Editors’ Note: This is the transcript version of the podcast we published last Wednesday with Kim Rivers. Please note that due to time and audio constraints, transcription may not be perfect. We encourage you to listen to the podcast, embedded below, if you need any clarification. We hope you enjoy!
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Rena Sherbill: Welcome again to the Cannabis Investing Podcast where we speak with C-level executives, scientists and law and sector experts to provide actionable investment insight and the context with which to understand the burgeoning cannabis industry. I’m your host, Rena Sherbill. Hi, again everybody. Welcome back to the show, great to have you listening with us as always.
Today, back by popular demand is Kim Rivers, the CEO of Trulieve (OTCQX:TCNNF), one of our favorite stocks to talk about on this podcast. The favorite stock of many investors, you know if you ask a lot of successful investors what’s their Number 1 pick, at least their Number 1, 2, or 3 pick, Trulieve is typically at the top of that list. We’ve talked about it a bunch of times on the podcast.
Kim came on the podcast in January. We heard from her, and a lot of people got really excited about the stock, I know, I have heard from multiple listeners who wrote in after Kim appeared on the show and, you know said how they invested in the stock and they’ve made a great return since then. I know people that were invested before Kim came on the show, did even better, people got it in during the volatile time around COVID, did better than that.
So, a really exciting stock to look at to do your due diligence on, to invest in as many people can attest to. And we talk with Kim today about what it means to be a company that is guiding with responsible fiscal stewardship, guiding towards profitability, growing with measured approaches to acquisitions and revenue generation and scouting for locations.
Also, something Kim talks about is the necessity to pass safe banking regulations for the industry. Why that is, some really obvious reasons that Kim brings up that I for one have never thought about like the petri dish of bacteria that is cash and how cannabis companies are forced to deal with that, and for other reasons, as well. You know many reasons to look at Trulieve as the leader of the industry.
One of the top things that I like about them, aside from their, you know the fact that they’re one of the few profitable companies in the cannabis industry doing so responsibly, you know, when they speak of the green rush days and teach the course in universities of this time where cannabis business became serious and responsible, one of the companies pushing it to be a responsible industry is Trulieve and that is Kim Rivers leading the charge, helping to lead the charge there. And one of the things that I really like about Trulieve aside from the investment superlatives that I can throw their way is how much they’re doing, and how much they have done in being present and giving back to their communities where they’re building.
Kim talks about that partnering with Roz McCarthy who works for minorities for Minorities For Medical Marijuana, a great organization and what they’re doing to give back to their communities, what they’re doing to build up diversity and more inclusiveness, which is salient in all industries, certainly in the cannabis industry, which has suffered from racial prejudice, discriminatory policies for too many years and what Trulieve is doing and primarily Kim, as a business leader in the industry, in the community.
She’s a part of different initiatives. She’s leading and partnering to help further the cause and evolve as an industry as people leading the industry, as companies, and you know, it’s important as investors to look for the best stock that’s going to give you the best return on your money. Obviously, that’s a salient feature of investing. Also worthwhile to spend our time looking at companies doing things the right way, and that gets a lot of trendy buzzword coverage these days, but when you peel back the layers, and Kim and I talked about this on the show, when you peel back the layers, you can see which companies are really doing the work behind the scenes and not just making press releases that cover the buzzwords that people are looking for. But companies and executives and leadership, their hiring practices, their business practices, where their locations are, what they’re doing in those locations, all of those things as essential as cannabis.
You know, it’s important as a company to show up and to say, what you stand for and what you believe in. And I feel like Trulieve at every turn shows up and says what they believe in and what they stand for. You know, when Kim came on last time, there was a short seller report. They sued them for libel. They showed up and were transparent. Even before, you know, the world went into upheaval mode and all of these inequalities that we’re being faced with, in an even stronger way than usual, Trulieve is showing up even further than they usually do and it seems obvious when leaders do that or when a company does that, be it on the social equity side on the social justice side, be it on the financial side, leading towards profitability. It seems obvious when somebody makes those measured, reasoned, responsible decisions. And yet, when we see companies not doing it, we think it’s stupid, but it’s not always obvious for a company and leadership to do the right thing because of all the examples that we can point to where we think, wow, what a silly decision.
Why did they do that? And I’m sure everyone listening has one or two examples, at the very least in the cannabis industry, of companies that have behaved badly, acted poorly, not taken their responsibility as stewards of capital seriously enough, or seriously at all in some cases, but there’s companies like Trulieve that we can point to, and we had Mike Reagan, a great cannabis analyst, on a few months ago and he said, investors should just keep it simple. Advice that we get a lot, but honestly, selecting Trulieve into your portfolio is a simple choice if you’re going by just the basic building blocks of what investing and business are about. It’s one of the reasons it’s the top holding in our #modelcannabisportfolio that we talk about, that we tweet about.
So, to paraphrase Lauryn Hill, if it could all be so simple. In this case I think do your due diligence and you might agree with me, and as I’m sure you know by now Trulieve is also, is our current podcast sponsor and honestly I could not be prouder to partner with Trulieve. For investors looking at Trulieve, which I know the numbers reach high. And for those investors looking at a stock and wondering why people are talking about Trulieve or looking for a stock to do their due diligence on look no further.
And before we begin, a brief disclaimer. Nothing on this podcast should be taken as investment advice of any sort. And in my model cannabis portfolio, I’m long Trulieve, Khiron, GrowGeneration, Curaleaf, Vireo Health and Isracann BioSciences. You can subscribe to us on Libsyn, Apple Podcasts, Spotify, Google Play and Stitcher.
Kim, welcome back to the cannabis investing podcast, really excited to have you back on the show. Thanks so much for joining us.
Kim Rivers: Yeah, thanks so much for having me.
RS: Last time we talked, I would say the world was entirely different, but, you know, since COVID has transpired, I think one of the things that we touched on back when we talked in January was there was still some hope left around the SAFE Banking Act. I remember when it passed the House in September, everybody kind of thought that it passing the Senate was close to a sure thing that obviously didn’t come to pass. You recently wrote an op-ed in the Hill that touched on this topic. Do you want to talk about what led you to write that and what your feelings are kind of about the hold up and the necessity of kind of the SAFE Banking Act?
KR: Sure. You know, really when reflecting on both SAFE Banking and how it interfaces with the kind of normal that we’re in right now, with COVID as an overlay, it really has been an interesting kind of juxtaposition, right? Because here we are in an industry that is deemed essential by many states and including the states in which Trulieve operates and in many states around the country that have certainly medical cannabis program, yet, we are relegated to continuing to use cash as the primary method of doing business within our industry, and without, you know, kind of the – being able to avail ourselves of what would be considered normal practices. And again, at the same time, we’re considered essential, and you know, are recognized by those states and oftentimes by the health departments within those states and have been requirement for folks to receive their medication.
And so, you know, when we think about that, and it really seemed to me that it was important for us to elevate that juxtaposition and into amplify that, because really, when you think about it, it just really doesn’t make a lot of sense. And, you know, in addition, here we are taking all of these precautions with respect to social distancing, making sure that our employees are safe with, you know, increased precautions, such as, you know, temperature checks, sanitation protocols, and you know, plexiglass dividers. And, you know, again, everyone in masks, but at the same time, we’re forced to use what is known to be one of the dirtiest substances in the world, which is cash and money transactions. And so, it really just, again, just struck me as something that we needed to have an additional discussion around given, you know, again, given the current environment that we’re within.
RS: It’s interesting, you know, I think for, when people talk about the SAFE Banking Act, I think a couple things like come at you immediately, which is the onerous regulations and kind of the unfair challenge of putting that on a company, but when you’re talking about COVID, and like I had never thought about the component of cash and just how, you know, much of a mess of bacteria that is in people handling it and people exchanging it and like everything that you talked about, and yet at the same, so they’re kind of like and exactly what you say.
I think a lot of what frustrates people about this time and about these regulations is kind of the inconsistency and the misguided approach that it seems to the reasonable eye and mind. What have you – have you kind of when you’re meeting with lobbyists or legislators or people in government or people that have an effect on these decisions, do you find any resistance to what you’re saying or like, what is their response there, I guess?
KR: No. I mean, I think that, you know, there certainly are some aha moments, right? And folks, you know, haven’t similarly, right. They haven’t necessarily thought about, like, the actual, tactical implications, right, not only on us as a business, but also on the customers that we interface with, right? We’re talking about that. Then here we are, we’re in a world where at every turn, we’re trying to limit you know, dollars changing hands, right. We’re trying to limit contact and the necessity for folks to, you know, we’ve stayed in our homes in a lot of cases, right to flatten the curve and to stop the spread, but here we are in our business, and we’re saying, yeah, you’re going to have to go to an ATM or you’re going to have to go by your bank and actually, you know, get cash out in order to transact business, which is essential, and it’s been deemed essential and is essential for your health and well being.
So, I think that that has been a bit of an aha for folks. And then, you know, you overlay on top of that, of course, and the other, you know, social issues that we’re dealing with right now as a country. And when we think about, you know, risk for, for robbery and risk for looting in certain situations, here we are, you know, as an industry with kind of a big sign on the front, you know, find your cash here and because we are forced to take and have cash transaction, so I think that that also has added an additional layer. And so, you know, we talk a lot about just safety and that is, of course, our first and foremost keeping with our employees and the public and our customers safe by enabling, you know, a more streamlined cashless environment. And then, you know, in addition, we’re also reminding folks as we are able to go in and have these conversations about as being an essential business.
The fact that we are, you know, here we are having the potential to be real economic drivers and in – as we as a country are staring down, you know recession, and as we are thinking about deficits on both the local and the national level and how we’re going to fill this gap, and as we, as we progress, you know, and continue to hopefully, you know, be beat back this pandemic. And so, I think that the other piece of the conversation that has been interesting is for us to step-up and say, look, we can help, we want to help and really one of the ways that we can help is for us to just be regulated like every other business to ensure that dollars are flowing through the banking system, that dollars are accounted for that tax revenues are being accounted for properly.
Let alone the fact that, you know, to the banking industry and when we think about that segment and sector of industry, us having the ability as an industry to provide a, you know, consistent deposit to provide a source of a growing business as opposed to a declining business, which so many unfortunately are right now. For them to have, you know, credible industry to provide loans to and mortgages to, and again, and just be a part of that, and a part of that economic solution, as we move hopefully through and out of COVID and into really, you know, having that conversation about, help us, you know, be a part of this industry wants to be a meaningful part of the solution. And really, we’re not asking for, you know, we’re not asking for anything special here. We’re simply just asking for us to have the ability to participate in a regulated banking system like any business in the country.
RS: Yeah. And it’s also, you know, as you said, it’s like during COVID when the cannabis companies are deemed essential, which feels like a huge, you know, paradigm shifting type of win in terms of public consciousness and all those great things, but then it’s like you’re in an essential business that can’t handle your business as efficiently as you should be able to, which must sting… is there still hope that it gets folded into any kind of like COVID legislation?
KR: I think so. I mean, I think that right as we – I think there is a little touch and go because I think that we’ve all been, you know, hopeful, quite frankly, that maybe an additional round of stimulus wouldn’t be needed. And, you know, and unfortunately, we’re continuing to see cases increase, we’re continuing to see, you know, sort of a pause if you will on state’s efforts to reopen and I think we’re all bracing a little bit for sort of the results, if you will, of some of those earlier reopening efforts. And so, I think that it’s becoming with every statistics that’s posted, I think more and more apparent that this is a continuing issue and that we’re certainly not out of the woods and businesses that even some businesses, you know, I’m thinking about, you know, the restaurant industry, for example, and hospitality for sure.
Who started to dip their toe back into a reopening paradigm now are walking that back because employees are coming back and testing positive and you know, they’ve got obvious liability issues and concerns there. And then quite frankly, right and we as a country aren’t, I don’t think really to a point where we’re comfortable yet. You know, traveling and again, getting back out into and participating in the economy, the way that we were pre-COVID. And so, I do think that there appears to be anyway and a renewed interest in passing an additional COVID recovery bill.
And so with that, as we know, SAFE Banking was included and language with SAFE Banking was included in the house version of that, and that has been with the senate now for some time. And like I said, I think the Senate was waiting to see what the statistics and look like with respect to some of the reopening efforts. And so, you know, I think that there is a possibility and, you know, look for whatever reason, and I think that’s just the sort of a symptom of being in an election year and the way that the political environment is right now, and there are a lot of politics that’s around that recovery package, but I do think that we have some key support within Congress, and I think that again as more and more folks are understanding just the legitimacy of the ask, right, and that this really isn’t about anything else other than getting dollars into the banking system so that tax revenue can be generated that really isn’t partisan.
These businesses – our businesses exist, they exist within the laws on a state-by-state basis. So, it’s really not, and again, we’re not asking for, although, you know, be fantastic, but we’re not asking for any sort of sweeping federal adoption of whether or not look that’s a positive or a negative, right. We’re simply saying, look, this exists. So, if it exists, why not? Why not ensure that and that you know that the federal government, and that quite frankly, local and state governments are able to have complete visibility and transparency for those dollars that are entering the system and allow those sellers to enter the system to be accounted for. So, I do think that those – that’s starting to resonate, and folks are starting to understand that and are – to have the ability to parse that out right from and say, okay, SAFE Banking is different than the state tax, and, you know, this isn’t – they’re not part and parcel, which I think is an important, incremental first step, right for us to have again, additional legitimacy around the industry.
RS: Yeah. Do you – you know, it’s interesting, like, it seems that this could be you talk about bipartisanship, and it seemed that the topic of cannabis legislation and further regulation was kind of already becoming a bipartisan issue. And I think with the onset of COVID, and the continuation of COVID as a global pandemic, I think it’s becoming even more so I think, because of all this revenue that people are saying, hey, this could come into the system and do real good, you know, for the economy. Do you think it goes hand in hand at all with the talk of de-scheduling or de-criminalization of cannabis itself?
KR: You know, I mean, I think that certainly, right, and I think that in some folks minds’, for sure. And but I think that right, we have to make sure I think as an industry that we’re being strategic in terms of how this moment is presented, right, and being – we want to be seen as an industry who’s bringing solutions to the table. And when we think about, you know, from a historical perspective, and we think back to for example, you know, alcohol, I think it’s important to note, right that and we don’t always, you know, put this in context, but, um, you know, alcohol in the rollback of prohibition happened during the Great Depression, right, which then led to, you know, the creation of the fifth largest industry in the United States and generating, you know, tax revenue and employing millions of Americans within that time period. And that was a much needed, again, economic driver during that time.
And so, here we are, and we have, we have the potential as an industry to serve in that same role, right. And I do think that the parallels are too close not to re-live, I guess, and to share and that, and I mean, it’s not only obviously everyone thinks about, you know, the retail in the dispensary, but it’s the entire supply chain. I mean, we create jobs and research and development and in agriculture, and, you know, manufacturing, delivery, logistics, etcetera. And then not to mention, again, the ancillary businesses, so I mentioned banking, but when you think about the other ancillary businesses that supply, you know, cannabis companies, everything from, you know, the lighting manufacturers, to the nutrient providers, to cocoa providers, and again, all the software and technology and inputs that we utilize from third parties.
So this really is an industry that can be looked to create a completely new and legitimate and, you know, tax stream for the federal government. And so I think that I do think that it’s important to make sure that we’re focused on that moment because it should be such an easy in my in my mind, right, like such an easy guess, whereby I think that the broader question of decriminalization and the broader question of acceptance, you know, in complete and legalization at the federal level that’s a more complex question for folks. And you know, yes we have, you know well over 30 states that have some form of medical cannabis on the books.
And I think that we may be, and, you know, unfortunately, a touch early, I think that there’s a number of other states that are going to be looking to develop, whether it’s adult use and or medical programs if they don’t already have medical programs at the state level, for the same reasons that we’re talking about, and, you know, thinking about adopting the state’s act at the federal level for from a from a tax generation, and from a job creation standpoint, particularly coming out of COVID. And, you know, I’ve always said that there’s going to become a moment in time in Congress, where it just is such a no brainer, because literally, this industry is going to be prevalent and important in each of the states that are represented, or an overwhelming majority of them. And we’re starting to see that happen, right, where the question of federal legalization is going to come up and it’s going to seem silly to oppose it. And I don’t know that we’re quite there yet.
I think certainly having the issue of cannabis legalization and decriminalization rise to the level of it being a subject for Presidential candidates to take a position on and they’re expected to take a position on, I think is amazing and certainly bodes well, right, for the future trajectory of legalization. But I think in this moment, right now, we certainly have the opportunity to cross party lines and to, you know, ensure that from a – for all the reasons that we’ve talked about that, you know, that our industry has the ability to participate again in the banking system that’s part of a regulated industry that’s recognized within that federal banking system.
RS: You know, it’s an interesting comparison that you made with prohibition and alcohol being legalized, when, during the – after the Great Depression, you know, I wonder if it takes something like terrible to convince people of these things that they demonize, and then kind of realized the error of their ways. So your feeling is that it’s going to be – or do you have an opinion on this, that it’s going to be federal as opposed to, like continuing to be a state by state approach? Do you think it’s eventually going to be a federal decision?
KR: I mean, I think eventually, right. I mean, I think you’re going to see for the near term, continued expansion of programs within states, right. I think there’s going to be a wave of new states that are expanding existing programs as they look at significant budget deficit coming out of COVID. And, you know, and I think, look, I think it’s absolutely a blessing for this industry to be able to step up to the plate and raise our hands and say, we are here and we’re available to help fill those gaps. Right, and, you know, allow us to help be again, you know, an economic contributor in the markets in which we operate. And so, I think that that will continue in the near term and then again, I think, eventually right, it will absolutely become a federal issue when it, again, when we, when we are at the point where, you know, there’s just significant participation, by the vast majority of states.
I mean, right now, we still have a kind of in the middle part of the country, right, which is a little bit of… and through the South quite frankly as that’s starting to churn, which are still, still don’t have or have very, very early stage cannabis programs. I mean, when you look at like powerhouse states such as Texas that has a pretty nascent CBD only program, right, and how that is looking to develop. You know, Georgia, for example, has just passed laws in the legislature, but applications aren’t out yet, and Virginia is just getting their program off the ground.
So, I think, you know, again, we’re a little early for sort of that national – the ability to get something nationally passed from a federal legalization perspective, but I do think that folks can understand and appreciate and when we’re narrowing the issue and focusing in on banking, the need to get those dollars into the system in a regulated and normalized way. And so, I think that that becomes – and because it is the federal banking system that by definition needs to be a Federal Act, and as I have more and more conversations and folks are starting to realize the amount of money that really this industry has the ability to contribute one; and two, how it’s actually functionally happening right now, which isn’t exactly ideal for anyone. And I do think that that becomes more of a likely first step.
RS: Yeah. Talking about the states and as you know, a leading MSO in the industry, you know, Trulieve is the podcast sponsorship right now, and I was really excited to have you guys come on board and partner with us because Trulieve is a company I talk about all the time on this podcast and when we talked in January, you know, we talked a lot about how Trulieve is one of the few to be profitable and the responsible path that has led you to that. And I think when we talked you had something like 47 stores open in Florida and you were planning on going online in Massachusetts. You just opened your 51st store in Florida, I believe that’s right.
Can you talk to me about kind of, a lot of people that have come on the podcasts that have that have touched on Trulieve being one of their top picks have said how, you know, adamant you guys were about sticking with Florida as a source of growth and I actually love what you said on the most recent conference call where somebody was like, you know, aren’t you guys pushing for further growth and you’re like, well, we’ve done pretty well sticking to our plan, which I think is very true.
And you know, I think more companies should probably take that lesson to heart. Especially now with so many closing and people being you know, laid off and all of these things you guys are opening up more stores. So, I guess, can you talk to listeners and potential investors and current investors about what your plan is going forward in the states and also, I guess how much COVID is affecting your plans to further grow?
KR: Sure. So, yeah, as you mentioned, we opened recently our 51st store in Florida, which is you know, we take a step – we were taking a step back to kind of reflect on that and it’s just really been such an amazing and fulfilling journey so far as we are approaching our four year anniversary this month of opening Florida’s first dispensary and making the state’s first sale of medical cannabis. So, it’s really been an amazing and incredible four years, and you know, our team is just incredible. And we, you know, it’s interesting, because I think to your point, right, we have always been committed to making sure that we are providing the highest level of cannabis products and customer experiences will stop.
And we are focused on creating loyal and repeat customers, who we of course refer to as our Trulievers and creating a sense of community around the brand. And really our whole business thesis is that, you know as those regulatory landscape shifts and changes nationally in from state-to-state quite frankly, that those companies who have that relationship and authentic relationship with their customers are the ones that are going to ultimately be successful.
And that’s we’ve always taken that to heart and we’ve been focused on again, building a company with that customer experience and front and center, which means right, that what we haven’t been focused on is you know, I’ll call it the dots on a map and it’s – we are certainly focused on growth we understand very much as a growth industry.
And however, we want to make sure that it’s we’re growing with the customer in mind and that we have, you know, responsible growth and that we’re able to, you know, continue our profitable, and, you know, our profitable path that we have that we have been on, and as I’ve always said, you know, it’s important to me personally as a CEO to ensure that we’re providing opportunity for our employees to build careers and that means that we’re a, you know, a long standing company that’s creating value for employees and quite frankly, for our shareholders.
And so, you know, our financial strength and discipline is key to our supply chain efficiencies and it gives us a strong position for organic growth, and of course, you know, expansion opportunities through acquisition we’ve been very, very careful with respect to how we analyze acquisitions. You know, as I said, I’m pretty happy, honestly, that we didn’t get sort of stuck down the rabbit hole that some of our peers did with respect to, you know, splashy acquisitions that then have had to be unwound or, you know, walked back. And because folks got a little over their skis with respect to commitment, and bandwidth, and look, this, this business is fast, and changes come fast, and having the ability to pivot is absolutely a requirement.
And so, and, you know, for us, it’s, again, it’s having the ability to come back and make sure that we’re very grounded in our mission, we’re very grounded in our strategy, and that we’re focused on our customer, you know, first and foremost, with respect to our growth plans, and we are building our, you know, our second I’ll call it, you know, meaningful market and in Massachusetts and so we’re excited about that and we were slowed a little bit there due to COVID, due to our construction on our building as well as the regulatory body there, the CCC and on break during the COVID period, and so, but we’re back up and running there and look forward to having that facility built-out and able to open here soon.
And with respect to Florida, you know, is interesting, we really had an opportunity when others in the last part of 2019, we’re reevaluating their expansion and growth plans due to capital constraints, due to perhaps as I mentioned, folks getting a little over their skis, maybe with some other some other, you know, acquisitions, and what we noticed is that folks were actually kind of pulling back in Florida and so some of our competitors were, you know, shutting down dispensary’s cutting back hours laying off employees and we really saw that as an opportunity for us to go faster, and continue to build out.
And you know, first and foremost, again, we want to make sure that patients in Florida have access, and that we’re providing the opportunity for folks to participate in the medical program and to get products and quality products. And then, you know, secondly, when we think about our business, and we think about our strategy, you know, we’ve always said that Florida is our backyard, and that we’re going to remain focused on Florida. So, having the ability to continue to open stores, having the ability to continue to make investment when others were pulling back was something that we weren’t necessarily expecting, but we were happy that we had the ability to take advantage of that opportunity when it was presented.
RS: Yeah, and the rates of growth in Florida seem, you know, astounding, and that you guys are pretty much the company to be capitalizing on it. So, I wanted to just like piggyback on what you just said in terms of Florida remaining, your point of focus, does that still remain true, like within your states and plans for growth? Florida is still kind of going to be your number one market that you’re focused on?
KR: Well, I mean, look, I mean, Florida has, I mean, Florida is our, you know, it’s a like kind of, you know, we’re a Florida based team, right. So, I mean, Florida is our, it’s like when you’re, you know, you’re – and I’m a big football fan. So I mean, Florida is the home stadium, right. We got to protect, you got to protect the home turf, for sure. And so, but we have been focused on making sure that we’ve been building our bench appropriately, we’ve been adding key members of our team, for those folks who follow us very closely.
They will have noticed a number of key strategic hires that we have made over the last, you know, six to eight months. And so, you know, I would say that we are going to continue to build out Florida, we feel like we’ve got a really solid strategy and team in place to be able to continue to innovate and compete and remain focused on Florida, while also looking at other markets. And so again, I think as opposed to some other folks where you’ll see, you know, maybe more of a kind of small positions in a number of states, I think with us, our strategy is to really go into a state to focus on developing that state, making sure that we’re building out our brand and appropriately in that state, and that we’re well positioned in that state.
And so when we talk about Massachusetts, we really do have, you know, our plan is, is a focused one on Massachusetts, it’s not something where it’s going to be a press release and a headline and then you know, it’s okay next, and so we do want to make sure that we can, we can be successful and in the states in which we enter in the ways that we define success again, our winning, you know, the hearts and minds and repeat business and loyalty of customers and creating a whole new set of a Trulievers and a Truliever community in that particular market. So, you know I think that you will see us and you know as I’ve said take the show on the road and begin to build out additional markets, but again, it’s going to – it will remain and it will be with that and you know, discipline and patient focused strategy that you’ve seen us execute on and will continue to execute on in Florida.
RS: And touching and staying in for a minute on Florida, do you have any updates or any insight into the picture on edibles or any talk of legalization there?
KR: Yeah. So, you know edibles is and I will continue to say that I think edibles will happen in 2020. And there were three rules that needed to come out prior to the edibles rule being dropped. Waste disposal, testing, and packaging, we’re through two of those. So, waste disposal and testing have been implemented. So, we’re waiting on the packaging roll, which we expect any day now. And once that – because all three of those actually had edibles components, that the department felt that they needed to get level set prior to authorizing edibles to come to market and so, you know, again, I think we’ll see a packaging rule be released and then edibles, but you know, per kind of, you know, rumblings within the department and conversations that have been had, and, you know, my understanding is that it is being drafted and that we should expect, again, those rules to be released at some point and in 2020. I’m really hoping for a Q3, you know, release, but again, we’ll see.
Listen, I’ll be happy if it’s 2020. I think it’s going to be a big catalyst for additional growth in Florida on top of what we’ve seen. I mean, we’ve been seeing record patient numbers, new patient numbers in Florida over recent weeks. And so, you know, we’re – we feel pretty confident that with edibles coming on board that we’ll see, you know, additional growth there. With respect to legalization, really what we’re talking about there as we’re talking about adult use in Florida, and I think that still remains and I think, you know, our best case scenario there is 2022 via a ballot initiative, and there could be depending on how real about ballot initiative becomes, and how quickly that ballot initiative comes into focus.
There could be movement on the legislative side in 2021 with a desire for legislators to set policy around adult use prior to the ballot initiative being passed. So, but I think there’s a lot of kind of it depends scenarios with respect to that, but I think, you know, again, kind of that 2022 timeline still remains fairly valid.
RS: Okay. And the edibles thing. I mean, I imagine you’re excited for it to come online for the growth. I imagine you’re also probably sick of the question. But, it seems like yeah, and especially because of COVID like edibles are kind of like a slam dunk it seems like once they do come online.
KR: Yeah, no, absolutely. I mean, yeah, I think that edibles I mean, we’re basically I mean when you look at other markets and then again Florida, I mean first of all let me start and say that Florida – in Florida patients love, love, love new products and we get asked daily and when edibles will be coming online. So, I think when you take into account to the demographics, when we look at, you know, the fact that our patient demographics trend, a little older, right. I mean, so average age is 50 years old, and you know, folks, I think it’s going to be a really nice additional products for folks to add-on to two orders.
So, it will be interesting to see basket sizes and in so forth, and, you know, the ramifications there. And also, I think that, you know, we’re just really excited, you know, we’re planning to come to market with a suite of products, both truly branded and via our brand partners and have a full suite of options for folks to try. And so I think it’s going to be a really convenient option for folks to try and I think that it will be, you know, just an incredible, incredible catalyst again for the Florida market.
RS: Yeah, I think I would be in full agreement. So, talking a little bit about, you know, we talked about this even in January, like I don’t think it needs to be just because of all the horrific news that’s happening, you know, in terms of civil rights in terms of what’s already been happening in the cannabis industry for a long time, which is kind have, you know just discrimination and terrible policies and criminal, you know what’s deemed criminal that isn’t criminal. And a lot of companies kind of talk the talk, but not everybody walks the walk, I would say.
Something that I saw from Trulieve that I really liked is a couple things. One, you did a recent talk with C.J. Wallace about the systemic racism in the cannabis industry. I was wondering, like through doing that, a, how did you come to take that on; and b, kind of what did you take away from that talk, and what do you take away from kind of what’s happening now, but also, I think, probably what you already knew needed to happen anyway?
KR: Yeah. So I mean, we’ve been, you know, we have been partnered and supportive of minorities for medical marijuana for a very long time. And you know, Roz McCarthy, who’s one of the founders of that group actually lives in Florida. And when the laws were being passed in Florida, she was, you know, a strong voice and on the Hill and in working with legislators and advocating for, you know, and quite frankly was successful on some fronts and there’s still more work to do within the Florida program on others. With respect to, you know, requiring, for example, each application to include a diversity and inclusion plan that’s reviewed and submitted along with licensing renewals, and to talk about and a license award for black farmers, which is a bit unique to Florida. With respect to some of the history that’s happened around black farmers and particularly, it was…
RS: What does that mean exactly?
KR: Yeah. So, in Florida, the way that the law was written is that you, in order to apply or to qualify to apply for a license, you had to have a nursery that was in existence for a minimum of 30 years. Well, one of the issues around that when you talk about generational agricultural businesses in and there was actually a case and it was called the Pigford case. And that acknowledge the fact that, and, you know, black farmers in particular, did not have the ability to own land and own their own nursery operations. And so, and there was a class action lawsuit that was successful. And so there was actually a requirement in Florida law that a license be given and in order to qualify for that license, and you had to be recognized under the Pickford case as one of those farmers who should have basically been able to qualify, but for the fact that you were black, and therefore, under the laws of the time, we’re not able to have specific ownership. And then also, you need to be part of another organization. That was a minority farming organization.
Unfortunately, in Florida, there’s been significant litigation around that license. And so it has yet to be issued, which I think is an absolute travesty. And it’s fairly shameful that there hasn’t been a solution around that particular award which, you know, Roz and I talk about quite often in addition. Roz and minorities for Medical Marijuana was successful in working with the legislature to have a portion of the licensing fee and go to when so the card renewal fee when anyone renews Medical Marijuana card in the state of Florida portion those fees go to Florida Agricultural University, which is the Historically Black College University and HBCU network. And so she’s done a lot of great work in Florida and I’ve worked closely with her, I’ve had the privilege of working closely with her with Trulieve for a very long time and have always been very supportive of the work that of the work that she’s done in the work that minorities for Medical Marijuana have done.
And really, she and I sat down pretty early and, you know, as two females, right, and really had a pretty honest and open conversation about, look, what can we do as an organization to make sure that as we think about and as we’re building this company, that we’re – that we are holding ourselves internally accountable and doing things the right way, to the best of our ability, and with the recognition that there’s always room for improvement, and there’s always more that we can do. And so, you know, I think that, I mean from Trulieve’s perspective, and you’re right, there’s – it’s a little bit frustrating because I feel like sometimes these initiatives are I put it in the check the box category, right, where it’s okay, as a company of a certain size, we’re supposed to have this.
So let me create a web page and, you know, put some words on a page and check the box, right, as opposed to it being an ongoing and ingrained cultural part of who we are. And that was, I guess that’s what I would say as maybe a bit of the difference is that, you know, when we think about how we’re building the company, and when we think about how we’re awarding contracts with suppliers when we think about how we’re hiring, when we think about where we’re making investment, and you know, diversity inclusion is always a part of those conversations, and it’s a part of those conversations in a meaningful way.
And, you know, one of the things that Trulieve is, I guess known for is that we choose to invest and choose to invest in majority and minority communities or underserved, underprivileged communities whenever possible, and that’s not, you know, again to check the box that’s because, I’m a true believer that we can bring economic transformation to those communities and we can be a meaningful, again, change agent for those communities.
And so in Gadsden County in Florida, where our cultivation and manufacturing operations that – we’re the largest employer, we’re the largest consumer of power by far, and we have provided and brought opportunity to those areas that then have, of course, you know secondary and tertiary effects on those economies. And so, you know, I’m very proud of that work. I’m very proud of the work that we’ve done when you look at our employment numbers when you look at our leadership numbers, but again, I think that going back to the conversation in the forum that I was recently a part of, it just continues to highlight the fact that we can continue to do more.
And so, you know, we’re looking at, we’re going to continue to look internally, but then also, you know, being a little bit more public with respect to what we are doing, asking and challenging ourselves in terms of what else we can be doing, and then also starting to work a little bit more externally. So that’s one area that we haven’t been as visible in. And so that’s something that we’re going to be, we’re going to be working on and as we move forward.
RS: Well, love to hear it. Are you encouraged at all by your colleagues, you know, the other companies in the industry? Are you seeing any kind of – I mean, I know that everybody’s seen some kind of uptick in exactly what you’re saying ‘words on a page’ type of sentiment, but are you seeing like real change that that you are hopeful about? I guess going forward?
KR: Yeah. I mean, I think what I’m seeing is that, I mean, look, I think that there’s certainly initiatives that other companies have taken on that I’ve been like, wow, that’s really awesome. I’m so glad to see that they are, you know that they’re involved with these organizations that they’re really putting true dollars behind. And, you know, again, the words on the page, right. And I think that, you know, in addition, I joined, you know, within the last year, the National Cannabis Roundtable, for example, and was part of, I was fortunate enough to be part of the group that has led the diversity and inclusion effort there. And that was all about right, creating actual accountability. And I think that what I’m encouraged by is the number of companies who have been willing to step up and say, look, we’re not perfect today.
And that’s what – that’s one of the harder things right, is to be able to really take an honest look at where we are today, so that we can then measure and track again, and define what progress and success looks like because it’s not going to happen overnight. It’s not going to happen in a single press release right. It is, you know, again, and it has to be an intentional over time thing. And so, within National Cannabis Roundtable, the companies that are part of that all the CEOs signed a pledge, and it includes real reporting from within each company of where are we today?
Where are we on not only, you know employment numbers, generally, but where are we in leadership numbers? Where are we in management numbers? Where are we in contractors? Where are we on social justice initiatives? Where are we on, you know, how we’re positioning our investments and how are we tracking and tracing where those investment dollars go? And so I’m really encouraged by that work, because that is to me anyway, that is more meaningful and that type of work is what will I think, you know, over time change and create meaningful and positive change within the industry.
RS: Yeah, yeah. Real work always works better than soundbite work. So, yeah. Let’s hope that that is happening for real. And it’s great to hear. I mean, it is great to cynicism aside, there are like a lot of great things happening. So, it’s good to hear. So, talking to, you know, people that are invested in the cannabis sector, people that are invested in Trulieve, you know, are aware of the volatility that’s involved in this sector, and especially in this past year, which has been so up and down. What would you say and kind of, in closing, like, what would you say to investors as the CEO of, you know, one of the top MSOs what do you see going forward this year, or what they can expect maybe?
KR: Yeah, I mean, I think look, I think we’re at a point of inflection where you’re starting to see expectations from and rightly so, quite frankly from the investment community to – for companies to do what they say that they were going to do and to begin, and you know, again, while we continue to be in a growth industry, and there certainly are catalysts coming, and I think investors are now at a point where they’re expecting companies to perform, and to show that they can, that they can execute and that they can deliver on what they said that they were going to do. And so, I think, you know, as a result, we’re hearing and seeing a lot more focus around things like free cash flow and EBITDA and not only top line, but true bottom line growth and efficiencies and expectations around both.
And so, I think that you’ll continue to see that type of analysis being done quarter-after-quarter. I think that you’re going to continue to see separation and pull away from folks and those of us who are performing vis-à-vis folks who maybe are still trying to find their footing. And I think that again, there will be – it’s going to be interesting because obviously COVID is not affecting everyone equally. I think in some cases, certainly, we’ve seen increased growth in demand as a result of COVID in certain markets and other markets it’s been exactly the opposite.
So, I think that’s going to be, you know, a little interesting, particularly in this next quarter’s results, but I think overall, right, it’s going to be really a focus on okay, you know, we’ve been riding this, and, you know, let’s look at next year, let’s look at next year, let’s look at next year, and you know, train for a while now. And now all of us have marks that we had set, you know, a year ago. And I think that the expectation now is that we’re hitting those. And so, I think it’s going to be a continued focus on execution through the rest of the year.
RS: And do you think that we’re going to see a lot of companies even more than we’ve seen fall by the wayside?
KR: I think look, I mean, I think in any, you know, emerging industry, you’re going to have folks that kind of rise and fall right. And I think that certainly there were companies who got themselves into precarious positions. And it’s not like we couldn’t see it coming with respect to announcements on financings and in terms that, you know, I think in any situation we’re, I mean, to me sometimes shocking, right, in terms of interest rates and payback periods and so forth. And so, you know, I think when you start to see that we’re continuing to see that I think that that will continue to raise concerns about those particular companies being able to being able to find their way into get out from under this particular financing situations, and I think it becomes harder when you overlay that with the capital – say the capital markets, you know, currently and again, to read this macro environment of uncertainty that we have given you know, given the current COVID landscape.
So, you know, I hope not right, I don’t wish I mean, I want and I will always say this, I want our industry to be comprised of really strong, financially sound solid companies, because when we are able to uplift on the U.S. exchanges, we need there to be, you know, several of us, right, and that are strong and can be bellwethers of the industry in the U.S. And so, you know, I think that the sector is, there’s a lot of room, and there’s different ways to win. But I think that it’s necessarily going to be the same names that are there today, not necessarily.
RS: Last question, do you plan for or is it part of your, I guess, I don’t know if you have like a checklist, is it your desire to want to be up-listed to a major exchange like within the next year?
KR: You know, I mean, I think that that – well, first of all, let me start by saying certainly when we are able to up-list to a U.S. Exchange and we will look to do that. And whether or not that will have the ability to do that within the next year is really, you know, that’s up to the U.S. and that’s again a federal issue. So, you know, not sure I would love to sit here and say that I’ve got confidence that that’s going to happen within the next year. I don’t necessarily, what I can say is, that I think it’s my job as the CEO for us to be poised and ready to take advantage of that opportunity when it is presented. So to that end, you know, we’re working on our SEC registration, we’re working on our GAAP financials etcetera. So, I mean, we do want to make sure that we’ve got the ability, right, to be to be up-listed when that opportunity presents itself.
RS: That makes sense. Well, Kim, it’s always really a pleasure talking to you and I know our listeners love hearing from Trulieve and really happy to partner with you guys and talk to you again. So, really appreciate you taking the time.
KR: Oh, of course no, it’s a pleasure as always and thank you so much for reaching out.
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