheet Items of Note:

Cash increased by $16 million to $162 million largely through operations.  Their ability to put cash in the bank quarterly from operations allows them to hold less of a cash balance than some of their peers.  They also have a better ability to add incremental debt.

They did an equity raise at USD$39.63/share of $219 million post Q.  They will use $20 million of that for Anna Holdings (PA 3 dispo acquisition) and $3 million for WV acquisition.

Sales, Bio Assets, Inventory, WIP, FG:

Oh, what a change US GAAP has.

Inventory value dropped $2 million to $104 million.

Based on Q CoGS they have 1.8 Q’s inventory on hand.

Waterfall: Peer

This is comparing apples and oranges given some are GAAP and some IFRS.  You can spot the US GAAP as they have no biological assets like GTII.  Trulieve does have more inventory than GTII despite less sales.

Not much worth noting as to deltas in the balance sheet other than

• the $47 million increase in PPE to $365 million. Construction in progress +$27 million, Furniture & Fixture +$16 million and Buildings +$11 million are the reasons.
• Income tax payable is increased +$36 million to $42 million.  Previous Q it looked like they must have paid ahead of schedule.
• Note payable of $12 million to a related party moved from Current Liabilities to Long term as it was extended until May 2022.
• +$16 million in share capital from warrants

What we said last Q:

Trulieve is a metronome.  They are a class ahead of their peers.  Now we will see if they can replicate Florida success in other markets.

This Q:

Another progress quarter.  Their cost structure will change as PA launches and Harvest is brought on board. 

A very efficient company that will now be tasked with integration of PA and Harvest assets.

I am looking forward to how some of our efficiency metrics respond to construction in progress converting to revenue producing. 

GoBlue

The preceding is the opinion of the author and is in no way intended to be a recommendation to buy or sell any security or derivative. The author does not have a position in TRUL and will not start one in the next five days.