Trulieve Earnings release.

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

Quite a few expansionary items this Q:

• Opened 9 new dispensaries in FLA
• Purchased cultivator and dispensaries (6) in Pennsylvania closed Nov. 12, 2020
• Won a new cultivation license in West Virginia that they will have to build out

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 13% to $136 million after a 26% increase last Q with nine more FLA dispensaries opened in the Q and 61 total across FLA, Connecticut, California and Massachusetts footprint.  The FLA market continues to grow and the addition of flower, and more recently edibles, 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 $8.25/gram from $8.40/gram or -2% QoQ. That is three Q’s in a row aggregating -22%.

61 dispensaries opened versus 52 last Q and 49 the Q prior.  Average dispensary revenue was $2.4 million on the Q flat to last Q.   

Retail Revenue: Peer and Trend

With the addition of a Penn wholesaler to go along with the Penn dispensaries, we will likely see Trulieve with some wholesale revenue next 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).

The first step back we have seen with Trulieve under this metrics at $1.64 versus $1.72 last Q.  This is the most efficient in peer group. The $52 million in PPE in the Q dampened the metric.

Income Statement Drivers & Breakeven Sales: Peer

Trulieve is no longer the sales leader as GTII took that crown and CURA still has to report.

Gross Margin

Gross Margin hits a record high of 75%. NO change from last Q.

Absolute GM is $102 million up from $91 million, fully due to sales increase.

Biological Asset note gives some color here:

• After Harvest cost has increased 5%. They ring in at $1.65/gram from $1.57/gram last Q, and
• Reasonable Margin on After Harvest Cost to Complete and Sell decreased 6% to $1.86/gram from $1.97/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 $12 million to -$106 million.   If you add FVI on Inventory sold and CoGS it aggregates $140 million, greater than sales. 

Gain on Biologicals increased to $89 million from $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 $0.59.

This metric did take a step backwards this quarter from $1.30 to $1.23. The $52 million in PPE in the Q dampened the metric.

Gross Margin: US Peers

TRUL is at #1 spot. Being vertically integrated and no wholesale is the differentiator.

Gross Margin: North American Peers

SGA & SBC: Trend

Selling was flat at 21% of sales and increased $4 million to $29 million.

G&A was flat at 6% and increased $0.5 million to $8.0 million.

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

Depreciation rounds out Opex at $4.0 million on the non-production assets an increase from $3.7 million QoQ.

Total Opex was $42 million at 31% of sales versus $37 million at 30% last Q.   

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 $60 million up from $54 million last Q.  The pick-up was the +$11 million in GM was offset by Opex increase of $5 million.

Other Income and Expenses:

• Interest expense of $6.4 million versus $6.8 million QoQ
• Other expenses of $10 million versus an expense of $5 million last Q. Looks like that was warrant driven tied to appreciating stock price.
• Income Taxes was $26 million versus $25 million last Q.

Net Income before IFRS for the Q was $22 million versus $23 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 $6.6 million to $68 million on the quarter from $61 million last Q. An enviable figure.

Cash provided by

• Operating Activities was a Use of $4 million versus a Source $53 million last Q
• Investing Activities was a Use of $35 million versus $14 million last Q
• Financing Activities was a USE of $81 million versus $10 million last Q as they sold shares to finance the cash portions of the Penn acquisitions.

Net increase in Cash was $43 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, flat as compared to last Q

+EBITDA Breakeven: North American Peers

Sales, Bio Assets, Inventory, WIP, FG:

They are projecting an increase in yield QoQ of +23% from 25,587 KGs to 31,383 KGs their highest projected yield on record.  

Inventory has decreased to $205 million a $14 million decrease QoQ despite the increase in sales.  They have 1.5X last Q sales now in inventory.

Last Q they had a small decrease in FG delta QoQ. FG are $28 million.

Waterfall: Peer

TRUL has +$75 million more inventory than their closest peer.

Cash is sitting at $198 million an increase of $43 million from last Q.  Free cash flow!

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

• the $52 million increase in PPE to $303 million
• -$41 million in income taxes payable
• Note Payable current portion migrating from Long term liabilities of +$12 million
• +$21 million in new capital leases, likely tied to the 9 new stores
• +83 million in share capital from the equity raise.

What we said last three 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 has dominated Florida.  I am interested to see how they translate to Pennsylvania and how thye do at wholesaling product.

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.