Trulieve stock tanks following report of record third-quarter revenues for Florida’s top medical cannabis provider
Investors might not be paying attention to the business that supplies an estimated 70 percent of the medical marijuana to Florida and has the highest revenue of any other North American cannabis company. United States-based Trulieve Cannabis Corp. (OTC:TCNNF) (CSE:TRUL) operates 21 dispensaries in Florida, providing medical marijuana to patients across the state. The company began trading on a Canadian exchange this past quarter.
Trulieve announced its financial results for the third quarter ended September 30, 2018, before market hours Monday morning. Many traders bet on a successful earnings call in the days leading up to the announcement judging by the trading activity that pushed the stock price up over 20 percent in the two days prior. However, the stock tanked in Monday’s trading session following the company's earnings call.
Shares fell $1.46 to $10.94, yielding an 11.80 percent decline from the prior day’s close and a 10.49 percent intraday loss.
The 20 percent price spike seemed to be attributed more so to the anticipation of the earnings report than to the overall market activity, especially considering Trulieve’s stock returns greatly outperformed the aggregate marijuana market in the two days prior to the announcement.
However, Monday’s trade activity for Trulieve stock does not seem to appropriately correlate to the company’s financial success discussed on the earnings call and rather followed Monday’s overall market decline more closely instead. In the two days when Trulieve was up 20 percent, Horizons Marijuana Life Sciences Index ETF (OTC:HMLSF) (TSX:HMMJ) was down 1.7 percent.
In comparison, Trulieve fell 11.80 percent relative to Horizons ETF’s drop of 4.81 percent Monday.
Generating more revenue and growing at a rapid pace
According to New Cannabis Venture’s Public Cannabis Company Revenue Tracker, Trulieve generates more revenue than any other publicly-traded cannabis company in North America, except recently when Aurora Cannabis (NYSE:ACB) (TSX:ACB) inched ahead in their last earnings announcement.
Trulieve generates more revenue than Tilray, Inc. (NASDAQ:TLRY), Aphria Inc (NYSE:APHA) (TSX:APHA) (OTC:APHQFF) and GW Pharmaceuticals PLC (NASDAQ:GWPH) combined and has continued to grow with each new earnings announcement. Revenue grew from $23.3 million in the second quarter of 2018 to $28.3 million in quarter three, a 21.5 percent increase.
Even at their $23 million revenue level, this made Trulieve the top-grossing cannabis company in North America at that time. Better yet, their net income more than doubled from $7.9 million to $17.5 million quarter-over-quarter.
Adjusted EBITDA increased at a more conservative pace, however, going from $11.7 million in the second quarter to $12.6 million in the third quarter, or a 7.7 percent increase. All of these figures are incredible compared to what was reported for the entire year of 2017, which was $19.8 million in revenues, $0.8 million for Adjusted EBITDA and $3.6 million for Net Income.
They also made two large acquisitions in the third quarter, including Massachusetts-based Life Essence, Inc. and California-based Leef Industries, LLC. These two acquisitions have allowed for Trulieve’s presence to grow outside of Florida and are the first initiatives to do so.
"These transactions mark an important milestone in the growth of the Trulieve brand and our goal of becoming a leading multi-state operator," said Kim Rivers, CEO of Trulieve in a statement. "Life Essence is establishing itself as a prominent seed-to-sale operator in Massachusetts, while Palm Springs-based Leef Industries is a leading cannabis retailer in one of the largest and most significant cannabis markets in the country. We look forward to establishing the Trulieve brand and leveraging our proven business model to deliver a truly unique and full-service experience to customers in these booming markets."
When Trulieve announced the opening of their 21st Florida location on October 31 of this year, Rivers stated that with every new dispensary, their focus is “creating an environment that is comfortable, safe, and reliable” and that “with thousands of patients being added to the registry each week, bringing them safe and effective care will continue to be our focus” and that expanding to as many locations as possible will encourage the reach. They plan on opening 30 locations by February 2019 which is the maximum number of locations currently allowed by state law.
Florida’s retirement community might be Trulieve’s ticket
As more and more medical benefits of marijuana are being discovered and implemented, what better customer base might there be for medical marijuana than the elderly. As of 2013, there were 44.5 million elderly people in the United States — indicated by being over 65 years old — and Florida had the most of any other state. About 19 percent of Florida’s population is elderly.
Research has shown marijuana to have health benefits including pain management, narcolepsy treatment, nausea relief and many more. It can be greatly beneficial to the elderly to have alternatives other than synthetic pharmaceutical drugs for medical treatment, and Trulieve is taking advantage of these opportunities, especially in Florida.