Trulieve Earnings release.

The King of “Fortress Florida” reported earnings today, and respected shareholders enough to post them to Sedar same day!!

And they have increased guidance:

In millions	Previous Guidance	Updated Guidance
Revenue	$380.0 – $400.0	$465.0 – $485.0
Adjusted EBITDA	$140.0 – $160.0	$205.0 – $225.0

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

Income Statement Drivers & Breakeven Sales: Trend

Sales are up 26% to $121 million after a 21% increase last Q with three more FLA dispensaries opened in the Q and 52 total across FLA, Connecticut, California and Massachusetts footprint.  The FLA market continues to grow and the addition of flower has certainly propelled Trulieve well.  Covid did not seem to hurt Trulieve sales.

Estimated selling price per gram from Biological Asset note provides some color on where pricing per gram is: decreasing to $8.40/gram from $9.30/gram or -10% QoQ. That is two Q’s in a row of -10%.

52 dispensaries opened versus 49 last Q and 44 the Q prior.  Average dispensary revenue was $2.4 million on the Q an increase of 16% from $2.1 million last Q.  This is the second Q in a row of increased sales per average dispensary opened for the Q.

 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).

TRUL is on a consistent upwards trend achieving $1.72.  This only trails CWEB which should drop below TRUL with their acquisition of Abacus and the G/I embedded therein.

Income Statement Drivers & Breakeven Sales: Peer

Trulieve takes over the sales lead from GTII who has yet to report June 30, 2020 Q.

Gross Margin

Gross Margin hits a record high of 75%.

Absolute GM is $91 million up from $67 million, largely due to sales increase and the improved GM%.

Biological Asset note gives some color here:

• After Harvest cost has decreased 9% after a increased cost of 10% last Q.  They ring in at $1.57/gram from $1.72/gram last Q, and
• Reasonable Margin on After Harvest Cost to Complete and Sell decreased 14% to $1.97/gram from $2.06/gram.  This might put downward pressure next Q.

Fair value increment on inventory sold “increased” (really decreased as it is negative, but easier to understand as an increase) by $14 million to -$94 million.   If you add FVI on Inventory sold and CoGS it aggregates $95 million greater than sales. 

Gain on Biologicals was flat at to $77 million. 

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 really shows TRUL is head and shoulders above their peers in the THC side of the business. They are more than double the next most efficient MSO being CURA at $0.54.

Gross Margin: US Peers

TRUL is at #1 spot.

Gross Margin: North American Peers

SGA & SBC: Trend

Selling was flat at 21% of sales and increased $4 million to $25 million.

G&A decreased modestly QoQ at 6% and increased $1.2 million to $7.5 million.

They have $0.5 million in SBC.  They also have Super Shares.

Depreciation rounds out Opex at $3.7 million on the non production assets.

Total Opex was $37 million at 30% of sales versus $32 million at 33% last Q.  Continued improvement.

SGA & SBC: Peer

Trulieve is the US leader in combined SGA and SBC.  When you focus mostly on one state, this should be the result.

Net Operating Profit Breakeven: US Peers

NOP before IFRS voodoo was $54 million up from $36 million last Q.  The pick-up was the +$24 million in GM was offset by Opex increase of $5 million.

Other Income and Expenses:

• Interest expense of $7 million flat QoQ
• Other expenses of $5 million versus an income of $5 million last Q. Looks like that was warrant driven. No Note was provided.  
• Income Taxes was $15 million versus $25 million last Q.

Net Income before IFRS for the Q was $23 million versus $18 million last Q.

Net Operating Profit Breakeven: North American Peers

The leader by far on this measure.

EBITDA: Trend and Peer

I do note that Trulieve reports a higher adj EBITDA as they add back “Grow Cost Expensed for Biological Assets and Unsold Inventory”. I do not add it back.  Per their note to financials:

• The Company does not capitalize any production costs including overheads to biological assets. All production costs related to biological assets are expensed as incurred and are included in production costs in the table above. All indirect and direct cost related to biological assets are recorded within production expenses and cost of goods from third party suppliers.

Notwithstanding my calculation, they improved their Adj EBITDA by $19 million to $62 million on the quarter from $43 million last Q. An enviable figure.

Cash provided by

• Operating Activities was a Source of $53 million versus $24 million last Q
• Investing Activities was a Use of $13 million versus $13 million last Q
• Financing Activities was a USE of $10 million versus $2 million last Q

Net increase in Cash was $50 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 32% of existing sales down from 36% last Q.

+EBITDA Breakeven: North American Peers

Sales, Bio Assets, Inventory, WIP, FG:

They are projecting an increase in yield QoQ of +25% from 20,502 KGs to 25,587 KGs. This stopped the two sequential decreases in previous Q’s.  

Inventory has decreased to $219 million a $9 million decrease QoQ no longer outpacing sales increase of $25 million.  They have 1.8X last Q sales now in inventory.

Last Q they had a flat FG delta QoQ . FG are $28 million.

Waterfall: Peer

TRUL has double the inventory of their closest peer.

Cash is sitting at $150 million an increase of $50 million from last Q.  Free cash flow!

Not much worth noting as to deltas in the balance sheet.

What we said last two Q: This is another very good Q operationally.  Increased sales.  Rebounding GM%.  SGA did creep modestly.  EBITDA growth continues.   Inventory is getting a tad high but not worrisome yet.  Cash is in a better position.

This Q:

Trulieve truly is the king of Fortress Florida and operationally the top cannabis company in the public space.

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.