TCNNF Q3 2026 earnings call transcript, November 5, 2026

Good morning, everyone, and welcome to the Trulieve. Cannabis Corporation third quarter 2026 financial results conference call. My name is Chuck, and I will be your conference operator today. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host for today's call, Ms. Christine Hersey, Chief Corporate Affairs and Strategy Officer for Trulieve. Please go ahead.

Thank you.

...performance and outlook for Trulieve. Following the prepared remarks, we will open the call to questions. This morning, we reported third quarter 2026 results. A copy of... ...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 An archived version of today's conference call will be available on our website later today.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 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, if... 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.

Thank you, Christine.

Good morning, everyone, and thank you for joining us today. We are thrilled to report third quarter results that exceeded guidance with higher revenue margin. ...and cash generation. Third quarter results represent medical-only markets, and our first full quarter listed on the New York Stock Exchange. This is an incredibly exciting time for our company. For anyone new to... We are the largest U.S. medical cannabis operator with 208 dispensaries and 3.5 million square feet of production capacity. We are in the early stages of an... Accelerated growth period fueled by organic market development, acquisition opportunities, regulatory catalysts, and continued adoption of cannabis. Before we discuss our quarterly results, I'd like to share some perspective on rescheduling. and how truly this positioned. The Trump administration made history by completing the first major cannabis policy reform in over 50 years. Last December, President Trump issued an executive order opening the door. for medical cannabis research and supporting rescheduling a state licensed medical marijuana to schedule three. Following the executive order in April, Attorney General Todd Blanche took. two major actions. First, he issued a final order to reschedule state licensed medical marijuana to schedule three. And second, he restarted the rulemaking process to reschedule marijuana more broadly to schedule three.

The first action, rescheduling a state licensed medical marijuana, triggered three major positive developments for Trulieve. One, registration with the DEA. Two, removal of the RECO. You're welcome. Two ADE punitive tax burden. And three, uplisting to the NYSE. I'll touch briefly on each area. First, Trulieve registered all of its medical only marijuana dispensaries and production facilities with the DEA, complying with the final order. Since then, the DEA has completed inspections and began issuing final registrations at all of our medical dispensaries and production facilities. With DEA registration and state licensure, Trulieve is a federally legal Schedule 3 operator. This is an important differentiator for us as it opens the door. It opens the door for new strategic partnerships and service providers. Second, concurrent with rescheduling of state-licensed medical marijuana, the Treasury Department issued a press release confirming that punitive 288 e-tax does not apply to state-licensed medical operators under Schedule 3. From this year forward, we are taxed the same as any U.S. corporation. This parity is important because it improves profitability and cash flow while acknowledging the medical status of our business. Third, state-licensed medical marijuana rescheduling enabled Trulieve's list on the NYSE. As the largest U.S. medical operator, Trulieve was uniquely positioned to segregate its business into two parts, separating the non-medical mixed-use market from our medical-only business.

Trulieve listed its medical-only Schedule III business on the NYSE in June. Since uplisting, we have realized higher daily trading volume, reduced swap exposure, expanded access to institutional investors, and inclusion in several indices such as the S&P Total Market Index and the Morningstar Total Stock Market Index. We expect Trulieve will be added to additional indices in the coming year. Altogether, Trulieve has realized meaningful benefits from rescheduling of state-licensed medical marijuana. Turning now to our third quarter results. As a reminder, results include markets serving only medical patients. During the third quarter, the team outperformed in multiple... delivering impressive execution in our core markets while rapidly expanding in Georgia and preparing to build out vertical operations in Texas. Third quarter revenue... of 230 million grew 4% year-over-year and sequentially compared to medical-only revenue in prior periods. Medical revenue exceeded guidance and outperformed... ...typical seasonal trends. Compared to medical-only results last year, third-quarter gross margin of 64% improved 1%, reflecting operational efficiencies, low production... ...in our disciplined approach to promotional activity. Adjusted EBITDA of $89 million, or 39% margin, was driven by expense control in our core business. During the quarter, we generated $74 million in operating cash...

...which contributed to our quarter-end cash balance of $327 million. Subsequent to quarter-end, we fully repaid a $65 million mortgage secured by our cultivation campus in Jefferson... ...in County, Florida. The reduction in debt lowers annual interest expense, improving profitability and cash flow. Retail revenue grew 2% sequentially due to growth in Georgia and Pennsylvania. Traffic increased 3%, partially offset by a slight sequential decline in average basket size. Units sold were up 2%. In Georgia, traffic and units increased 7%. Units sold with market expansion and new product types including concentrates, flower, and vapes. In Pennsylvania, higher traffic and strength in the wholesale channel contributed to revenue growth. Results in Florida were consistent with typical seasonal trends. Trulia sold 55% more flower per store than the state average across 170 stores totaling 657,000 ounces. We sold 1.4 billion milligrams of oil, more than two times the next highest competitor. Across our branded retail platform, customer trends have been consistent throughout the year. With some mid-tier customers leaning into value products, while the premium segment remains unchanged with a focus on exclusive top-shelf products. Our investment in Harvest performed well in the third quarter. With revenue growth and margin expansion compared to the second quarter, driven largely by growth in Ohio. As we approach year-end and the busy holiday season, our team is carrying the momentum forward.

At the start of the year, we identified four strategic initiatives to focus on. One, expanding access to cannabis. Two, investing in growth initiatives. Three, elevating our branded... ...product portfolio. And four, growing our loyal customer base. Year to date, we have made significant progress in all four areas. First, I'd like to discuss expanding access to cannabis, which is central to our mission here at Trulieve. 2026 has been a pivotal year, with historical federal policy changes and expansion in state markets, such as Georgia. Federal rescheduling of state-licensed medical marijuana removes barriers for research, reduces stigma for patients and physicians, and... ...and provides a level playing field for lawful operators, enabling additional investments in patient access. We remain optimistic that broader rescheduling will happen in the near term. We expect that the Treasury Department will issue additional guidance on tax treatment... ...including potential retroactive relief following completion of the rescheduling process. Following the midterm elections, cannabis reform remains a central theme across the country. We look forward to... ...continuing to work with Congress to advance cannabis policy into 2027. Alongside rescheduling, we remain supportive of additional reform, including updated SIN-SIN guidance and safe banking. These measures reduce friction for operators, support credit card payments and dispensaries, and ease restrictions on banking and service providers. Our second strategic growth priority...

is investing in growth initiatives, which includes both organic and acquisition opportunities. We believe Georgia and Texas present meaningful organic growth opportunities for Trulie. In Georgia, following changes to the state medical marijuana program... and federal rescheduling for state licensed operators, we are pursuing two pathways for growth. The first is expansion of our licensed medical dispensary network. Today, we own and operate seven dispensaries that serve qualified patients... with our branded products. Yesterday, we received approval to open our eighth and ninth dispensaries, which we anticipate will open in the coming months. The state program is designed to provide expanded access as the patient count grows. With 80% patient growth since the start of the year, the patient count recently surpassed 60,000. We can request an additional location for every 10,000 patients that are enrollment. We plan to apply for our 10th dispensary this month once the patient count reaches 65,000 patients. The second growth area is wholesale distribution of branded products to independent pharmacies. In Georgia, independent pharmacies can register with the state and the DEA to dispense approved medical marijuana products to registered patients. Today, we are shipping to almost 20 pharmacies. While development of this channel remains ongoing, early progress is encouraging. Over 30 more pharmacies are ready to commence sales of Trulieve products pending licensure, and over 125 independent

pharmacies are ready to commence sales of Trulieve products. pharmacies previously expressed interest. Our team is meeting with pharmacy owners across Georgia to discuss medical cannabis and share information on how to apply for state NDA licenses. In support of growth and Georgia, we have been increasing production capacity since last spring. Our Georgia operations are fully vertically integrated, where we produce all of the cannabis products that we sell in our dispensaries. As I mentioned, third quarter units sold increased by seven times the amount sold in the second quarter. Newly launched in-house brands Modern Flower and Roll 1 accounted for 70% of our branded units sold in Georgia. Our team has done a fantastic job managing through the period of rapid growth. Today, we have adequate supply to service our current business, and we are adding capacity in stages. to 2027 to meet growing demand in all channels. While the Georgia market is rapidly expanding now, we believe Texas represents the largest medical cannabis opportunity in the U.S. Last December, Truly was awarded a conditional license. We are working through the process to convert the conditional award to a final license. We expect the next steps to include completion of financial review and site inspections. Our initial production capacity is ready for inspection and we have a robust retail pipeline of stores covering all regions. Pending final licensure, our team is ready to quickly ramp to serve Texas patients. New patients can enroll in the program through convenient telehealth consultations.

Easy program entry, greater price variety, and increased awareness all support rapid program growth. We plan to replicate the success we've had in other markets like Florida and Georgia by scaling modularly as the patient count increases over time. Alongside investments in Georgia and Texas, we are actively evaluating acquisition opportunities ranging from tuck-in assets to larger single and multi-state operations. We expect consolidation in the cannabis industry will continue for the foreseeable future. Our stringent evaluation criteria includes price, strategic fit, quality of assets, and market framework. The strength of our core business and cash flow generation allow us to flexibility to consider acquisition opportunities while remaining disciplined to ensure transactions enhance long-term shareholder value. While reform and growth initiatives continue to advance, we remain committed to operational excellence in our core business. This brings us to our third initiative, which is elevating our branded product portfolio. Serving our customers consistently with high-quality branded products is a key ingredient to our success. Our branded product portfolio includes both in-house brands and partner brands. In the third quarter, we sold over 10 million branded product units in our medical dispensaries. With in-house brands Modern Flower and Roll One accounting for 55% of the units sold. We complement in-house brands with partner brands to add variety for our customers. In September, we closed on a master licensing agreement with Connected.

The agreement affords us exclusive perpetual royalty-free rights to genetics, trademarks, and know-how for Alien Labs and Connected branded products in Florida and Texas, and has a payback period of less than two years. In 2022, TrueLeaf has been the exclusive provider of Alien Labs and Connected Premium Blower in Florida. We plan to introduce new Alien Labs and Connected categories and form factors in Florida, including vapes and... ...as soon as the first half of 2027. The agreement provides TrueLeaf with the right of first refusal for exclusive licensing rights and additional expansion markets. Availability of... ...top-shelf premium products supported with collaborative marketing campaigns reinforces customer acquisition and retention. We will continue to enhance our assortment with new and innovative branded products. Turning now to our fourth... ...initiative this year, growing our loyal customer base. Since inception, Trulieve has embraced a customer-centric approach to building our company, reinforcing acquisition and retention. We use a combination of... ...outreach, paid media, and in-person events to attract new customers to Trulieve. Across our platform, we conduct over 100 community and physician engagement events per month. ...partnering with a wide variety of nonprofit organizations to raise awareness for cannabis. Establishing and maintaining reciprocal relationships with our customers is essential for customer retention.

Customer retention remains strong at 75%, highlighting the success of our approach. Consistent customer retention requires availability of high-quality products, timely and informative messaging, and exceptional service. Over the past three years, we've invested significantly in talent, technology, and training to reinforce our customer messaging and service. As our marketing capabilities evolve, we are adding more sophisticated functions. Together, personalized messaging rewards program and mobile app provides customers with convenient real-time updates. Earlier this year, we launched an initiative called Project Hyper. that uses generative AI to enable personalized customer messaging at scale. This initiative is on track, and we expect to begin realizing efficiency and speed-to-market benefits in the first quarter of 2027. Our rewards program added over 45,000 members in the third quarter, surpassing 700,000 members. Rewards members spend, on average, 2.1% of the year. Oftentimes, more than non-members, comprising more than 80% of third quarter transactions. In May, we added tiers to the rewards program in Florida, giving our most loyal customers greater rewards. Following the early success in Florida, we are rolling out tiered rewards in Georgia this month. One year ago, we launched our Florida mobile app, giving patients a more convenient way to browse products, access deals.

and rewards and place orders. Adoption continues to exceed expectations with more than half a million orders or 30% of all online orders placed through the app in the third quarter. We plan to launch the mobile app in Georgia soon, followed by additional markets in 2027. In summary, we have made substantive progress on our strategic priorities with notable wins across reform, growth initiatives, branded products, and customers. As we approach year-end, our team is laser-focused on maintaining operational excellence in our core business while prepping for the next wave of accelerated growth. With that, I'd like to turn the call over to our CFO, Jan Rees. Please go ahead.

Good morning, and thank you, Kim. As a reminder, third quarter report... ...results include TrueLeaf medical operations. Following the deconsolidation of harvest, the harvest results are reported as an equity investment. Please refer to our earnings presentation for additional... ...details. Third quarter, medical revenue was $230 million. Compared to medical-only revenue of $221 million in Q3 last year and $230 million... ...$22 million in Q2 this year, up 4% compared to both periods. Third quarter revenue exceeded guidance, outperforming typical seasonal trends driven... ...by growth in Georgia and Pennsylvania. Third quarter gross profit totaled $148 million, or 64% margin. Up from $139 million in Q3 last year and $140 million in Q2 this year. Gross margin improved by 1% year-over-year and sequentially. Gross margin... Strengths reflects economies of scale, operational efficiencies across our platform, and disciplined promotional management. We expect quarterly gross margin to vary based on product and market mix. Inventory sell-through, promotional activity, and idle capacity costs. Third quarter SG&A was $88 million, or 38% of revenue. Adjusted SG&A. was $78 million, or 34% of revenue, a 1% improvement from last quarter. We expect SG&A may fluctuate based on the- timing of investments in growth opportunities and infrastructure. Third quarter, net income was $1 million. Excluding non-recurring items, third quarter net income would have-

Thanks, Jan.

Thank you. We will now begin the question and answer session. To ask a question, you may press star than 1 on your. Touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. And to withdraw your question, please press star than 2. We ask that.

The next question will come from Bill Kirk with Roth Capital Partners. Please go ahead.

The next question will come from Aaron Gray with Alliance Global Partners. Please go ahead.

The next question will come from Gabby Angolia with Cancer Fitzgerald. Please go ahead.

The next question will come from Federico Gomez with ATB Cormark. Please go ahead.

And this will conclude our question and answer session. I would like to turn the conference back over to Ms. Christine Hersey for any closing remarks. Please go ahead.

Thanks, everyone, for your time today. We look forward to sharing additional updates during our next earnings call.

Thanks again, and have a great day.

The conference is now concluded.

Thank you for your participation.

You may now disconnect.