Trulieve Cannabis Corp

Good morning, everyone, and welcome to the Trulieve Cannabis Corporation's second quarter 2025 financial results conference call. My name is Keith, and I will be your conference operator today. As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Christine Hersey, Vice President of Investor Relations for Trulieve. You may begin.

Thank you. Good morning, and thank you for joining us. During today's call, Kim Rivers, Chief Executive Officer, and Ryan Blust, Interim 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 2025 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 An archived version of today's conference call will be available on our website later today.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 fact 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 most recent annual report on Form 10-K, 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 TRULY'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 thank you for joining us today. We are pleased to share second quarter results that demonstrate momentum in our core business. Our team continues to deliver stellar performance underpinned by strong margins and cash flow. While our core business remains strong, we are optimistic on the prospects for meaningful federal cannabis reform. A central part of Trulieve's mission is to reduce stigma and expand access to cannabis. We are pushing tirelessly for change and will continue to lead from the front. Moving now to our results. Second quarter revenue of $302 million was comparable to last year and up 1% sequentially. Growth margin at 61% improved by 1% compared to last year, representing industry-leading margin driven by scaled operations and disciplined promotional activity. Adjusted EBITDA of $111 million, or 37% margin, increased by 2% versus last year, attributable to high gross margin and strict expense control. Operating cash flow of $86 million contributed to cash of $401 million at quarter end. Second quarter results underscored strong demand for cannabis. Retail traffic and units sold increased by 8% and 9% year over year. offset by pricing compression and loyalty point redemption. Several months ago, we recognized a shift in consumer preferences towards value and mid-tier products, broadly in line with national economic conditions. We quickly adapted production and retail to increase availability of approachable products in order to meet customers where they are. These changes resulted in market share growth in Arizona and Florida and higher truly branded product sales in Pennsylvania. Second quarter customer trends continued into July, with traffic and units up 7% versus last year during the 7-10 holiday, and with value products comprising the largest segment. Our recipe for success in retail remains unchanged. We are laser-focused on delighting customers with high-quality products and exceptional service. Wholesale revenue grew 27% compared to last year, demonstrating solid execution and the strength of our brands. We are thrilled with the progress our team has made with expanded and new relationships, particularly in Maryland and Pennsylvania. In Ohio, our affiliated partner continued to ramp production while increasing wholesale revenue. We are expanding our wholesale business as conditions permit while with careful monitoring of the credit quality of customers and industry developments. Turning now to our strategic objectives for this year. We previously outlined four key areas of focus, reform, branded products, distribution, and customers. We have made demonstrable progress and will remain focused on these areas in the second half of the year. I want to address cannabis reform first, given the recent excitement around this topic. The drumbeat for change is growing louder as Americans of all ages and political parties overwhelmingly support reform. The vast majority of voters support medical cannabis and recognize the inconsistency in keeping cannabis as a Schedule I drug alongside heroin and synthetic fentanyl. The Trump administration has an opportunity to enact the first real meaningful cannabis reform in over 50 years by rescheduling cannabis to schedule three. This would represent an acknowledgement of the medical value of cannabis and open the door for scientific discovery and further delineation of the medicinal properties of the plant. Rescheduling would not legalize cannabis, but it would remove the punitive tax burden on state legal operators, enabling greater conversion from the illicit market. Alongside rescheduling, safer banking enjoys strong bipartisan support. Safer banking would allow legal operators broader access to basic banking services, reducing the amount of cash transactions and providing greater safety for employees at dispensaries. Industry workers would have normalized access to banking services, including deposit accounts and mortgages. Recently introduced state's 2.0 legislation would directly address the gap between federal and state law by removing cannabis from the Controlled Substances Act and allowing states the autonomy to regulate their own cannabis programs. Trulia is actively engaged in federal reform efforts, working independently and alongside industry peers to drive change. In our home state of Florida, the Smart and Safe Florida Campaign for Adult Personal Use of Marijuana has collected over 900,000 raw signatures. Through July, over 660,000 signatures have been validated, representing 75% of the total required by February 2026 for ballot inclusion. We expect Florida Supreme Court review of the ballot language and summary will be concluded as required by April 1 of next year. The language for the 2026 ballot includes explicit provisions designed to protect children, ban smoking in public, add additional operator licenses, and clear the way for legislative approval of home grow. To date, Trulieve has been the primary financial contributor to this effort, leading the charge for change in Florida. We firmly believe Florida can set the standard for successful state cannabis programs, striking an appropriate balance between individual freedom and responsible consumption. With over 23 million residents and 143 million tourist visits per year, Florida could be the strongest market in the U.S. In Pennsylvania, support for adult use remains high and lawmakers continue to work on legislation. Adult use is increasingly viewed as a potential source for meaningful tax revenue and an inevitable step given the adoption by virtually all neighboring states. If adult use is launched in Pennsylvania, Trulieve is well positioned given our established retail footprint, strong brands in retail and wholesale, and scaled production capabilities. We believe that adult use will be enacted in Pennsylvania in the near future. Trulia will continue to push for reform, allocating time and resources to highlight the need for action. We remain confident that real change can happen. While advocacy efforts are ongoing, our team remains focused on three operational areas, branded products, distribution, and customers. Providing customers consistent access to high-quality products at the right price is an essential part of our strategy to build lasting brand equity. With over 4 million square feet of production capacity, our scaled platform is a meaningful competitive advantage. Our production team continues to outperform, driving costs lower while consistently delivering great products. High quality helps differentiate our products in an increasingly competitive landscape. Trulieve manufactures and sells a combination of in-house and partner brands, bringing customers a wide assortment of products and form factors. During the second quarter, we sold over 12.5 million branded product units. Trulieve brands Modern Flower and Roll One continue to gain momentum, representing 50% of the branded products sold in the second quarter. According to data from Hoodie Analytics in Pennsylvania, Modern Flower was the number one or number two flower brand throughout the first half of this year. We are launching new modern flower and roll one products, including all-in-one vapes and concentrates in several markets. Last month, we launched purpose-led brand Redemption Cannabis in West Virginia, building upon our existing relationship with Redemption in Maryland and Pennsylvania. Redemption Cannabis was founded by Ryan Basor, who served time in federal prison for cannabis-related charges. A portion of every sale is reinvested by Redemption to support individuals and families impacted by cannabis prohibition laws. we are proud to partner with purpose-led brands like Redemption Cannabis. Turning now to the beverage category. In February, we launched Onward, a line of Farm Bill-compliant THC beverages. The initial pilot included five cocktail alternatives formulated with CBD and THC. Feedback from customers and critics alike has been overwhelmingly positive, with cases sold in the second quarter up almost 300% compared to the pilot launch. All five original Onward flavors recently received medals from the SIP Awards, an international spirits competition where the judging is done by consumers. We are thrilled to win such recognition in this exciting new category. Building upon the success, next month we are launching four new 10 milligram Onward flavors, Berry Smash, Cosmopolitan, Lemon Drop Martini, and Paloma. Similarly, early response to our recently launched Upward energy drink has been very positive. Upward beverages are now available online and in stores with four flavors, 5 mg lemonade, peach nectarine, and strawberry tea, and 10 mg pink lemonade. We plan to launch a new Upward flavored next month, 10 mg half-and-half iced tea and lemonade. Sales of Onward and Upward beverages allow us to reach new customers who may not visit cannabis dispensaries. We recently expanded distribution of Onward and Upward, into all ABC fine wine and spirits and total wine locations in Florida, totaling 167 stores. In addition, we launched new distribution deals with Anheuser-Busch covering northern Florida and Romano Beverage in Illinois. Visit drinkonward.com to find a retail location near you or order online. Distribution supports customer and branded product sales growth in both retail and wholesale channels. Year-to-date, we have opened nine stores in Arizona, Florida, and Ohio, expanding our total retail network to 231 stores. We expect to open one additional truly branded store in Ohio in the coming weeks, pending regulatory approval. This year, we plan to refresh or remodel up to 45 stores, with 27 stores already completed. In wholesale, distribution in Maryland and Pennsylvania is expanding, while our partner in Ohio continues to ramp sales of branded products, including Modern Flower and Roll One. Consistently offering trusted branded products through an established distribution network allows Truly to make meaningful customer connections. Since our very first sale nine years ago, our primary focus has been on the customer. Our business has grown from serving a single customer in July 2016 to serving more than 3.5 million customers in the past five years, including 775,000 unique customers in the second quarter alone. Throughout this incredible growth, our commitment to our customers has never changed. From start to finish, we strive to provide exceptional experiences through all stages of the customer journey. Over the past two years, we have upgraded many customer-facing aspects of our business, including retail associate training programs, website and technology platforms, and our loyalty program. Investments designed to improve the online and in-store experience for our customers have paid off. Our team reinforces our commitment to customer service by tracking customer metrics and linking performance to incentive programs for retail associates. While retail traffic increased by 8% compared to last year, overall satisfaction and net promoter scores across our markets remain high in the second quarter. Kudos to our entire retail team for taking such excellent care of our customers. One year ago, we completed the rollout of our revamped loyalty program. The new program has surpassed our expectations, reaching over 725,000 rewards members at the end of June. Loyalty members accounted for 71% of transactions during the second quarter. We continue to see greater retention and monthly spend among rewards members, who spend on average 2.4 times more than non-members. We recently added new program features, including early access to new products, and popular back-end stock products as well as early notifications for special events including in-store activations. Consistently delivering elevated experiences, high-quality branded products, and generous loyalty rewards reinforces customer retention. Second quarter retention improved by 1% sequentially to 67% company-wide and 76% in medical-only markets. Overall, we are making real progress across our focus areas. reform, branded products, distribution, and customers. With continued momentum and significant flexibility in our core business, we are set to expand our leadership position while pushing for cannabis reform. With that, I'd like to turn the call over to our interim CFO, Ryan Blust. Please go ahead.