💸 The Tape

Trulieve Reports Q3 As Floridians Head To The Ballot Box

Ladies and gentlemen, gather 'round for the quarterly tale of a company that knows how to keep things interesting—even when reporting a net loss. In Q3 2024, our protagonist reported revenue of $284 million, marking a modest 3% year-over-year increase. Not too shabby, especially when you consider that 95% of that sweet, green revenue came straight from retail sales.

Now, let's talk margins—because who doesn't love a good margin? Achieving a gross margin of 61% with a GAAP gross profit of $173 million is like hitting a three-pointer from half-court. It shows operational efficiency and a keen eye on costs. However, a reported net loss attributable to common shareholders of $60 million. Before you gasp and clutch your pearls, note that the adjusted net loss is a more palatable $12 million. This figure conveniently excludes $48 million in campaign support and other non-recurring charges. Think of it as the company saying, "Ignore the man behind the curtain; focus on the adjusted numbers where we're practically profitable!"

Speaking of profitability, adjusted EBITDA came in at a cool $96 million, representing 34% of revenue and a 24% uptick year over year. It's the kind of growth that would make even the most stoic accountant crack a smile—or at least raise an eyebrow.

Cash flow from operations was $30 million, with free cash flow playing the role of the moody teenager at $(7) million. Both figures were impacted by that $48 million in campaign support. One might say they're investing in the future—or perhaps just sponsoring the world's most expensive ballot initiative (which it was).

On the balance sheet front, cash and short-term investments totaled a robust $319 million. It's always comforting to know there's a hefty cushion to fall back on, especially when you're opening new stores up and down 95 in the Sunshine State.

Operationally, the Q was buzzing for Trulieve. They launched adult-use sales at three Ohio locations—Beavercreek, Columbus, and Westerville—which we will be listening on the earnings call for any performance metrics. They also rolled out the #YesOn3 product line to support the Smart and Safe Florida adult-use campaign. It's a marketing move that's as strategic as it is supportive, blending civic engagement with, well, sales.

But the pièce de résistance is their entry into the world of pickleball. Yes, you read that correctly. They've partnered with the Professional Pickleball Association and Major League Pickleball to sponsor events in Arizona, Florida, and Georgia. It's a bold move that says, "We don't just serve the community; we play ball with them—pickleball, to be exact."

Not to be outdone, they opened 15 new dispensaries in Florida and Pennsylvania. With 30% of retail locations now outside the Sunshine State, the growth of the footprint outside Florida is starting to take shape.

While the net loss might make headlines, it's the underlying growth and strategic maneuvers that tell the real story. From solid revenue figures and impressive margins to nationwide expansions and quirky partnerships, this company is playing the long game. And if that game happens to involve pickleball and a few new dispensaries, who are we to judge? After all, diversification is the name of the game—even if that game comes with a side of sour pickles (or financial metrics).

SNDL Printes An Impressive Q

If you're searching for a company that can navigate market headwinds with a grin and a puff, look no further than SNDL. Their third quarter of 2024 reads like a tale of two indulgences: while liquor sales nursed a slight hangover, cannabis operations were flying high, lighting up the balance sheet in the process.

First, let's address the mild buzzkill. Net revenue for Q3 2024 was $236.9 million, a negligible dip of 0.3% compared to the same quarter last year. The culprit? A soft patch in the Liquor Retail segment. It appears that some consumers are trading in their bottles for buds. However, before you pour one out for SNDL, consider this: net revenue actually climbed a healthy 3.8% from the previous quarter's $228.1 million. It seems the green leaf is cushioning the fall of the clinking glass.

Now, onto the good stuff—the kind that would make any CFO's eyes gleam with pride. Gross profit soared to $63.0 million, marking a record gross margin of 26.6%, up from 20.5% a year ago. That's a year-over-year gross profit improvement of 30%, or an 8.3% lift quarter-on-quarter. It's clear that SNDL's margin improvement initiatives—like data licensing, product mix optimization, and supply chain wizardry—are paying off at an accelerated rate.

Of course, every party has its costs. The company reported an operating loss of $18.5 million, nudged into the red by a $13.4 million negative valuation adjustment of equity-accounted investees (looking at you, SunStream portfolio) and $1.9 million in restructuring charges. But let's not get lost in the accounting smoke. Excluding these non-cash valuation twists, SNDL is showing material improvements in profitability.

Cash flow is where SNDL really flexed its financial muscles. Positive cash flow hit a robust $80.0 million, a significant leap from the $16.5 million pocketed in the same quarter last year. Year-to-date cash flow stands at a solid $67.9 million. Free cash flow was also in the black at $9.2 million, bringing the year-to-date figure to a near-breakeven negative $2.8 million—a remarkable recovery from the $62.3 million deficit in the first nine months of 2023. In a world where cash is king, SNDL just crowned itself.

Strategically, SNDL made some high impact moving and shaking in the Q. They snapped up the principal indebtedness of Delta 9 for $28.1 million, ascending to the throne as its senior secured creditor. A mid-July restructuring program aimed at trimming the corporate fat is on track, already delivering over $2 million in savings this quarter—a cool $10.3 million annualized. It's corporate efficiency on a diet plan that actually works.

In early August, they collected a tidy US$73 million from SunStream, following loan repayments that cleared the decks with Ascend and Jushi. Not one to rest on their laurels, SNDL's stalking horse bid galloped to victory in acquiring Indiva Group's business and assets. This move crowns them as the market leader in the Canadian edibles category—proof that they can have their cake and infuse it too.

October brought more treats than tricks. SNDL completed the privatization of Nova Cannabis Inc., acquiring the remaining minority equity interest. This consolidation is set to streamline operations and could be the strategic equivalent of finding a forgotten stash of high-grade synergy.

Financially, SNDL's war chest is impressive. The company boasts $763.8 million in unrestricted cash, marketable securities, and investments, with no outstanding debt—cleaner than a distillery's finest batch. Even after shelling out $37.3 million post-quarter for Nova's minority interest, they still sit on a comfortable $263.0 million in unrestricted cash. Notably, they haven't diluted shareholder value by issuing new shares since June 2021—a rarity in an industry where dillution is common place.

In summary, SNDL's third quarter performance is a masterclass in balancing acts. While the Liquor Retail segment might be nursing a slight headache, the Cannabis divisions are soaring, driving growth and profitability. With strategic acquisitions, operational efficiencies, and a fortress-like balance sheet, SNDL appears well-positioned to keep the good times rolling. Investors might find themselves raising a glass—or perhaps something a bit more herbal—to a company that's proving it can thrive in both spirits and spirit.

📈 Dog Walkers

Agrify Taps GTI For Financing

Agrify Corporation just found its own Green Thumb—literally. The company announced a $20 million convertible secured note from a subsidiary of Green Thumb Industries, with half of it ready to sprout immediately. Worthy of a corporate soap opera, outgoing Chairman and CEO Raymond Chang and Director I-Tseng Jenny Chan sold their stakes to this Green Thumb offshoot before gracefully exiting stage left. But fear not, Agrify isn't turning over a new leaf entirely; it retains most of its management and independent directors.

Stepping into the spotlight is Benjamin Kovler, the cannabis industry's Midas and Green Thumb's head honcho, now wearing dual hats as Agrify's Chairman and Interim CEO—all while keeping his day job. With fresh capital and seasoned leadership, Agrify seems poised to cultivate new growth. After all, sometimes it takes a Green Thumb to make things bloom.

The Stakes Are High Today In Texas

Hold onto your hats, folks—this Tuesday, voters in three Texas cities, including the big player Dallas, will decide whether to decriminalize marijuana. Ground Game Texas is leading the charge, hoping to add these cities to the half-dozen in the Lone Star State that have already eased up on cannabis possession. The proposed measure in Dallas would stop police from arresting or ticketing anyone carrying up to four ounces of marijuana—unless they're part of a high-stakes felony investigation. Even the legendary Willie Nelson has thrown his hat (and probably his bandana) into the ring, urging support for the initiative. For those keeping an eye on the burgeoning cannabis industry, a win here could signal a significant shift in one of the nation's largest markets. God speed Texas.

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👾 Number Of The Day

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🗞️ The News

Trulieve Reports Third Quarter 2024 Results Ahead of Florida Adult-Use Vote

SNDL Emerges as Canada's Leading Producer of Edibles with Indiva Acquisition

Agrify Secures Financing from Green Thumb Industries and Announces New Leadership

Live 2024 Marijuana Election Results

📺 YouTube

Special Time Alert! Trulieve CEO Urges Florida To Vote #Yeson3 for Cannabis | Trade to Black

What we covered:

✅ On our latest Trade To Black, CEO Kim Rivers will join us to discuss the latest news on Amendment 3 and why Floridians should vote in favor of the initiative. She will also address information being promoted by the Florida GOP, led by Governor DeSantis, and explain why she believes the amendment would benefit the state moving forward.

On Election Night, Floridians will head to the ballot box to cast their votes on the amendment, which requires a 60% threshold or higher to pass.

If successful, Florida would become one of the largest legal cannabis markets in the world, estimated at around $4 billion.

Plus, US Cannabis Council SVP David Kulver will join us to provide the latest updates from Washington and discuss what the cannabis and hemp industry could look like once election results are finalized later this week.