Trulieve Cannabis Corp

Good morning, everyone, and welcome to the Trulieve Cannabis Corporation Second Quarter 2024 Financial Results Conference Call. My name is Jamie, and I'll be your operator today. As a reminder, today's conference call is being recorded. And at this time, I'd like to introduce your host for today's conference, Christine Hersey, Vice President of Investor Relations for Trulieve. Ma'am, you may begin.

Thank you. Good morning, and thank you for joining us. During today's call, Tim Rivers, Chief Executive Officer, and Wes Getman, Chief Financial Officer, will deliver prepared remarks on the financial performance and outlook for Trulieve. Following the prepared remarks, we will open the call to questions. This morning, we reported second quarter 2024 results. A copy of our earnings press release and PowerPoint presentation may be found on the investor relations section of our website, www.trulieve.com. An archived version of today's conference call will be available on our website later today. As a reminder, statements made during this call that are not historical facts constitute forward-looking statements, and 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 our forecast, including the risks and uncertainties described in the company's filings with the Securities and Exchange Commission, including item 1A, risk factors of the company's annual report on Form 10-K for the year ended December 31, 2023, as well as our periodic quarterly filings. 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 Trulieve's 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 8K that we furnished to the SEC today and can be found in the investor relations section of our website. Lastly, at times during our prepared remarks or responses to your questions, we may offer metrics to provide greater insight into the dynamics of our business or our financial results. Please be advised that we may or may not continue to provide these additional details in the future. I'll now turn the call over to our CEO, Kim Rivers.

Thank you, Christine. Good morning, everyone, and happy Ohio Adult East lunch day. We are thrilled to share results from another outstanding quarter. Strength in our core business was demonstrated by our third consecutive quarter of top line growth and margin expansion. All of the effort and investment over the past two years to set a solid foundation for long-term success is paying dividends. The flexibility that we have embedded into the organization provides multiple pathways for growth and the ability to pivot quickly as the industry evolves. This summer is shaping up as we expected with a heightened focus on major upcoming catalysts. At the state level, we are very pleased with the campaign efforts to deliver a yes on three vote in Florida this November. Recent polling of likely voters showed support in the mid to upper 60s, well above the 60% threshold required to pass the Abilities Initiative. To date, the campaign has received almost 70 public endorsements from a wide variety of bipartisan supporters, including physicians, activists, educators, faith leaders, labor unions, law enforcement, elected officials, and celebrities. We are confident that targeted messaging to raise awareness and educate voters about the many benefits of legal cannabis will positively influence voter turnout and persuade Floridians to vote yes on three. While there are many reasons to support legalization this November, here are the top three. First, a yes vote would decriminalize personal cannabis possession in Florida. No one should be in jail or fear arrest for personal cannabis possession. Second, adults deserve access to safe, tested, and labeled cannabis products available in a normalized retail environment. No one should risk death from fentanyl or pesticide-laced products sold on the street. Third, legal cannabis offers numerous economic benefits through job creation and tax revenue collected on sales. At Trulieve, we are taking every available opportunity to feature Yes on 3 information at our store grand openings, physician education events, hiring events, and community events. Last week, we launched our first Yes on 3 products with Yes on 3 whole flower eights and pre-rolls. We plan additional product launches as we approach the election with a portion of proceeds going to support the campaign. And as always, we encourage other industry operators to use their platforms to help raise awareness. In Ohio, we are launching adult e-sales at our Beaver Creek, Columbus, and Westerville locations today. The team is thrilled to be among the first group of operators to serve adult use customers in the Buckeye State. Kudos to the state regulators who successfully rolled out this program following voter passage last year. We expect to have popular Chewy brands available in our stores before year-end through our support services arrangement with a Tier 1 grower processor. In addition, we are working through the regulatory process and with our partners to open additional locations in Columbus, Toledo, and Sainsville in early 2025, expanding our retail footprint to six dispensaries. We estimate Ohio could reach $2 billion in annual sales. In neighboring Pennsylvania, we believe momentum is building for the passage of adult use legislation. We currently operate 21 affiliated dispensaries, including a new location in Wilkes Bar and three grower processor facilities. We remain optimistic that adult use sales in Pennsylvania could launch in the next 12 to 24 months, and the market could reach $4 billion in annual sales. At the national level, cannabis remains more popular than any politician, with over 70% of adults in favor of legalization. The first major federal reform in decades is advancing through the formal rulemaking process to reclassify cannabis to Schedule III. Public comments showed overwhelming support, with 92% of over 43,000 comments received in favor of rescheduling or rescheduling. With this public approval, we are optimistic that rescheduling can happen this year. We believe the time is right for the administration to take this historic step and reclassify cannabis. Before turning to results, I'd like to acknowledge two major milestones we recently achieved at Trulieve, which lend perspective to how far we've come as an organization. Last month, we celebrated the eight-year anniversary of our very first sale, which was actually the very first medical market sale in the state of Florida. In 2016, when we recorded our first sale, that was the only transaction we conducted for many weeks as we worked to recruit physicians into the program. In 2024, on the eight-year anniversary of our first sale, we conducted approximately 50,000 transactions. On top of that, we opened our 200th retail location in June, a new store located in Brooksville, Florida. While it took us five years to reach our 100th store, we doubled our retail presence to 200 stores in less than three years. This impressive growth and expansion of our industry-leading retail network is a true testament to the team and all that we have collectively accomplished. Now, turning to our second quarter results. Revenue and margins beat our guidance with sequential and year-over-year improvements in each. Revenue increased to $303 million, up 2% from Q1 and 8% compared to last year, with growth in both retail and wholesale. As expected, strong retail performance was partly offset by higher promotional activity for 420, the beginning of seasonal headwinds in Arizona, and the highly successful launch of our Refresh Loyalty Program. Gross margin increased by 1% to 60%, primarily driven by lower cultivation costs. SG&A spending was comparable to the first quarter. Adjusted EBITDA of $107 million, or 35%, exceeded expectations, primarily driven by higher growth margin and cost controls. We ended the quarter with $356 million in cash. Strong retail performance was driven by a 3% increase in traffic, partly offset by a 1% decline in basket. Our relentless push to sell branded products through branded retail is the foundation of our strategy to build lasting brand equity. We sold over 11.5 million branded product units in the second quarter. up 4% sequentially. Consumer behavior at the start of the second quarter was largely consistent with patterns observed in the first quarter with willingness to spend more for compelling products and bundle-style promotions. As the second quarter progressed and continuing into the third quarter, we are realizing softer conditions in retail across the portfolio, consistent with seasonal headwinds. As always, we are closely monitoring retail KPIs as we amplify messaging to highlight the value proposition of our product offerings. With the flexibility built into our capacity, we are able to adapt our production to meet evolving consumer preferences. During the second quarter, our industry-leading retail network grew to 200 stores nationwide with new dispensaries in Florida and the acquisition of two stores in Ohio. In June, we completed the rebranding of all retail locations in Arizona and Ohio to the Trulieve brand. Subsequent to quarter end, we opened five more stores in Florida and one in Pennsylvania. We remain on track to open at least 25 new stores this year. Product quality and world-class customer service are key drivers for our strength in retail. Our production team continues to turn out high-quality products at scale while harnessing efficiencies and driving down costs. Yields, potency, and costs at our flagship 750,000-square-foot indoor facility in Florida remain at peak performance levels. Yields at our legacy sites in Florida outperformed our plan by double digits, further reducing cultivation costs. Across the organization, we are focused on incremental improvements designed to enhance product quality and fortify our brand portfolio. In-house brands such as Modern Flower and Roll One continue to resonate with customers, and we continue to expand product offerings with new launches of various sizes and form factors in our markets. Customer experience metrics show incremental improvements across our retail network with higher NPS scores in virtually all markets during the second quarter. Overall, customer satisfaction is further underscored by our customer retention, which improved at 66% company-wide and 75% in medical-only markets. Infrastructure investments to reinforce customer loyalty are having an immediate impact on our business this year while setting the foundation for future growth. Three examples of infrastructure investments include our Web 2.0 platform, revamped loyalty program, and enhanced customer data platform. Migration to our Web 2.0 platform was successfully completed in Q2, bringing enhanced functionality including real-time updates to products, pricing, and promos, and product availability at nearby stores. The rollout of our refreshed loyalty platform was completed in early June. The Best in Cost program features fully stackable points that can be redeemed across all brands in all markets. The simplified and intuitive program design has led to high adoption rates, exceeding our goals in all markets. To date, over 325,000 customers have signed on to the loyalty program, and 80% of members have made at least one purchase since opting in. Many of our own employees are loyalty members, providing them an opportunity to earn rewards and effectively communicate the benefits of the program to customers. The rewards program itself was built inside of our customer data platform, allowing interconnectivity between rewards, website, and the customer data platform. In April, we rolled out enhanced capabilities in the CDP to enable automatic basket-level analysis powered by machine learning, which we used to further personalize customer messaging. These technological improvements provide a meaningful competitive advantage today, allowing us to forge deeper customer relationships cemented by hyper-personalization. Across the organization, as our company continues to grow, we are investing in new technology and tools to support more sophisticated marketing outreach, business planning, and inventory and warehouse management. Last week, we completed a significant upgrade to our SAP platform, adding expanded functionality and capacity for future growth. We anticipate these infrastructure investments will increase in the back half of this year. In summary, our team continues to deliver spectacular results while we prepare for future growth, as we believe adult youth in Florida is a key unlock for cannabis adoption in the U.S. With that, I'd like to turn the call over to our CFO, Wes Getman. Please go ahead.