Q4 2023 Trulieve Cannabis Corp Earnings Call

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Good morning, everyone and welcome to the truly of cannabis Corporation fourth quarter and full year 20 twenty-three your financial results Conference call.

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As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference Christine Hersey, Vice President of Investor Relations for truly may begin.

Operator: Thank you. Good morning, and thank you for joining us. During today's call, Kim Rivers, Chief Executive Officer, and Wes Gettman, Chief Financial Officer, will deliver prepared remarks on the financial performance and outlook for Trulieve. Following the prepared remarks, we will open the call to questions. This morning, we reported fourth-quarter and full-year 2023 results. A copy of our earnings press release and PowerPoint presentation can be found in 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 An archived version of today's conference call will be available on our website later today.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 annual report on Form 10-K for the year ended December 31st, 2023, as well as our periodic quarterly filings. Although the company may voluntarily do so from time to time.

Thank you.

Good morning, and thank you for joining us.

Today's call Hamburgers, Chief Executive Officer in West <unk>, Chief Financial Officer will deliver prepared remarks on the financial performance and outlook are truly.

Knowing that prepared remarks, we will open the cough questions.

This morning, we reported fourth quarter and full year 2023 results a copy of our earnings press release, and Powerpoint presentation, maybe balance on the Investor Relations section of our website Www Dot <unk> dot 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An archived version of today's conference call will be available on our website later today.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 fact constitute forward looking statements.

Statements are subject to red 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.

Alluding item one a risk factors of the company's annual report on Form 10-K for the year ended December 31st 2023, as well as our periodic quarterly filings.

The company May voluntarily do so from time to time.

Operator: It undertakes no commitment to update or revise these forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. During the call, management will also discuss certain financial measures that are not calculated in accordance with the United States Generally Accepted Accounting Principles, or GAAP. We generally refer to these as non-GAAP financial measures.

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 gap, we generally refer to these as non-GAAP financial measures.

Kimberly Rivers: 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, which is an exhibit to our current report on Form 8K that we filed with the SEC today and can be found in the investor relations section of our website. Lastly, at times during our prepared remarks or responses to your questions, we may offer metrics to provide greater insight into the dynamics of our business or our financial results. Please be advised that we may or may not continue to provide these additional details in the future. I'll now turn the call over to our CEO, Kim Rivers. Thank you, Christine. Good morning, everyone, and thank you for joining us.

These measures should not be considered in isolation or as a substitute for truly financial results prepared in accordance with gas.

Conciliation of these non-GAAP measures to the most directly comparable job <unk> is available in our earnings press release that as an exhibit to our current report on form 8-K that we furnished to the S. C. C. Today and can be found in the Investor Relations section of our website.

Lastly at times during our prepared remarks or responses to your questions. We may offer metrics to provide greater insight into the dynamics of our business or our financial results.

Please be advised that we may or may not continue to provide these additional details in the future.

I'll now turn the call over to our C E O <unk>.

Thank you Christine good morning, everyone and thank you for joining US. This is an incredibly exciting time for tree leave we entered 20th 24 in a position of significant strength just as the outlets for meaningful catalyst frightened by the end of this year, we will have greater clarity on two of the biggest events for our industry Rescheduling and Florida adult youth.

Kimberly Rivers: This is an incredibly exciting time for Trulieve. We entered 2024 in a position of significant strength, just as the outlook for meaningful catalysts became brighter. By the end of this year, we will have greater clarity on two of the biggest events for our industry, rescheduling and Florida adult youth. The DEA is expected to make a recommendation on the pacification of cannabis any time now. In Florida, the Adult Youth Initiative is awaiting a court opinion for inclusion on the ballot this November. Either of these catalysts alone would be significant.

<unk> is expected to make a recommendation on the part of the kitchen of cannabis anytime now in Florida. The adult youth initiative as a waiting a ford opinion for inclusion on the ballot. This November either of these catalysts alone would be significant.

Kimberly Rivers: Given our cash position and outsized market share in Florida, we are best positioned to realize a tremendous potential upside. However, it should be noted that without any catalysts, our base business remains strong, and we are poised to build upon recent momentum. Having completed the lion's share of inventory reduction and optimization efforts, we are operating more efficiently, making higher quality products, enhancing performance in retail, and generating more cash from our existing core business. In 2023, we cut SG&A expenses by 14% to 34% of revenue.

Given our cash position and outside some market share in Florida, we are best positioned to realize the tremendous potential upside. However, it should be noted that without any catalyst are based business remains strong and we were poised to build upon recent momentum having completed the lion's share of inventory production and optimization efforts, we are operating more efficiently.

Making higher quality products elevating performance in retail and generating more cash from our existing core business in 2023, we cut SG&A expenses by 14% to 34% of revenue.

Kimberly Rivers: Full-year Adjusted EBITDA of $322 million, or 29% margin, underscores our operational strength, alongside full-year cash flow from operations in excess of $200 million, driven by a significant boost in cash flow in the back half of the year. The fourth quarter was exceptionally strong, the best quarter of the entire year, underpinned by substantial improvements in revenue, gross margin, and adjusted EBITDA. Revenue increased 4% to $287 million. Strong holiday sales in the last six weeks of the year contributed to the outperformance.

For your adjusted EBITDA $322 million or 29% margin underscores or operational springs, alongside pull your cash flow from operations in excess of 200 million driven by a significant boost in cash flow in the back half of the year.

The fourth quarter with exceptionally strong the best quarter of the entire ear underpinned by sequential improvement in revenue gross Martin and adjusted EBITDA revenue increased 4% to 208 7 million strong holiday sales in the last six weeks of the year contributed to outperformance.

Kimberly Rivers: Gross margin of 54% improved 2% due to lower production costs, targeted promotional activity, and reduced pressure from inventory reduction efforts. Adjusted EBITDA margins improved to 31%, representing our 24th consecutive profitable quarter. Fourth quarter operating cash flow was $131 million, and free cash flow was $122 million.

Margin of 54% improved two per cent due to lower production costs targeted promotional activity and reduce the pressure from inventory reduction efforts.

Dusted EBITDA margins improved to 31%, representing our 24th consecutive profitable quarter.

Fourth quarter operating cash flow was $131 million in free cash flow with $122 million <unk>.

Kimberly Rivers: In addition, we recently added two seasoned executives to the leadership team, CFO Wes Gettman and COO Marie Zhang, and we are already benefiting from their contributions. We exited this year as a much stronger company and have carried that momentum forward into 2024, where we will continue our relentless focus on incremental improvement. Before we dive deeper into results, I want to discuss state catalysts, starting with Florida. To date, Trulieve has been the primary financial supporter of the Smart and Safe Florida Adult Use Campaign. We are proud to be at the forefront, driving this opportunity to expand access to cannabis in our home state. Currently, we are awaiting a decision by the Florida Supreme Court to allow the initiative on the ballot this November. The court has until April 1st to make a determination, or the initiative will automatically be included on the ballot. Once on the ballot, the initiative requires 60% voter approval in order to pass.

In addition, we recently added to see if it gets back to you. That's the leadership team CFO West got men and <unk> and we are already benefiting from their contributions we exited this year as a much stronger company and have carry that momentum forward into 2024, we will continue our relentless focus on incremental improvement.

Before we dive Bee branch results I wanted to discuss a catalyst starting with Florida.

To date truly what's been the primary financial supporter of the <unk> say, Florida I don't use campaign, we are proud to be at the forefront driving this opportunity to expand access to cannabis at our home state. Currently we are waiting a decision by the Florida Supreme Court to allow the initiative on the ballot. This November the court has until April 1st to make a determination or the initiative will automatically be.

Included once on the ballot initiative requires 60% voter approval in order to pass we anticipate a robust voter education and awareness campaign will be required to ensure success in November.

Kimberly Rivers: We anticipate a robust voter education and awareness campaign will be required to ensure success in November. Legal cannabis in Florida could be a $6 billion market opportunity, effectively tripling from today's medical-only market. With 22 million residents and 138 million annual tourist visits, we believe Florida will be the best cannabis market in the world. Legalizing adult use in Florida would be the largest change in U.S. cannabis history, and our team is working diligently to prepare for this monumental event. Trulieve maintains an outsized market share, with 21% of stores in Florida selling over 115% more flour than the state average, eclipsing all competitors.

<unk> cannabis in Florida, It can be a 6 billion dollar market opportunity effectively tripling from today's medical only market with 22 million residents and 138 million annual tourist visits we believe Florida won't be the best cannabis market in the world.

Adult Houston, Florida would be the largest conversion and U S cannabis history and our team is working diligently to prepare for this monumental event.

Truly maintained outsize market share with 21% of stores in Florida, selling over 115% more flower than the state average eclipsing all competitors give.

Kimberly Rivers: Given our ability to ramp idle capacity and fund additional investments, we expect to build upon our leading position at launch in May of 2025. From a production standpoint, we are positively thrilled with the performance of our new 750,000-square-foot, state-of-the-art cultivation facility in Florida. The site is fully ramped and consistently producing high-quality, high-potency products at scale with lower costs. We are realizing an average potency of 28% THC and 3% terpenes, alongside a 30% reduction in cultivation costs.

Given our ability to ramp idle capacity and fund additional investments, we expect to build upon our leading position at launch in May of 2025.

From a production standpoint, we are positively thrilled with a performance of our new 750000 square foot state of the art cultivation facility in Florida.

It's fully ramp and consistently producing high quality high potency products at scale with liver cough. We're realizing an average potency of 28 per cent T C and three per cent or beans, alongside a 30% reduction in cultivation cough. The strategic asset continues to outperform our internal expectations and we believe that there's.

Kimberly Rivers: This strategic asset continues to outperform our internal expectations, and we believe additional benefits may be unlocked as we continue to dial in production. In 2023, we idled legacy capacity as we moved to Disney's facility. During the fourth quarter, we brought a portion of our idle capacity back online to support increased customer demand. As demand increases alongside the Florida built-use opportunity, idle capacity will be restarted. Turning to retail, we are able to support higher traffic through a combination of increased staffing, additional points of sale, increased online orders, and express lanes. During the fourth quarter, we added four new stores in Florida, including our first dedicated express pickup location in Crawfordville. This efficient store concept is designed to provide customers with quick and convenient access to pick up orders.

No benefits, maybe unlocked as we continue to violent production.

In 2023, we idled legacy capacity as we branch this new facility during the fourth quarter, we brought a portion of our idle capacity back online to support increased customer demand.

Demand increases alongside the Florida adult youth opportunity idle capacity will be restarted.

Turning to retail we were able to support higher trophic through a combination of inquiry scoffing additional points of sale increased online orders and express lanes during the fourth quarter. We added 40 stores in Florida, including our first dedicated express pick up location in Crawford Bill <unk>.

Is sufficient store concept is designed to provide customers with quick inconvenient access to pick up orders.

Kimberly Rivers: Early performance at this location has exceeded expectations, and we will be opening more express pickup locations this year. Throughout 2024, we will be adding new locations in Florida, expanding our retail network to serve the growing medical market. Moving now to other adult use opportunities. A few weeks ago, the governor of Pennsylvania called for the state legislature to pass adult use legislation as part of his budget overview.

Early performance at this location has exceeded expectations.

The opening more express pick up locations this year throughout.

Throughout 2024, we will be adding new locations in Florida, expanding our retail networks to serve the growing medical market.

Moving now the other adult youth opportunities a few weeks ago, the governor of Pennsylvania called for the state legislature to pass a bill legislation as part of his budget overview the.

Kimberly Rivers: The governor is aiming for enactment by July of 2024, with adult use sales launching on January 1st, 2025. Trulieve remains the leading operator in Pennsylvania with 20 affiliated dispensaries supported by three production sites. We are actively monitoring the progress in Pennsylvania and expect momentum will continue to build as nearby states adopt recreational programs. In Ohio, final regulations for the Adult Youth Program are expected later this year, with sales launching as soon as this fall.

The governor is aiming for an accident by July of 2024 with a don't you sales launching on January 1st 2025.

Truly remains the leading operator in Pennsylvania with 20th Ciliated dispensaries supported by three production sites were actively monitoring the progress in Pennsylvania unexpected momentum will continue to build as nearby states adopt recreational programs.

In Ohio final regulations for the adult youth program are expected later this year with sales watching as soon as this fall truly operates one medical dispensary and may gain additional assets pending the outcome of ongoing litigation. We have reached a preliminary settlement agreement and expect our store count to expand with both operational and potential dispensaries.

Kimberly Rivers: Trulieve operates one medical dispensary and may gain additional assets pending the outcome of ongoing litigation. We have reached a preliminary settlement agreement and expect our store count to expand with both operational and potential dispensaries. We will be in a better position to share additional information pending a final settlement agreement and Adult Youth Program details in Ohio. However, moving back now to our results and the current business climate. In 2023, we added 17 new locations in Arizona, Florida, Georgia, Ohio, Pennsylvania, and West Virginia and launched recreational sales in Connecticut and Maryland. Today, Trulieve has the largest retail network of 193 dispensaries, serving as the primary conduit for our strategy to distribute branded products through branded retail.

We will be in a better position to hear additional information pending a final settlement agreement and adult youth program details in Ohio.

Shifting back now to our results and the current business climate.

In 2023, we added 17, you locations in Arizona, Florida, Georgia, Ohio, Pennsylvania, and West, Virginia, and launched recreational sales in Connecticut in Maryland.

Today, It's relief had the largest retail network of 193 dispensaries, serving as a primary conduit for our strategy to distribute branded product they're branded retail.

Kimberly Rivers: This year, we will complete the rebranding of all retail locations in Arizona to the Trulieve brand. In 2023, we sold approximately 45 million branded product units and gained traction with several of our brands, most notably Modern Flower and Roll One. From an operational standpoint, today we are running more efficiently with optimized assets, streamlined processes, improved inventory levels, and lower production and operating costs. Adding to our strength from our improved competitive position, consumers are showing greater resilience. While it is too early to call a definite trend, signs of improving consumer health are emerging. Spending accelerated into year-end with higher baskets, trending up into higher price tiers, and greater willingness to participate in buy more, save more style promotions. This was evidenced by December traffic, which exceeded third-quarter average traffic by 100,000.

This year, we will complete the rebranding of all retail locations in Arizona cause it's really brand.

In 2023, we sold approximately 45 million Brandon product units and gain traction with several of our brands, most notably modern flour and roll one.

From an operational standpoint today, we are running more efficiently with optimize assets streamline processes improved inventory levels and lower production and operating costs.

Adding to <unk> strength from our improved competitive position consumers are showing greater resilience.

While it is too early to call a definite trend signs of improving touch consumer health are emerging spending accelerated into your N with higher basket, turning up into higher price tears and greater trading up into higher price tears in greater willingness to participate and buy more save more styled promotions.

This was evidenced by December traffic, which exceeded third quarter average traffic by 100000. In addition baskets were up in December and every market compared to every other month in the quarter and B Q3 averages in total by five per cent.

Kimberly Rivers: In addition, baskets were up in December in every market compared to every other month in the quarter, and BQ3 averages increased by 5%. Units sold during the fourth quarter increased by 4% sequentially. As our customer base continues to grow, we are adapting how we approach customer service and how we continue to motivate employees to maintain high service levels. During the fourth quarter, we piloted a revamped bonus program in Florida for our store general managers to incentivize favorable customer experiences. By rewarding specific outcomes for metrics, including net promoter score, overall satisfaction, wait times, and fulfillment times, compensation is appropriately aligned with our team's ability to deliver positive customer experiences. Based on the early success of this program, we're implementing this structure across our retail network this year. Our focus on the customer experience contributes to customer retention. During the fourth quarter, customer retention held steady, with 66% of customers company-wide and 74% in medical-only markets returning to stores.

Units sold during the fourth quarter increased by 4% sequentially other.

Our customer base continues to grow we are adopting how we approach customer service and how we continue to motivate employees to maintain high service level.

During the fourth quarter, we piloted a revamped bonus program in Florida for a store getting <unk> to incentivize favorable customer experiences a rewarding specific outcomes prometric, including net promoter score overall satisfaction wait time and fulfillment times compensation is appropriately a line with our team's ability to deliver <unk> positive <unk> customer.

Appearances based.

Based on the early success of this program we are implementing this structure across our retail network. This year.

Our focus on the customer experience contributes to customer retention during the fourth quarter customer retention held steady with 56% of customers company companywide and 74% in medical only market returning to source.

Kimberly Rivers: We aim to improve the customer experience and retention, reinforcing lasting brand equity for the retail platform and branded products across a loyal customer base. In January, we launched a new website in several markets built upon more advanced technology, which we call Web 2.0. This new web architecture provides greater functionality for users while supporting higher traffic and enhanced data capabilities.

To improve the customer experience and retention reinforcing laughing brand equity for the retail platform and branded products across a loyal customer base in January we launched a new website in several markets built upon more advanced technology, which we call <unk>.

This new web architecture provides greater functionality for users, while supporting higher traffic and enhance data capabilities building. Upon this upgrade a revamped loyalty program rolled out in Arizona in Maryland, and we'll be launching in other markets, including Florida, and Pennsylvania thing.

Kimberly Rivers: Building upon this upgrade, our revamped loyalty program rolled out in Arizona and Maryland and will be launching in other markets, including Florida and Pennsylvania soon. With a simplified reward structure, tiering designed to reward repeat purchases, and portability across markets, we expect this new program will attract and delight loyal customers. We plan to have all markets migrated to the Web 2.0 platform and refresh our loyalty program this year.

With a simplified reward structure tearing designed to reward repeat purchases and portability across markets.

Expect this new program will attract into light loyal customers. We plan to have all markets migrated to the web to dano platform and refresh loyalty program. This year.

Wes Gettman: We remain committed to investing in infrastructure, technology platforms, and talent. These critical elements are necessary to solidify our competitive position today and ensure readiness for long-term success in this rapidly evolving industry. In summary, last year, we successfully executed on our plan to reposition Trulieve ahead of the next growth cycle, just as we said we would do. We created a leaner organization that is ready to meet the opportunities ahead. With that, I'd like to turn the call over to our new CFO, Wes Getman. Please go ahead.

We remain committed to investing in infrastructure technologies platforms and talent. These critical elements are necessary to solidify our competitive position today and ensure readiness for long term success in this rapidly evolving industry.

In summary last year, we successfully executed aren't on our plan to Repositionings relieve ahead of the next growth cycle. Just as we said we would do we created a leaner organization that is ready to meet the opportunities ahead with that I'd like to turn the call over to our new CFO <unk>. Please go ahead.

Wes Gettman: Thank you, Kim, and good morning, everyone. We delivered full-year 2022 revenue of $1.13 billion, highlighted by a strong fourth quarter to close out the year. 2023 was another pivotal year, marking the substantial completion of our transformation strategy ahead of the next wave of catalysts. As Kim noted, fourth-quarter revenue of $287 million improved 4% sequentially, driven by stronger retail performance across all markets during the last six weeks of the year. Fourth quarter results include contributions from Ohio VAE operations. Even without the inclusion of our Ohio VIE, fourth quarter revenue exceeded guidance. Fully year gap gross profit was $589 million on 52% margins compared to $689 million on 57% margins in 2022. Price compression and inventory reduction efforts pressured gross margin, partly offset by lower costs.

Thank you and good morning, everyone.

We delivered full year 20, twenty-two revenue of 1.13 billion highlighted by a strong fourth quarter to close out the year 2023 with another pivotal year Martin substantial completion of our transformation strategy ahead of the next wave of catalyst is Kim noted for quarter revenue to one or two 7 million improved 4% sequentially driven by stronger retail performance.

Across all markets are in the last six weeks a year.

Four four resolved include contribution from Ohio via your operations.

Without inclusion of Ohio via your fourth quarter revenue guidance.

Full year gap Rose Crawford was $589 million 52 per cent mortgage compared to $689 million 57 per cent emergency 2022.

Price compression inventory reduction numbers pressured gross margin, partly offset by lower cost.

Wes Gettman: We exited the year with stabilized pricing, reduced pressure from inventory, and lower operating costs, all of which aided fourth quarter margins. Fourth quarter GAAP gross profit was $154,054,000, with 54% margin, representing a 2% improvement sequentially. Gross margin will continue to fluctuate quarter to quarter depending on product and market mix, inventory sell-through, promotional activity, and idle capacity costs. For the full year 2023, SG&A expenses were $386 million, or 34% of revenue, improving from $447 million, or 37% of revenue in 2022. SG&A expenses in the fourth quarter were $96 million, or 34% of revenue, holding steady compared to the third quarter.

<unk> your stabilize pricing reduce pressure from inventory and lower operating costs, all of which 84 for a mortgage.

<unk> gross profit was $154 million with 54% margin representing two per cent improvement sequentially grills.

Rosemary and will continue to fluctuate quarter to quarter, depending on product and market mix.

<unk> fell through promotional activities and oil capacity calls.

Full year 2023, <unk> expenses with 386 Moon for 34% of revenue improving from 447 million for 37% of <unk>.

And expenses and the four 496 million for 34% of revenue holding studied compared to the third quarter.

Wes Gettman: The net loss was $527 million for the full year 2023, compared to a loss of $246 million in 2022. The net loss would have been $70 million in 2023, excluding the second quarter, goodwill impairment, and other non-recurring charges primarily associated with the strategic repositioning of assets to improve our cash flow. The four-quarter net loss was $33 million compared to a net loss of $25 million in the third quarter. The four-quarter loss per share was $0.18 compared to a loss of $0.13 in the third quarter.

No laws was $527 million for the full year 2023, 30 loss of 246 million 2022.

That lost would have been $70 million can be twenty-three, excluding the second quarter goodwill impairment and other non recurring charges, primarily associated with strategic repositioning of assets to improve our cash flow.

So let's put it at last was thirty-three name for a net loss of $25 million in the third or.

Fourth quarter loss for sure. It was 18 cents preferred lots of 13 cents in the third quarter.

Excluding non-recurring charges fourth quarter loss for sure would have been 12 stones or to eight cents in the third quarter.

Full year 2023, adjusted EBITDA was 322 million I'm, 29% margin compared to $398 million or 33 per cent through 2022.

Wes Gettman: Excluding non-recurring charges, the 4th quarter loss per share would have been $0.12 compared to $0.08 in the 3rd quarter. Full year 2023 adjusted EBITDA was $322,000,000 on a 29% margin compared to $398,000,000 or 32% in 2022. Fourth quarter of justice, you would dial it 88 million or 31 percent. Fourth Core Adjusted EBITDA Margin reflects the culmination of optimization efforts to maximize past preservation and generation. During the fourth quarter, cash flow from operations totaled $131 million, with free cash flow of $122 million. Inventory was reduced by $17 million in the fourth quarter as a result of continued efforts to wind down specific volumes and product categories. Capital expenditures totaled $9 million in the fourth quarter and $40 million for the year.

Four quarters rested, Utah was 88 million for 31%.

Four four address would EBITDA margin reflects the culmination of optimization efforts to Max much past preservation and generation.

During the fourth quarter cash flow from operations total of $131 million with free cash flow of $122 million.

Inventory was reduced by 17 million in the fourth quarter. As a result continue that first one down specific volumes in product categories.

Capital expenditures totaled 9 million in the fourth quarter and 40 million for the year.

123, we open 17, you dispensaries, where you're located five inline with guidance.

Moving poor balance sheet Anthrax road.

<unk> with 208 million and fast and 483 me that a reduction of $166 million from last year's that balance in the four four we redeem 130 million senior notes with an interest rate of 1975 per cent enclose a 25 million dollar mortgage financing a fixed.

Wes Gettman: In 2023, we opened 17 new dispensaries and relocated five in line with guidance. Moving to our balance sheet and tax strategy. We exit the year with $208 million in cash and $483 million in debt, a reduction of $166 million from last year's debt balance. In the fourth quarter, we redeemed $130 million in senior notes with an interest rate of 9.75% and closed a $25 million mortgage financing at a fixed rate of 8.3%.

Fixed rate of 8.3 per cent are next step mature does not flip over 2026 provided ample one way to generate cash and support investments and long term growth initiatives.

During the last call recently took attached physician channels, you can flip the ability to aid each of our business.

Last October we filed amended tax returns for multiple business opportunities for the your appointment Jean 2020th 2021 based on our legal interpretation of 280.

Debate, we've received approximately 113 million cash refunds associated with a portion will be submitted returns on wood 62 <unk>. Prior to your we also receive correspond with the nine one amended return amounted to $1.2 million.

Wes Gettman: Our next debt maturity is not until October 2026, providing ample runway to generate cash and support investments in long-term growth initiatives. As we highlighted during the last call, we recently took a tax position challenging the inflictability of 280E on our business. Last October, we filed amended tax returns for multiple business entities for the years 2019, 2020, and 2021, based on our legal interpretation of 280E. To date, we've received approximately $113 million in cash refunds associated with a portion of these amended returns, of which $62 million was received prior to year-end. We also received correspondence denying one amended return amounting to $1.2 million.

Unknown final outcome of the test physician at this time, we continue to approve an uncertain textbooks on our balance sheet.

<unk> three parts.

<unk> received for someone to be amended returns plus the estimated incremental tax liability for 2022, and 20 twenty-three offset by estimated overpayments monographs accounts.

And so this process reaches a final resolution, we anticipate uncertainty physician will increase over time, we will continue to make timely payments doesn't ordinary corporate taxpayer.

As mentioned earlier the Dj's currently evaluating oppose the rescheduling of Kansas to schedule three if it's reedy burden is lifted truly could realize hundreds of millions of savings over the next few years.

Turning now to our outlook based upon the visibility that we have today <unk> first quarter revenue would be similar to the fourth quarter. While we continue to see momentum across a retail platform mark resolved to be influenced by the time, you as far as a tax refund checks and consumer spending and.

Wes Gettman: Due to the unknown final outcome of this tax position, at this time, we continue to accrue an uncertain tax position on our balance sheet. In summary, this accrual includes three parts. The amounts received for some of the amended returns, plus the estimated incremental tax liability for 2022 and 2023, are offset by estimated overpayments on our tax position. Until this process reaches a final resolution, we anticipate the uncertain tax position will increase over time. We will continue to make timely payments as an ordinary corporate taxpayer.

2024 of your carbon in cash flow from operations of at least 225 million and capital expenditures of $70 million.

Do you plan to open at least 25 stores this year.

Refresh our forecasts later this year, depending on the timing and progress industry careless, including you don't need some issue in Florida progress on adult use legislation in Pennsylvania and program details to be Ohio adult use market, we're off to a fantastic start commuting remains focused on further improving the business what we're going to the next phase of accelerated growth with that I'll turn the call back over to him.

Wes Gettman: As mentioned earlier, the DEA is currently evaluating a proposed rescheduling of Canvas to Schedule 3. If the 280E burden is lifted, Trulieve could realize hundreds of millions of savings over the next few years. Turning now to our outlook, based upon the visibility that we have today, we anticipate first quarter revenue will be similar to the fourth quarter. While we continue to see momentum across our retail platform, market results will be influenced by the timing and size of tax refund checks and consumer spending. In 2024, we are targeting cash flow from operations of at least $225 million and capital expenditures of $70 million.

<unk>, we're on the cusp of what could be a historic tipping point for you guys cannabis rescheduling of cannabis to schedule three would represent a watershed moment after over 50 years of classification as a schedule one drug this major development could set off a series of reforms ultimately leading to greater acceptance and adoption of cannabis across the country. The.

Clear validation of accepted medical used for cannabis and the Unredacted H H S recommendation for scheduled three confirms what everyone. In the industry has known for years and cannabis has tremendous potential is a medicine.

Similarly, the analysis completed by H H S. Clearly demonstrates that cannabis is less dangerous than many scheduled drugs and alcohol.

Wes Gettman: We plan to open at least 25 stores. We may refresh our forecast later this year depending on the timing and progress for industry catalysts, including the Adult Use Initiative in Florida, progress on adult use legislation in Pennsylvania, and program details for the Ohio adult use market. We're off to a fantastic start, and the team remains focused on further improving the business while preparing for the next phase of accelerated growth. With that, I'll turn the call back over to Kim.

The state of lines with prevailing attitudes of consumers between 21, and 40 years old he do not have to repeat the same social stigma to cannabis as those who grew up during the war on drugs.

Recognition of the unfair characterization of cannabis as a meaningful starting point for future reform.

<unk> continues to gain mainstream acceptance many of the state markets, we operate in our increasingly likely to adopt and don't use programs in the near term O'hare.

Ohio is poised to launch <unk>. This fall we estimate this market can reach $2 billion in annual sales efforts to advance I don't use legislation in Pennsylvania are gaining momentum propelled by strong support from Governor Shapiro, we estimate the Pennsylvania market could reach approximately $4 billion in sales.

Kimberly Rivers: Thanks, Les. We are on the cusp of what could be a historic tipping point for U.S. cannabis. The rescheduling of cannabis to Schedule 3 would represent a watershed moment after over 50 years of classification as a Schedule 1 drug. This major development could set off a series of reforms ultimately leading to greater acceptance and adoption of cannabis across the country. The clear validation of accepted medical use for cannabis and the unredacted HHS recommendation for Schedule 3 confirms what everyone in the industry has known for years, that cannabis has tremendous potential as a medicine. Similarly, the analysis completed by HHS clearly demonstrates that cannabis is less dangerous than many scheduled drugs and alcohol.

Ending court review and voter approval, Florida will launch adult sales in 2025, our number one priority. This year is to secure and prepare for adult Eastern Florida.

Today, it's really just not only the largest operator in Florida with over 3 million square feet of production capacity and 132 stores, but I'll send a clear market leader.

Our scale competitive production cost and ability to quickly fluffed up production, we are prepared to expand our market leading position with this opportunity.

Kimberly Rivers: This data aligns with prevailing attitudes of consumers between 21 and 40 years old who do not attribute the same social stigma to cannabis as those who grew up during the War on Drugs. Recognition of the unfair characterization of cannabis is a meaningful starting point for future reform. While cannabis continues to gain mainstream acceptance, many of the state markets we operate in are increasingly likely to adopt adult use programs in the near term. Ohio is poised to launch adult use sales this fall.

Withdrawing cash generation and a clearly defined strategy, it's really the best position for the coming wave of meaningful growth catalysts reinforced by a solid core business I'm fully confident in our ability to execute on our plan and I wouldn't trade hands with anyone in the industry.

Thank you for joining us today, and as I always say onward.

At this time and rivers and <unk> will be available to answer your question. Please.

Please open up with all of our questions.

Thank you.

The question please.

The one on your telephone keypad.

Kimberly Rivers: We estimate this market could reach $2 billion in annual sales. Efforts to advance adult use legislation in Pennsylvania are gaining momentum, propelled by strong support from Governor Shapiro. We estimate the Pennsylvania market could reach approximately $4 billion in sales. Pending court review and voter approval, Florida will launch AdultEAST sales in 2025. Our number one priority this year is to secure and prepare for AdultEAST in Florida. Today, Trulieve is not only the largest operator in Florida with over 3 million square feet of production capacity and 132 stores but also the clear market leader.

Questions.

Four two.

Once again, losing gentlemen.

I have a question.

That's really the first question.

Good morning, everyone. Congratulations on the strong results came I just wanted to ask I realize I'm I'm, putting the cart a little bit before the horse here because we have until April 1st before you have a mortgage a picture of of whether or not.

The adult use market measure should be on the November ballot, but.

In the event that it is and we do get accepted it's passed by the people of Florida, I'm, having an adult use market that's stood up 2025.

Kimberly Rivers: Given our scale, competitive production costs, and ability to quickly flex that production, we are prepared to expand our market-leading position with this opportunity. With strong cash generation and a clearly defined strategy, Trulieve is best positioned for the coming wave of meaningful growth catalysts reinforced by a solid core business. I am fully confident in our ability to execute on our plans, and I wouldn't trade hands with anyone in the industry. Thank you for joining us today, and, as I always say, Onward!

Should we be thinking about any incremental investments required from true leave in advance of that happening I imagine if you were to go into the stores in Florida, you know if there's a lot of appear west terminal. So.

More people to stop those and handle the additional traffic is there any other investments we should be thinking about Jack goes ramps and there's all sorts of legacy grow that you can bring back online what else should we be considering.

Operator: At this time, Christine Rivers and Wes Gettman will be available to answer any questions. Operator, please open up the call for questions. Stars and one on. And, ladies and gentlemen, the star of the night. Kim, I just wanted to ask. I realize I'm putting the cart a little bit before the horse here because we have until April 1st to decide whether adult use market measures should be on the November ballot. But in the event that it is, and we do get acceptance, it's passed by the people of Florida, and we have an adult use market in 2025. How should we be thinking about any incremental investments required from Trulieve in advance of that happening?

<unk>. So obviously, we are incredibly excited and very laser focused on the adult used opportunity in Florida.

It really can't be understated and the the size of the opportunity and when we talk about a market you know converting into a 6 billion dollar uhm opportunity with again 138 at annual tourist visits and 22 million residents not to mention of course and neighbouring neighboring state resident opportunities as.

Well it really is and just an incredible incredible opportunity you know we of course have been doing a lot of work and behind the theme does it relates to the modeling and running through different scenarios. So that we can be in the best absolute position to take to take advantage of the opportunity as it prevent like we said we're gonna.

Operator: I imagine if we were to go into the stores in Florida, we know that there are a lot of POS terminals. So you need more people to stop those and handle the additional traffic. So any other investments we should be thinking about Jeffco's ramps, and there's also the legacy growth that you can bring back online. What else should we be considering? Thanks, Luke.

Update Oaks as add things come into focus but to your point, we certainly have.

Room within our existing footprint, we have stores that have you know that are underutilized currently and that's strategic that's by design. We have stores that are currently medical but would be better position as recreational location.

Kimberly Rivers: So, obviously, we are incredibly excited and very laser-focused on the adult youth opportunity in Florida. It really can't be understated the size of the opportunity. When we talk about a market, you know, converting into a $6 billion opportunity with, again, 138 annual tourist visits and 22 million residents, not to mention, of course, neighboring state resident opportunities as well, it really is just an incredible opportunity. We have, of course, been doing a lot of work behind the scenes as it relates to modeling and running through different scenarios so that we can be in the best absolute position to take advantage of the opportunity as Like we said, we're going to update folks as things come into focus, but to your point, we certainly have room within our existing footprint. We have stores that are, you know, that are underutilized currently, and that's strategic; that's by design.

The last our store in Daytona sure Uhm, we have several beaches stores that are come to mind as it relates to that to that footprint and then as you mentioned really the timing as it relates to the performance of Jafco could not come at a better time M. As that site is now fully contributive and and but we have you know additional.

Efficient fees that we think we can we can eke out and while we of course also has have our legacy capacity that we can bring online as well so I'm really excited about the future as it relates to the adult youth opportunity and and again, we'll say it again believe that it is the biggest conversion opportunity. It is the biggest conversion opportunity and use cannabis history.

That's great and then falling on the last line there. The the you had mentioned that the store economics and unit economics for that you Express pickup stores were better than your expectations and you'll be rolling out some more of those sorts of course, a year can you give us a sense of a little more detail maybe help favorably those <unk>.

Kimberly Rivers: We have stores that are currently medical but would be better positioned as recreational locations, you know, Key West, our store in Daytona, our store on the beach, we have several beaches, stores that come to mind as it relates to that, to that footprint. And then, as you mentioned, and really, the timing as it relates to the performance of Jeffco could not come at a better time as that site is now fully contributive. And, but we have, you know, additional efficiencies that we think we can eke out while we, of course, also have our legacy capacity that we can bring online as well. So, really excited about the future as it relates to the adult use opportunity. And again, we'll say it again, believe that it is the biggest conversion opportunity in US cannabis history. That's great!

<unk> the traditional stores that you rolled out and give me a direction, we speaking where it is that you're able to find those better you know economics, I imagine, it's lower labor costs, but.

Anything else to consider their.

Sure. So you know our our express pickup location, we pilot it and in Crawford Bill for those of you who aren't familiar with geography. That's about 30 45 minutes from our headquarters here. So we were able to get and no ice on it and we knew that there were there was then demand there and as we are able to track both of the delivery is anarchy.

Mapping of our customer our customer database and we knew there was to me on there, but it's it's you know a a bit of a bedroom community. If you will and so it's you know we we didn't believe that it could support a full you know a full investment of a full service store location. So the the current store on average is between two and three employees and.

Kimberly Rivers: And then following on that last line there, you had mentioned that the store economics, the unit economics for the express pickup stores were better than your expectations, and you'll be rolling out some more of those over the course of the year. Can you give us a sense in a little more detail, maybe how favorably those compare to the traditional stores that you've rolled out? And give me, directionally speaking, where it is that you're able to find those better unit economics? I imagine it's lower labor costs, but is there anything else to consider there?

Again, we're able to turn around and pick up orders and a very efficient manner. So you know the throughput capabilities of that store as well uhm and it's a smaller footprint and because we don't have a full on a full showroom and there's no walk up service available. So it really is in terms of being in an economic significantly more efficient than our traditional stores.

Kimberly Rivers: Sure. So we piloted our express pickup location in Crawfordville. For those of you who aren't as familiar with geography, that's about 30, 45 minutes from our headquarters here. So we were able to get eyes on it. We knew that there was demand there, as we were able to track both through deliveries and our heat mapping of our customer database. So we knew there was demand there. But it's a bit of a bedroom community, if you will.

And of course it in that location, we have the demand, but that is supportive as well. So it really is a is a home run on on on that tricks and we're looking for additional opportunities that have the same type of of demographic metrics to to really use in some cases as in those stores in other in other locations throughout the state and this upcoming year.

Great last question and then it'll all possible while I'm here.

It's great to see that you're able to get the <unk>.

Kimberly Rivers: And so we didn't believe that it could support a full investment in a full service store location. So the current store averages between two and three employees. And again, we're able to turn around pickup orders in a very efficient manner. So the throughput capabilities of that store as well. And it's a smaller footprint because we don't have a full showroom and there's no walk-up service available.

Cashback from me.

<unk> taxes that you've paid previously and I realized.

Not a whole lot of detail you can share.

As it relates to your legal strategy here, but I wanted to ask when it when it comes to be.

Legal opinion or the base that you're relying upon is that that information that I gotcha applicable solely just truly or is it mostly relying upon.

Kimberly Rivers: So it really is, in terms of unit economics, significantly more efficient than our traditional stores. And of course, in that location, we have the demand that is supportive as well. So it really is a home run on all metrics.

<unk> information I guess, just trying to figure out if there's implications from the the broader industry as a result of the.

Kimberly Rivers: And we're looking for additional opportunities that have the same type of demographic metrics to really use in some cases as infill stores and other locations throughout the state in this upcoming year. Great. Last question and then I'll pass the line here. It's great to see that you're able to get the cash back from the 280e taxes that you've paid previously, and I realize there's really not a whole lot of detail you can share as it relates to your legal strategy here, but I wanted to ask, when it comes to the legal opinion or the basis that you're relying upon, is that information that's, I guess, applicable solely just to Trulieve, or is it mostly relying upon industry-wide information?

The information that you've shared on the the refunds earlier today.

Yeah, so given the uncertain position of the claims as I said it today and we do view that as a trade secret and and you know and in large part specific to to our position and our and our organization, we are not going to be sharing that information.

Publicly given the fact that it is and in or could be in a litigation posture and and you know specifically that information would become available if and when we actually get to a court filing and so that's really all I'm able to say about it and today, but and you know there's there's gonna be I would say.

Kimberly Rivers: I guess just trying to figure out if there are implications from the broader industry as a result of the information that you shared on the refunds earlier today. Yeah, so given the uncertain position of the claims as they sit today, we do view that as a trade secret and, you know, in large part specific to our position in our organization. We are not going to be sharing that information publicly, given the fact that it is in or could be in a litigation posture.

A blend of right industry, and truly a specific positioning and and our and our position.

Okay I appreciate it thank you very much.

Thanks <unk>.

The next question comes from.

<unk>.

Kimberly Rivers: And, you know, specifically that information would become available if and when we actually get to a court filing. So that's really all I'm able to say about it to date. But, you know, there's going to be, I would say, a blend of the right industry and truly specific positioning in our position. Okay, I appreciate it. Thank you very much. Thanks, Luke.

Please go ahead.

Oh, great. Thank you for taking my question is does that sound to another very strong quarter here. So first I'm just a bit of a follow up to that last question on the tax returns wondering if you could elaborate on the uncertain nature of your tax returns here I mean, this is something that you know potentially we should sort of earmark. These these returned.

Eric Deslauriers: And our next question comes from Eric Deslauriers with Craig Hamilton. Great, thank you for taking my question and congratulations on another very strong quarter here. So, first, just a bit of a follow-up to that last question on the tax... I'm wondering if we could elaborate on the uncertain nature of these tax returns here.

Potentially needing to be paid again down the road can you just elaborate a bit more on sort of how confident do you feel that this cash will remain on the balance sheet.

<unk>, Yeah, I mean for accounting standpoint, you know the rules are the rules of these these remain where it was cold on certain sectors just because of all the statues are currently room. So that's why the refunds received will continue to be approved on the balance sheet and will continue to add to the incremental nutrasweet and future periods.

Wes Gettman: I mean, is this something that, you know, potentially we should sort of earmark these returns as potentially needing to be paid again down the road? Explain a bit more on sort of how confident you feel that this cash will remain on the balance sheet. Thanks for the question, Eric. This is Wes.

Potentially rescheduling happens operationally.

It would be just the legal counsel board of directors.

Wes Gettman: Yeah, I mean, from an accounting standpoint, you know, the rules are the rules, and these remain what's called an uncertain statute, just because of how the statutes are currently written. So that's why the refunds received will continue to be approved on the balance sheet and will continue to add to the incremental nature of 280E in future periods until, potentially, a rescheduling happens. Operationally, you know, in conjunction with legal counsel and our board of directors, we're fully aligned on this process and on this filing position. You know, we don't count on additional refunds, but that said, we are not necessarily holding back the monies received as it relates to future investments in the growth initiative. Okay, great, I appreciate that color. And then you mentioned how...

Fully a line on this on this process and on this on the following position you know we didn't call.

An additional refunds, but but but that's not.

Not necessarily you know holding back, but the money's receiving it relates to the future investments with a broken initiatives.

Okay, Great I appreciate that color and then you mentioned, how you you've seen a bit of a shift in queue for towards consumers uhm.

You know purchasing more premium products a bit of a mix shift towards that premium end of things you just kind of gun. How you view your current inventory and production mix between valued premium obviously, if you've you've highlighted the very impressive.

Quality metrics coming out of do do facility in Florida.

Screaming, where you'd be sort of you know ready to meet that increased demand for premium products. I'm. Just wondering if you could comment on sort of how you view that current inventory production. Thank you.

Kimberly Rivers: This is a bit of a shift in Q4 towards consumers purchasing more premium products, a bit of a mixed shift, you know, towards that premium end of things. Can you just comment on how you view your current inventory and production mix between value and premium?

Sure. So really what we saw in the fourth quarter was some mix shifts that I will say that it was really more weighted toward the trade up from.

Kimberly Rivers: You know, obviously, you've highlighted the very impressive quality metrics coming out of your new facility in Florida. So, seemingly, you would be sort of, you know, ready to meet that increased demand for premium products. I'm just wondering if you could comment on sort of how you view your current inventory and production mix. Thank you.

Value to mid tier so and we're seeing some more consumer flexibility I'm in the market and so what I mean by that is you know earlier in 2023, there's certainly was more of a what appeared to be a hard and fast ceiling on spend and wallet pressure with significant meaning that you know someone who would come in.

Kimberly Rivers: So, really, what we saw in the fourth quarter was some mixed shifts, but I will say that it was really more weighted towards a trade-up from value to mid-tier. So, I mean, we're seeing some more consumer flexibility in the market. And so, what I mean by that is, you know, earlier in 2023, there certainly was more of what appeared to be a hard and fast ceiling on spend, and wallet pressure was significant. Meaning that, you know, someone would come into the store, and they literally only had, call it, $20 to spend. Whatever dollars they had, that was all they had.

The store and I literally only had call at $20 to spend whenever dollars. They had that with it they're really with no ability to flex up or flex into either a higher higher category or with you know certain promotions such as a buy more save more we were finding those and that they were really not as effective and or.

2023 that behavior has begun to shift and I will again empathize. The fact that we're just starting to see that now and we thought some in the holiday period or watching it very closely of course in in Q1 and as you mentioned specifically March will be an important month as we see how consumers respond with.

Kimberly Rivers: There really was no ability to flex up or flex into either a higher category or with, you know, certain promotions, such as buy more, save more. We were finding those that they were really not as effective in early 2023. That behavior has begun to shift, and I will, again, emphasize the fact that we're just starting to see that now, and we saw some of it in the holiday period. We're watching it very closely, of course, in Q1. As we mentioned specifically, March will be an important month as we see how consumers respond with some additional dollars in their wallets via tax refunds. So, you know, again, Modern Flower has been a very strong category for us across all of our markets and has been performing exceptionally well, which is our mid-tier brand in both Flowers, and we have a lot of oil products in that brand as well. And so it's great to see some consumer resilience, but a little bit, like I said, a little too early to call a definitive trend on that. All right, I appreciate the call. Thanks again.

Some additional dollars in their in their wallet via tax refund. So and you know again modern hour has been a very strong category for us across all of our markets and you know and has been performing exceptionally well uhm, which is our our mid tier brand in both flower and we have a lot of oil products in that brand is.

Well and so it's it's great to see some consumer <unk> consumer resilience and but a little bit like I said, a little too early to call a definitive a definitive trend on that.

Alright appreciate the call and thanks again.

Yep.

Sure.

It was the Lions.

Please go ahead.

[noise].

Hi, Good morning, Thank you for the question exactly.

Around the corner someone should break a little bit more.

More on the rewards program, you mentioned that you'd want to know what to say to a plan to go forward, including in Florida.

Operator: Yep. Our next question today comes from Aaron Grey. Hi, good morning.

Aaron Thomas Grey: Thank you for the question. And congrats on the quarter. Someone said focus a little bit more on the rewards program.

Any potential additional commentary you can provide in terms of.

<unk> generated from loyal to members with this new program the ability you're able to see an increase basket sizes, you know from those members.

Kimberly Rivers: You mentioned that you've launched it now in two states and plan to go forward with it, including in Florida. Any potential additional commentary you can provide in terms of the additional sales you're seeing generated from loyalty members with this new program, the ability you're able to see increased basket sizes, you know, from those members, and any differences we might see when it comes to a state like Florida given the greater scale advantage you have in the state. Yeah, thanks, Aaron.

Differences, we might see when it comes to stay like four orders given the greater scale advantage of having a mistake. Thank you.

Yeah. Thanks, Erin and we are really excited and to to be in a position to launch our loyalty program alongside of and it's very it's it's important to note that really loyalty in our in our web our new web web site go hand in hand.

Kimberly Rivers: We are really excited to be in a position to launch our loyalty program alongside it, and it's important to note that loyalty and our new website go hand in hand and really build upon one another. And so I'm excited to have that rolled out across all of our markets by the end of this year. Arizona was launched early in the year, and so we don't have a ton of data yet. However, I will say that having a robust loyalty program is increasing our ability to actually capture data in that market, which is, I think, interesting given the fact that Arizona is kind of an anonymous market, meaning that you can just shop by showing your ID. You're not necessarily required, right, unlike a state like Florida or Pennsylvania where there's a significant tracking of information because of the medical nature of those programs.

And and and really build upon one another and so and excited to have that <unk> rolled out and across all of our markets by the end of this year and Arizona and was launched and early in the year and so we don't have a ton of data yet however, I will say that having and the robust loyalty program is in.

Creasing, our ability to actually capture data in that market, which is M. I think interesting given the fact that Arizona is kind of an anonymous market, meaning that you can just shop right by showing your I D. You're not necessarily required right. Unlike us state like Florida, or Pennsylvania were theirs is significant tracking of information because of the medical nature of this program. So.

Kimberly Rivers: So we are seeing significant increases in our ability to actually get folks into a program, get them those data, and then begin to, of course, continue to market to them. So I would say, Aaron, if you can ask me again in the next quarter, I'm hopeful that I'll have some additional color for you. And certainly as the year continues, as we roll it out across our markets, I think one of the biggest things that I'm excited about as it relates to that program is just the portability and the fact that we'll have a seamless loyalty program across all of our markets and across all of our stores. And I think that's really a big deal as we look to – we're always looking for ways to reduce friction in the landscape. Even though we have to deal with a lot of friction behind the scenes, making it as frictionless as possible for our customers is the goal.

We are seeing significant and significant increases in our ability to actually get folks into a program that focuses data and then begin to and of course continue to market to them and so I would say are and if you can ask me again on the next corner I I'm hopeful that I'll have some additional color for you and certainly as an ear.

<unk> continues as we roll it out across our markets I think one of the biggest things that I'm excited about as it relates to that program is just the portability and the fact that will have a seamless loyalty program across all of our markets and across all of our stores and I think that's really a big deal as we look to for we're always looking for ways to reduce friction.

In the in the you know in the landscape you know, even though we have to deal with a lot of friction behind the scenes to make it as frictionless as possible for our customers and is the goal. So I'm very excited and and certainly more to come.

Kimberly Rivers: So I'm very excited, and certainly more to come. Okay, great. Thanks for the detail. We'll look for more color later on.

Okay, great. Thanks for teaching was a favorite color later on I appreciate it great. Thanks, Sir.

Operator: I appreciate it. Great. Thanks, Aaron.

Ooh.

Kimberly Rivers: Thanks for tuning in. Hey, thank you for taking my question and congratulations on the results. Just looking at Florida, I guess my first question would be, were you guys surprised at all by Governor DeSantis' comments a while back predicting that the AU measure would get on the ballot? Not so much by the prediction itself, but by the fact that he said anything at all on that.

Mhm.

Please go ahead.

Okay. Thank you for taking my question and congratulations on the results just looking at Florida I guess my first question would be where are you guys surprised at all by the Governor San Francisco minutes Awhile back predicting that the a new measure will get on the ballot not so much by the prediction itself, but by the size, but he said anything it.

Kimberly Rivers: Yeah, I mean, I think that certainly, and that was a pleasant surprise. I would say that, and to that point, I think we are all, and anyone who listened to the oral arguments from the court, and would believe, rightly, that the court is certainly postured favorably as it relates to a ruling. And of course, you know, the lawyer in me would say that, you know, we of course need to wait until the official official ruling happens, which could be anytime between now and April 1. But, you know, I do think that the governor was acknowledging, right, the reality of what we all heard in the courts and in the courts and the oral arguments, and so very much looking forward to it being official here soon. Okay, thank you.

On this.

Yeah, I mean, I think that and certainly and that was a it was a pleasant. It was a pleasant surprise I would say you know I think that to that point I think we are all in anyone who listened to the oral argument from the court and would we believe right that the court is certainly postured favorably and.

As it relates to a ruling and of course, you know the lawyer and you would say that you know we of course need to wait until the official official ruling happened, which could be anytime between now and April 1st, but you know I I do think that you know the governor was acknowledging right. The the reality of of what we all heard and and the and the court.

And of course anywhere arguments and so very much looking forward to you it being official here soon.

Okay. Thank you and then I just sticking with Florida, we expect additional licenses to be issued soon what are your mid term expectations for the vertical integration requirement.

Kimberly Rivers: And then, I guess, sticking with Florida, we expect additional licenses to be issued soon. What are your midterm expectations for the vertical integration requirement? That is still a major entry barrier given the capex that it does require.

<unk> is still a major entry barrier given the topic.

Kimberly Rivers: Yeah, I mean, look, I mean, I think new licenses have continuously been issued in Florida since our entry into the market, right? We were one of the original five license awardees, and now we have, you know, over 20 businesses, and there's more that will be licensed in accordance with the Florida program, which has licenses that come on board as the program grows. So, you know, not surprised by that by any stretch. The Florida legislature is in session for another week and a half, and there is no pending legislation that would change the requirements of the program.

<unk> require.

Yeah, I mean look I mean, I think new licences has has continuously been issued in Florida since since our entry into the market right. We were one of the original five license Ortiz and now we have you know over 2020 businesses and there there's more that will be licensed in accordance with the Florida program, which has.

Licenses that come on board and ask the program grounds. So you know not not surprised by that by by any stretch and the Florida legislature is in session for another week and a half and there is no pending legislation that would change the requirements of the program as it relates to adult.

Brenna: As it relates to adult use, you know, the current operators are grandfathered in under the current structure, and so I do not anticipate a landscape whereby vertical would not be permitted, and I think that as it relates to ongoing vertical, that's just as it is now, and that will be up to the legislature in future sessions if they decide that they want to allow for other license types moving forward. Again, we believe that Florida is the best cannabis market in the country and certainly will, you know, entrench that position with adult use sales. And with $6 billion in potential market, there's going to be plenty of business for folks, and I would say it will be important for there to be capacity to meet demand.

<unk> and you know the current operators are grandfathered in in the current structure and so I do not anticipate a landscape whereby vertical but not be permitted and I think that as it relates to ongoing vertical. That's just as it is now and that will be up to the legislature in future sessions if they.

Decide that they want to you allow for other license types and moving forward again, we believe that Florida is the best cannabis market in the country and certainly will you know insurance that position with adult you failed and with $6 billion in potential potential market, there's gonna be plenty.

A business for folks and I would say it will be important for for there to be capacity to meet to meet demand. So so again not only the adult you spell out within the medical program can continue to be service. So we're certainly planning to do our part in terms of stepping up to the plate and you know I think that it's exciting it's an exciting.

Brenna: So, again, not only the adult use but also the medical program can continue to be served. So we're certainly planning to do our part in terms of stepping up to the plate, and, you know, I think that it's an exciting time to be in the state of Florida. Okay, thank you for answering my questions. I'll hop back in the queue.

Time to be to be in the state of Florida.

Okay. Thank you for answering my questions all the help I can get to you.

Thank you I don't know it's questions.

Mmm.

Perfect.

Hi, Good morning. This is run on for Friday to go congrats on this phone corner I'm just curious about the the five per cent basket increase in December that was pretty impressive given the discounting transferring on the holidays. So curious if you can provide any read through or additional color on how your industry, leading dot add lettuce helps to play into this game and more specifically how.

Kimberly Rivers: Congratulations on the strong quarter. I'm just curious about the 5% basket increase in December. That was pretty impressive given the discounting trends seen on the holidays. So curious if you can provide any read through or additional color on how your industry-leading data analytics helps to play into this game. And more specifically, how do you think it's supporting the consumer resilience you're seeing? And do you see there being further room for improvement?

Do you think it's supporting the consumer resilience your scene and do you see there being further room for improvements in that.

Brenna: Yeah, thanks so much for the question. You know, our data capabilities are something that we've invested in, you know, very religiously over the last two years, and we are continuing to see results as it relates to that investment. I don't want to, I don't want to, but I would be remiss if I didn't also point to our cultivation team.

Yeah. Thanks, so much for the question you know our our data capabilities is something that we've invested in you know very religiously over the last two years and we are continuing to see an inner results as <unk> as it relates to that investment you know I I don't Wanna I don't Wanna, you know I would be remiss if I didn't.

Also point to our cultivation team and you know we launched a program initiative at the beginning of 2023 called Pasha I've only grow fire and that team has been doing an incredible incredible job across the country on increasing the quality of our our flower output, which leads downstream to increase quality of all of our all of our <unk>.

Kimberly Rivers: And, you know, we launched a program initiative at the beginning of 2023 called Hashtag Only Grow Fire, and that team has been doing an incredible, incredible job across the country on increasing the quality of our flower output, which leads downstream to increased quality of all of our, you know, all of our products in our portfolio. So, I think you had a number of things come to fruition in Q4. Specifically, with promotions, we were able to be strategic and continue to be strategic, I should say, in our promotional activity. We were able to use our consumer data platform to segment and target promotions towards specific individuals and specific products with margin, you know, while protecting margin. And again, with the backdrop of increased quality in our products, and really, the result was, was a win-win, you know, we, of course, in Q4 also did not have the pressure of our inventory winding down through the entire quarter.

<unk> and our portfolio. So I think you had a number of things come to fruition in queue for specifically with a promotion we were able to be strategic and continue continued to be strategic I should say in our promotional activity, we're able to use our a consumer data platform to segment and to target promotions towards spits.

Vic individuals in specific products with <unk>, you know <unk> <unk>, while protecting Oregon, and again with a backdrop of increased and quality in our products and really the result was with a win win you know we of course and T. For also did not have the pressure of our inventory wind down through the entire.

<unk> and so a number of this doctors came together and to lead that led to our improved results in the corner and and I will say you know very excited about the future as it relates to uhm again that that quality of production and the quality of our products that we have coming through our our facilities across the country and partner.

Kimberly Rivers: And so a number of those factors came together and led to our improved results in the quarter. And I will say, you know, I am very excited about the future as it relates to, again, that quality of production and the quality of our products that we have coming through our facilities across the country. And partnered with not only our consumer data sciences, but then when you overlay that with an improved web experience, our ability to use some of those consumer metrics into a targeted, targeted experience online. And that's what the loyalty program, right? It really all starts to come together and lead to a world-class customer experience.

With not only our consumer data sciences, but then when you overlay that with an improved web experience our ability to use some of that this consumer metrics into targeted and targeted experience online doctor with a loyalty program right. It really all starts to come together and lead to a world class customer experience.

Awesome, Thanks for the color.

Thank you.

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Brenna: Awesome. Thanks for the color. Thank you. Those are questions. Sarah Baxter. Thank you everyone for your time today. We look forward to sharing additional updates during our next earnings call.

Sure.

Hershey foreclosure even worse.

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.

Operator: Thanks again, and have a great day. Do you need anybody? I need somebody to love. Could it be anybody? I want somebody to love.

Thank you.

Sort of self control.

Extra large well have a wonderful day.

Mmm.

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