Trulieve Cannabis Corp.
Q3 2021 Earnings Call Transcript

Published: 15 Nov 2021

[Operator:]

Good morning, ladies and gentlemen, and welcome to the Trulieve Cannabis Corporation 's Third Quarter 2021 financial results conference call. My name is Jamie and I will be your conference operator today. As a reminder, this conference call is being recorded. And at this time, I would like to turn -- to introduce your host for today's conference, Christine Hersey. Ma'am, please go ahead.

[Christine Hersey:]

Thank you. Good morning and thank you for joining us. During today's call, Kim Rivers, Chief Executive Officer, and Alex D'Amico, Chief Financial Officer, will deliver prepared remarks on the financial performance and outlook for Trulieve. Following their prepared remarks, we will open the call to question. Steve White, President, will also be available to answer questions. 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 1-A risk factors of the Company's annual report Form 10-K for the year ended December 31st 2020. 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 U.S. 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 quarterly results. Please be advised that we may or may not continue to provide these additional details in the future. This morning, we reported results for the third quarter of 2021. A copy of our earnings press release and an accompanying 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. I'll now turn the call over to our CEO, Kim Rivers. Please go ahead.

[Kim Rivers:]

Thanks, Christine. Good morning, everyone, and thank you for joining us today. We are thrilled to report our 15th consecutive profitable quarter driven by continued outperformance and record revenue. As we approach the end of the most transformative year in our Company's history, we remain firmly on offense with an unrelenting focus on executing our strategy. Just over 6 weeks ago, we closed the Harvest acquisition, the largest U.S. Cannabis transaction to-date. As we outlined during our call on October 1st, this deal solidifies our position as the largest and most profitable public multi-state Cannabis operator in the U.S. On a pro forma basis, the combined Company's third quarter results would've been approximately $316 million in revenue and a 121 million in adjusted EBITDA, the strongest among any reporting MSO this quarter. On a standalone basis, Trulieve reported third quarter results of 224 million in revenue, representing an increase of 64% growth compared to last year. This growth was achieved with an industry-leading gross margin of 59% and adjusted EBITDA of $98 million. Trulieve operates in 11 states across three hubs, where we now have a total of a 155 dispensaries, 40% greater than our nearest competitor. Importantly, we now operate 47 dispensaries outside of Florida compared to 2 just 1year ago. Our industry-leading retail network is supported by over 3.5 million square feet of cultivation and processing capacity. With market-leading operations and Arizona, Florida, and Pennsylvania, we are well-positioned to build additional scale and depth in our cornerstone states, while redeploying profits to open and expand into new and emerging markets. While our teams were working to close the Harvest acquisition, we did not slow down during the third quarter. Trulieve alone opened 7 new dispensaries, closed the Keystone Shops acquisition in Pennsylvania, launched new products including the first-line of concentrates using hydrocarbon extraction in Florida, introduced a new brand portfolio with Cultivar Collection, Momenta, Muse, and Sweet Talk product lines announced a pending license award in Georgia, acquired an additional retail license and launched wholesale operations in Massachusetts, and became the first operator to commence cultivation activities in West Virginia. Concurrently, the Harvest team opened 6 new dispensaries, purchased an option to buy a license in Arizona, secured sale-leaseback financing for the Hancock, Maryland facility, and arranged the sale of the duplicative licensed in Florida for $55 million in cash. Since the end of the third quarter, we've kept the momentum going. In October, we opened a new affiliated retail location and Pittsburgh, Pennsylvania. In the past week, we were first-to-market in West Virginia, opening the first 2 medical dispensaries in the state in Morgantown and Weston. In Florida, 14 legacy Harvest dispensaries reopened its truly branded locations throughout the month of October. Those dispensaries are carrying Harvest branded products such as Alchemy, Co2lors, Modern Flower, and Roll One in addition to the extensive portfolio of Trulieve products totaling over 750 SKUs across a wide variety of form factors. For Harvest stores that were opened more than 1 month as Harvest and subsequently converted to Trulieve post acquisition, we have already seen a 35% increase in the revenue run rate thus far. With the conversion of Harvest stores in Florida completed, we are focused on additional locations. As of today, Trulieve operates 108 dispensaries in Florida and we expect to open another 5 dispensaries by year-end. During the third quarter, Trulieve maintained the top position in our home state of Florida. Trulieve remains the largest operator in Florida as measured by every conceivable metric, including volume of products sold for flour and oil, number of seeds, range of product categories sold, number of patients served, total employees, open retail locations, cultivation and manufacturing capacity, revenue and profit. According to data published by the Department of Health between July 2nd and October 1st, Trulieve alone fold over 32 thousand pounds of flour and more than 1.1 billion milligrams of oil, respectively, amounting to more than 200% and 275% greater than our nearest competitor. While we're proud of our achievements and acknowledge these impressive statistics, we're committed to continually setting the standard for operational excellence while remaining focused on delivering exceptional customer experiences. We are forging ahead with a series of initiatives centered around broadening access Cannabis products in Florida capacity expansion and technology investments designed to further advance our leading position. First, we are proudly to lead the way further expanding access to Cannabis products in the State of Florida with the first available concentrates manufactured using hydrocarbon extraction. Since the initial launch in September, these products have been very well received. So much so, that we recently quadruple hydrocarbon extraction tech capabilities and now building out additional capacity that will come online through the beginning of 2022. In addition, we continue our cultivation expansion efforts, while also adding manufacturing capacity across several other product lines. During the third quarter, we began operations at our new 55000-square-foot Tampa production facility, which includes a larger edibles kitchen. We expect the new kitchen will be fully ramped by year-end, bringing up existing space for increased production. As the market-leader in Florida, with roughly 50% market share for over 5 years now, we have collected and analyzed data for roughly half of the total transactions in the market to date. This data offers us valuable insights into customer preferences and behavior that informs our decision-making. One point of differentiation for our organization is continued investment in technology including our SAP enterprise software system and customer data and analytics platforms. These tools afford Trulieve the ability to capture and utilize data Company-wide, aid in SAP compliance, and enable patient and customer appreciation and retention tools. We aim to maintain our position as a leading operator and purveyor of high-quality Cannabis products with the customer - centric approach. We will continue to invest in Florida, adding cultivation, manufacturing, and retail capacity so that we can deliver high-quality products and best-in-class customer experience to patients across the state. Florida remains one of the most attractive medical markets in the U.S., demonstrated by continued growth in 2021 on top of the accelerated growth experienced during 2020. Patient growth in the third quarter remains strong despite the end of Telemedicine consultations in June, with an average of over 2,600 patients added per week. Do our existing scale and depth, additional investments in Florida continued to deliver fast and favorable returns that we can redeploy and invest in future growth opportunities ahead of catalysts including adult-use sales. Turning now to Pennsylvania. In July, we closed on the acquisition of Keystone Shops, adding 3 affiliated medical dispensaries in the Philadelphia area to our retail presence. As we indicated during the October 1st call, we were not required to divest any affiliated cultivation or retail assets in Pennsylvania as part of the Harvest acquisition. In October, 1 additional affiliated medical dispensary open in Pittsburgh. Pennsylvania presents a significant growth opportunity both within the existing medical market and with the potential future expansion to include adult-use sales. As of mid-August, Pennsylvania reported over 360,000 active patient certifications, and more than 2 billion in cumulative dispensary sales since the program's inception, we remain optimistic that mounting bipartisan support will ultimately lead to legislative measures to allow adult-use consumption in Pennsylvania. Finally, rounding out the discussion of our key markets, let's turn to Arizona, our cornerstone state in the Southwest. The Arizona market continues to develop and has outperformed our expectations since the launch of recreational sales in January. Since Harvest reported second quarter results in August, the team opened our 16th dispensary in North Mesa, purchased an option to acquire a 20th license and made considerable progress on developing a new upcoming retail location, which will be the only dispensary in downtown Phoenix. This market provides both an anchor to our operations in the Southwest and an opportunity to glean valuable insights in these growing recreational markets. We are continuing to invest in Arizona and, as the largest retail operator in the state, we are well-positioned ahead of the coming winter months and return of tourists and snowbirds. Following the recent debt offering and repayment of high cost and short-term Harvest debt, Trulieve has ample cash to fund our growth initiatives within this generational investment opportunity. Over the next few quarters, we will continue to invest in our cornerstone markets, adding depth in our retail reach and scale on our cultivation and production assets. By fortifying our leadership position, we will increase branded products through branded retail stores while continuing to build our wholesale channel, broadening our reach ahead of future catalysts. In the coming year, more than 20 locations will be re-branded Trulieve outside of the State of Florida creating a consistent experience across markets. In addition, we will strategically invest in emerging markets that offer attractive returns. While we continue to invest in further developing assets across our existing hub, we're open to completing additional tuck-in and expansive acquisitions. Our hub strategy allows us to add bolt-on assets in our operational hubs supported by our existing teams and infrastructure. In new regions, our M&A activities set us around adding both teams and assets as we did with the Harvest acquisition in the Southwest. Again, we will remain disciplined with our M&A strategy pursuing profitable growth, where we have an opportunity to acquire strategic assets in attractive market at an appropriate price. In addition, we will continue to pursue opportunities in new markets through organic license awards. We remain focused on markets with attractive regulatory structures that will allow us to achieve optimal scale with consistent supply, quality, and branding as part of our commitment to delivering exceptional customer experiences more pursuing profitable growth. Our third quarter results and recent actions demonstrate our commitment to our strategy and to our goal of building a sustainable and scalable business engineered for success. As a reminder, our fourth quarter results will include the full quarter contribution for Harvest. As for any contribution from Harvest, we remain confident in our 2021 guidance of revenue in the range of $815 million to $850 million and adjusted EBITDA in the range of $355 million to $375 million. We will provide full-year 2022 combined guidance when we report fourth quarter results in March. With that, I'll turn the call over to Alex for more details on our third quarter results.

[Alex D’Amico:]

Thank you, Kim, and good morning, everyone. This has been a tremendous year so far. Highlighted by significant progress along several fronts, including operational execution, organic growth and expansion initiatives, and acquisition and integration efforts. We'll continue to build on this momentum through year-end and into 2022. As we fully integrate the Harvest acquisition, we'll be leveraging expanded capabilities across our organization, supported by a deeper bench to help successfully navigate the rapidly evolving landscape within our industry. We're proud of how far we've come and excited to keep it going into next year. As Kim highlighted earlier, we reported third quarter revenue of $224.1 million, an increase of 64% year-over-year compared to $136.3 million during the third quarter of 2020. Third quarter revenue increased sequentially compared to $215.1 million during the second quarter, further adding to outsize growth in recent quarters. Trulieve ended the third quarter with 101 dispensary locations. As of November 15th, Trulieve owns or operates 155 dispensary locations. The Company achieved gross profit of $154 million or gross margin of 69% in the third quarter compared to $144.5 million or 67% during the second quarter. During the third quarter, we employed a targeted pricing strategy to preserve margin and retain the value of our brands and product offerings. In addition, gross margin was positively influenced by increased flow-through of material to finish goods despite macroeconomic labor constraints, and the on-boarding of additional capacity in all markets this was partially offset by increased third-party product sales and the inventory fair value step-up brought on by the acquisition of Keystone Shops early in the quarter. As saving and prior quarters, we expect gross margin will continue to fluctuate quarter-to-quarter depending on inventory flow-through, product, and market mix. Turning now to operating expenses. SG&A expenses in the third quarter, excluding depreciation and amortization were $79.9 million or 36% of revenue compared to $61.5 million or 29% of revenue during the second quarter of 2021. Third quarter expenses included approximately $16.1 million associated with 1 time share-based compensation and transaction acquisition and integration costs. The increase in share-based compensation expense related to the one-time exchange of outstanding warrants to restricted stock units. The transaction acquisition and integration costs were primarily related to the Harvest acquisition. Excluding these onetime costs, SG&A was 29% of revenue. As we continue to build scale and depth in cornerstone markets while expanding in new markets, we expect quarterly fluctuations in operating expenses, as investments are made ahead of increases in revenue. Operating income for the quarter was $66.3 million compared to $76.3 million earned in the second quarter. Net income was $18.6 million for the quarter, compared to $40.9 million for the second quarter. The sequential decline in operating and net income reflects the aforementioned one-time operating expenses and higher estimated tax provision for the third quarter. We expect quarterly fluctuations in estimated taxes, particularly within our high-growth industry. We generated earnings per share of $0.14 on a fully diluted basis. Absent one-time expenses, earnings per share would have been $0.26. We expect transaction and integration costs will continue to impact reported EPS for the next few quarters. Turning now to adjusted EBITDA. For the third quarter 2021, adjusted EBITDA was $98 million or 44% compared to $94.9 million or 44% during the second quarter. This is attributable to the flow-through of our increased gross margin, partially offset by the increase in sales and marketing expense associated with our growing retail footprint. We ended the third quarter with a cash balance of $213.6 million bolstered by $75.1 million in operating cash flow through the first 9 months of the year. Subsequent to quarter-end, we completed a $350 million private placement of 5 year senior secured notes at 8% representing industry-leading terms U.S. plant - touching cannabis companies. We have retired $270 million of high costs and short-term Harvest debt and $18 million of Trulieve notes payable. Our strong cash generation and financial profile provides flexibility to quickly capitalize on expansion opportunities, invest in organic growth, and go deeper in states where we operate. Company-wide capital expenditures year-to-date, averaged just over $21 million dollars per month in accordance with our plans. Expansionary capex investments will continue through year-end and throughout 2022 as we build scale and depth in line with market growth trends. Fourth-quarter investments will include allocation of capital to newly acquired Harvest assets. In closing, I'd like to express how proud I am of the team here at Trulieve, and how tremendous it has been to see firsthand the growth and continued evolution within the organization. I look forward to carrying this positive momentum into next year. With that, I will turn the call back over to Kim.

[Kim Rivers:]

Thanks, Alex. This has been an exceptional year-to-date at Trulieve underpinned by the transformational acquisition of Harvest. We're exiting the year as a larger, stronger organization, well-capitalized, and ready for the next phase of growth. While we have accomplished a great deal, it remains true that our story is just beginning. We're still in the early innings for Trulieve and the U.S. cannabis industry. The continued efforts to advance significant cannabis reform through legislation, such as the SAFE Act, MORE Act, and the newly introduced STATES Reform Act highlights the increasingly mainstream acceptance of the cannabis industry in this country by the broader population, business, and political leaders. In our view, it is only a matter of when and not if change will come. Even if federal reform continues to build momentum, advancements at the state and local level are accelerating over time, broadening the opportunity set and delivering greater access to cannabis to an eager public. For reference, the U.S. legal cannabis market is expected to grow to $48 billion in 2026, up from $26 billion in 2021. The markets in which we operate today represent over 50% of forecasted sales and are expected to grow over 65%, in the next 5 years. Within this context, Trulieve is uniquely positioned to meet the promise of this generational investment opportunity with an enviable combination of unmatched scale, operational excellence, strong financial profile, and world-class team. Trulieve is poised and ready to

[Christine Hersey:]

define the future of Cannabis. Thank you for joining us today. And as I always say, onward. At this time, Kim Rivers, Alex D'Amico, and Steve White will be available to answer any questions. Operator, please open up the call for questions.

[Operator:]

We will now begin the question -and-answer session. . If you are using a speakerphone, we do ask the please pick up your handset before pressing the keys. . Our first question today comes from Derek Dley from Canaccord Genuity. Please go ahead with your question.

[Derek Dley:]

Hi. Good morning and congrats on another set of strong results. I wanted to focus in on 2 states in particular. So 1, let's start with Pennsylvania. We've been hearing from some others about price competition in Pennsylvania, from what I get, namely on the value and can you comment on what you're seeing within that? And then the second part of that question, just in terms of incremental capacity coming online in PA, is your capacity online now and I would assume that that would focus on the higher end cultivar side?

[Kim Rivers:]

Sure. Thanks Derek. So as it relates to pricing and Pennsylvania, I think to your point, there has been a lot of conversation around pricing and what we believe and what I believe is that pricing in Pennsylvania started exceptionally high. And so what we're experiencing is normalization of pricing that happens over time and should happen over time in any market. Certainly, value products appear to be more effected, which makes sense as of course, quality separation occurs among pricing tiers. In Pennsylvania historically, through our acquisition of pure pen (ph) we have been focused on premium products, and so we certainly have experienced, I believe -- less pricing pressure than maybe some of the peer set. Moving forward, we do plan to bring additional capacity online and as noted, we won't require to divest any of our -- any of the Harvest retail or cultivation affiliated assets in that state. And so really the focus in Pennsylvania will be to bring increased branded products through branded retail over time and we believe that that will provide significant upside as it relates to margin in that's state along with of course increased product availability and that the customers are looking for from our brands.

[Derek Dley:]

Okay. Great. That's helpful in Pennsylvania. And then secondarily on Arizona and maybe Kim or Steve can answer this one, but as the markets entered adult-use here, what are the typical consumption patterns of customers in that space? Are you noticing that there's a -- is there material difference between new adult-use customers and perhaps the previous medical customers?

[Steve White:]

Thanks Derek. Derek, generally the customers -- the adult - use customers look a lot like the medical customers. What you will see over time, and this is generally true, I think, of all markets that add adult - use sales, that the recreational sales, the basket sizes tend to be a little bit smaller than the medical sales. And over time you see a transfer of customers from patients over to adult - use customers. In other words, the number of medical patients decreases as the recreational customers increase. We are seeing those patterns in the state of Arizona.

[Derek Dley:]

Okay, great. That's very helpful. Thank you very much.

[Operator:]

And our next question comes from Andrew Partheniou from Stifel GMP. Please go ahead with your question.

[Andrew Partheniou:]

Hi, good morning, congrats on the great results and thank you for taking my questions. Maybe thinking about Pennsylvania and Massachusetts, especially given -- you just entered Massachusetts Wholesale market. If we leveraged headset, we kind of see that the pricing in both markets at the retail level is similar. But at the same time we are seeing some pricing normalization, I think as you put it, in Pennsylvania, but Massachusetts seems to be a little bit more stable even though it's a non limited licensed market there. I'm just wondering if you have any thoughts around that, why do we see a kind of difference in trends in both of those states, and if you could provide any of your thoughts and color on that would be helpful, thank you.

[Kim Rivers:]

Yes, thanks, Andrew. So I think that first I would just caution against relying on any single data set as we certainly have found some inconsistencies there, but understand that we deal with the best -- and the best available that we have. I think that it goes back to what my comments previously around the fact of where things started, in Pennsylvania and we may in fact be seeing a bit of a pendulum swing there as, again, differences in tiers here are established, whereby I do you think in Massachusetts there are already existing pretty definitive price -- pricing as it relates to quality on a tiered basis across several categories in Massachusetts. So I think that it's a little bit of a case study in pricing strategy and in consumer behavior across both markets, but that's at least what we're seeing, and I think just to add a little additional color, we certainly are seeing the continuation rate of barbell patterns across both markets. But with Pennsylvania I think part of that barbell is being established, which is a bit different than what we see in Massachusetts.

[Andrew Partheniou:]

I appreciate that call and maybe switching gears to new states and your outlook on that, ideas around, New Jersey, New York, Illinois, other states in that area. In New Jersey in particular I believe, and correct me if I'm wrong, but you were among the 2019 RFA medical applicants, wondering if you had any updated thoughts around entering New Jersey or any of those other states, does M&A make sense with the increased visibility on wreck legislation and how that market will look in New Jersey or New York?

[Kim Rivers:]

Yeah. As you know, we don't comment on any sort of specifics around M&A. We remain very bullish on the Northeast as a whole. We think and we like our position in the Northeast, currently. We also, of course, as we noted in our prepared remarks, have a very specific metrics around deployment of capital, whether it's through organic growth or through M&A. Just for -- this is in the Northeast, it's depending on how you draw your state lines, but West Virginia that we just opened this past weekend, I was at that grand opening. And I can tell you that there were -- there was an exceptional reception to the first store opening in West Virginia. We served over 248 customers on day 1, lines around the block starting very early and going into the evening. So we're excited about our footprint. We're certainly poised to take advantage of additional opportunities as they become available and remain bullish on the Northeast as a hub.

[Andrew Partheniou:]

Thank you for that, and I'll get back in the queue.

[Kim Rivers:]

Great.

[Operator:]

And our next question comes from Russell Stanley from Beacon Securities. Please go ahead with your question.

[Russell Stanley:]

Good morning and thanks for taking my question. I guess my first just around the integration progress. Congrats on the re-branding of the Harvest dispensaries in Florida. Just wanted to get your thoughts on how far through what must be an extensive process you are. I know you're only 6 weeks in, but I guess wanted to get your thoughts on when you expect to be substantially complete.

[Kim Rivers:]

Sure. I think from our perspective and I'm going to let Steve comment on this as well, but from our perspective, integration is going extremely well. I think I've noted previously that -- Steve and I when we first started having discussions about the possibility of a transaction and we're in the final wrap-up stages of the LY, we set a priority of alignment across teams as really a defining priority. In other words, if its through the transaction through diligence, if things started to get offside, we were going to have another conversation about whether or not it made sense to continue because that's how important we believe that alignment really is throughout the process. And I think that that was well-served. Our teams have gotten shoulder-to-shoulder very quickly and are working together. And I think that the evidence there is in the fact that we haven't had any significant departures of what I've identified as key team members. In addition, as you mentioned, stores are being converted, product lines are coming through on a combined portfolio basis, which is again a key thing for us. As we get through integration, we'll certainly have additional work to do through 2022, bringing systems together over 11 markets and it's no small feat, and we're certainly heads down working on that as we speak. And then of course, on my prepared remarks, we talked about the fact that we're going to begin store conversions across that combined platform. And in addition, we'll be working through increased capacity to bring that branded products portfolio on a combined basis across the combined platform as well. Steve, do you have any other comments there?

[Steve White:]

Sure, I think, Russ, it's important to remember that just for context that we're actually months away from what would be expected close was. In other words, we shouldn't even be having this conversation yet. But we did find a number of areas in which the two teams -- where we could bring the two teams together more quickly and we could actually get to the close faster. It's been a point of emphasis for both organizations obviously because it's a very big deal. So I would say across all aspects, every way that you're going to look at the integration process we're very much ahead of schedule and have demonstrated that the teams together are executing maybe even better than they were independently.

[Russell Stanley:]

That's great. And maybe just one more and I'll get back in the queue on Massachusetts. I think you've recently entered the wholesale market there, just wanted to get a sense if you could share perhaps penetration numbers where you're at and perhaps any targets on penetration, be it by year-end or H1 or whatever you can share on that front would be helpful.

[Kim Rivers:]

Thanks, Russ. As you noted, we just launched our wholesale operations in Massachusetts. We have been focused on making sure that we have the right product mix with both truly branded products, as well as our national partner branded products. We recently brought to market those bang and our partner Blue River, which we think are 2 differentiators for us in Massachusetts alongside our very well received Cultivar Collection flower brand and our high-end concentrates brand, Muse. We feel like we have the product mix where we wanted at this point, and now we're ramping production scale to meet demand as we get to understand what those demand profiles look like for each one of those categories. I can say -- and I'm not in a position to share particular numbers on this call, but I can say that we -- in terms of number of doors, we are hitting our targets and are continuing to ramp as, again, we bring that capacity online.

[Russell Stanley:]

That's great. Thanks for the color. I will get back to the queue.

[Operator:]

And our next question comes from Matt McGinley from Needham. Please go ahead with your question.

[Matt McGinley:]

Thank you. Based on the proforma numbers you provided in the third quarter, it looks like Harvest revenue declined by about 10% quarter-over-quarter and EBITDA dollars would have been down a little bit as well. I've seen that was mostly Pennsylvania and Arizona, but can you talk about what happened in those states and I guess how those trends fared in the fourth quarter overall with the Harvest business.

[Alex D’Amico:]

Hey, Matt? Yes. Keep in mind when you do a proforma, we're taking out the impact of intercompany. So when you, when you add that back quarter-over-quarter, Harvest was down just slightly over 1% actually.

[Steve White:]

And Matt, this is Steve. Specific to your questions about Pennsylvania and Arizona, what we can say is that we actually saw quarter-over-quarter improvements in our retail sales in both of those markets; that the marginal decline, quarter-over-quarter, was mainly attributable to -- or entirely attributable to Nevada sales.

[Matt McGinley:]

Okay. And on the on the gross margin side, how much of a headwind would labor inflation and labor availability in the gross margin in the third quarter? I know that that was something you noted as a bigger issue in the second quarter and it appears to have largely dissipated in the third, but I'm just kind of curious what that looked like overall. And I guess more importantly, like what does that look like into the latter part of this year?

[Kim Rivers:]

Yes. Thanks, Matt. So as we noted correctly in Q2, certainly that was a headwind for us in Q2. It was also avail -- it was also there in the beginning of Q3. We compensated for it by increasing our overtime. And so the cost of labor for us did was elevated somewhat in Q3. We do see a normalization happen, not started occurring in the back side of Q3, and we would expect that to be back to a more normal rate going into and, certainly, what we're experiencing now in Q4.

[Matt McGinley:]

Thank you.

[Operator:]

And our next question comes from Paul Blow Zonnic from Cantor Fitzgerald.Please go ahead with your question.

[Pablo Zuanic:]

Thank you. Good morning, and Steve, one question for you. I hear there on the commentary at the beginning that in Florida the Harvest stores with the new assortment and changes, sales were over about 35%, can you give more context over that? I saw the stores were just re-branded. Is that a number for the month, for a week? Is that a number that we should just lap on top of your Harvest stores in Arizona, Pennsylvania as you get the benefits of the Trulieve ? And then a second one for Kim, if I may.. Kim, if I look at the Solevo numbers that were given at the time and now our estimates we think Keystone was about $10 million for the quarter. Certainly the sales were about flat and if I'm right, sales were flat and had said about 8% volume growth in Florida, that would mean that Solevo price mix was down about 7 to 8 points quarter-on-quarter for you. Can you give some context there? Any quarter would help. Thank you.

[Steve White:]

Thanks, Pablo. And I'll start with the Florida question. So when the legacy Harvest stores where they were required to be shut down and then opened again as Trulieve stores post close with the addition of additional products and some additional renovations in the stores themselves. What we saw on an annualized basis is an increase of 35% between the numbers at the Harvest stores were showing prior to the close down and after. In other words, it's not just a bump that you saw that was temporary, that the days that we calculated out and annualized those days. And so you saw 35% increase there, marked mainly due to the increased product SKUs, and some of the additional flow-through work that was done by the Trulieve team.

[Pablo Zuanic:]

But can we --

[Kim Rivers:]

Yes, and I'm sorry.

[Pablo Zuanic:]

Sorry, you can go ahead. I'm sorry.

[Kim Rivers:]

No, go ahead.

[Pablo Zuanic:]

I was going to say that 35% number of course is very impressive, but my question is more -- was that something you guys calculated based on results of a week or a month and I'm just trying to think how we extrapolate are you going forward. And is that 35% something that we should assume? You could also see a benefit in your stores in Pennsylvania and our rezoning, Steve. Thank you.

[Steve White:]

I don't know whether or not you could apply that pattern across other states or not. But what specifically what we're looking at as we're comparing our August legacy Harvest numbers with the annualized numbers post flip over two Trulieve Stores. Whether or not those -- I mean, I don't know that you could extrapolate much further in other states because obviously in the State of Florida, the Trulieve skews are quite expansive. So we'll see and we'll report what happens in the other states.

[Kim Rivers:]

Yes. I'm going to try Pablo to -- there was a few questions I think on the backside of that for me. But just to piggyback on what Steve said, certainly strategically in the other markets, what we are going to be focused on near-term is while we will have additional capacity coming online, we are going to be focused on getting the product mix situated for -- through our combined brand portfolio for each market and increasing production of branded retail into, sorry branded products into and through an expanded branded retail channel, And that certainly will be the primary focus in both Pennsylvania, as well as Arizona in the coming months. And so while in Florida specifically, we were able to come in and make immediate impact by increasing not only product availability, but also again, more robust combined product portfolio of both Harvest, Legacy Harvest and Trulieve products into those channels. We will plan to do some of the same in other markets but of course we'll also have a different product mix that's appropriate and acceptable, right to customers and each of those markets moving forward.

[Pablo Zuanic:]

Got it, and can you comment on my question about Florida, if you want I can repeat it, but do you want to repeat it?

[Kim Rivers:]

Yeah. I'm not sure. Yes, please repeat it.

[Pablo Zuanic:]

Okay. So in the case of Florida the question was based on my math, Keystone Shops is about 10 million in sales for the quarter. That will be in the quarter-on-quarter in organic terms, the business was flat, nothing wrong with that in the current context. But they're all more data for Florida had shown about 8% volume growth. Does that mean that the price mix in the Quarter was down about 8% sequentially. It will be consistent with all the talk that we're hearing about pricing competition there. But some color there would help. Thank you.

[Kim Rivers:]

Yeah. I'm trying to reconcile the comment as it relates to Pennsylvania to how it relates to Florida. What I can say around the Florida business is that certainly we're very proud of our performance in Florida this quarter. We had increased inventory flow-through into finished good products which we felt was very important in order to continue to keep up with what we're seeing on the ground. And so as we mentioned, there was promotional activity. However, I think we did a significantly better job this quarter executing on strategic promotional opportunities while maintaining margin, which you saw come through in the results, and certainly making sure that we are offering more targeted promotions across certain product categories. We -- when you have promotional activity, it's important that we continue to have the ability to have increased scale because you have to have additional production rate to increase because you're selling more units obviously at slightly lower prices. And so I think that this quarter we really saw, again, a combination of our scale coming through, our production team firing on all cylinders, and our sales and marketing team leaning into more specific strategic promotions that led to our outperformance on our peer set as it relates to Florida and, quite frankly, are maintaining over 50% market share most weeks as reported by the LMMU.

[Pablo Zuanic:]

Thank you, congratulations.

[Kim Rivers:]

Thanks.

[Operator:]

Our next question comes from Aaron Grey from Alliance Global Partners go ahead with your question.

[Aaron Grey:]

Hi. Good morning. Thanks for the questions and congrats on the quarter. So first question for me, wonder, double back a little bit on the last one. Kind of talked about between the lens of kind of retail versus wholesale. I know you haven't historically provided the breakout between retail versus wholesale for the Company, starting to shift now with some of the key acquisitions as well as Harvest coming through. Just wanted to know maybe if during the quarter you could provide some of the breakdown or maybe you don't want to do that, maybe some metrics used to provide in terms of same-store sales, visits basket, just if you could provide some color on how that trended during the quarter, I think that could be helpful. Thank you very much.

[Kim Rivers:]

Yeah. Thanks, Aaron. So obviously, historically, wholesale has been less of a relevant metric for Trulieve given our significant presence in the State of Florida, where wholesaling is not an option. However, to your point, we are starting to experience additional wholesale capacity as we expand outside of state of Florida. Important to note that we're not necessarily managing the business this way currently, but we are, again, continuing to focus on that wholesale channel on a go-forward basis. I think it's important to note that in 2021, if you were to exclude Florida, about half of our business is -- was via wholesale, and we do plan to double that business moving into 2022. However, I should again reiterate that we do believe that the best return is through branded product and branded retail, and that will remain a priority.

[Aaron Grey:]

Okay, great. Thank you for that color. And then just in terms of some of the competition within Florida and the promotional activity, and you talked about some targeted promotion yourself just based on some commentary from peers. If it does persist, we had talked about on this call on the last quarter, in terms of how long it would last given the high margin profile within the state. So if it does persist in the state, what are you guys looking to do maybe in terms of expanding it beyond just more targeted promotion? Obviously, very healthy margins despite some of your target promotion during the quarter. So how are you now looking at the state and evaluating the competitive environment, in the case of more heightened competition and promotional activity for an ongoing basis. Thank you.

[Kim Rivers:]

Yeah. I think that -- look, we've been I think very, very successful in maintaining static in terms of impact overall as it relates to pricing and promotional activity. However, what you saw from us this quarter, again, was an increase as that followed through to our margin based on our strategic focus. Look, if I can put up 69% margin, I will do that all day, and so I think that the proof is in the results and we'd like to rely on our results as opposed to go forward statements. I should note that as it relates to investment in Florida, to be clear, we have the ability over the next 12 months to bring online an additional million square feet of cultivation. And again, we'll be making decisions as to whether or not to actually bring that capacity fully online or not, depending on what we need to do and what we see in the competitive landscape. We're not taking our foot off the gas in the State of Florida. It's an incredible market, with incredible continued returns, as well as future upside -- as it continues to grow on the medical front. And of course, as we continue to position ahead of adult use.

[Aaron Grey:]

All right. Thank you so much for the color. I'll jump back into the queue.

[Kim Rivers:]

Great.

[Operator:]

Our next question comes from Camilo Lyon, from BTIG. Please go ahead with your questions.

[Camilo Lyon:]

Thank you. Good morning, everyone. Just went back Alex maybe if you could just help us on the Q3 gross margin and unpacking the moving question, you talked about a few different puts and takes. Maybe if you could just quantify them to help us understand the magnitude of those buckets and maybe just from a larger perspective, where from a higher level perspective how do we think about the buckets to consider into '22?

[Alex D’Amico:]

Just keep in mind when we say we deploy the strategic and targeted discounting strategy in the quarter, helps us preserve margin and protect our brands. So you could call that flat to Q-over-Q in that regard. In addition just -- we've continued to build our infrastructure in accordance to our capex plans, we bring on additional -- we onboard additional capacity in all markets this quarter, particularly in Florida, and we were able to, as Kim alluded to, navigate some of those labor challenges in our processing centers and increase of flow-through of working process to finished goods, we implemented some additional over time to do that and we end the quarter with a higher level of finished goods in the prior quarter. So those in conjunction -- and that was partially offset by the inventory fair value step-up that we all know and love, GAAP things from -- with our Keystone Shops. Those were the buckets for margin.

[Camilo Lyon:]

Was the better pricing action the bigger contributor or was it the higher level of finished goods?

[Alex D’Amico:]

The high, I mean, higher -- as you bring on capacity, right? So it's a combination. So higher level of finished goods. Increasing that flow-through from whip and then you bring on additional capacity as we were saying and that was a little bit back-loaded in the second half so we benefit from that.

[Camilo Lyon:]

Got it. Very helpful. And then as we look at '22, maybe if you could just remind us what your Capex projects look like as you have coming online to support some of the market in store growth that you're talking about.

[Kim Rivers:]

So we'll certainly give additional color on 2022, on the year-end call. I think globally what we're prepared to say today, is that we're going to continue to invest in our cornerstone markets, which we're defining as Florida, Pennsylvania, and Arizona, to bring on additional capacity, again, with the goal of having increased branded products through an increase in robust platform of branded retail stores. And so those investments, many of them are underway currently. With additional expansions expected throughout 2022.

[Camilo Lyon:]

Great, very helpful. Good luck and thanks for the color.

[Operator:]

Our next question comes from Graeme Kreindler from Eight Capital. Please go ahead with your question.

[Graeme Kreindler:]

Hi, good morning, and thank you for taking my question. We're about to enter what's expected to be a seasonally strong period in Arizona. So I was hoping you could discuss, if you're seeing any shift as we are in the early stages. Some seasonality’s here, what that's looking like as well as the inventory situation mistake given it was tightly managed earlier in the year at the onset of break. Thank you very much.

[Steve White:]

Sure, Graeme. In Arizona, typically, what you see is a little bit of seasonal weakness over the summertime months. You see less people in the State of Arizona. And typically, what you see is that that trend reverses or starts to reverse around October. In terms of any supply constraints continuing in the State of Arizona, as you would expect, the supply or the wholesale market is less constrained than it was when we originally introduced adult use sales. And so additional capacity has come online. And so we are starting to see less and lesser strengths there.

[Graeme Kreindler:]

Thank you for that. Dan, just as a follow-up on Arizona market, we've seen some increased consolidation activity as of late and I'm wondering if you could discuss what the opportunities in the landscape looks like potentially for further consolidation or where valuations are trending, particularly after it started off the year hot and now we're seeing some more deals as of late. I'd appreciate that. Thank you.

[Steve White:]

You bet. So Arizona, obviously, a cornerstone market and one where we'd be interested in adding to the retail portfolio if the price was appropriate. But the challenge has always been when the price is appropriate. When you saw the initial passage of the recreational initiative, you saw prices spike, and so you saw some that where -- deals that we are aware of and, frankly, not interested in paying those prices. So it becomes for us in a state like Arizona more challenging to get deals done, but we will continue to be evaluating what opportunities are there. And if they hit the -- our criteria for acquisition, then we will still execute on deals in the State of Arizona.

[Graeme Kreindler:]

Okay. I understood. Thank you very much for that.

[Operator:]

And our next question comes from Kenric Tyghe from ATB Capital Markets. Please go ahead with your question.

[Kenric Tyghe:]

Thank you and good morning. Kim, I wanted you speak to hydrocarbon extraction and its ramp versus and the moat as you look to 2022 and the competitive dynamics in Florida. I'd be interested to hear any insights you may have there with respect to I would say that ramp and that significance.

[Kim Rivers:]

Sure Kenric and so hydrocarbon extraction is an incredibly efficient extraction technique that yields significantly higher quality concentrate products than any of our previously existing extraction methodologies. And we are currently in the process of bringing on a number of new skews that will be new to the State of Florida that customers have been asking for, that not only will we be able to make available, but we'll be able to make available on a very scaled way, which we believe is -- has always been part of our competitive strategy in the State of Florida, and products that we brought to market so far have among the highest velocity of products as any in our portfolio, and signal to us that we needed to quickly not just double Down, but wonderful down with respect to our output, and so that's what we have done The capacities from that expansion is actually coming online as we speak. So products have been made and are in the testing cycle now with the expectation that we'll have an expanded portfolio available going into the holidays. As I mentioned on the call, we are also -- we're not stopping there because our forecasts indicate that we're going to need even more capacity to be able to effectively bring online the variety of products that we want to bring online coming through 2022. So we have additional investments in production equipment that will go into additional manufacturing facilities across the state through 2022. So that will continue to ramp first-half of '22 But we're very, very excited about that particular market segment in the state of Florida.

[Kenric Tyghe:]

Thank you, Kim. And just not to mischaracterize, but I mean, obviously very useful towards sector availability, but it will be a fair characterization that in the context of current promotional activity or potential profitable is in Florida that can and will also provide for a useful additional arrow in your curve, so to speak?

[Kim Rivers:]

Absolutely. I think it's also important to note that the efficiencies and therefore margin pull-through on those products are exceptionally high. And again, allows us significant flexibility as we think about positioning on a go-forward basis.

[Kenric Tyghe:]

Thank you. And a quick final one for me, just on Pennsylvania. What's your mind all the risks of any supply imbalance or market dislocation in the second half of 2022 with a number of players, yourselves potentially included? Adding a needing to add cultivation capacity ahead of adult use. How do we think about the potential pricing dynamics or dislocation there if the market were to move into a position of supply in balanced and anticipation of adult use.

[Kim Rivers:]

Yeah. I mean, I think that again, it's important to note that not all suppliers created the same and not all brands or products they are created equally in that coupled with. So I like our positioning in Pennsylvania as I've noted previously, and certainly the way that products -- legacy products resonate with customers has been and continues to be extremely well received on the wholesale front. On the retail front. And as we get more and more capacity, availability and product availability that we can provide internally through branded retail, we become I think -- in a more insulated position through 2022. So strategically I feel that we're in about as good of a position as you can get as you look at, again, the combined affiliate footprint vis -a - vis our peer set there.

[Kenric Tyghe:]

Nice. Thanks and congrats.

[Operator:]

And our next question comes from Scott Fortune from Roth Capital. Please go ahead with your question.

[Scott Fortune:]

Good morning. Kim, you've made a pretty good update on the legislative upfront first on the federal side with the Republicans narratives now in play and we'll learn more later today, but the seemingly pressure to give legislative reform ahead of mid-term with a lot focus around SAFE thinking and then color around that. And then also progress towards Florida and Pennsylvania movement ahead of adult use, what keys as you see going forward with those two states? That'd be great for an update there.

[Kim Rivers:]

Yeah, absolutely. I mean, I think that I, along with probably everyone on this call, is very much looking forward to Congresswoman Meza 's update today at 2 o'clock, on her proposed legislation. I, for one, am thrilled to see a female republican take a leadership position in this conversation. I think that it is doing the job of refocusing the conversation in a bipartisan way, which hopefully will lead to something that is actually possible in both chambers as you said before the mid-term. So we're encouraged by the development, and of course, we also have our eye on the defense bill this this week. And the opportunity potentially at least for faith thinking to be in the mix as that moves forward. I think a lot of positive movement on the federal side. But I think importantly, our business remains successful and remains poised for significant growth as we have been growing over the last five years. Regardless of what happens at the federal level, there are a number of state catalysts ahead and those provide significant opportunity for our business And to your point, Florida. We are -- currently there is a home-grow bill that is making its way which would crack the door, if you will, for legalization. Certainly, conversations continue around the posturing for an adult use initiative coming down the pike ahead of elections in 2024. In Pennsylvania, we similarly are encouraged by recent bipartisan legislation and think that the conversation in the Northeast as a region continues to accelerate with markets finally coming online in the adult use space, which, again, we continue to believe will be somewhat of a domino effect across the region.

[Scott Fortune:]

Great. And I appreciate the update. And then last question for me kind of where we're at on the loyalty programs, potentially help offset some of the discounting or pricing competition in Florida. Could you provide a little bit of update on the loyalty side of things and those initiatives?

[Kim Rivers:]

Sure. We certainly have a very widely accepted loyalty program in the State of Florida. When we look at our loyalty metrics, which we review quite often, those remain exceptionally high and we're still around 78%, 79% of customer loyalty in the state of Florida. Our customer base is continuing to return to Trulieve time over time to get to get products that they depend on and incorporate into their everyday lives. And we're looking forward on a go forward basis as we integrate our systems across the combined platform, the goal certainly is to have a unified loyalty program across the 11 markets that we are in today to offer, again, that consistent customer experience from branded retail to branded retail location.

[Scott Fortune:]

Perfect. Thanks for the color, I will jump back in the queue.

[Kim Rivers:]

Thanks.

[Operator:]

Our next question comes from Eric DesLauriers, from Craig-Hallum Capital Group. Please go ahead with your question.

[Eric Des Lauriers:]

Great, thanks for taking my question, and I offer my congrats as well on the strong results. I appreciate your comments on the price normalization trends that you're seeing in Pennsylvania and some other markets. Florida does seem to be a bit different, mostly retailer discounts here. Can you comment on some of the pricing trends that you're seeing in Florida across product categories or across the premium value spectrum? And then are any of these price normalization trends that you're seeing impacting your planned production or branding mix? With comments on hydrocarbon and Cultivar Collection, it sounds like there might be a increased mix towards premium, but just would love to get your color there. Thank you.

[Kim Rivers:]

Eric, thanks for the question. We're continuing to see barbell patterns hold true in Florida quarter-over-quarter, with certainly increased growth on both the value and on the premium side of the business. What we're seeing is we're seeing a high -- a little bit of an increase in that mid-tier as well simply because with certain promotional activity and certainly with the strategy that we deployed this last quarter, margins actually tend to be a bit better in that mid-tier. And so when you discount that mid-tier category, that value customer is unable to purchase into mid-tier. So there's a little bit of a blended a blended pickup on that front. But overall, I would say that really when we look at premium quarter-over-quarter, it's very, very consistent and when we look at value, again, with just that color that I gave at the release to just a slight uptick in the mid-tier. We're seeing value continue along existed trends as well. So in terms of how we are thinking about product mix moving forward, certainly we want to make sure that we have an adequate and robust supply on the premium side of things, and that we are continuing to focus on efficiencies and product quality, which thankfully the hydrocarbon setup allows us to excel in both of those through that through those product offerings.

[Eric Des Lauriers:]

Great, that's helpful. Thank you.

[Operator:]

And our next question comes from Andrew Semple from Echelon Capital Markets. Please go ahead with your question.

[Andrew Semple:]

Good morning and congrats on the results. Hoping for some insights on Pennsylvania retail dynamics in recent months, inclusive of the Harvest business there. Has the pricing normalization we've seen at the wholesale level increased transactional volumes at the stores? And assuming that might the case, has that volumes uptake perhaps been enough to offset pricing? And then secondly, where you have seen wholesale price compression. Have you seen retail margins expand at all or have those price savings been mostly passed onto the consumer?

[Kim Rivers:]

Yeah. I'm going to give some general color and then I'll let Steve take it as it relates to the Legacy Harvest portfolio in the quarter. What I would say is that I think in general, we're seeing a lot of that pricing flow-through to the customer. And, again, in Pennsylvania, I'll just reiterate the fact that it's not universal and we certainly are seeing different segments that have a different level, if you will, of bifurcation on pricing. And I think that, again, that's really the establishment of more clear cut tiers of products, which is again very normal. And really every other market that we participate in. So we think that it's healthy in terms of how the market is responding to create again, clear-cut tiers of products across different lines. And then if you want to speak to the Harvest legacy.

[Steve White:]

Sure. There was as I mentioned earlier, in response to a question from Matt McGinley, we did actually see an increase quarter-over-quarter in the legacy Harvest stores at the retail store front. In fact, it was one of our larger increases on a percentage basis across the portfolio. So we aren't seeing or haven't seen a significant pressures at the retail level.

[Andrew Semple:]

Great. That's helpful. And just a second question on the guidance. If I look at the upper end of that guidance range for the full year, for the Trulieve business, it would seem to imply maybe even a slight sequential decline even at the high end of that. I just want to see if you would comment on whether you expect to see any pressures to grow within Q4. I know there's a lot of moving pieces, potentially even inter-Company revenues. But I just want to see if there's any potential pressures to the pace of growth heading into the fourth quarter.

[Kim Rivers:]

Yeah. Thanks. We -- as we've said over time, Trulieve does not -- we're not going to change guidance on a quarter-by-quarter basis, absent some significant or material change in the business. We thought that it was important to indicate that we are very confident and remain confident in our ability to hit previously stated guidance, especially given the -- this quarter as it relates to our peer set with many folks changing or in some cases withdrawing guidance. We felt that it was important to comment on it, but again, it's just to be consistent with our previous practices and that we're not going to necessarily update it in a given quarter. And then, again, just a reminder, we will be giving, of course, combined guidance on a go-forward basis in the next quarter call.

[Andrew Semple:]

Great. Thanks again for the additional color and congrats on the results.

[Operator:]

Our next question comes Vivien Azer from Cowen. Please go ahead with your question.

[Harrison Vivas:]

This is Harrison Vivas on for Vivien. Thanks so much for taking the question. I know there's been a lot of discussion about pricing, but we'd love to get a better sense of how the pricing environment informs your philosophy around incremental cultivation capacity. So with the little evidence that these dynamics of reversing the near-term, have you had to reevaluate your expansion plans in any legacy Trulieve markets or any of the newly acquired Harvest markets? Thanks very much.

[Kim Rivers:]

Yes. No, I think you -- look, our model and our decision making metrics have a number of inputs. And we've built the Company to be very bottoms-up in terms of how we model and how we look at the business. Certainly, as we think about our forward -- forward-looking plans, we are evaluating not only of course, pricing and -- but again, we're looking at growth in the market. We're looking at increases in our customer bases. We're looking at our flow through in our current customer metric at our store levels. So there are a number of inputs to our model. I would say that again as we look at the future, we believe that in all of our markets additional capacity is warranted. We are looking at a very robust, we think, forward-looking growth cycle ahead through 2022 on a now a much more significant platform. We see a number of opportunities for growth that absolutely would indicate that we need to make additional investments in those markets and again, we think that really one of the big takeaways for 2022 will be that capacity coming through into branded product and branded retail that will provide and not only top line, but again, additional margin pickup across the platform as we continue to integrate and optimize this incredible platform that we now have.

[Vivien Azer:]

Thank you very much, I'll pass it on.

[Operator:]

And our next question comes from Owen Bennett, from Jeffery. Please go ahead with your question.

[Derek Margiado:]

Hi. Good morning. This is actually Derek Margiado calling from congrats on the Quarter. Again, most of my questions have been answered about Florida and Pennsylvania, but just wanted to touch on the Georgia market, you guys have received a tenth of the award for the Class 1 production license there, and one of two licenses, its alluded licensing environment. Just wondering if there's any update on timeline that come online and kind of comments on potential of that market? And then I guess second question would be plans within these more mature markets like Colorado and California where your footprint isn't as robust as obviously Florida, Pennsylvania, Arizona. But what are plans there with obviously, they are much more mature in competitive markets. Any color would be great. Thank you.

[Kim Rivers:]

Sure. We remain very, very excited on the door to opportunity, very normal post license award for there to be a period of -- a pause period as regulations are developed, and it's also very, very typical for there to be protests period, etc. that happened in I think every market that I'm aware of. And so that's the period that we're in right now in Georgia. We would hope that by within the next 12 months that we would have greater clarity. We certainly have plans in place, all ready to hit go as soon as we're able to and as soon as we received the green light from the state there. Georgia look a lot like the Florida market looks out its inception, with a big differentiator in the fact that there are already over 18 thousand patients registered in the seat of Florida awaiting for products to come online. And so in addition, as we think about the other markets, to your point, California and Colorado, what you'll see from us in the next year is you will see in California the rebranding of a number of stores into Trulieve locations. In Colorado, we're continuing to evaluate that market. We have made some smallish investments in Colorado to ensure that our product mix there on a wholesale basis is properly positioned as we think about again that branded product portfolio and getting that into as many customer hands as possible moving into next year.

[Derek Margiado:]

All right. Thanks so much. I'll pass it on.

[Operator:]

Ladies and gentlemen, with that, we'll be ending today's question-and-answer session. I'd like to turn the floor back over to the management team for any closing remarks.

[Kim Rivers:]

Thank you for your time today. We look forward to providing additional updates on our progress during our next earnings call. Have a great day.

[Operator:]

Ladies and gentlemen, with that, we'll conclude today's conference call. We do thank you for attending today's presentation. You may now disconnect your lines.