Trulieve Cannabis Corp. (TRLV) Earnings Call Transcript & Summary

Thank you. Good morning, everyone, and welcome to the True Leave Cannabis Corporation second quarter 2026 financial results conference call. My name is Chris, and I will be your conference operator today. This conference call today is being recorded. I would now like to turn the conference call over to Christine Hersey, Chief Corporate Affairs and Strategy Officer for Trulieve, who will be your moderator.

moderator for today. You now may begin. Thank you. Good morning and thank you for joining us. During today's call, Kim Rivers, Chief Executive Officer, and Jan Rees, Chief Financial Officer, will deliver prepared remarks on the financial performance and outlook for TrueLeaf. Following the prepared remarks, we will open the call to questions. morning, we reported second quarter 2026 results. A copy of our earnings press release and PowerPoint presentation may be found on the investor relations section of our website, www.trueleaf.com. An archived version of today's conference call will be available on our website later today. As a reminder, statements made during this call that are not historical facts constitute forward looking statements, and these statements are subject to risks, uncertainties, and other factors that could cause our actual results to differ materially from our historical results or from our forecast, including the risks certainties described in the company's filings with the Securities and Exchange Commission, including Item 1A, risk factors of the company's most recent annual report on Form 10-K, as well as our periodic quarterly filings. Although the company may voluntarily do so from time to time, it undertakes no commitment to update or revise these forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. During the call, management will also discuss certain financial measures that are not calculated in accordance with the United States Generally Accepted Accounting Principles, or GAAP. We generally refer to these as non-GAAP financial measures. These measures should not be considered in isolation or as a substitute for TRULY's financial results prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures is available in our earnings press release that is an exhibit to our current report on Form 8-K that we furnished to the SEC today and can be found in the investor relations section of our website. Lastly, at times during our prepared remarks or responses to your questions, we may offer metrics to provide greater insight into the dynamics of our business or our financial results. Please be advised that we may or may not continue to provide these additional details in the future.

I'll now turn the call over to our CEO, Kim Rivers. Thank you, Christine. Good morning, everyone, and thank you for joining us today. We are thrilled to report second quarter results for the first time as a company listed on the New York Stock Exchange. For those of you who may be new to Trulieve, we are the largest medical cannabis operator in the U.S. Our mission is to expand access to cannabis while serving customers with high-quality products and exceptional experiences. Ten years ago, Truly served the first medical cannabis patient in Florida, and over the past decade, we have grown from a single dispensary to 207 medical dispensaries and 3.5 million square feet of production capacity. When we include Truly branded adult and medical mixed-use dispensaries owned by Harvest, our branded retail network includes two 241 retail locations and over 4 million square feet of production capacity. Last month, Trulie was named to Times America's Best Companies 2026 list, a prestigious recognition awarded to the top 1,000 companies, highlighting our commitment to employee growth and career development. I am so proud of the team and what we we have built together. Since the very beginning, Trulieve has led from the front, pushing for reform. For the past two years, we have actively supported federal reclassification of marijuana. In December, President Trump issued an executive order to support rescheduling, delivering on his campaign promise to address cannabis reform. In April, Attorney General Todd Blanch, rescheduled state licensed medical marijuana to Schedule 3, completing the first meaningful federal reform in over 50 years. In conjunction with state licensed medical marijuana rescheduling, the Treasury Department confirmed that punitive 280e tax no longer applies to state licensed medical marijuana operations beginning in 2026. The removal of this tax burden provided an immediate boost to our reported net income and cash flow. At the same time, AG Blanch resumed the broader rescheduling process for marijuana. Hearings concluded last month, and we expect a final order to be issued this year. As part of an order to reschedule state licensed medical marijuana, a new process was created for operators to register with the DEA. Truly registered all of its medical only marijuana dispensaries and production facilities with the DEA, complying with the six month grandfathering provision in the final order. To date, the DEA has completed inspections at of our dispensaries across Florida, Pennsylvania, and West Virginia. We anticipate facility approvals in the coming weeks. In order to facilitate listing on the New York Stock Exchange, Trulia segregated the medical-only state-licensed DEA-registered business from the mixed-use states that have both medical and adult-use operations. State operations serving medical and adult use customers are part of Harvest. Following precedent and as part of the deconsolidation, 10% of the mixed use business was sold to an independent third party investor along with operational control. Trulieve retains 90% of the economic interest in Harvest and will have the option to reconsolidate the Harvest business pending broader rescheduling and NYSE permitting inclusion. Since listing on June 10th, we have conducted non-deal roadshows to meet investors in Chicago, Denver, New York, Montreal, and Toronto. We introduced Trulieve to a host of institutional investors who are new to the cannabis space. Over time, we expect to realize greater stability in our shareholder base, higher liquidity, broader analyst coverage, and index inclusion for our stock. We plan to commemorate our listing at a closing bell ceremony at the NYSE on August 18th, marking another milestone as the first U.S. cannabis company to ring the bell. We believe uplisting the NYSE, redomiciling in the U.S., and removal of the punitive 280E tax burden will lower our cost of capital. While the shift in federal policy is historic, I'm equally excited about three significant near-term growth opportunities. First, in Georgia, program changes have created an unlock for increased distribution that we are executing on now. Second, in Texas, where we are in the process of converting our conditional license to final, we have the opportunity to serve the biggest medical market since Florida. And third, across our market, we have a targeted strategy to acquire new customers currently served by the intoxicating hemp market as the federal ban takes effect. Overall, Trulieve is ready to further our leadership position during this incredibly exciting time for the industry. Our core business continues to outperform, generating industry leading margins and strong cashflow, providing the flexibility to make strategic investments and growth initiatives. Turning now to our second quarter results. Please note, reported results for this quarter include the combined business until the deconsolidation transaction on June 3rd, and then the medical-only business for the remainder of June. Second quarter revenue of $271 million was in line with guidance. For the medical-only business, revenue increased 4% sequentially to $222 million. Second quarter gross margin of 60% reflects operational efficiencies, low production costs, and our disciplined approach to promotional activity. For the medical-only business, quarter growth margin was 63%. Adjusted EBITDA of 98 million, or 36% margin, was driven by expense control in our core business. During the quarter, we generated 53 million in operating cash flow, which contributed to our quarter end cash balance of 325 million. Second Second quarter retail results were in line with positive seasonal trends, including the 420 holiday. In medical-only markets, traffic increased 6%, pressured by a slight sequential decline in average basket. Units were up 8%, underscoring strong demand for cannabis. In Florida, we sold 56% more flour per store than the state average across 169 stores, totaling $680. We sold 1.5 billion milligrams of oil, more than two times the next highest competitor. Patient growth in Florida, Georgia, and Pennsylvania has accelerated recently, further highlighting cannabis demand. Customer preferences for value, mid, and premium tier units sold remain consistent. consistent from the first quarter. During the third quarter, we expect growth in Georgia and Pennsylvania to offset typical summer pressure in Florida. We expect momentum to fuel continued growth through year end. Our investment in harvest performed well in the second quarter with revenue growth and margin expansion compared to the first quarter, driven largely by growth in Ohio. Turning now to our strategic objectives for 2026. We have made meaningful progress in these four areas. One, expanding access to cannabis. Two, investing in growth initiatives. Three, growing our loyal customer base. And four, elevating our branded product portfolio. I'll begin with expanding access to cannabis, which is a critical part of our mission. State licensed medical marijuana has been reclassified to Schedule III, representing a major win for patients, caregivers, and physicians. Acknowledging the medical value of cannabis reduces stigma, eases barriers to research, and sets the stage for further reform. We remain supportive of broader rescheduling and expect a final order this year. We expect momentum to continue with safe banking, updated FinCEN guidance, and Treasury guidance on 280e tax treatment, including potential retroactive application for state-licensed medical marijuana operators. These measures can expand access to banking and service providers, reducing friction and costs in day-to-day operations. While cannabis reform continues to come to fruition, we are ramping investments in meaningful growth opportunities in both Georgia and Texas. Following recent program changes in Georgia and federal reclassification of state licensed medical marijuana, Trulieve has significant growth potential in both the independent pharmacy channel and our own dispensaries. Independent pharmacies in Georgia are eligible to register with the state and with the DEA to dispense approved medical marijuana products to registered patients. In June, we began supplying licensed pharmacies with medical marijuana products and are now shipping to almost 20 pharmacies. We believe this market opportunity will expand over time as more than 125 independent pharmacies have previously expressed interest in carrying medical marijuana products. Our team is meeting with pharmacy owners across Georgia to discuss medical cannabis and share information on how to apply for state and DEA licenses. Alongside pharmacy distribution, the Georgia program has six licensed operators for cultivation and retail. As one of only two Tier 1 license holders, Trulieve opened the first medical dispensary in April 2023. At that time, the program was limited to low THC products for patients with severe and end-stage qualifying conditions. the governor signed a new law that expands the program. As of July 1st, Georgia's medical marijuana program removes the THC cap, includes new qualifying conditions such as HIV, IBS, and lupus, and allows for new products such as vape and inhalable flower. In the first two weeks of July, traffic at our dispensary The number of our plants is tripled. Due to high demand, we sold out of flower. However, we expect to have flower back in stock in the coming weeks. Cultivation capacity is ongoing and will ramp in stages throughout the end of the year and into 2027. While flower production is ramping, we have a variety of new concentrate and date products rolling out in August and September. in September. Today, we have six open dispensaries and are on track to open our seventh store in Dunwoody this fall. The program allows us to open additional dispensaries as the patient count increases. Patient enrollment in Georgia is accelerating, with growth up 38% this year and surpassed 45,000 this week, triggering eligibility for an eighth dispensary which could open as soon as early 2027. While Georgia presents a meaningful growth opportunity, Texas has tremendous near-term growth potential. We believe Texas represents the largest medical cannabis opportunity in the U.S. Historically, Historically, the Texas Compassionate Youth Program, or TCUP Medical Marijuana Program, was limited in scope and size. The program had only three licensed operators and strict rules that made it very difficult for any of the three operators to achieve scale, such as requiring all products to be removed from each dispensary and warehoused every night. Last September, a new law passed that revamped the program, making several critical improvements. Healthline conditions were expanded to include chronic pain, Crohn's disease, traumatic brain injuries, and terminal illnesses. Initial patient consultations with physicians can be conducted via telehealth, providing a convenient way for patients to speak with a physician to determine which products and dosing may be appropriate. In addition, rules were updated to allow products to remain in dispensaries without warehousing overnight. Permissible products were expanded to include new form factors such as vapes, lotions, and patches. Finally, the number of operators is increasing from 3 to 15 with the award of 12 new licenses. In December, Trulieve was awarded a conditional license for the TCUP Medical Marijuana Program. We are working to convert the conditional award to a final license. The TCUP program allows each license holder to build vertically integrated operations with unlimited production capacity on a continuous site to support unlimited retail, as long as the operator has one retail location in each of the 11 regions across Texas. Construction of initial production capacity is complete and we have a robust retail pipeline of stores covering all regions. We plan to scale our production capacity and retail network modularly as the patient count increases over time. this year the program has grown by 16% to over 157,000 patients representing less than 0.5% of the population in Texas. For context, established medical programs in Florida and Pennsylvania have 4% population penetration, which for Texas would be about 1.3 million patients 8.5 times the current market size. The setup in Texas strongly favors to lead the approach to market penetration through scaled operations to sell branded products through branded retail. Our proven track record of developing vertically integrated medical markets, such as Florida, combined with our strong balance sheet, provide us with meaningful competitive advantages in Texas. We believe the Texas market can grow more quickly than Florida did, and we look forward to contributing to the success of the TCAP program. Alongside expansion in Georgia and Texas, we are investing in our retail network with both new locations and store refresh or remodels to support patient growth while maintaining brand standards. Year to date, we have opened eight new dispensaries in Florida and refreshed or remodeled 24 locations across our markets. On top of investments in organic growth, we are actively evaluating in new and existing markets ranging from tuck-in assets to large single and multi-state operations. We evaluate potential targets using stringent criteria, including price, strategic fit, quality of assets, and market framework. In addition to this, In addition, we are investing in technology. Earlier this year, we launched Project Hyper, an initiative focused on hyper-personalization of customer messaging. Through generative AI, we are automating creative production at scale, enhancing how we personalize and orchestrate customer communications, and modernizing our digital commerce platform. to deliver a more seamless experience across web and mobile. Project Hyper remains on track, and we expect to begin realizing efficiency and speed to market benefits by year end, with additional capabilities rolling out ahead of our targeted completion date of March, 2027. As the cannabis industry continues to evolve, creating deeper and lasting connections with our customers is critical to long-term success. Customer engagement through digital and real life interaction are at the core of our strategy to grow our loyal customer base. Local community events, physician engagement, and paid media help Trulieve establish and maintain reciprocal relationships with patients, caregivers, and physicians. Across our branded retail network, we conduct over 100 community and physician engagement events month, partnering with a wide variety of nonprofit organizations to raise awareness for cannabis. Last year, we launched our Florida mobile app, giving patients a more convenient way to browse products, access deals and rewards, and place orders. Adoption continues to exceed expectations with more than 200,000 downloads since launch. In the second whole year, we launched a new alone, the app drove 30% of all online orders with increased average basket size and order frequency. Given the success we've seen in Florida, we plan to launch the app in Georgia later this year with additional markets expected to follow in 2027. Across our branded retail platform, our rewards program added 80,000 members in the second quarter, surpassing 1.1 million members. Rewards members continue to spend on average 2.2 times more than non-reward members, comprising 80% of second quarter transactions. In May, we introduced programs here in Florida, enabling greater rewards for customers who spend more, including exclusive offers, products, and events. We plan to add reward tiers in additional markets this year. Customer retention is one of the key metrics we use to measure the depth and quality of our customer connections. For medical-only markets, customer retention held steady at 78%. We sold almost 14 million branded product units with ModernFlower and Roll1, comprising almost half of branded units sold. The Roll1 clutch all-in-one continues to gain momentum with over 35% growth in units sold. We will continue to identify white space in our branded product portfolio and the markets we serve as we develop and launch innovative new products. Overall, we have made tremendous progress on all of our objectives. Our team is highly engaged in carrying the momentum forward into the back half of the year. With that, I'd like to turn the call over to our CFO, Jan Rees. Please go ahead.

Good morning and thank you, Kim. As a reminder, second quarter reported results under GAAP include both. the true leaf and harvest operations until the deconsolidation event on June 3rd and only in true leaf medical operations as a remainder of June. Following the deconsolidation of harvest, the harvest results are reported as equity investment. Please refer to our earnings presentation additional details. Second quarter revenue was $271 million, in line with guidance and typical seasonal trends. Revenue for medical-only states was $222 million, up 4% sequentially. New stores opening and wholesale growth contributed to higher revenue. Second quarter gross profit totaled 162 million or 60% margin. Gross profit for medical-only states was 140 million or 63% margin. Gross margin strength reflects economies of scale, operational efficiencies across our platform and disciplined promotional management. We expect quarterly gross margin to vary based on product and market mix, inventory sales through, promotional activities and idle capacity costs. Second quarter SG&A was 102 million or 38% of revenue. Adjusted SG&A at 32% of revenue was comparable to last year. We expect SG&A may fluctuate based on the timing of investments and growth opportunities and infrastructure. Second quarter net loss was $406 million, which includes $407 million impact from the harvest deconsolidation and equity investment. Excluding non-recurring items, second quarter net income would have been $20 million or $0.11 per share. Second quarter adjusted EBITDA was 98 million, representing a 36% margin and reflecting expense leverage across our core operations. Turning now to our tax strategy. As a reminder, we've followed mandatory terms challenging the applicability of Section 280E to our business. Thank you. Our balance sheet includes uncertain tax position covering 2019 to the present. The UGP includes 280E tax liability, refunds received from the IRS totaling more than $102 million and include interest. Second quarter income tax expense does not include to ADE tax liability. The increase in our uncertain tax position includes 20 million in interest on the UTP and 13 million on overpayments used to cover ordinary taxes. We remain confident in our position and our ability to address the outstanding UTP. Moving to our balance sheet and cash flow. We ended the quarter with $325 million in cash and $289 million in debt. Second quarter operating cash flow was 53 million. Capital expenditures were 21 million. And free cash flow totaled 32 million. In June, the company adopted a share repurchase program of up to the lesser of 50 million or approximately 8.5 million shares. During the second quarter, no shares were repurchased. Turning to our outlook, third quarter revenue will include only Trulia's medical operations. We expect third quarter revenue to be comparable to the medical-only revenue of $222 million in the second quarter. Growth in Georgia and Pennsylvania is expected to offset typical seasonal pressure in Florida. we expect growth to accelerate into year end. Gross margin is expected to be comparable to the 63% gross margin in the second quarter for the medical-only operations. For the full year 2026, we anticipate operating cash flow of at least 225 million reduced from 250 million to reflect the impact of the consolidation. With increased investment in growth markets to meet demand, capital expenditure are now expected to be 95 million, up from 85 million.

pending regulatory approvals, we may accelerate investment in Texas. With that, I turn the call back over to Kim. Thanks, Sean. 2026 is shaping up to be another landmark year for Trulieve. Federal rescheduling, uplisting to the New York Stock Exchange, and new growth opportunities in Georgia and Texas all solidify as an industry leader. Marijuana rescheduling represents a major policy shift. We applaud the Trump administration for enacting common sense cannabis reform. Trulieve is proud to have played a role alongside many others in supporting this historic policy change. Looking ahead, we expect additional reform to gain traction. State banking, updated FinCEN guidance, and treasury funds on 280E tax treatment all further align federal policy and state licensed marijuana programs. as well as truly was the first to segregate its business by deconsolidating harvest uplist the medical only operations on the NYSE. Since uplisting, we've seen greater liquidity and renewed interest by institutional investors. Over time, we expect our shareholder base to broaden ultimately lowering our cost of capital. Once broader rescheduling of marijuana is completed, truly has the option, but not the obligation, to repurchase the investment by the third party investor at a fair market value. As demonstrated by our proven track record in Florida, we are incredibly well positioned to succeed in Georgia and Texas. We have the capital and playbook to rapidly scale with discipline, adding retail and production capacity alongside demand. Since day one, our approach hasn't changed. Trulieve grows one patient at a time.

as I always say, onward. At this time, Kim Rivers and Jan Ruys will be available to answer any questions.

Operator, please open up the call for questions. Thank you. We will now begin the question and answer session. If you do like to ask a question, please press star then 1 on your telephone keypad. If your question has been addressed and you would like to withdraw it, please press star then 2. For participants using a speakerphone, please pick up your handset before pressing the keys. We will now pause momentarily to assemble our roster. And today's first question comes from Luke Hannon with Canaccord Genuity. Please go ahead.

Thanks and good morning, everyone. Kim, I'd like to go through, if we can, you called out three significant near-term growth opportunities, being Georgia, Texas, and then the conversion. of folks from the hemp market into the legal market. I'd like to go through each of those if we can. So starting with Georgia, it sounds like that's a big driver in the stability quarter on quarter that you're seeing thus far in Q3. But if we zoom out and think about your presence in the Georgia market over the long term, you have obviously deep experience selling bread branded product through branded retail. Should we think about Trulie's presence in Georgia over the long term being primarily through its own dispensary network or do you expect it to be active within the pharmacy channel?.

Yes, so on the Georgia opportunity, we will see growth continue to ramp throughout this year. As we mentioned, those program changes went into effect July 1st, and so Q3 impact with, again, you know, some supply challenges that are coming, you know, back on the online through the end of the year. And so some increased growth as we continue to meet current patient demand that is and through our branded retail network currently, as I mentioned on the call, we're able to expand that retail presence. It's a very prescriptive program and we can add a dispensary with every 10,000 patients that come online. So, crossing that 45,000 patient threshold allowed us an additional dispensary, and then the next mark will be at the 55,000 mark. Important to note from a timing perspective for folks is that we actually make that request at a set meeting with the Georgia Commission. And so it has to have met that threshold by the time that meeting comes into place. So it's important for us to have a retail real estate pipeline so we can bring that location to that commission at the maximum based have a maximum opportunity at those meetings. And so those will be very, I would say, you know, everyone can track that because it's just going to track with the growth of the program in terms of how many dispensaries we're able to build in Georgia. I will say on the pharmacy side, I mentioned in the prepared remarks that we already have established relationships with 20 pharmacies with more to come, a lot more pharmacies have their paperwork in and are going through the process of getting they have to get both the license and marijuana license, as well as, you know, maintain or obtain, rather, the Georgia medical marijuana-specific license. So they have kind of a two-step process to go through. But that network will be expanding, and we will wholesale to those folks. However, I think there's also interesting opportunities in Georgia with us being able to actually come in and do a hybrid. model, which we're exploring and have active conversations and even some LOIs out currently, whether that's a store within a store construct or a pop-up construct where we take over part of the independent pharmacy and really brand it as a true dispensary, there's an opportunity for us to potentially do a JV with a pharmacy where potentially we actually do some construction on an adjacent property and then combine those properties into a single. And so it's really a pseudo standalone, if you will, and a JV construct. Or there's also an opportunity for us to purchase independent pharmacies. So there's a lot of, I'll call it, opportunity and optionality for us in Georgia so that it would not only be, if you will, a traditional wholesale type model, but potentially a blended model. So you'll have kind of three different pieces where it will be retail, wholesale, and then again, the sort.

of blended type of arrangement in Georgia. That's great, thanks. And then switching gears to Texas, you had called out it as a larger market than Florida. And what's interesting, that looks and feels very similar to the Florida market just based on the regulations as well, the force of vertical integration, and the form factors, et cetera. So I guess I'm curious to know, if we were to do a look back on Florida and how you already had scale in that market, of course, from the outset, but you really built your scale in 2022, 23 at a bigger investment cycle to make sure you really retained that. dominant market share and it's very early days in Texas I realize that but over the long term is it reasonable to assume that you should try and get to that same level of scale in in Texas as well just considering the opportunity.

Oh, absolutely. We are very laser focused on the Texas opportunity. And as we noted in the prepared remarks, believe that our experience in Florida, you know, is unique and that we understand what is required to come in and have strong adoption, create relationships and communities, build out sufficient capacity, and ensure that we are in fact serving the customer base as it grows and scales. And it becomes a little bit of a chicken and an egg. We see this over and over again, right? And that you have folks who are interested in the program, but they need to see and have access in order to come in and actually get their card and begin begin the process of entering a program. And so we feel that it's very, very important for us to be a provider that is creating again that first experience whenever we can. And we understand how valuable that is with our experience in Florida. And so you have to provide access in order for that to occur. And so as I mentioned, we have already built, we are complete and ready to go. And the Texas regulators have been notified that we are ready for inspections. on our initial phase one of our cultivation and production. We have been interacting on a very regular basis with the regulators in Texas, have answered, you know, additional questions that they've had, have gotten fingerprinted, et cetera. And so we will be moving very quickly as soon as we get the grants.

might that our license has converted to final. That's great. Last question for me, and then I'll pass the line. Everyone has seen the Ohio which has been very strong over the course of the last couple of months here, and runs a trade-off with the US dollar. and the hemp ban. It gives us a lot of hope that we can get through this. Can you just remind us what is the size of the hemp market in I'm thinking specifically in Florida and Pennsylvania, Texas as well because it's going to be a big organic growth opportunity for you guys in the near term. Like how, I guess what I'm trying to get at is what could be the, the organic revenue tailwinds that you could get purely from folks converting from the hemp markets to.

at the legal market? Thanks. Yes, sure. So in Florida, you know, the regulated medical marijuana market has, you know, a little over 700 store locations across the state. We estimate that the smoke shop or hemp storefront, you know, portfolio is about 7,000 in Florida. in Florida, the regulated marijuana market in Florida, medical marijuana market is about $2 billion. And the hemp market in Florida, we would estimate to be about 4 billion. So it is significant. And I think, you know, similarly, right, in Texas, and that's also a very large, hemp market with about, we would estimate about a $6 billion market. It's going to be interesting to see kind of what happens in Texas with the hemp changes that, and really the, you know, and product availability that has gone into effect recently. So we'll be watching that as well. We also, of course, think that Pennsylvania has, there's a significant opportunity in Pennsylvania as well. To your point, Harvest operates in Ohio and we have seen along with the other operators an increase in demand you know following the hemp shutdown in Ohio. That's great thank you very much.

And the next question comes from Aaron Gray with Alliance Global Partners.

Good morning. I thank you for the questions and congrats on the uplifting to NYSE. First question for me, just going back to Georgia, it looks like it can be a really nice market based on our tours there. Just looking at it a bit differently, wanted to talk about the cultivation needs over time. I know for dispensaries, it's embedded in the regs for you being able to add those, but it's not embedded for expansion. So curious, just given your commentary of already being restricted on supply in the early days of medical, how best to think about, you know, long-term, you know, supply, particularly given you're going to have additional distribution outlets through pharmacies. Thank you.

Sure. So, we are in the process, as I mentioned, Erin, of building out additional capacity. It was already planned for Georgia, and so it's really, this is alongside of our plans. And we're, just like in other markets, we're able to, you know, increase the speed up or down depending on growth and demand. So we're executing against those plans now. As a tier one license holder, we have the ability to expand up to 100,000 square feet of canopy currently with our existing license. I do believe that there could be an opportunity in the future in Georgia. It's not unusual for once there's an acceleration for there to be changes and additions allowed under that cultivation capacity. And so we're planning, right, I would think, to have those conversations with regulators and lawmakers. I do think that Georgia is very invested in the success of this program and particularly Georgia. as these independent pharmacies come online, and they're very invested in ensuring that there's a real opportunity for those independent pharmacies to participate and to be successful. And so, right, that is going to require, of course, supply of high quality product. And so we're going to continue to build out up to, I would anticipate up to that maximum threshold, assuming, right, which I would make the assumption that the program will support from a demand perspective that cultivation threshold.

Appreciate that color. Second question for me, going back to Texas and the opportunity there. And we've often looked at it similar to Florida, as you have. One of the key differences we see is obviously the wholesale market versus forced verticality in Florida. So I want to get your commentary in terms of how that might change or if it does, your plans for expanding cultivation and reforestation. retail, just given the fact you will have a wholesale market, even though you can't have that scaled retail, which is, you know, a difference from what we've seen in Florida. Thank you.

Yes, I mean, I think that right with the way that that market is going or what we think anyway, how that market is going to develop, we're going to be very focused on, again, that branded product through branded retail. And candidly, I think. Most, if not all operators will be similarly situated. So, I think we're going to execute the playbook that we know works and aligned with our strategies and our strategic positioning. If we are able to wholesale, we'll have a conversation about that internally, but I don't believe that there'll be, I don't know that the strategic rationale will support, and certainly I don't think there will be a need out of the gate to really lean in on that front, Erin.

Thanks very much for the detail. I'll jump back in the queue. Our next question is from Gabby Ingolia with Cantor Fitzgerald. Please proceed.