Trulieve Cannabis Corp.

Thanks, Julie. Good morning, ladies and gentlemen.

And thank you for joining us today to discuss financial results and corporate highlights for Trulieve Cannabis Corporation's second quarter of 2019. With me today are Kim Rivers, Chief Executive Officer and Mohan Srinivasan, Chief Financial Officer.

Following our prepared remarks, we will open the call to questions. Before we get started, I would like to note that today's call is being recorded for the benefit of investors, individuals, shareholders, the media and other interested parties.

Please remember that our discussion today may include forward-looking statements that involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those forward-looking statements. Certain material factors and assumptions were considered and applied in making forward-looking statements.

These risk factors are included in our MD&A and applied in making for the quarter ended June 30, 2019, and in the earnings press release that we furnished in connection with today's call under the heading forward-looking statements. The forward-looking statements made on this call speak only as of today, and assume no obligation to update any of these forward-looking information.

Also, our prepared remarks this morning reference non-IFRS financial measures in order to provide greater transparency regarding Trulieve. Any non-IFRS financial measures presented should not be considered an alternative to financial measures required by IFRS and are unlikely to be comparable to non-IFRS financial measures provided by other companies.

Any non-IFRS financial measures referenced on this call are reconciled to the most directly comparable IFRS measures in the Company's MD&A for the quarter ended June 30, 2019, as well as in the table at the end of our earnings press release. We believe that our profitability and performance is further demonstrated using these non-IFRS metrics.

Please note that all dollar references are to U.S. dollars.

Last night, we reported results for the second quarter of 2019. A copy of our news release, financial statements and MD&A may be accessed through the Investor Relations section of our Web site trulieve.com, and were also filed on SEDAR.

In addition, a webcast of today's conference call will be available on our Web site. Now, I will turn this call over to our CEO, Kim Rivers.

Thanks Lynn and good morning everyone. Thank you so much for joining us.

We are very excited to share our financial results and provide a business update with you all today. Following my remarks, Mohan will discuss our second quarter financial results and then, we will be happy to take your questions.

Now on to our results. Trulieve had strong performance again this quarter, and I'm very happy with how we're tracking against our strategic plans.

Last night, we announced revenues of $57.9 million for the second quarter, which on a sequential quarter-to-quarter basis, was an increase of 30% and was another record revenue producing quarter for Trulieve. Of course, at Trulieve, revenue was only half the story.

Our adjusted EBITDA in the second quarter was $31.6 million or 55% compared to $19 million, or 43% in Q1 2019. Our industry leading profitability sets us apart and is an important differentiator for Trulieve.

The first half of 2019 was focused on setting the foundation to support explosive growth, and a strong national presence. Trulieve made substantial progress in the first half of the year on strengthening our infrastructure and building efficiencies into our business, and we are well positioned now for future growth.

Let me walk you through some of the highlights. First, I am excited to finally share with the world our full Greenhouse data.

An area of focus for us has been gaining efficiencies through scale to combat future price compressions, which leads us to our experimental greenhouses. Vertical integration is a requirement for us in Florida, and we have looked for ways to leverage our acreage and establish indoor footprint.

In addition to the 710,000 square feet of cultivation we generally speak of, which is primarily indoor-grow facilities and increased established greenhouses, we have also mentioned our large scale greenhouse experimentation for additional low cost ways to expand cultivation. These greenhouses provide a highly efficient and cost-effective alternative to expand our oil biomass, and will allow us to shift into our capacity to focus on premium flower as market segments shifts.

As such, we have been adding a significant amount to our cultivation and capacity. As we have said, we wanted the years' worth of data before discussing more broadly, and we now have that.

Combined, Trulieve had just over 1.6 million square feet in active cultivation across all sites with a biomass capacity of 54,609 kilograms. Plus, we have approximately 72,000 square feet of indoor grow under construction with expected completion during Q3, which when completed, will bring our cultivation footprint to 1,684,408 total square feet and biomass capacity to 63,189 kilograms.

In Q2, we also announced the purchase of nearly 85 acres in Jefferson County, Florida. We've already started Phase 1 of our four phase construction plan there.

This future indoor cultivation build out will allow continuous expansion as we keep ahead of both current and future demand to supply Florida's medical marijuana and importantly, expected future recreational and wholesaling opportunities in the state. For the first half of 2019, we have also been operating in our GMP certified state-of-the-art processing facility.

This is another critical transformation for Trulieve as it increases our production capacity significantly, and allows us to keep ahead of demand. During the second quarter we had a number of automation initiatives launched or underway in our facilities to further increase our efficiencies, product output and innovation.

In addition to the automation initiatives, we undertook a major transformative initiative by investing in an enterprise resourced planning software platform, SAP. For anyone out there who has been through SAP integration, you understand the time and operational commitment it takes to fully onboard.

Our teams recently completed this customized SAP implementation, and we are already seeing analytical and operational benefits. Our Web site interface to SAP, for example, allows customers to have an enhanced online shopping experience, garnering overwhelming positive feedback.

In addition, more inventory visibility greatly enhanced our throughput at the store level for efficiencies, thereby enhancing patient experiences. With 30% of our sales driven through online ordering, it is imperative that we continue to build a strong infrastructure to grow this segment of the business.

These best-in-class efficiency initiatives, such as the SAP implementation, automation projects, and the added Greenhouse capacity, will allow us to continue to scale efficiently. In addition, these initiatives add a level of professionalism and discipline into our operations that will let us do so intelligently.

And as we look at investing in the foundation for growth on a national level, we are also focused on bench strength. The implementation and scale of our strategic plans and the initiatives to support this plan require a strong, dedicated and seasoned team, which we view as key assets of the organization.

With over 2000 employees, we continue to invest in our human capital and recruit best in class to bring to the team. Peter Healey joining our Board of Directors demonstrates that commitment, as Peter brings an impressive legal background with capital market and financing experience, and will provide fresh insights as our business continues to grow at an accelerated pace.

In addition, we have continued to add managers to prepare the leadership team for national expansion efforts. Looking ahead, we will continue to add corporate and board bench strength as we scale up our business and grow both our product lines and our geographic footprint.

These areas of investment and growth need capital of course, and we are now well capitalized to execute on our plans. Our team hit the ground running earlier this year and the pace has only increased.

Operating as a profitable company allows us to continually reinvest in our business. However, we quickly determined that increasing our capital would allow us to be more agile in our rapidly evolving industry and provide a faster path to our end goal.

In June, we completed a public debt offering raising an aggregate principal amount of $70 million, which based on our strong financial record, was the first public pure debt offering in the cannabis industry. In July, we announced that we sold property in Holyoke, Massachusetts, with a favorable lease back and build out plan in place.

I am happy to say that the public debt offering and the lease back in Massachusetts, provide us with the capital to solidly execute on our business plan, while minimizing dilution for our shareholders, a true Win-win. In addition, with shareholder value in mind, last month we also announced the voluntary extension of our voluntary lock-up agreement.

The lock up extension was a show of confidence in the Company's strategy. We believe the thoughtful approach to the extension allows for a measured and orderly release of shares to the market this summer and in 2020, which will increase liquidity and create long-term shareholder value.

So, with best in class infrastructure in place and the capital to fund growth, where are we going? Trulieve's approach to customer experience sets us apart and differentiates us in the market, which is why we believe we will be a leader in the states we enter.

We don't just have customers we have Trulievers', a dedicated and passionate customer base that helps us form business decisions. We expect the efficiency initiatives will have a wide sweeping positive impact across our company and importantly, for our customers.

And to build on this new intelligent enterprise advantage, we are executing diversification initiatives that will allow us to effectively compete on a national level. Over the last few quarters, we shared our brand strategy, how we go to market with a three tier, how's the brand's approach and how we intend to grow organically and diversify to expand our profitable business beyond Florida.

Currently, Trulieve had one standard in-house brand under which all of our Trulieve products are sold. With a focus on national expansion and in anticipation of the new potential for wholesale, this is the ideal time to re-segment and re-establish product lines, as well as for re-merchandise our retail stores.

Our new brand segmentation initiative is currently underway, along with a product packaging refresh to allow for clear product segmentation for the customer based on addressable markets. In addition, our stores just completed a refresh to allow for proper display space to highlight new product offering segments and brand partnership products.

Speaking of brand partners, Trulieve has selectively partnered with some of the leading cannabis brands in the industry, and we plan to continue that vision on a national and local level. As part of our three-tier brand approach, we're building partnerships with customer favorite, national and local brands.

We've established partnerships with industry leaders, such as Bhang, Binske, SLANG, Loves Oven, and Blue River. We view these partnerships as another competitive differentiator in the market as we are able to bring new innovative and exciting products to our shelf.

For example, in early July, we announced RESERVE, the first SLANG product to be offered in Florida under a strategic partnership with Trulieve. SLANG is an extension of the O.penVAPE brand, the popular Open and RESERVE vape carts were an exciting edition, and we look forward to launching more of their brands here in Florida.

Building on our Trulieve name, which patients connect with product quality and industry leading service, we aim to consistently deliver an exceptional customer experience. As covered in the past, we use an internal boomerang report to track customer loyalty based on our sample size of our patients in market.

Our boomerang metrics remain quite strong in July, with Truliever's trending just north of 42%, 5 points higher than our last report. With hoppers and traders, which are those who hop around to different dispensaries, are those who just live dropping to 28% and 4% respectively.

These numbers are suggesting more patients are becoming Truliever's based on the strength of our product and brand and reflects our ability to maintain our lead in Florida. This has all setup a solid foundation to execute on our strategic expansion plans to be a leading multi-state operator.

We believe we need a mixture of both strong organic and inorganic growth to succeed. A smart and compelling mix of organic growth, leveraging our product quality, diverse range of skews and importance placed on customer service in-stores and online will deliver competitive strength against other players in the market.

Also, maintaining a disciplined M&A approach to targeting states and company partners where we see the highest future potential and share strategic vision instead of a land graph to us makes the most sense and aligns with our business approach. As we say, we are a multi-state operator, not a multi-state aggregator.

I'll now cover on a state-by-state basis where we are with our expansion plans, starting with our home state of Florida. In Florida, we maintain our first-mover advantage and hold an impressive market share.

Florida is a large vibrant target for medical cannabis and we intend to maintain our dominant position moving forward. Delivering the optimal customer experience and ensuring patient awareness are part of the Trulieve mission.

We believe this is a foundational aspect to our mandate of growing one patient or customer at a time. The sizeable Trulieve patient base reflects our attention to patients and the investments we make.

In the second quarter, with the explosive patient growth in Florida as a result of smokable flower, an amazing 96% of the 36,021 new patients in Florida visited the Trulieve dispensary, increasing our patient count to 181,020 patients at the end of the second quarter. With our ever increasing patient count comes the need for additional store and ways to service these patients to keep ahead of the demand.

We currently have 30 stores open in Florida today with 14 more planned by year end. And just this morning, we got approval to open another store in Clearwater Beach tomorrow.

We are pleased to be making progress on our new store rollout, and we'll be accelerating our dispensary build out in the second half of the year. The second quarter was our first full quarter with smokable flower.

As you may recall, smokable flower was approved in March in Florida, and Trulieve executed the first sale of smokable flower in the state. Flower sales are now nearly 50% of our product mix today compared to approximately 30% as reported on our Q1 earnings call.

Our success with flower demonstrates our ability to meet evolving patient needs in a quick and efficient manner. On a trailing one month basis, according to OMMU report, Trulieve dispensed an average of 52% of the flowers sold in the state.

This is nearly three times the flower market share over our nearest competitor, and was achieved without the need for deep discount sales leading into the reporting periods. For the second quarter, we maintained our dominant market share in milligrams sold with a blend of oil and flower sales, and may hold an estimated 55% overall market share in the state.

In addition, we are geared up and ready for the introduction of edibles into our stores as soon as the DoH releases corresponding rules. We fully believe that edibles will be launched in 2019, and we look forward to bringing Trulieve branded edibles, as well as products from the brand partners mentioned earlier to expand patient access.

Looking beyond the medical market in Florida, we are cautiously optimistic by the recent developments surrounding the potential for adult use legalization in the state. Recently, the requisite numbers of signatures was achieved to trigger a review of the language that would be included within a ballot question in November 2020 to legalize adult use cannabis.

While the next hurdles to get the question placed on the ballot is high, we are encouraged by the initiative. We intend to maintain or lead through future expansion, and are confident we will continue to hold our leadership position in Florida by successfully delivering the customer experience our Trulievers expect and count on.

Now, turning to Connecticut. In May, we announced the acquisition of the Healing Corner, a medical marijuana dispensary in Bristol, Connecticut.

The Healing Corner numbers were only included for a portion of the quarter, but we are very pleased with the team in place, the revenue performance and continued profitability. We see an entrenched propensity in the Connecticut team for delivering great customer experiences, translating into a very loyal customer base.

In June, five new qualifying conditions were accepted for treatment by Connecticut's Regulation Review Committee. Once approved and added to Connecticut's growing medical marijuana program, it will bring the qualifying conditions total to 36 for adults and 10 for patients 18 and under, which could translate into increased patient growth in the state.

We also believe there's a high likelihood that adult use will become a reality in Connecticut in 2020. We're hopeful and excited for the upside revenue potential recreational marijuana could bring, and have adjacent property that can be converted into additional dispensary space.

In short, we're extremely happy to have the Healing Corner team as part of the Trulieve family, and are looking forward to the future. In California, we recently acquired an additional 19% of the outstanding ownership of Leef Industries Inc., in June, bringing our total ownership to 99% of the Company, almost there.

Our Palm Springs location is optimally located for R&D and exploring a wide cross section of the state to evaluate our direction. We continue to identify and explore options for this driving market.

Turning now to Massachusetts. We made significant progress since Q1 with our cultivation facility activities in Holyoke and advancing our search for potential Trulieve dispensaries, and developing partnerships.

As mentioned earlier, we now have financing in place for the build out of the cultivation and processing facility in Holyoke. And we made progress with our North Hampton dispensing location.

We plan to have functional cultivation and production facilities online by early 2020 in order to participate in the thriving wholesale market in Massachusetts, and start building inventory for the dispensaries planned in 2020 and beyond. Also, Trulieve is working with a number of economic empowerment applicants.

Our goal is to have a robust true accelerator program in place to provide a seed capital and executive mentoring to help build thriving minority owned businesses within our industry. Ensuring diversity is core to our values as a company, and we applaud the ongoing efforts in Massachusetts to establish the economic empowerment program.

In addition to the four states we just touched on, there's also a lot of M&A pipeline activity underway to achieve our goal of being in six states by year end. Our team is targeting the most important and strategic markets.

And as such, we are continually evaluating the landscape. Many states debating or enacting adult use programs in the northeast and that remains an interesting target area for us.

Geographic location aside, it is also important that M&A targets meet a high standard for growth and profitability, or have the potential to quickly reach profitability with the combination of Trulieve to ensure M&A transactions are accretive. It is also critical that these potential acquisitions matter own company philosophy and values relative to delivering exceptional customer experiences.

Trulieve is dedicated to ensuring we are aligning ourselves with the best opportunities in key markets. I'll now hand the call over to Mohan Srinivasan to discuss our second quarter financial results.

Mohan?

Thank you, Kim, and good morning everybody. I'll now proceed with the review of the second quarter ended June 30, 2019.

Trulieve experienced significant growth in the second quarter achieving record revenue of 57.9 million, which as Kim mentioned, represents a sequential quarter-over-quarter increase of 30% and 149% increase over the same quarter last year. For the second quarter, we achieved earnings per share of $0.52.

The increase in revenue reported in the second quarter was primarily driven by growth in flower sales, revenue realized from the Healing Corner, our Connecticut acquisition and the new store of openings. The second quarter gross profit before net changes in the fair value of biological sciences was 37.6 million, or 65%, which is relatively in line with 29.9 billion, or 67% of revenue in the first quarter, taking into account the net change and the fair value of biological assets require under IFRS accounting standard s for the second quarter.

For the second quarter, the Company had operating income of 87.2 million and net income of 57.5 million. As a percentage of gross profit, including the net change in fair value of biological assets, our effective tax rate was 27% for the three months ended June 30, 2019.

We believe this is a better and more stable measure of calculating effective tax rate than as a percentage of income before taxes based on discussions with our tax advisors. Our adjusted EBITDA in the second quarter of 2019 was 31.6 million or 55% of revenue compared to an adjusted EBITDA of 19 million or 43% of revenue in the March quarter.

On a sequential quarter-to-quarter basis, the adjusted EBITDA increased by 66%, driven primarily by the adjustment for increase in growth costs associated with increases in biological assets and unsold inventory. Under our financial policy, the expense growth cost whether it is in the biological assets or in the inventory, we should expect to see fluctuations from quarter-to-quarter as more cultivation facilities come online, and as the inventories grow and fluctuates to accommodate the accelerated pace of new store openings in the second half of the year.

We believe, adjusted EBITDA and non-IFRS measure provides valuable insight into our profitability and performance. Adjusted EBITDA excludes from net income as reported interest, tax depreciation non-cash expenses, RTO expenses other income, growing costs related to biological assets and unsold inventory, and the non-cash effects of accounting for biological assets.

We report adjusted EBITDA to help investors assess the operating performance of our business. Turning now to our store metrics.

In Florida, we had a total of 29 stores operating at the end of the second quarter. For the 13 locations that were opened in both Q2 2019 and Q2 2018 for the entire quarter same-store sales increased by 48%.

The 22 stores open for the entire first quarter and second quarters of 2019 showed a quarter-over-quarter increase in sales of 16%. As Kim mentioned, we are ready to declare victory on our experimental greenhouses and start including them as part of a continuation.

As we've said today with the previously disclosed cultivation footprint of 710,000 square feet in July, combined with the experimental greenhouses, we are at 1,612,408 square feet with a combined biomass capacity of 54,609 kilograms. Based on our planned indoor construction of 72,000 square feet by the end of September, we expect to execute with a combined cultivation in Florida of 1,684,408 square feet, delivering an annual biomass capacity of 63,189 kilograms.

Between our planned constructions of indoor grow in Q3 and the additional greenhouses we just mentioned, we will more than double our previously reported cultivation by the end of the quarter which will provide us the ability to keep pace with our expected store and patient growth, and stay ahead in demand. Turning now to retail, sales and marketing expenses, these costs are largely dispensary related costs and in the second quarter amounted to $11.4 million or 20% of revenue, compared to $4.9 million or 21% of revenue for the same period last year.

The increase in cost in this expense category was primarily due to cost related to additional stores that were opened in the second quarter, and cost related to preparing for new store openings for the second half of 2019. G&A for the quarter was $3.4 million or 6% of revenue, compared to $1.1 million or 5% of revenue for the same period last year.

Included in the G&A cost is approximately $600,000 related to the Healing Corner transaction, and the debt issuance cost which are expensed. Excluding these costs, the G&A expenses are up at 5%.

G&A expenses also reflect growth in stock levels, current mix and increase infrastructure cost related to operating as a public company. Other non-cash expenses include depreciation and amortization totalling $1.9 million in the quarter ended June 30, 2019, compared to $200,000 for the same period last year.

Moving now to our balance sheet and recent financing activities. In June, we strengthened our balance sheet by completing a $70 million public debt offering.

In addition subsequent to Q2, we closed on the sale of our wholly-owned Massachusetts property for $3.5 million and we entered into a triple net lease agreement with innovative industrial properties for our cultivation facility in Massachusetts. As part of the terms of the lease, we can recoup building improvements, brand for cultivation build-out, of up to $40 million.

At June 30, 2019, prior to the real estate transaction just mentioned, the Company’s cash balance was $54 million. This represents an increase of $29.6 million from $24.4 million at December 31, 2018.

This was primarily the result of approximately $66 million generated from the debt financing completed in June 2019, and $20 million of cash flow from operations, offset by $53 million for investing activities related to expansion of our stores, cultivation and processing facilities. Finally, last quarter we provided revenue and EBITDA guidance for full year 2019 and an outlook for 2020.

We are reaffirming our guidance, reflecting a strong outlook for our second half as we continue the exercise financial discipline, while leveraging our scale. Full year 2019 revenues are forecasted in the range of $220 million to $240 million with anticipated adjusted EBITDA of approximately $95 million to $105million based on our current store footprint in Florida, plus, expected new store openings.

This side and does not contemplate Massachusetts generating revenues in 2019. Our outlook for 2020 incorporates our expansion into Massachusetts as well as continued growth in Florida, Connecticut and California.

Based on these markets, current regulations and foreseeable store growth, we estimate 2020 revenues in the range of $380 million to $400 million, generating $140 million to $160 million in adjusted EBITDA. I'll now hand this over to Kim, for closing remarks.

Kim.

Thanks, Mohan. In closing, I want to reiterate that our vision is to build a true cannabis brand focused on customers, while still delivering profitability to our shareholders.

Our performance in the first half of 2019 has set us up well for the second half of the year. The team is moving full steam ahead here in the sunshine state and we are on track for another strong quarter.

We're executing on our strategic expansion plans and are looking forward to leveraging the efficiencies and business diversity, diversification plans outlined earlier in the fall during the second half of the year, which includes: establishing the foundation to support explosive growth and scale to reach a strong national presence through efficiencies and business diversification, deploying capital smartly to execute on our plans, replicating Trulieve's competitive differentiators and new target markets, and employing a strong, dedicated and disciplined team to drive aggressive growth and future shareholder value. We will now open the line for any questions.

Operator.

Hey, guys, congrats on the fantastic quarter and thanks for taking my questions here. I thought I would just first ask a little bit about the nice profitability in Q2.

If we adjust for the cost on biological assets, looks like your gross margin north of 75%. Can you maybe give us some insight into the increased profitability and what was driving that?

Sure. Thank you, Rob, for asking this question.

As you know, our gross profit and adjusted EBITDA, basically they are increased, driven primarily by adjustment for increase in grow costs associated with increases in biological assets and inventory. Under our financial policy, the expense cultivation costs whether it is in the biological assets or in the inventory.

We should continue to expect fluctuations from quarter-to-quarter, as more cultivation facilities come online, and as inventories grown fluctuate to accommodate the accelerated pace of the new store opening in the second half of the year. At some point, they should normalize at 43% or 44%.

Okay Thank you, Mohan for that. Maybe I'll just move on to a question kind of like around capital allocation going forward.

Obviously, in light of the addition of the previously experimental greenhouses, you've got a big increase in capacity even ahead of really expanding that new indoor facility. So does that kind of change your the way you think about allocating capital, maybe you could have more devoted towards M&A?

And in that respect, I know you had mentioned in the past that you're going to enter into two new states by the end of this year, because that now include maybe some larger M&A of some other public players, are you still going to go kind of build from ground up in new states?

Thanks for the question, Rob. With respect to capital allocation, we are evaluating opportunities all the time.

And as and with M&A, the pipeline does fluctuate, and we will look at opportunities that aligned again both risk being the goal of being accretive. And I think more importantly, being in line with our culture, creating a customer first brand and also focusing on a financial discipline alignment, which in this industry and definitely differentiates you know strong players from others.

With respect to our cultivation footprint, we've been very focused on the first half of the year to make sure that we had capital on hand to execute on and make sure that we felt that we had the capital backing our adjusted guidance that we released last quarter. And so, we do feel that we're in a good spot with respect to having the infrastructure in place to satisfy and perform and to the numbers.

Okay, so just to reiterate, I mean, the entry into additional states maybe to this year, do guys are still holding by that? Or is that, maybe even have upside potential?

We are still holding as we discussed on the call, and Rob we're still holding to a goal of being in 6 states; and by the end of the year, but of course as we know, and we're very opportunistic and we will review opportunities from a qualitative perspective as they come.

Okay, last one and then I'll get back in queue. Following the appellate court's decision to perhaps suggest that vertical integration requirements in Florida were unconstitutional; do you have any kind of updated timing on perhaps when we could see some final resolution to that?

And do you have kind of any kind of vision into what the ultimate structure could look like just wondering how and when I could play out?

Sure, I'll take the crystal ball question from you. And so -- the state of -- for the governor's office specifically filed a couple of weeks ago for an en banc sharing, which means that the case that and the ruling that you're referring to at the appellate court level will now be reheard.

And by the full court, all the judges of the appellate level, if that is granted, so right now we're waiting to see whether or not that en banc hearing will be granted or not. And regardless, my gut is that this issue will likely be appealed all the way to the state Supreme Court, which could take some time.

And if anyone's best guess with respect to timing and on that full and final resolution, of course we'd move into session here in Florida. And at the beginning of 2020 and so and we'll look for, and as you know and for those of you who have been following Florida markets for quite some time, there’s always some push and pull around medical cannabis and around cannabis in the state.

I don’t think our state is any different here in Florida than others. So, we’ll continue to evaluate and look for those policy changers.

We’ve always been focused on our business, kind of heads down, making sure that we’re building a best-in-class, best-in-breed along the supply chain to provide us with the most flexibility and ability to pivot regardless of what comes down from a policy level.

Good morning and congrats on the quarter. First question I guess around the continued retail build out.

Can you remind us where you’re at with respect to the number of locations you secured? And to follow on that, I guess given the cap and the number of dispensaries is scheduled to I believe next April.

How are you planning for the world beyond that?

Sure, thanks for the question. So, as we stated, we have 30 dispensaries in Florida currently open, we’ll be opening number 31 tomorrow.

We’ve just actually got approval, final approval from the Department of Health this morning prior to the call to be able to open that. We’re on track and to open our 44 that we’ve guided towards for 2019.

Those are all well underway, and we’re going to have a lot of announcements coming out in the next bit of while and as we move forward to opening the stores. Beyond 2019, as you know, the Trulieve Cap is set at 49 stores.

All of the stores are currently in pipeline and under development and actually a number beyond that. And so, we are very much preparing and looking forward to that that cap being removed and are optimistic that, that will impact to come up in April.

Thank you for the color and that answered one of my other questions. I guess I’ll throw in another crystal ball question around adult use in Florida.

Just wondering the extent to which you’re supporting the initiative and I guess what do you see at any sort of the key barriers to getting it done, having observed what goes on in other states around adult use so far in 2019?

Sure. So, we’ve been working with a group called Regulate Florida, which is initiative that I've already mentioned and on the call, that just cleared the hurdle for Supreme Court review.

And their petitions have been in our dispensaries for a while and we also have partnered with a local brand called, Sunshine Cannabis, which have been on the ground, grass roots supporters Regulate Florida from the timing that it started. Actually, we just launched another skew over there this past week and are matching all of their donations to Regulate Florida this month.

They currently are getting in approximately 28% of their royalties to that initiative. So, we are certainly and supporters of that effort.

And the hurdles are procedural in nature in that, it’s a requirement in Florida that any initiative be approved by the Supreme Court for single subject among other, among other specific requirements, and then of course, it's a signature effort. So, this is a citizen driven ballot initiative with foots on the ground, signature collection happening.

So, it'll just be a month -- part of it is going to be the signatures that can be collected. The second thing of course is capital, and having a appropriately placed PR campaign around the initiative, once it is approved by the Supreme Court to be placed on the ballot.

And there is and has been talked of support by a very prominent lawyer who was behind the -- who's behind the medical initiative, he threw his ring in the hat a couple weeks ago, tweeting his support. So, it does look like there is some momentum building, which is a positive thing.

And we certainly are going to be continued being active in initiative.

That's, that's very helpful. Thanks.

So, just one last question for me and I'll get back in the queue. Just moving to Massachusetts and your plans there to work on the developing the wholesale market there.

Just wondering where you're at or where you can be at with respect to talking to potential customers and trying to build a customer base in advance of getting the facility online?

Thanks Russ. What I can tell you is that in Massachusetts, there is definitely more demand than there is supply.

We inbound field calls very regularly, multiple times per week of folks wanting to lock down supply agreements with us. And we have not yet entered into any specific agreements.

We wanted to get further down the road and have better visibility to what our projected needs are four stores that we have coming online and prior to getting ourselves into specific supply agreements with third parties, but we feel very confident with respect to our ability to some wholesale extra supply there.

Good morning. Congrats on the great results.

Congrats on the great results. Just wondering, Kim, if you can provide any color as it pertains to the trends in dry flower or dry bud.

You said it amounted to about 50% of the product mix. Can you give any color on how many of that is new customers that just want flower?

Maybe some that are changing over from derivative products or maybe others that are trying at once and then going back? Just trying to get an assumption basis of where we think the normalization as a percentage flower will end up?

Thanks, Matt. And we believe that there is still some room for that flower percentage to creep up.

And so, I think internally, we don't believe that we've hit those tops yet with respect to the flower mix. That being said, what I can tell you and this is, a bit anecdotal.

but we're not seeing a lot of tickets that are pure flower tickets. And typically there is still a mixed ticket.

Although, you may see predominant flower ticket meaning that you know, maybe it's three units, the flower in one, one day product as an example. And as you can see in the week over week numbers are, oil milligrams continue on an absolute value from an absolute value, dollar value standpoint to grow week over week.

So, that market is continuing to grow as well. So, I don't have a specific breakout for you, but I can tell you that we see both segments of the market continuing to grow.

Of course, we're looking forward to edibles coming online, as mentioned. And we'll be interested in seeing how that further shakes up the products mix for us.

And then maybe just on pricing, is there any anecdotes you have with respect to in wide groups of products whether there is vape pens or tinctures and dried bud? How pricing is hanging in the state as more and more operators open-up source?

So, we continue to set pricing in Florida, new competitors that are coming in, are either pricing at our price levels or slightly above, which we've seen historically. There been a number of instances where competitors have had to adjust downward to meet our pricing, but we're not really seeing whole sector movements in pricing, I'll say yes in Florida.

So, it's our pricing remains competitive. And remember when we launched Trulieve, we did so with the thesis that we wanted to create a brand that can penetrate Florida, but it can also be replicated on the national scale.

So when we price the product segment, we're pulling price comparisons from mature medical market, so we're looking at the Californias, we're looking at Arizona. We're looking at markets that are that are more mature to price competitive to because we do want to have our value proposition withstand the test of time, which I think we're seeing proven out since these are the same prices that we launched with three years ago when we opened our first store.

And then last for me. Just the data from the OMMU for about five or six weeks, if that they've been providing dry flower by volume.

I just wanted to confirm, if one, you think that is a fair representation of what's happening at the macro level? It seems like its good data to me, but you guys would know better.

And then secondly, is there any way to compare the flower versus a milligram sold or is it apples and oranges with how they provide that that breakdown?

Matt, you've just hit on a big internal debate here at Trulieve. So, it is decent data.

I mean, the reason that it's reported that way is because of the way that flower was written into statute. And it's dispensed by way as opposed by as opposed to active milligrams, which is the way that the rest of the products can file in Florida or distance.

So it is just a different metric and that's just kind of it is what it is, right I mean good, bad or otherwise, it's the data that we have available and I think it is accurate it is it is pulling directly from the sensations across all of dispensaries in the state thing. So I think it can be relied on from that perspective and there are a number -- in order to convert or do some put of a blended metric and there are a lot of assumptions that we have to be made and we certainly run some of that internally, but it's not anything that I would be comfortable with and sharing details obviously it will depend on primarily on potency which we certainly have great data for what we sell but we don't necessarily have data on every single strain that every single competitor is telling on a week-over-week basis or the volume associated with the strains because it -- so it still becomes very assumption based.

Right. So if you were selling, on average, strains for $12 a gram and a competitor was, obviously, if they're selling something of a lower quality or lower price, it's going to come up as the same data point in the state's summary?

Correct.

Hi everyone. I wanted to -- actually I have a similar question to Matt about smokable flower.

Maybe I could just add on another question which relates that. Just wondering, if since that introduction of dried flower, whether you’ve seen a drop in the average agent, wondering if the demographics for smokable flower are the younger customer?

And as well just the additional patients that have come on since the smokable flower? My hypothesis is that you would see an abrupt increase in customers.

Just wondering if that's board out, what you’re seeing in retail level?

Sure, great thanks. And so, we’ll take that in two parts.

So, the first related to the age, average age of customer. We’ve seen a very slight decrease.

So again our average age historically has been 50 years old, and it’s still on those I would say, upper 40s, so a slight decrease in age. And again, we’ll see once and there’s a number of products of course that aren’t currently available in Florida that we were waiting on rules, and edibles as we touched on also hydrocarbon products, which are going to be some of more concentrated and innovative products that are popular out west.

So, we’ll look into need to monitor that and see if there are any additional swings there when those product categories come online. And with respect to and your second question was, with respect to the patient count, we did see an increase in patients and really came prior to flower actually coming on board, like prior to that marketing team date and we saw it leading up to that.

So, historically in 2018 we reported 2,000 patients per week on average. Now, we’re at approximately between 2,800 patients per week approximately.

And again, you can track it on the OMMU. So, there has been over the first half of the year, certainly an increase in patients, and it’ll fluctuate from week-to-week, some weeks it will be 2,500, 2,600, and 2,800.

But in a one week timeframe, we saw this amazing jump that's when -- I can't remember exactly what week it was, but it -- from 2,000 and 3,000 patients. So, certainly, we know and we’re feeling in our business that patient on boarding rates have increased certainly over a way they were in 2018.

Thank you everyone for joining us today. We look forward to updating you on our progress again next quarter.

Have a good day.