Trulieve Cannabis Corp., together with its subsidiaries operates as a vertically integrated cannabis company. It is a multi-state operator (MSO) in the U.S. operating in 11 states, with leading market positions in Arizona, Florida, and Pennsylvania. In the cannabis sector, Trulieve has the largest operating retail, cultivation, and production footprint in the USA. The company cultivates and produces products in-house and distributes its products to Trulieve branded stores (dispensaries) in Florida, California, Massachusetts, Connecticut, Pennsylvania, and West Virginia, as well as directly to patients through home delivery. It produces approximately 550 stock-keeping units (SKUs), including flowers, edibles, vaporizer cartridges, concentrates, topicals, capsules, tinctures, dissolvable powders, and nasal sprays. As of December 15, 2021, the company operated 155 dispensaries in the USA. Trulieve Cannabis Corp. has a strategic partnership with SLANG Worldwide Inc. to supply branded cannabis products in Massachusetts. The company is headquartered in Quincy, Florida.
Trulieve is one of the largest and most profitable legal cannabis operators in the United States as well as in the world. The company has partnered with national brands such as Love’s oven, Blue River, Slang worldwide, Binske, and Bhang to bring the best product collection to its dispensaries. The company also owns brands such as Muse, Momenta, CO2colors, Sweet Talk, Cultivar collection, and Alchemy. By combining both in-house and partner brand products, the company offers one of the largest product lines in the industry with 900+ SKUs.
Almost all the Trulieve dispensaries have 4 stars or higher ratings (out of 5 stars) on Google. This is also a good indication of customer satisfaction and the company’s ability to serve the customers successfully.
In Q-3, 2021(ended in Sep-2021) company recognized $224.1M in revenue with $98M in Adjusted EBITDA. This indicates a +64% revenue growth year-over-year. Net income was $18.6 million in the third quarter.
Trulieve stock is down to $24/ share recently from $53/share in March-2021. The main reason is Cannabis investors are expecting U.S federal legalization of Cannabis which will allow companies to transport Cannabis between states. This may result in operational efficiency and net profit increase. But there is no such indication from U.S federal govt. to legalize medical/ recreational use of Cannabis throughout the USA. Right now, different states have different rules that companies need to follow to operate successfully in each state.
Another reason Trulieve has been struggling is that J.T. Burnette, the husband of CEO Kim Rivers, was convicted on public corruption charges in August. Although Trulieve management came out clean from the charges, the company stock is still falling since then.
Harvest Health & Recreation Inc. acquisition- On Oct 1, 2021, Trulieve announced that it has completed the acquisition of Harvest Health & Recreation Inc. This helped Trulieve to expand its footprint across the northeast part of the USA with additional affiliated facilities in Pennsylvania and entry into Maryland, the southeast part of the USA with additional stores, cultivation and production facilities in Florida, and the southwest part of the USA with dispensaries in California, cultivation and production facilities in Nevada and Colorado, and a leading vertical presence in Arizona. Before the acquisition company held its main presence in Florida with a limited presence in a few states. This acquisition helped the company to strengthen its presence in Florida with building the cultivation, production, and retail network across major USA states. With this acquisition, TRUL became an industry-leading MSO holding licenses to operate in 11 states and the largest operating retail, cultivation, and production footprint in the country. After the acquisition, the company owns 111 of its own branded dispensaries with a total of 155 dispensaries combined. Trulieve CEO Kim River said, “Now, the company’s total number of dispensaries represents approximately 37% more than our next closest competitor, and over 3.1 million square feet of cultivation, which is approximately 50% more than our next closest competitor.” In the Q-3 the total cultivation area increased to 3.5M sq. ft. After closing the deal, Trulieve and Harvest had combined $317.6 million in reported revenue, the highest among U.S. public reporting cannabis companies. This acquisition also helped to bolster the balance sheet of the combined company with Trulieve and Harvest's strong cash and cash equivalents of $289.0 million and $71.0 million, respectively, as of June 30, 2021. Trulieve recently announced $350.0 million debt financing to retire Harvest’s high-interest debt and to aggressively pursue strategic growth initiatives. The company also received $55.0 million proceeds from the sale of Harvest’s Florida license.
Kim mentioned the new combined company, is now planning to expand its footprints in Florida, Georgia, Pennsylvania, and Arizona. Growing in West Virginia is the company’s priority, where it is “first mover,” as well as potentially Maryland, where the company sees an opportunity to grow more. Kim River indicated that “Steve White, chief executive officer of Harvest and others from the Harvest executive team will remain in high stature in the new combined company. Also, the combined company will be onboarding the majority of Harvest management and employees”. This way the combined company will have management teams from both companies, which will help Trulieve to achieve operational excellence across cultivation, manufacturing, and retail in long run.
According to the terms of the deal, holders of Harvest shares received 0.1170 of a subordinate voting share of Trulieve for each subordinate voting share of Harvest held. In total, Trulieve issued an aggregate of 50,874,175 Trulieve shares in connection with the transaction in exchange for all of the issued and outstanding Harvest Shares. Harvest was delisted from the Canadian Securities Exchange at the close of the trading day on October 4.
In Q3, 2021(ended in Sep-2021) Trulieve generated $224.1M (Million) in revenue with a net income of $18.6M. The net income was impacted by $16.4M of one-time stock-based compensation, transaction, acquisition, and integration expenses related to Harvest acquisition. Without this expense, the company would have generated $35M in net profit. In Q-2,2021(before acquisition) Trulieve generated $215.1M in revenue with $40.9 in net income. This represents 19% of revenue in net profit.
Trulieve and Harvest combined third-quarter revenue is $316 million, with a net loss of approximately $9.8 million. In the second quarter, their combined revenue was $317.6, the highest among U.S. public reporting cannabis companies. The combined net income was $21.7M. I believe the revenue and net profit decreased from Q-2 to Q-3 because fourteen Harvest stores in Florida were closed for rebranding (from Harvest to Trulieve) purpose for a short period and reopened in October. In Q-2, 2021, Trulieve recorded a profit for the 14th consecutive quarter.
Right now, the company is trading at $24.5/share that makes the market cap around $4.6B on the company. Trulieve grew about 100% in 2020. It is expected to generate $815M in the revenue by end of 2021 with Harvest expecting to add another $400M in revenue. From these numbers, we can assume that the total combined revenue by the end of the fiscal year will come around $1.2B. If we assume the company can grow 30% per year for the next 5 years after that (Trulieve has grown 60%+ every year in the last 3 years so this is conservative guidance) then that would make the revenue $4.45B by 2026. Now if we consider 15% of the revenue in net profit (Trulieve achieved 19% revenue in net profit in Q-2 so this is easily achievable for the company in long run) by end of 2026 the net profit would be $668M. I believe the company will still keep growing by double digits after 2026 so it is reasonable to consider at least 15 P/E on this stock. That would make the total valuation on the company $668M X 15 = $10B. That is $53.4/share by 2026. This indicates a 118% return in 5 years or 16.9% average return per year.
Trulieve has one of the most experienced and diverse management teams in the Cannabis industry. The management team has combined work experience of over 100 years in various areas such as Cannabis operations, health care, M&A, technology, entertainment, advertising, Securities law, and corporate & tax law.
It is very hard to elaborate the skills and knowledge of the whole management team in one article, so I have tried my best to keep this as concise and informative as possible.
Kim Rivers - Chief Executive Officer- Kim Rivers joined Trulieve at its inception and has been the key driver for the Company’s customer-centric vision, strong growth, strategic expansion, and industry-leading profitability. Ms. Rivers oversees every activity involved with the cannabis process from seed to sale to ensure quality, operational integrity and financial success. Prior to Trulieve, Ms. Rivers spent several years in private practice as a lawyer where she specialized in mergers, acquisitions, and securities for multi-million-dollar companies and has run a number of successful businesses from real estate to finance. Her experience has been instrumental in building Trulieve’s market leading position in its home state of Florida.
Steve White – Harvest Chief Executive Officer- Steve has Over 10 years of cannabis experience as CEO and Co-Founder of Harvest Health & Recreation with legal background as former litigator. He is the pioneer in advancement of regulated cannabis industry.
Alex D'Amico- Chief Financial Officer- Alex brings over 20 years of accounting and finance experience in technology, healthcare, entertainment and advertising. He has held several senior finance and executive roles at public companies such as Cognizant, Quest Diagnostics, Synvista Therapeutics and Telaria. Mr. Alex is a growth-oriented business leader with a unique ability to scale an organization cross-functionally while operating in a public landscape. He has an extensive history of assembling high-powered teams and driving toward strategic initiatives.
He was a Summa Cum Laude graduate of Rutgers University and is a member of the American Institute of Certified Public Accountants, New Jersey Society of Certified Public Accountants and Financial Executives International.
Valda Coyat- Chief Marketing Officer- Ms. Coryat brings a unique blend of consumer-packaged goods and agricultural marketing leadership. Through her U.S., global and regional brand building experiences, she has delivered award winning innovation and consumer inspired multi-media campaigns. Ms. Coryat has leveraged strategy, analytics and creativity to drive profitable brand growth at companies such as Colgate-Palmolive, Avon and Heineken. Prior to joining Trulieve, Ms. Coryat led the National Mango Board’s Marketing across the consumer, retail and foodservice verticals. She received her B.A. from Duke University and MBA from Columbia University’s Graduate School of Business.
Chris Kelly- Director, wholesale- Chris has 20 years of experience in sales, operations and marketing roles. As Director of Wholesale for Trulieve, Chris leads the strategy development as well as the implementation and execution of Trulieve’s national wholesale plan. Chris brings vast experience to this role with an impressive track record in building strategy and delivering results across national wholesalers and strategic customers. Prior to joining Trulieve, Chris spent 8 years with Kellogg’s and +10 years with PepsiCo in various cross-functional leadership positions in.
Tim Morey- Chief Sales Officer- Tim has over 20 years of Retail leadership and Operations experience holding the roles of Region VP with Foot Locker and Sr. Operations Director with the Finish Line. He has achieved awards for Region of the Year, District Team of the year, Multiple Coach and Leadership awards throughout his career.
Nilyum Jhala- Chief Technology officer- 20+ years information technology experience at large public and private high tech and national CPG companies. Expertise across business and technical domains including digital and back-office transformation, ecommerce, IT architecture and business processes. Held leadership positions at companies such as Hallmark Cards, Dollar Tree Inc, Lowes, and Office Depot.
Also, there are other management team members- Kyle Landrum, Eric Powers, Jason Pernell, and more than half a dozen experienced and proved successful board of directors who are in the driver's seat to make this company succeed and thrive.
Trulieve has several competitors in the Cannabis sector such as Green Thumb industries (GTBIF), Curaleaf (CURLF), Canopy Growth (CGC), and Tilray (TLRY) to name a few. But each of them has one or more disadvantages when we compare their company valuation to Trulieve.
Green Thumb Industries (GTBIF): GTBIF is valued at $4.502B. The company is profitable and trading at 64.71 trailing P/E ratio vs Trulieve trading at 36.71 trailing P/E ratio. TTM P/S ratio for the Green Thumb is 5.96 vs TTM P/S ratio 4.09 on Trulieve. This shows the valuation on the Trulieve is cheap compared to Green Thumb industries.
Curaleaf (CURLF): Curaleaf is the biggest company of the pack with around $6.4B valuation. The company brought $1.12B in TTM revenue. Right now, the company is not profitable. It generated -$116.6M in TTM net profit.
Canopy Growth(CGC): This company is valued at $3.65B. This company barely grew 25% revenue during the past 12 months with negative revenue growth in the last quarter. This company is not profitable yet.
Tilray (TLRY): TLRY is valued at $3.863B. This company grew around 30% revenue during the past 12 months. The company delivered a loss of $367.42M on $513.08M revenue in the past year.
These are just a few examples. With most of Trulieve’s competitors, the story remains the same. Trulieve beats its competitors in one way or the other when it comes to the right stock valuation.
Note: P/E valuations may differ slightly by source. The P/E valuations mentioned here are based on Yahoo finance.
Trulieve’s majority of dispensaries are located in the state of Florida. Out of 155 dispensaries, it only operates 47 dispensaries or 30% of retail outside of Florida. This makes it a little risky business in case more cannabis businesses decide to expand in Florida and take market share from the company. This may reduce the company’s revenue growth as well as net profit. I believe, the company also realized this fact and started opening more dispensaries outside of Florida. Harvest acquisition is a solid example of Trulieve’s intention to expand outside of the Florida market.
Also, Trulieve recently acquired Harvest Health & Recreation Inc. Harvest is not profitable yet. It realized a loss of $19.2M in Q-2, 2021, and a loss of $28.4M in Q-3, 2021. This could hurt Trulieve’s short-term profitability and so the stock price.
Trulieve is rapidly growing and expanding by opening new dispensaries as well as by acquisitions. It is one of the most profitable companies in the Cannabis sector with a high growth track record which is a rare combination. The company has a track record of profitability for the consecutive 14 quarters till Q-2, 2021. After Harvest acquisition investors need to make sure that the company maintains its revenue growth (at least 30 percent per year) with net profitability. Right now, Trulieve is trading at a forward P/E ratio under 20 which is cheap considering its high growth opportunity. In my opinion, the risk/reward is very attractive at the stock price of $25 or below.
Note- This is not financial advice. It is just a personal opinion so please do your own research before making an investment decision.