Trulieve Cannabis Corp. 2026 Q2 Earnings Call

Good morning, and thank you for joining us. During today's call, Kim Rivers, Chief Executive Officer, and Jan Reese, 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 2026 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 An archived version of today's conference call will be available on our website later today.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. 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 forecasts, 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 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 8-K 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. Thank you for joining us today. We are thrilled to report second quarter results for the first time as a company listed on the New York Stock Exchange. For those of you who may be new to Trulieve, we are the largest medical cannabis operator in the U.S. Our mission is to expand access to cannabis while serving customers with high-quality products and exceptional experiences. 10 years ago, Trulieve served the first medical cannabis patient in Florida. Over the past decade, we have grown from a single dispensary to 207 medical dispensaries and 3.5 million sq ft of production capacity. When we include Trulieve-branded adult and medical mixed-use dispensaries owned by Harvest, our branded retail network includes 241 retail locations and over 4 million sq ft of production capacity.

Last month, Trulieve was named to TIME's America's Best Companies 2026 list, a prestigious recognition awarded to the top 1,000 companies, highlighting our commitment to employee growth and career development. I am so proud of the team and what we have built together. Since the very beginning, Trulieve has led from the front, pushing for reform. For the past two years, we have actively supported federal reclassification of marijuana. In December, President Trump issued an executive order to support rescheduling, delivering on his campaign promise to address cannabis reform. In April, Attorney General Todd Blanche rescheduled state-licensed medical marijuana to Schedule III, completing the first meaningful federal reform in over 50 years. In conjunction with state-licensed medical marijuana rescheduling, the Treasury Department confirmed that punitive 280E tax no longer applies to state-licensed medical marijuana operations beginning in 2026.

The removal of this tax burden provided an immediate boost to our reported net income and cash flow. At the same time, AG Blanche resumed the broader rescheduling process for marijuana. Hearings concluded last month. We expect a final order to be issued this year. As part of the final order to reschedule state-licensed medical marijuana, a new process was created for operators to register with the DEA. Trulieve registered all of its medical-only marijuana dispensaries and production facilities with the DEA, complying with the 6-month grandfathering provision in the final order. To date, the DEA has completed inspections at 100% of our dispensaries across Florida, Pennsylvania, and West Virginia. We anticipate facility approvals in the coming weeks. In order to facilitate listing on the New York Stock Exchange, Trulieve segregated the medical-only state-licensed DEA-registered business from the mixed-use states that have both medical and adult use operations.

State operations serving medical and adult use customers are part of Harvest. Following precedent, as part of the deconsolidation, 10% of the mixed-use business was sold to an independent third-party investor along with operational control. Trulieve retains 90% of the economic interest in Harvest and will have the option to reconsolidate the Harvest business pending broader rescheduling and NYSE permitting inclusion. Since listing on June 10th, we have conducted non-deal roadshows to meet investors in Chicago, Denver, New York, Montreal, and Toronto. We introduced Trulieve to a host of institutional investors who are new to the cannabis space. Over time, we expect to realize greater stability in our shareholder base, higher liquidity, broader analyst coverage, and index inclusion for our stock.

We plan to commemorate our listing at a closing bell ceremony at the NYSE on August 18th, marking another milestone as the first U.S. cannabis company to ring the bell. We believe uplifting to the NYSE, re-domiciling in the U.S., and removal of the punitive 280E tax burden will lower our cost of capital. While the shift in federal policy is historic, I am equally excited about three significant near-term growth opportunities. First, in Georgia, program changes have created an unlock for increased distribution that we are executing on now. Second, in Texas, where we are in the process of converting our conditional license to final, we have the opportunity to serve the biggest medical market since Florida. Third, across our markets, we have a targeted strategy to acquire new customers currently served by the intoxicating hemp market as the federal ban takes effect.

Overall, Trulieve is ready to further solidify our leadership position during this incredibly exciting time for the industry. Our core business continues to outperform, generating industry-leading margins and strong cash flow, providing the flexibility to make strategic investments in growth initiatives. Turning now to our second quarter results. Please note, reported results for this quarter include the combined business until the deconsolidation transaction on June 3rd, and then the medical-only business for the remainder of June. Second quarter revenue of $271 million was in line with guidance. For the medical-only business, revenue increased 4% sequentially to $222 million. Second quarter gross margin of 60% reflects operational efficiencies, low production costs, and our disciplined approach to promotional activity. For the medical-only business, second quarter gross margin was 63%. Adjusted EBITDA of $98 million or 36% margin was driven by expense control in our core business.

During the quarter, we generated $53 million in operating cash flow, which contributed to our quarter-end cash balance of $325 million. Second quarter retail results were in line with positive seasonal trends, including the 420 holiday. In medical-only markets, traffic increased 6%, pressured by a slight sequential decline in average basket. Units were up 8%, underscoring strong demand for cannabis. In Florida, we sold 56% more flower per store than the state average across 169 stores, totaling 680,000 ounces. We sold 1.5 billion milligrams of oil, more than two times the next highest competitor. Patient growth in Florida, Georgia, and Pennsylvania has accelerated recently, further highlighting cannabis demand. Customer preferences for value, mid, and premium tier units sold remain consistent from the first quarter. During the third quarter, we expect growth in Georgia and Pennsylvania to offset typical summer pressure in Florida.

We expect momentum to fuel continued growth through year-end. Our investment in Harvest performed well in the second quarter, with revenue growth and margin expansion compared to the first quarter, driven largely by growth in Ohio. Turning now to our strategic objectives for 2026. We have made meaningful progress in these four areas. One, expanding access to cannabis, two, investing in growth initiatives, three, growing our loyal customer base, and four, elevating our branded product portfolio. I'll begin with expanding access to cannabis, which is a critical part of our mission. State-licensed medical marijuana has been reclassified to Schedule III, representing a major win for patients, caregivers, and physicians. Acknowledging the medical value of cannabis reduces stigma, eases barriers to research, and sets the stage for further reform. We remain supportive of broader rescheduling and expect a final order this year.

We expect momentum to continue with safe banking, updated FinCEN guidance, and Treasury guidance on 280E tax treatment, including potential retroactive application for state-licensed medical marijuana operators. These measures can expand access to banking and service providers, reducing friction and costs in day-to-day operations. While cannabis reform continues to come to fruition, we are ramping investments in meaningful growth opportunities in both Georgia and Texas. Following recent program changes in Georgia and federal reclassification of state-licensed medical marijuana, Trulieve has significant growth potential in both the independent pharmacy channel and our own dispensaries. Independent pharmacies in Georgia are eligible to register with the state and with the DEA to dispense approved medical marijuana products to registered patients. In June, we began supplying licensed pharmacies with medical marijuana products and are now shipping to almost 20 pharmacies.

We believe this market opportunity will expand over time, as more than 125 independent pharmacies have previously expressed interest in carrying medical marijuana products. Our team is meeting with pharmacy owners across Georgia to discuss medical cannabis and share information on how to apply for state and DEA licenses. Alongside pharmacy distribution, the Georgia program has six licensed operators for cultivation and retail. As one of only 2 Tier 1 license holders, Trulieve opened the first medical dispensary in April 2023. At that time, the program was limited to low-THC products for patients with severe and end-stage qualifying conditions. In May, the governor signed a new law that expands the program. As of July 1st, Georgia's medical marijuana program removes the THC cap, includes new qualifying conditions such as HIV, IBS, and lupus, and allows for new products such as vapes and inhalable flower.