Trulieve (TCNNF), our top pick in the cannabis space
Trulieve posted stronger-than-expected earnings, beating consensus estimates, and raised 2020 guidance. The company had record revenue in Q2 at $120.8M vs FactSet Consensus $106M, a 109% YoY increase and a 26% QoQ increase. Adjusted EBITDA was $60.5M vs FactSet Consensus $45.6M, growing 91% YoY and 22% QoQ. Gross margin improved to 75%, a 500 bps sequential increase from Q1’s gross margin of 70%. The company bolstered their cash position with another $50M, bringing their total cash on hand to $150.3M. Trulieve generated positive free cash flow for a second quarter in a row, with $39.6M for Q2 and $11.2M in Q1.
The company gave a new outlook on their 2020 guidance, raising revenue guidance to $465M - $485M from $380M - $400M, a roughly 22% increase. Adjusted EBITDA was raised to $205M - $225M from $140M - $160M, a roughly 43% increase. At the time of writing, FactSet Consensus estimates for 2020 are $440M for revenue and $197M for adjusted EBITDA.
The company added 5 new stores in Q2, bringing their Florida total to 54 and nationwide total to 56 – management expressed that they were “very, very comfortable” in meeting the yearend goal of 68 stores nationwide. Data from Florida’s Office of Medical Marijuana Use (OMMU) indicates that on a 12 week-moving average basis ending on July 2nd (roughly Q2’s end), Trulieve had 19.3% market share of units, 51.4% share of mgs THC sold, 44.9% of mgs CBD sold, and 54.6% of flower (oz.) sold. As of August 7th, the number of qualified patients with active ID cards in Florida’s medical marijuana program is ~389K, a 30% increase YTD.
We presented Trulieve (TCNNF) as a Hedgeye Cannabis Best Idea Long in February 2020. For a replay of our Best Idea Long presentation CLICK HERE.
Oklahoma’s medical marijuana program has been on a tear (CURLF)
According to data analysis by the Oklahoma Tax Commission (obtained by The Oklahoman), Oklahoman spent over $385M in 1H20 medical marijuana – close to the entirety of medical marijuana sales in 2019. Like other states, the medical marijuana program experienced a spike in sales during the early days of the pandemic in line with general pandemic stockpiling.
Compared to other states, Oklahoma has significantly looser restrictions for their medical marijuana program. The state does not limit the qualifying medical conditions necessary for a medical marijuana prescription. State law allows medical marijuana patients with a state-issued license to legally possess up to three ounces on their person, up to six marijuana plants and six seedling plants, one ounce of concentrated marijuana, and up to 72 ounces of edible marijuana.
Through their acquisition of Grassroots, Curaleaf (CURLF) has a foothold in the Oklahoma market, and as of June 2020, they hold seven dispensary licenses in the state.
New Jersey allows remote medical marijuana recommendations
The AG for New Jersey announced earlier this week that patients could obtain medical marijuana recommendations via telemedicine due to the pandemic. In a press release, AG Gurbir Grewal said, “New Jersey health care practices are again offering in-person services, but telehealth remains an important option for patients and providers.” He added “Doctors who use telemedicine to prescribe CDS or authorize medical marijuana will be held to the same professional standards as for in-person visits and must comply with all of the important safeguards we have adopted to prevent diversion and misuse.
This administrative order comes several months before adult-use legalization hits the November ballot.
