There’s something to be said for staying in one’s lane.

While some other MSO’s were implying they on the cusp of Amazon-like expansion – just a scant 4 quarters ago – Trulieve ($TRUL) held fast, and rode the build of Fortress Florida™. They had to deal with some glares from investors demanding immediate presence in as many states as possible, as fashion dictated being islanded from the broader US marketplace would inevitably leave them far behind when this thing really got going.

How a year changes things.

MSO’s like $CURA and $GTII – while showing some improvements – haven’t yet become the darlings that were expected to grow into. It’s interesting that the ‘MSO’ darling is really just a one-state wonder. Sure, they’ve got some movement and assets in formation, but it’s been far from clear what they envision their ‘MSO’ strategy to look like.

Common thinking is that recreational is going to come in Florida, inducing massive competition and crush margin.

To the financials!

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• Cash at $150MM, sales up 25%, 75% margin. Well then.
• Sales and Marketing at $25MM/Q. Sales of $120MM, inventory at ~=2:1 at $218MM.
• Property, Plant, and Equipment (PP&E) expansion orderly. These guys add $44MM in a quarter, on their balance sheet it looks like its’ absolutely normal course.
• Goodwill and Intangibles effectively a rounding error at $30MM.
• G&A at $7MM. Good.
• Income taxes, at around $20MM this quarter, almost 3x G&A.

Ok, this outfit is running well. We said last time that $TRUL is looking good, and again they show the same. With hard growth as well.

Looks like some improvement in their processing/packaging QoQ, with the high range of finishing cost per gram dropping by $0.25 between March and June. This number had been fairly rigid until now:

Not much else to add. Our last structure on $TRUL laid out our view, and it hasn’t changed.

If Trulieve’s genuinely ambitious enough to expand beyond Fortress Florida™, their future success relies on their ability to replicate operations and brand uptake elsewhere.

Early in Florida’s developing market, I’d made a note comparing $TRUL’s stores and competitors’ outlets.

$TRUL presented a straight up block party atmosphere, immersed in and presenting ‘weed culture’ at the retail level. Deep bass, turntables, chill, and Tiki lights. Compared with the starched and staid presentation of the $LHS’ or $CURA’s of the world, it was a different tack, and the results speak for themselves.

The landscape in other states – with different regulators and licensing and operational profiles – has presented challenges in scaling. $TRUL is loosely at an advantage: a stable home base, cash, and they’re not necessarily in a rush to buy. Conventional thinking (very conventional) says that Florida is going to flip the switch to recreational, and when that happens, the flood of stores and competition will take out their advantage, and the edge they have will be gone.

To me, that represents a deterministic, black and white, 2-dimensional view of a world that is none of these.

Economists are fond of (and live by) the phrase ‘ceteris paribus’ – which means: ‘all things being equal’. If an economist predicts some sort of outcome from a given set of conditions, they caveat the outcome by adding ‘cet par’ – thus – the condition holds when any and all other variables are held constant.

While it helps for model definition and backtesting, it’s unhelpful in prediction. Because the real world doesn’t work ‘cet par’. Actions cause reaction, feedback loops occur, courses adjust – which becomes another ‘action’. Regulatory can change the size or shape or number of players allowed on the field.  And consumers themselves can induce action by adopting a new product platform, or diving into an emergent fashion/flavour of the day.

$TRUL has a choke strangle-hold on Florida. They’ve signalled interest in the US North East. Which, has the attention of every other MSO on the planet.

$TRUL is probably in a better position than anyone else right now, and I suspect we’ll be seeing moves out of them as well. I’m tentative to offer up my thoughts on what their best path could or might be, because there is a range of options for $TRUL to go forward. The lands they are choosing to enter are either currently being fought over by a hoard of others (both public and private), or in places where the land hasn’t been cleared yet.

The only guess I have? Anything that will happen….will come out of left field, done with somebody/something that nobody’s heard of, and that $TRUL been in negotiations with them for months. The strut they’re walking right now suggests they’re deep into something. Or, they could just go ahead and DIY.

The share price still makes no sense to me in any respect. I can understand forward expectations around the legal cannabis market attract premiums. I’m not sure $TRUL’s share price should get all of it though.

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 holds no position in $TRUL