Many of the biggest cannabis companies are struggling to stay relevant amidst mountains of debt and slow to grow revenue. Bucking that trend is Trulieve Cannabis Corp. (TCNNF) which continues to build a solid foundation and is one of the few in the industry that is consistently profitable. Trulieve is also putting up some monster revenue numbers and reiterated its guidance for revenue of between $380 million and $400 million for the year.
The Numbers
For example, when the company reported its first-quarter earnings in May, its revenue increased 21% sequentially to $96 million versus $79 million in the fourth quarter. This beat the Yahoo! Finance average estimate for revenue of $90 million for the quarter.
Revenue increased 116% over last year's first-quarter revenue of $44 million. Trulieve also delivered net income of $14 million in the first quarter. The company has a strong cash position of $100.8 million as of March 31, 2020.
Trulieve was also flexing when it came to jobs. The company has hired more than 500 employees since mid-March, and currently has nearly 300 positions that need filling. Trulieve also expanded its delivery fleet by 200 vehicles during March in order to address Covid-19 demands.
What's the Difference?
How is Trulieve accomplishing what so many other cannabis companies have attempted and failed. Is it that the company is led by Chief Executive Officer Kim Rivers? Trulieve is one of the largest cannabis companies led by a woman. She has managed to remain in the top position since the company was founded. That is a feat that some of the brashest men in the industry have been unable to accomplish.
MedMen Co-founder Adam Bierman was forced out of the company amid a flurry of accusations of bad behavior and iAnthus' (ITHUF) Hadley Ford was asked to leave after the company learned of personal loans that hadn't been disclosed. Acreage Holdings (ACRGF) Co-founder Kevin Murphy lost his job as CEO, but as a major shareholder in the company remains on the board. Acreage went from claiming it was the largest cannabis company in the country to selling off assets and taking loans charging 60% interest.
As an aside to female CEO's it's worth noting that between 2002 and 2014, researchers from Boston-based trading firm Quantopian compared the returns of Fortune 1000 companies led by female CEOs to those of the S&P 500. The company determined that during that time period, the companies with women at the top experienced returns that were 226% higher than their male counterparts. So, there's that.
Trulieve also focused it early efforts on mainly one state, which was Florida. A format that was also followed by Cresco Labs (CRLBF) and is now being emulated by many others. Florida is only legal for medical marijuana. The efforts to legalize adult use cannabis in 2020 failed to get enough signatures and so that look like it will be pushed out to a 2022 ballot initiative. Despite being a medical only state, sales are projected to reach $1.62 billion by 2022 according to the Sate of Legal Marijuana Markets issued by Arcview Research and BDSA.
As of July 10, Florida reported 367,592 Qualified Patients and 2,484 qualified physicians. Trulieve is the largest provider in the state with 51 dispensaries. Second to Trulieve is Surterra Wellness with 39 locations and Curaleaf (CURLF) is third with 29 dispensaries. The company also has three medical locations in Massachusetts along with a cultivation and processing facility. It purchased Leef Industries in California and The Healing Corner in Connecticut.
Grizzly Lawsuit
A conversation about Trulieve can't be had without mentioning a lawsuit related to short seller Grizzly Research. In December 2019, Grizzly wrote that CEO River's husband JT Burnette was being indicted and investigated by the FBI. The case is scheduled to go to trial in October 2020. Burnette is charged with racketeering, conspiracy and extortion along with mail fraud and making false statements to federal officials. At the center of the scandal were real estate developments in Tallahassee Florida. None of the counts are related to Trulieve.
However, Burnette has provided most of the construction work for Trulieve for which his company was generously paid, and which is disclosed in the corporate filings. He has also done real estate deals with Trulieve, which isn't completely out of context since Burnette was already a successful real estate developer in the state. Plus, many forget that in the early days of legal cannabis many companies refused to work with cannabis companies. The stigma is much less today. Still, Grizzly describes the two as crooks and says the stock is "absolutely uninvestible". Trulieve has filed a lawsuit against Grizzly asking for the report to be pulled and that Grizzly profited from the stock dropping as a result of the report.
In addition to the Burnett's trouble, Trulieve is also facing a lawsuit over the drop in stock price. A shareholder pointing to the Grizzly Report complained they had lost money when the stock hit $10.50, but with the stock now selling at $16 that might be a hard argument to make. The stock did tumble to $6.50 in March 2020 but has rallied since.
Non Short Sellers Say Buy
Non short sellers have a different opinion of the company, Beacon Securities rates it a BUY and has a C$41 price target. The stock trades on the Canadian Securities Exchange at C$21 currently. Analyst Doug Cooper wrote, "Trulieve set new company sales records expanding its share of dried flower sales from 47% to 54% with 60% volume growth w/w, more than offsetting a 4-point decline in its share of oil-based products to 50%."
Canaccord Genuity has a Speculative Buy rating and a C$35 price target. Analyst Bobby Burleson wrote, "We believe the strong balance sheet does afford the company the luxury of patience and could potentially allow it to capitalize on acquisition opportunities in the near term."
Separately, while Grizzly calls Rivers a crook, Trulieve has been a big community supporter. The company donated 150 computers to low income children who are home-schooled due to Covid-19. It donated $50,000 to LGBTQ+ non-profit groups for Pride month and has partnered with Florida -based Heavendropt, an organization that provides employment opportunities for persons with disabilities, as part of their TruVet Program.
Looking Ahead
Trulieve will releases its second-quarter earnings on August 12. The company also noted that 50% of its shares are now owned by U.S. citizens so it is no longer a foreign private issuer. It will need to report earnings under U.S. GAAP accounting rules and will be subject to SEC filings. It will continue to be a British Columbia corporation.