Trulieve Cannabis has been the most profitable marijuana chain in the country, but its December quarter earnings were crimped by charges from a big acquisition.
The sales growth reported by
(ticker: TCNNF) on Wednesday morning was good, however, and the Florida-based firm says that its profits will return to form in this year’s second half.
Net sales grew 81% in Trulieve’s December quarter to $305 million. But charges from the October acquisition of Harvest Health & Recreation threw the company for a quarterly loss of $71.5 million, or 49 cents a share, compared with a 3 cent profit in the year-ago quarter. But for those merger charges, the December 2021 quarter would have had net profits of $2 million, or a penny a share. Earnings before interest, taxes, depreciation, and amortization, or Ebitda, in the quarter were $101 million, adjusted for the merger.
For the 2021 year, sales grew 80% to $938 million. Net income was $18 million, compared with $63 million in 2020. Adjusting for the Harvest Health merger, 2021 earnings were $123 million, or 84 cents a share, and Ebitda was $385 million.
“I thought it was a great year,” Chief Executive Kim Rivers told Barron’s. “The December quarter was as-expected, given the acquisition, but it’s a nice setup as we’re moving into ’22.”
The December quarter results represent “an initial reset” after the Harvest acquisition, the company said, which reflected inventory revaluation, integration charges, the addition of lower margin operations, and some initial inefficiencies immediately after the deal closed. In Florida, state regulators wouldn’t let Harvest transfer its inventory to Trulieve and 14 Harvest stores had to be closed, rebranded, then reopened.
Results will improve in the second half of 2022, said Rivers. Introducing its guidance for 2022, Trulieve said it expects sales between $1.3 billion and $1.4 billion—representing 44% growth at the midpoint—with adjusted Ebitda of between $450 million and $500 million. Over the next few years, Trulieve believes it can average Ebitda margins of 40%.
“We believe that through discipline and focused execution, you don’t have to sacrifice profitability and robust margins for growth,” Rivers said.
States where the company anticipates growth, Rivers said, include Maryland and Pennsylvania. Voters in Maryland will consider a measure in November to allow recreational sales to adults. And on Wednesday, the Pennsylvania Senate passed a bipartisan bill allowing state-chartered banks to handle funds from licensed cannabis operations. That suggests the building of a consensus that would allow recreational sales in Pennsylvania, said Rivers.
Traders seemed unperturbed by Trulieve’s December quarter earnings hit. In Wednesday U.S. over-the-counter trading, the stock rose 2% to $21.12. Like other cannabis chains that sell the federally-illegal product in states that allow it, Trulieve can’t list its shares on U.S. exchanges, so its stock is listed on the small Canadian Securities Exchange.
Write to Bill Alpert at [email protected]