Trulieve CEO Sets Goal of $100 Million in Operating Cash Flow This Year

Stomping onward with the nation’s largest cannabis retail footprint, Trulieve reported $1.2 billion in revenue for 2022.

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Boasting an industry leading 184 cannabis dispensaries in the U.S., Trulieve leaned heavily upon its expanding multistate network of storefronts to produce revenue in 2022.

The Tallahassee-based operator reported more than $1.1 billion in retail revenue last year, representing a 33% increase over 2021. That performance, which accounted for 94% of the company’s overall revenue of more than $1.2 billion in 2022, came during a year of unprecedented sales trends in key markets Trulieve serves.

Specifically, statewide cannabis sales in Colorado took a 21% nosedive in 2022, while California’s year-over-year sales shrank 8%, and Arizona’s cannabis retail market remained somewhat stagnant with less than 2% growth, according to sales figures from respective state departments. Trulieve’s presence in those states includes 23 stores and more than 400,000 square feet of cultivation and processing.

Other highlights from Trulieve’s full year report released March 9 included $219 million in cash at year end, a gross profit of $682 million and gross margin of 55%, and a generally accepted accounting principles (GAAP) net loss of $246 million. Trulieve reported an adjusted net loss of $30 million, which excludes nonrecurring charges, asset impairments, disposals and discontinued operations associated with the Harvest Health acquisition and strategic repositioning of assets to improve cash flow.

The fourth quarter and full 2022 financial report can be viewed here.

Trulieve CEO Kim Rivers elaborated on the company’s 10-figure revenue milestone during a conference call with shareholders before the market opened March 8.

“Since inception, Trulieve has embraced a strategy-driven approach to building a sustainable and scalable company,” she said. “In 2022, revenue surpassed $1.2 billion, a huge milestone considering our very first sale was 6 1/2 years ago. In order to achieve such remarkable growth, a lot of things had to go right, and the team had to make a lot of intelligent decisions along the way.”

Now the third largest publicly traded cannabis company in the U.S. by market cap, Trulieve’s success can be attributable to well-timed capital raises, legal and regulatory victories, and “operational excellence,” Rivers said.

But company executives don’t plan to rest on their laurels.

During a period of significant industry growth in 2021, Trulieve completed seven acquisitions, including a $2.1-billion deal with Harvest Health, which became the largest completed transaction in U.S. cannabis history when it closed in October of that year. As M&A activity appeared contagious throughout late 2020 and 2021, Trulieve was one of many cannabis companies outlining its strategic growth vision at that time.

When 2022 arrived, many visions within the industry were scaled back; others took a 180-degree turn.

The timing of this major expansion at Trulieve coincided with a reversal in favorable economic trends brought about by the unwinding of COVID-related tailwinds and a decade-long period of global excess liquidity,” Rivers said. “The goal of 2022 was to digest and integrate Harvest while transforming the company into a scaled multistate operator.”

By mid-2022, those ongoing merger integration efforts evolved into a broader set of actions designed to bolster Trulieve’s resilience while improving its competitive positioning for the long term, she said.

Now the company has two main objectives for 2023: maximize cash generation and cash preservation; and make strategic investments to support future growth. More specifically, Trulieve executives anticipate achieving an operating cash flow of $100 million in 2023, up from $23 million in 2022, Rivers said.

The plan is that higher operating cash flow combined with at least 50% lower capital expenditures will yield positive free cash flow in 2023, Trulieve Chief Financial Officer Alex D’Amico said during Wednesday’s earnings call.

“Throughout 2022, we made a series of strategic pivots to reposition assets, streamline operations, lower expenses, and improve cash generation,” he said. “Throughout 2023, we will take additional measures to further gain efficiencies and boost cash generation. As we continue to optimize the business, we are prudently managing expenses while continuing to strategically invest in long-term growth opportunities.”

Last year, Trulieve repositioned away from margin dilutive and cash flow negative assets through the closure of dispensaries in California, redundant cultivation in Florida and the exit of its wholesale operations in Nevada. And through eliminating redundancies and furthering the Harvest integration, the company has reduced wages by approximately 20%, Rivers said.

While company executives laid out a path for that $100-million operating cash flow target in 2023, specifics on how that path will unfold remain less clear.

“Quite frankly, given the murkiness of the current environment, there is uncertainty,” Rivers said. “I read the Wall Street Journal yesterday—it’s ‘the recession is six months away,’ always, right? And it’s been that way for the last year. So, again, with uncertainty on the microenvironment, we have chosen to focus on the things that we can control, which, again, is the notion of cash generation and cash preservation.”

While certain economic variables aren’t always predictable, many larger businesses—in the cannabis industry and beyond—often have the luxury of operational flexibility. At Trulieve that means adjusting its more than 4 million square feet of cultivation and processing capabilities, roughly 3 million of which are based in Florida and Georgia, to properly align with current demand.

In Florida, Trulieve is working toward fully ramping up its new 750,000-square-foot indoor facility, allowing for lower production costs while it pulls back additional canopy at “legacy” sites, where capacity will be banked for future use. Rivers elaborated that the company defines its legacy sites by how they are designed to operate and not necessarily by age or location.

“Lower production costs should lead to lower costs of goods sold as inventory from legacy sites is reduced and more product from this facility is sold through our retail network,” Rivers said, adding that Trulieve is very much prioritizing inventory reduction throughout 2023, which will pressure growth margin but increase cash generation.

“Production mix adjustments and targeted promotional activity were utilized in the fourth quarter to accelerate inventory reduction and generate cash,” she said. “Inventory was reduced by $4 million, representing a meaningful shift compared to the inventory build of $32 million in the third quarter.”

In Florida, future growth will ride heavily on adult-use legalization. Trulieve has donated more than $25 million to Smart & Safe Florida’s 2024 adult-use ballot initiative, according to campaign finance records from the Florida Division of Elections.

Smart & Safe Florida organizers have collected more than 416,000 of the required 891,600 valid signatures required to land on the ballot—enough for judicial review of the proposal’s language, which must meet single-subject and “lack of ambiguity” standards. The state’s Supreme Court has until April 2024 to review the language, or it will be deemed automatically approved for inclusion on the ballot.

“With 22 million residents and 138 million annual tourist visits, we believe Florida will be a top legal cannabis market, reaching $6 billion in annual revenue,” Rivers said. “Giving our leading … market share in Florida, the adult-use opportunity will be a very meaningful contributor to financial performance in the near term.”

With 125 dispensaries in Florida, Trulieve’s retail presence is nearly double that of its nearest competitor, and the company’s stores regulatory sell more than one-third of the flower (by weight) that the state’s nearly 800,000 patients purchase each week, according to weekly updates from Florida’s Office of Medical Marijuana Use.

Alongside retail expansion in core markets—Trulieve plans to open 15 to 20 new dispensaries in 2023—Rivers said the company will continue to invest in new market development, from commenced cultivation operations in Georgia to support a 2023 retail launch to a forthcoming adult-use market in Maryland.

In addition, company executives also forecast growth opportunities that are driven by technology and data to gain a competitive edge as the cannabis industry evolves in an integrated commerce environment, Rivers said. Data-driven adjustments to ultimately meet shifting customer preferences while fostering customer loyalty is a strategic focus moving forward, she said.

While many cannabis operators are fighting for survival with expensive debt maturities looming within a tighter capital market environment, Trulieve’s capital position has afforded the company to continue pursuing thoughtful investments this cycle, she said.

“Trulieve has significant optionality and access to capital at attractive rates,” Rivers said. “Given our financial strength and operational flexibility, our team is well-equipped to navigate the current economic climate. While industry headwinds have persisted into 2023, we believe industry growth will resume as typical trends inevitably reverse and numerous catalysts come to fruition.”

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