Q3 2025 Trulieve Cannabis Corp Earnings Call

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Good morning everyone and welcome to the true Leaf. Cannabis Corporation, third quarter, 2025 Financial results conference call. My name is Danielle and I will be your conference operator. Today, as a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference. Christine Hearst.

See, vice president of investor relations for trulieve. You may begin.

Thank you.

Good morning and thank you for joining us.

During today's call Kim Rivers, chief executive officer and yon Reese. Chief Financial Officer will deliver prepared remarks on the financial performance and outlook for True leaf.

Following the prepared remarks, we will open the call to questions.

this morning, we reported third quarter, 2025 results, a copy of our earnings, press release and PowerPoint presentation, may be found on the investor relations section of our website, www.rule.com

An archived version of today's conference, call will be available on our website later today.

Our actual results to differ materially from our historical results or from our forecasts, including the risks and uncertainties described in the company's filings with the Securities and Exchange Commission. Including item 1A risk factors of the company's most recent annual report on form, 10K, as well as our periodic, quarterly filings.

Although the company May voluntarily do. So from time to time it undertakes, no commitment to update or revise these 4 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. These measures should not be considered in isolation or as a substitute for truly Financial results prepared in accordance with gaap. A Reconciliation of these non-gaap measures to the most directly comparable. Gaap measures is available in our earnings press release. That is an exhibit to our current report on Form 8K. That we furnished to the FCC 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 today first, I'd like to extend a warm welcome to yawn ree. Our new Chief Financial Officer, Yan brings a wealth of leadership experience and has already made impactful contributions since joining. The team, we're thrilled to have him on board.

Turning to the third quarter, we are pleased to report results that highlight the continued strengths of our Core Business. Despite seasonal pressure in the quarter, the team delivered robust margins and strong cash generation, while also expanding our customer base,

As we prepare for the busy holiday season, we remain encouraged by the momentum behind meaningful, cannabis, reforms. Truly, it continues to lead the industry forward, pushing for impactful change while reducing the stigma surrounding cannabis,

moving to our results.

Third quarter, revenue of 288 million with in line with guidance and typical seasonal Trends industry-leading growth margin at 59%, reflects pricing compression, partly offset by operational efficiencies adjusted sgna expense decline by 9 million dollars compared to last year demonstrating the team's commitment to reducing expenses in our Core Business.

Adjusted ibida of 103. Million improved by 7% versus last year, to 36% margin underscoring, tight expense control.

Operating cash flow of 77 million contributed to cash of 458 million at quarter end.

Yesterday we announced the planned redemption in December of our notes due in October 2026.

Depending on terms, we may issue new notes for up to 150 million.

During the third quarter retail traffic and units sold increased by 6% and 7% year-over-year highlighting strong demand for cannabis.

Consumers continue to lean in towards value and MIT your products reflective of General economic conditions.

Wholesale revenues are 16% compared to last year. Highlighting continued execution, outperformance and wholesale was driven by strength in Maryland, Ohio and Pennsylvania. We are expanding our wholesale business as conditions permit with careful monitoring of the credit. Quality of customers and Industry developments in our core markets October traffic has improved compared to September in line with historical. Seasonal patterns, We are continuing to monitor consumer Behavior closely for any changes in preferences and spending

As we approach your end, our team remains focused on 4, key areas reform, customers distribution, and branded products.

I'd like to start by discussing federal and state cannabis reform, given the importance for our industry.

We remain optimistic that the Trump Administration will address cannabis reform by rescheduling marijuana to schedule 3.

This important Milestone would acknowledge the medical value of cannabis, and open the door for additional research. Millions of Americans rely on medical cannabis for Relief. A fact that contradicts the current schedule 1 classification rescheduling when not legalized cannabis, but it would remove the punitive tax, burden on state legal operators, enabling greater conversion from the illicit Market.

We Believe rescheduling represents the first major domino in federal reform. Additional steps are needed to address challenges with Banking and the growing divide between federal and state laws.

Recognize the need to remove excess cash from dispensaries to ensure safety for workers and discourage criminal activities such as money, laundering.

In our home, state of Florida, tree leaves continues to support the smart and safe, Florida campaign for adult. Use legalization, the 2026 ballot language includes revisions to address concerns raised during the 2024 Campaign, which narrowly missed the 60% threshold required. For passage the new ballot language prohibits products, and packaging, that could be attractive to Children, prohibits smoking and public directs issuance of new non-vertical, licenses and expressly clears, the way for the state legislative body to allow home growth marijuana.

Signature Gathering efforts are ongoing and the campaign expects to reach the required number of validated signatures prior to the February 1st deadline. As of November 1st, more than 1.1 million raw, signatures have been submitted with over 675,000 signatures validated. We expect Florida, Supreme Court review of the ballot language and summary will be conducted as required by April 1st of, next year to date. Truly has been the primary Financial contributor to this effort. Leading the charge for change in Florida. While we firmly believe in the potential for Florida to serve as a model for successful State cannabis programs. We are preserving optionality and deciding whether to contribute meaningful financing to the 2026 campaign to release, ongoing support of the campaign will be determined based upon data and the political landscape heading into the 2026 election.

In Pennsylvania, we remain optimistic that a compromise. Can eventually be reached to enact adult East legalization. We Believe state legislators recognize the potential for adult, use to satisfy constituent demand for cannabis while generating revenue for the state. Several bills have been filed this year and many constructive sessions and hearings have been conducted. If adult use is launched in Pennsylvania. Truly was, well, positioned, given our established retail footprint, strong Brands and retail and wholesale and scaled production capabilities with adult, use programs already launched and 5 of 6 neighboring states. We expect Pennsylvania. Will enact adult use in the near term.

In addition to reform efforts, we are driving operational improvements. And 3 key areas, customers distribution and branded products.

Since Inception, truly has grown with customers at the Forefront of everything. We do our providing a normalized retail environmental, alongside Superior Service. We strive to deliver exceptional customer experiences throughout the customer Journey.

Personalized customer messaging and engagement continue to evolve as we add new capabilities to our customer data platform and analytical tools. During the third quarter, we implemented new product recommendation schemas, including prompts for suggestions and repurchases. Similarly, we added enhanced customer segmentation features to allow predictive modeling for shopping pattern frequency and anticipated order dates.

These tools allow identification of customers and personalized timing of recommendations to drive re-engagement.

Our generous Rewards program continues to grow reaching, 820,000 members, at the end of September, we continue to see greater retention, and monthly, spend among members who spend on average 2.5 times more than non-members rewards members completed. 77% of third quarter transactions. We recently introduced new monthly reward statements that highlight key Milestones achieved to enhance program engagement and visibility

Building upon the success of our Rewards program. Today, we launched a new mobile app available for download and the Apple App Store. The truly mobile app is uniquely designed to deliver a best-in-class experience that centralizes shopping deals gamification and rewards. The app gives customers an effortless and engaging way to browse and Reserve products.

Push notifications to learn about special promotions or when orders are ready for pickup. Provides a more seamless experience compared to email and text messaging. We are excited to bring these new features to our Apple customers in Florida, and we look forward to launching the app in additional markets and on Android devices in 2026.

Personalized, messaging, Loyalty Rewards and seamless digital experiences all contribute to customer retention.

Third quarter retention, improved by 1% sequentially to 58% companywide with 76% retention and medical only markets. While customer retention metrics are strong. We are amplifying the truly brand through local engagement to attract new customers across our Market. We are recalibrating community events to focus on 4, key areas, helping patients, serving veterans, assisting seniors, and promoting restorative justice.

Through community activities Partnerships and charitable work. We are directly addressing the needs of these stakeholder groups.

This month, we are supporting veteran organizations to serve those who have sacrificed so much for our country.

This weekend, Trulieve is sponsoring a weekend retreat for Operation Resilience, led by the Independence Fund. This event is designed to help veterans who are at high risk for suicide. We are proud to give back to these worthy causes and partner with groups that support our mission to expand access to cannabis.

Alongside engagement efforts. We are investing in retail and wholesale distribution to reach new customers and drive. Sustainable growth. We met our 2025 retail Target by opening 10, new stores, in Arizona, Florida, and Ohio expanding our Network to 232 stores.

In September, we relocated 1, Arizona store from Scottsdale to Bisbee broadening. Our reach by entering an underserved area. We are on track to refresh. Early model up to 45 stores this year.

And wholesale Maryland and Pennsylvania. Continue to outperform in Ohio, our production partner continues to ramp sales of branded products including modern flour and roll 1.

With over 4 million square feet of production capacity, our scale platform provides a meaningful competitive Advantage, including strong growth margins and the flexibility to adapt to evolving market conditions.

Our production team continues to identify operational efficiencies, driving costs lower while delivering great products.

Consistent product, quality differentiates Our Brands, in an increasingly competitive landscape.

During the third quarter, we've sold over 12.5 million branded product units. In-house Brands, modern flour and roll 1 continued to resonate with customers representing almost half of the Branded products sold in Florida. We recently launched a new role. 1 Club. All In 1 Vape, this new compact disposable Vape cart sold out in less than 2 weeks. We plan to launch additional modern flour and roll 1 skus, including new all-in-1 Vapes and several markets.

Turning it out of the beverage category. Last February, we launched a new line of farm, bill compliant, THC and CBD. Cocktail alternative beverages called onward throughout the year. We have added new flavors and expanded distribution. In July, we added the line extension of CBD and THC energy drinks called upward in September. We launched new 10 milligram flavors for onward and upward onward. Varies, smash, Cosmopolitan. Lemon drop martini and Paloma and upward half and half, iced tea. And lemonade, flavors are performing well, enjoying positive customer feedback.

These Farm Bill compliant THC beverages provide an opportunity to reach new customers with approachable products, and familiar Outlets.

Onward and upward beverages are available online and in more than 440 stores, including ABC Fine, Wine and Spirits, and Total Wine in Florida and Specialty groceries and convenience stores, in Florida and Illinois. We recently launched distribution through Anheuser Busch in Florida and Romano beverages in Illinois and we are actively working to expand distribution with new and existing Partners. Visit drink onwards, calm to find a retail location near you or order online.

Overall, we are making real progress across our Focus areas reform, customers distribution and branded products with continued momentum and significant flexibility in our Core Business. We are set to expand our leadership position while pushing for cannabis reforms with that. I'd like to turn the call over to our CFO Yan, ree, please go ahead.

Good morning, and thank you, Kim. I'm thrilled to join truly, and I'm focused on driving profitable growth at a leading company and Industry pioneer.

Third quarter Revenue was 288 million at 1% year-over-year driven by new store openings. The dog use in Ohio and wholesale growth partially offset by pricing compression and wallet pressure.

Cross profit was 170 million or 59%, more margin performance driven by increased pricing compression, loyalty Point, Redemption and product mix.

Partially offset by lower production cost. We continue to expect quarterly, fluctuation based on product mix Market, mix inventory sales through Pro promotional activity and idle capacity costs

Sgna expenses were 99 million or 34% of Revenue. A significant Improvement driven by reduced operating expenses and lower campaign support.

Adjusted sgna declined to 30% of Revenue 34% last year.

Uh, due to ongoing operational efficiencies.

Net loss. In Q3 was 27 million or 14 cents per share versus 33 cents last year. Excluding non-recurring items, net loss per share would have been 7 cents.

Year-over-year or 36% margin, reflecting expense leverage in our Core Business.

Turning now to our tax strategy. As a reminder, we have filed amended returns that in 2019 and continued through today. Shelling things challenging. The applicability of 288 to our business to date. We have received refunds totaling over 114 million

While we are confident in our position strategy, final resolution may take years, we continue to include an uncertain tax position while realizing lower tax payments.

It's important to note that rescheduling to Schedule 3 would have removed the burden, and Q3 and year-to-date results would show positive net income under those conditions.

Moving now, to the balance sheet and cash flow.

We ended Q3 with 458 million in cash and 478 million in debt.

Cash flow from operations totaled. 77 million with capital expenditure of 12 million, with free, and free cash flow of 64 million.

Turning. Now, to our Outlook, we expect low single digit, sequential Revenue growth. In Q4 we expect full year, growth margin will be comparable to 2024. We anticipate at least 250 million in cash from operations for the full year, capex of 45 million up to Prior Target of 40 million.

Reflects Investments to relocate, stools and minor cultivation upgrades in Ohio and Pennsylvania.

We remain focused on finishing the year, strong delivering results aligned to our strategic priorities with that. I will turn the call back over to Kim.

Has gained widespread support.

Americans recognize its therapeutic benefits. Today, nearly 90% of Americans favor, some form of legalization for medical or recreational cannabis,

Currently 40 states have established programs for medical cannabis. Providing millions of patients access to release relief from chronic pain anxiety, Sleep Disorders, epilepsy and symptoms associated with serious illnesses including cancer, multiple sclerosis, and PTSD.

While federal and, in some cases, state policy live, public opinion momentum for reform is gaining traction. The Trump Administration can deliver on campaign promises to address cannabis reform by rescheduling cannabis to Schedule 3 in Florida. We remain supportive of signature-gathering efforts for the Smart and Safe Florida ballot initiative to legalize adult use. With over 23 million residents and 143 million tourist visits per year, we believe Florida could be the strongest market in the U.S., striking an appropriate balance between individual freedom and responsible consumption. In Pennsylvania, we are hopeful that bipartisan adult use legislation can pass.

In the coming years, we believe, both Florida and Pennsylvania will eventually enact adult youth programs as an industry, leader, we remain firmly. Committed to pushing from meaningful reform and expanded access to cannabis given the core business and flexibility across our platform to leave this poised and ready to define the future of cannabis. Thank you for joining us today. And as I always say, onwards at this time, Kim rivers and yon ree will be available to answer any questions. Operator, please open up the call for questions.

Thank you. We will now begin the question and answer session to ask a question. You may press star then 1 on your touchtone phone, if you are using a speaker-phone please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question please press star then 2

As a reminder, please limit yourself to 1 question and 1 follow-up.

The first question comes from Luke Hannon from canaccord genuity, please go ahead.

Thanks. Good morning everyone. Um, Kim you you touched on in your prepared remarks. There you, you continue to generate an industry-leading, even a margin, there's a couple of things underscoring, that obviously you have very efficient cultivation Footprints but then also, as you pointed out, you are a little bit more efficient when it came to adjusted.

Sgna as well. So if we just think about those 2 components, I'm not necessarily asking for for guidance here. But what you when it just comes to Opportunities, I suppose to potentially improve on on that margin. What do you see as as sort of the the lower hanging fruits going forward?

You're set for our consistency as it relates to being able to do that and effectively, uh, kind of regardless of what's happening at the macro level. Uh, you know, I would tell you that really in terms of what we're seeing coming into Q4, it's going to be somewhat dependent on what happens with the customer, right? And certainly obviously, the holiday season is something that we've got our eye on and, which is typical this time of year. But, you know, given I would say, the, we have a little bit of a penis candidly, um, to the, as it relates to the consumer, you know, at the end of Q3 coming into Q4, we saw, um, some trading down and some price compression, I would tell you to answer your question. The fact that we have the ability in our platform to meet the consumer where they're at and be strategic and how we do so, um, you know, I am confident in our ability to continue to deliver, um, strong margin and but, you know, that has to be again, um, coupled with the the reality.

Again, of the of the consumer profile, it will be impacted by product mix and promotion. Um, but again, also, you know, keeping in mind that we have an amazing, um, and flexible, um, and modular, um, you know, production, uh, footprint that we're able to flex, um, again to meet to meet the consumer where they're at. And so, you know, I wouldn't, I would say that again in line with what we've said, all year, we expect that full year to be, um, to be consistent with um, with again last year.

And I can relate to margin and I think given the, um, sort of differences in this year's consumer profile, I think that's, that's pretty, I'm very, very happy with that.

That's great. Thanks for that. And then for my my follow up here, you touched on the the launch of the mobile app. And then also, some of the benefits associated with that. It sounds like more customer engagement is is Chief among them. But you, you also place truly places emphasis on, on data and analytics and being able to use that effectively when it comes to the entire sort of go to market strategy. So I guess I'm curious. Does the app make you any more efficient when it comes to being able to gather insights from that data? Or does it give you a richer set of of data points to be able to sift through as well?

Yeah. Well so certainly, um, we are excited about the ability to connect in a more personal way um, to our customers. And I would tell you that, you know, the ability to um, again have more of an interactive platform with our customers will be um, will be important as we continue to develop um, our our strategies around consumer personalization. Um, so you know, I mentioned that even on our our existing web platform. Um, we're now able to uh, more suggestive cell based on someone's past, um, buying patterns, as well as to be more predictive in terms of when um, he or she may be coming back into the store based again on on past behavior. And so,

Which is very exciting and being able to bring those features into an apple landscape. Um that again is a bit more real time and then to be able to also seamlessly integrate, our loyalty platform into an app. Um you know, shopping platform is you know, I would say The Best of Both Worlds. Um, and really we think that it's critical as we think about um, getting away from the combined. Um, you know, because we are um, in cannabis. Uh, we're restricted in terms of what we can do via text messaging and, and given the fact that we're all mobile these days, the ability to have push notifications to remind folks when they have points available to remind. Folks when there's certain things happening within our stores, that that particular Shopper may be interested in. Um, I, I just think it's going to be very Dynamic, um, as we, as we move forward into this into this next stage of our, um, of our connectivity Journey here.

That's great. Appreciate the commentary. All the best.

All right, thanks.

The next question comes from Russell, Stanley from Beacon Securities. Please go ahead.

Good morning. And thank you for, uh, taking my questions. So, first just around retail, you've you've refreshed and remodeled the significant number of sites uh, this year, can you? Um, I don't know if you have this handy but can you provide any any data points regarding the impact of those efforts on?

Traffic or basket size. You know what, you've seen, relative, expectations, and, and any lessons that you've learned

Uh, through the process, it'll inform your your refresh remodel plan next year.

Ended up with their with their customer base. So that's going to be. I would say something that you should expect from us on an on a pretty regular basis will be analyzing and it's a constant. Um, it's a constant, uh, review of stores the platform. And especially with our business since, um, many stores as everyone will recall were worse, you know, were initiated in a different regulatory landscape. Where there were different restrictions, you know, in Florida, for example, you know, it's a very beginning. We had to have. There were very strict rules about where we could be located and the types of lobbies, we had to have the security features between showroom and Lobby, Etc. And so opening up, those floor plans is those regulations have changed to make a more welcoming environment for customers and improving customer flow. Um, Vault size, how product moves from backup house to front of house, Etc. Um, is certainly, um, important from an efficiency standpoint and then, of course, from a customer

Experience standpoint as well. And so we're going to always be looking for those types of opportunities across across the platform. And then again, I think it's just good hygiene to make sure that you've got, you know, welcoming um fresh, you know, bright environments for for our customers that are adapting to what the expectations of a of a primary, you know, a premier retail experience would be

Thanks for that. And and maybe just on the balance sheet, uh, given the the Redemption, uh, plan Redemption. And, and you talked about, you know, another debt issue for up to 150 million. I think, I guess. Can you talk? It's a relatively modest amount given what you're redeeming. But, uh, can you talk about what you're seeing in terms of appetite out there especially given the, uh, the recent similar short list of delivering credit spreads just wondering what kind of environment you're seeing from would be lenders and and the the appetite that you're seeing relative to, you know, 3 6 months ago. Thank you.

Sure. So, um, you know, we we have a, you know, we haven't gone to market yet Russ. So I think that, you know, color on that should be probably reserved for, um, for, you know, future commentary. Um, I can tell you that, you know, again, we have flexibility in our ability to, um, you know, to, to whether to complete or not complete, depending on terms and depending on appetite. And again, I think that our balance sheet is strong. Our cash generation is strong. Um, our Core Business is very solid. I think our consistency and our Core Business is very solid in terms of our ability to generate cash and, and bring, you know, that that again, like we talked about before, um, bring that Revenue down to bottom line profitability. So, um, you know, I would say stay tuned but I feel, I feel pretty confident that that we'll have. You know, we'll have optionality there and then we'll be in a decision along with course,

With the board to make to make a determination as to, um, how much or if we, um, we decide to move forward with, uh, with the raise. But, um, you know, again you know, we're generating, um, we're generating cash every quarter and, um, feel good about about where we set.

That's great. Thanks for the color. I'll get back in the queue.

Thanks.

The next question comes from Bill, Kirk from mkm Partners, please, go ahead.

Good morning, everybody. Um, in in 2024, the Florida initiative didn't seem to get the kind of deserved monetary support from other msos. Do you expect those those other msos to better contribute either monetarily or in other ways this time around?

You know, I would, I would say that certainly, I would love for you guys to ask that question on their on their earnings calls. Um, you know, I have I have been in, um, in talks with the other CEOs. And I think that we're going to have, um, some pretty robust conversations after, um, you know, after Supreme Court review, once we have just like, we sent our prepared remarks. Once we have additional data and visibility into the political landscape. Um, polling right, all of the things. Um, you know, I do think that folks are um, certainly um, certainly at the table in a, in a, in a different way than they were the last the last cycle. And but I also think

Great that, um, some of its going to be dependent on where everyone sits as it relates to available cash, and of course, um, you know, 288 has a has a big. Um, it's a big contributor there. So, uh, we shall see but um, I I would say that I think that the um, the msos at least are are working together as it relates to reform and I think that that is a positive. Um and and definitely we could see that also come come over to the Florida.

For regulating intoxicating hemp differently or or possible closing of any, uh, what people call the farm bill loophole. And I, I guess if we step back, how would you like to see intoxicating hemp treated by by the federal government and states?

Yeah, I mean, certainly it's, um, as you know, it's a checkerboard out there, um, as it relates to the state and how, they're how they're treating, um, intoxicating hemp. Um, you know, we have a little bit of a front row seat to it. Um, not only of course from the regulated cannabis side of the business, but also from the beverage side of the business, um, in Florida, there were, um, you know, new rules that were issued midyear this year. Um, and, you know, a big crack down, the state, um, products in total wine, beverage products, and Total Wine. And ABC's were taken off shelves. Um, because of labeling, uh, challenges among some other, some other regulatory, um, concerns. Um, you know, our branded beverage products onward and upward, we're actually able to stay on shelf. Uh, we are, you know, and we're compliant. Um, which I think is actually becoming a little bit of a differentiator for us because we're very used to write having to have um all of our our testing back.

Back up and making sure that, you know, consumers can scan back to a finished product test and that the labeling is accurate and all those things. So, um, certainly we have seen um, a step up in enforcement I would say across across markets and and I think that's in line with sort of an increase in, um, attention that it's getting again at both state and, and at the federal level. Um, I think, you know, I, I hear what you hear as it relates to the, the federal, um, you know, differences in terms of potential Pathways, um, for regulating intoxicating hemp. And I think, you know, we'll we'll see where that, we'll see where that lands. Um, but I, I it does seem to me that similar to the states. The intensity of the conversation, um, is increasing both at, um, at the state level and at the federal level,

Thank you, Kim.

The next question comes from Brena. Cunnington from ATB Capital markets, please go ahead.

Hey, it's Brian on for Puerto Rico. Thanks for taking our questions and congrats on the results. This quarter. Um, just continuing on the theme of the floor development measure, we all know that Florida. Legalization would be a game-changer, um, but the 60% approval threshold does seem to be a bit of an issue since we saw that the majority of floodings do actually want to legalize. So, just trying to understand here, theoretically speaking. What about this time? Could be different, do you think it's more of a factor of raising more voter awareness?

Or was there a specific verbiage that needed to be changed last time to address potential voter issues or perhaps something else?

Sure. So I think there's a couple a couple of uh of main you know, differences. Um well maybe actually 3 um 1 I think that um you know, the there will be a big component of this that centers around just um, again the political landscape. Um, we're in a gubernatorial race this time as opposed to a presidential race and so the Dynamics in Florida in particularly in particular shifts, um sometimes dramatically in terms of profile of Voters um that turn out between those 2 different um, types of races. So I think that's an important thing. Um, that we'll certainly be analyzing and watching 2. The ballot initiative itself has some, um, you know, changes as mentioned in the prepared remarks that were very that were specifically, responsive to, um, pulling and feedback from the last campaign, um, particularly voters indicated that they wanted, more certainty around.

What the legalization. Um, you know, program would look like in the State of Florida specifically around, um, confirmation that these products would not be attractive to children that, you know, they're it is, of course, age, gated for adults, over the age of 21 that, um, there would be no smoking allowable in public.

Around what happened in the last campaign as it relates to some public dollars being spent and taxpayer money, Etc. The legislature passed a package of laws last legislative session that clarifies and, and candidly locks down, um, that activity such that, um, we believe that there will not be that same level of, um, opposition at least from those particular paths. Um, in this, in this next, in this next election, which we think is, is very important. Um, and and you know, at the end of the day, right? Um, I think that, um, just a, a fair and straightforward, um, election process could could definitely be a, uh, a game changer as well. So, um, I do think that at least early indicators are that it's going to be a more, um, positive backdrop, but again, um, we want to make sure that that's confirmed by, um, again the data and

The political backdrop before we before we decide to move forward.

Understood, thank you. And then our second question is just regarding the hemp beverages, which we do know as a small category but we were just loving the additional color. You could add on how sales or ramping in Florida and Illinois and also specifically how online sales are doing

Yeah, so, um, you know, it's it's ramping, um, candidly, you know, ahead of what our initial expectations were. Um, you know, we I think, as we have, um,

developed our Partnerships with both, um, Total Wine and, um, ABC, they have grown, um, pretty pretty dramatically, um, since Inception. Um, in addition right, our ability to successfully, um,

you know, land additional distribution Partnerships has also been a a positive and they'll be more announcements from us on that, um, in the near term. Um, we are being thoughtful in terms of how we, how we ramped, um, simply because we want to make sure. I mean, we believe very strongly, uh, truly. Even this goes back, it's in our DNA. Since Inception that, you know, it's important to to launch and penetrate. Um, and make sure that your um, understanding and getting as much data as possible about the consumer and making pivots early, um, to get it right. So that, you know, we're able to again, um, really have the lasting brand Equity with this with this customers. And so we, I could tell you that we candidly, we could be ramping faster. Um, but we want to make sure again that we've got the opportunity to really have a presence in those stores. And in those markets,

By doing things such as tasting events, um, trainings with the employees, and those stores to make sure that they're actually educated on THC and how our beverages are different than all. The other brands that may be on shelf, um, why they should feel comfortable recommending, um, you know, our beverages to Consumers, um, what is how to read a label, um, as it relates to our, our beverages Etc. And so we are making sure that we do this the right way um which I think will play dividends um, and for the, for the long term.

Perfect. Thank you, Kim. And team. I will jump back into you.

All right, thanks.

As a reminder, if you have a question, please press star 1. The next question comes from Aaron Gray from Alliance Global Partners, please go ahead.

Hi. Good morning. Uh, thanks for the questions, congrats on the quarter. Um, first question for me, uh, just on some of the consumer engagement initiatives, loyalty programs, you know, now mobile app.

You know, obviously it would seem like you're most able to leverage that in states where you might have more of an existing mode uh, like Florida as well as Arizona. But also curious to, to know, you know, how you might be looking to leverage that and build a larger presence in markets where smaller today and maybe you rely more wholesale, so, maybe just some more color in terms of how you're able to leverage, you know, some of these, uh, you know, products and learnings to build it out. Uh, a market share, we are smaller today.

Thank you.

Particular patient. So when you think about it in a market like, you know, a Florida or a Pennsylvania, we have a lot of information because they have to have a patient identification card and we have to, you know, allocate and make sure that we've got, um, the tracking of the product that's dispensed across their recommendation, from their physician. So there's a lot more, um, already known, um, components of this purchases and of those customers, but you contrast that with an adult Ace Market where someone is just, you know, we have to age gate, of course, and take their, uh, license information, you know, information confirm that they are an adult age, 21, and up. But aside from that, you can really be more Anonymous in those markets and the Loyalty program has been phenomenal in terms of having those customers actually voluntarily right engage with us in a more regular way so that we can Again Begin to get to know them and um, have that

Truly reciprocal relationship where we're understanding, they're buying patterns, we're able to offer them additional um, product suggestions or deals that they may be. Um, they may have not known about right because there's no reason for previously. There would have been no necessary reason for them to connect with us in that way. Um, we think the app is going to take that to a completely different level. Um, so, right, you'd have the ability to pre-order online track your order. It'll push you a notification just like and Starbucks or other places where we all use apps across our normal retail experience to say, hey, your order

Is ready for pickup. In addition, we can talk about, you know, as it relates to our wholesale business. Hey, we just launched this new all-in-1. Um, find it near you, right? We saw that you purchased an all-in-1, Vape. Previously, it's available, you know, a mile from your house at this particular location, right? So there's all kinds of capabilities that are going to be available um, through the app. Initially, we are definitely using it to reinforce our in-store branded product through branded retail being our core. Right. Our Core Business, uh, driver. But Aaron to your point in a state like Maryland, for example, where we only have 3 stores, but we have a, a bigger wholesale business. Being able to leverage things like an app to offer gamification, Etc of products, um, that are available in our in-house brand, products that are available throughout the state. Um, certainly is something that, uh, that we'll be looking forward to as we further, develop it

Really helpful call with their Kim, appreciate that. Uh, Second

Question for me, just on Florida in store, saturations and opportunities.

Any color you can provide in terms of, you know, how you're feeling about the foreign market today, additional opportunities for you to open up stores both for the true at the level of truly and more broadly where you're seeing that. And then how that might differ for the different store model type that I know truly has. And whether or not that would be dependent on adult use, um, becoming legalized in the state. Thank you.

Sure. So um,

I would tell you that, you know, in Florida, um, we certainly it. It's interesting because it's a little bit of a mixed bag right now. Um, as I mentioned, we're certainly seeing, um, across the entire system. Not just in Florida, but we're certainly seeing some price price compression, and some wallet pressure and some trade down activity. Um, Florida is a big state. And I would tell you that 1 of the, um, 1 of the things we've been focused on is really, um, ensuring that we can manage down to that specific store level and then we understand um, because not every Source position the same, right? And we have some stores that have very little competition around them. We have other stores that are in highly competitive environments, we have some stores that cater more towards a um, you know, maybe a more um, higher end, kind of store crowd other stores that are more value oriented crowds. So being able to strategically differentiate and ensure that we have the right product. Mix we have the right promotional Cadence. We have the right.

and uh, messaging techniques on a store-by-store basis, is something that we have been um

really excited about and that

We're seeing some of our competitors actually closed stores and shutter stores, which we believe is a tremendous opportunity for us to absorb those customers and and you know, let them ReDiscover uh, truly and and hopefully bring them into into our fold. Um, but also write gives us an opportunity to reevaluate the landscape and see if there are um if there are areas where

You know, we feel like we need to reposition or even potentially open um, an additional location. Um, so I would just say stay tuned on that, that analysis is ongoing and absolutely. It will depend on the specifics of the location to your point. As it relates to whether or not we would consider opening a whole service, a flagship, uh, or a Express. Um, type model, um, as well as of course, if um, you know, adult use, uh, is on this on the table and it, you know, obviously that that does change the The Narrative a bit as it relates to, um, where store attractiveness, you know, the attractiveness of certain stores May, uh, may change depending on that.

Okay. Great. That's really helpful. Thank you. I appreciate that camera. I'll go ahead and jump back into the queue.

Thanks Aaron.

The next question comes from Andrew simple, from Echelon Capital markets, please go ahead.

Hi there. Good morning. Thanks for taking my questions here. Um, start off with a pair of questions on Capital expenditures. Um, you know, just want to home in on the capital budget of 45 million for the year. I believe you're already at uh, 40 million uh, the first 9 months. Uh, so, you know, just want to check in on that anticipated. You know, you're seeing expecting to see a Slowdown in the fourth quarter year on on Capital spending and then uh just secondly on that on Capital budgeting. I'm wondering if you have a capital budget for next year, just kind of directionally uh how much you would uh think to spend maybe whether it's high or lower or roughly the same as as what we're about to see in 2025,

Thank you, let me take this question, Kim. Uh, first off. Yes, we do have a very robust uh, Capital expansion process and review process. Uh, we do take opportunities though when we do have the opportunity to relocate those to a more customer service customer uh uh facing program. So if you look at the uh, 45 million that we have currently in the forecast uh you can divide this into 2 main buckets. 1 is Relocation Store in Arizona. The other 1 is the cultivation in Pennsylvania and Ohio both invest.

Long and short term will yield a much better return. So we we went forward and make this investment as we always do with our review process, the good things we will execute and will do uh uh yield higher returns as we promise ourselves.

Okay. Uh, thank thanks for that Jen. Um, and then maybe just uh pivoting to inventory balances. Um you know, the inventory levels continue to inch higher. Um, do you have any color or thoughts about your inventory? Balances are you happy where that? Where that sits today? Uh, just any thoughts around? That would be appreciated.

Yeah. So as we, as we've said, um, consistently our inventory is going to going to fluctuate a little bit. Um, you know, uh, from uh, from quarter to quarter. Um, I think that it was 2 million, uh, increased in, um, in a 1.8 million in Q3. So, um, to us, that wasn't really anything, you know, to cause any sort of alarm. Um, and again, we believe that it's going to fluctuate quarter to quarter. Uh, yes, we are happy with it now. I mean, I think a couple things just to note that we will, of course, um, ramp inventory prior to Som store openings, which we've had in Ohio. And then, additionally, as we mentioned in the prepared remarks, we've got um, in some markets, um, some new products, uh, launching as well as in Ohio, some of our brand, uh, brand

Portfolio coming through for the first time. So, um, like like we said, there's going to be a, you know, slight swings. But don't think that, um, there's there's really anything out of the ordinary there for us, um, as it relates to inventory.

Great, appreciate the color. Thanks for taking my questions, I'll get back into queue.

This concludes our question and answer session, I would like to turn the call back to Christine hersy for closing remarks.

Next Ernie's call. Thanks everyone. Have a great day.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect