Trulieve Cannabis Corp

CNSX:TRUL

Earnings Call Transcript 2023-Q1

[Operator]

Good morning, and welcome to the Trulieve Cannabis Corp. First Quarter 2023 Results Conference Call. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note, this event is being recorded.

I would now like to turn the conference over to, Christine Hersey, Vice President of Investor Relations. Please go ahead.

[Christine Hersey, Vice President, Investor Relations]

Thank you. Good morning, and thank you for joining us. During today's call, Kim Rivers, Chief Executive Officer; and Alex D'Amico, Chief Financial Officer, will deliver prepared remarks on the financial performance and outlook for Trulieve. Following their prepared remarks, we will open the call to questions. Steve White, President, will also be available to answer questions.

This morning, we reported the first quarter 2023 results. A copy of our earnings press release and PowerPoint presentation may be found in the Investor Relations section of our website www.trulieve.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 An archived version of today's conference call will be available on our website later today.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 and uncertainties described in the Company's filings with the Securities and Exchange Commission, including Item 1A, Risk Factors of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

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 Trulieve'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.

[Kim Rivers, Chief Executive Officer]

Thanks Christine. Good morning everyone and thank you for joining us today. We are pleased to report first quarter results and share recent wins as we execute on our strategic plan. Before we dive into results, I'd like to briefly discuss the cannabis industry, and the tremendous opportunity set ahead. Today, more than 80% of the U.S. population resides within states that have adult use and or medical cannabis programs.

Adoption continues to rise with greater access to regulated and tested products. Consumers are increasingly turning to cannabis to deliver a variety of experiences, including relief from severe and current conditions, anxiety, insomnia, and pain as well as recreation.

Over the next few years, we expect more states will enact programs that not only provide access to cannabis, but also create jobs and generate tax revenue. Barring any federal reform, U.S. legal cannabis sales are expected to reach over $70 billion by 2030, almost tripling from $26 billion in sales last year.

Turning now to our results. First quarter revenue of $289 million was inline with our expectations and historical seasonal performance. GAAP gross margin improved to 52%, up from 50% in the fourth quarter. On top of margin improvement, the team delivered a $24 million reduction in SG&A expenses. Adjusted EBITDA was $78 million or 27% margin, representing our 21st consecutive profitable quarter.

As we highlighted during the fourth quarter call, our near-term focus is on cash preservation and generation, while leaning into strategic priorities that will continue to differentiate to relieve in the years ahead. For the full year, we are targeting an operating cash flow of $100 million. We expect to generate positive free cash flow in 2023. Cash preservation efforts are geared toward expense reduction and harnessing greater efficiencies across the organization.

As I mentioned, this quarter SG&A was reduced by roughly 20%, as we further refine staffing and production levels to more closely align with current traffic and consumption. Adjustments to procurement processes and modulation of vendors and duplicative services also contributed to lower expenses. These efforts will be ongoing. We generate cash through both scale and service. Since inception, Trulieve has invested heavily to build scale and develop world-class customer service. Both are true competitive differentiators, particularly within the current macroeconomic environment.

Taking a closer look at our scaled operations, Trulieve has the largest retail network and legal cannabis with 186 dispensaries. This is supported by over 4 million square feet of production capacity. In addition to having significant capacity, it is also flexible. We can ramp up or pull back utilization, as needed to align with shifting demand trends.

The ability to increase volume significantly and change production mix to match evolving customer preferences is a direct result of the flexibility built into our modular production. Our data and technology platforms enable quick adjustments to marketplace changes, providing an edge compared to peers.

At various times, we have pivoted due to rapid change. For example, with accelerated growth during COVID, when we quickly ramped production to meet higher demand. More recently, in light of economic conditions, value to your products have represented the fast this growing segment.

In response, we have expanded offerings within our value brand Roll One product line. New launches include larger volume products such as 28-gram ground flour and super-sized 4.5-gram weights, as well as minis, pre-rolls and cured crumble wax and shatter. The ability to quickly pivot is a competitive advantage versus peers, who lack sufficient capacity and capital to make impactful changes in this environment. When the current cycle inevitably turns and customer preferences shift, we will be able to identify trends and adapt yet again to meet demand.

Given our unique scale in our home State of Florida, there are opportunities to differentiate our position. Four years ago, we set out to build a 60-yard indoor cultivation facility with automation and a unique workflow layout. The facility was designed to lower production costs, while allowing higher touches for each plant.

We began ramping production at this facility last summer and we are just beginning to reap the rewards of the strategic asset. In the first quarter, output at this new facility exceeded our plan by 17%. Even with the outperformance at the new facility, inventory in the first quarter was flat, as we executed our strategic plan to wind down inventory this year. We expect the site will be fully planted by the end of Q2 and fully ramped by the end of this year.

Once fully ramped, output from the new facility will be the equivalent of roughly 30 legacy design buildings, but with reduced cycle time and labor cost, and lower usage of electricity, water, and fertilizer. Lower production costs at this site allow us to pass on a portion of savings to customers, while protecting margin.

As the new facility comes online, we continue to pull back utilization at legacy design sites, banking capacity for future use when demand accelerates. With these adjustments, indoor cultivation capacity represented the majority of our online capacity exiting the first quarter. We believe large-scale production of high-quality indoor flower is another meaningful differentiator relative to peers.

Moving on to our second pillar for cash generation service. We often say at Trulieve that we are customer obsessed. We know that providing exceptional customer service on a consistent basis is absolutely required to reinforce loyalty and attract new customers. Service standards are met through a combination of convenience, ease of transaction, branded product availability and promotion, and attentive and knowledgeable staff.

Data and technology are utilized to understand the customer journey and gather feedback that informs our approach. Clear delineation of brand segmentation and value proposition plays an important role in customer acquisition and retention. In store customer education programs designed to expand product knowledge and empower the customer to take ownership of their cannabis journey elevate our service. Success is measured through a variety of metrics, including customer retention. First quarter customer retention was 64% company-wide and 73% in medical-only markets.

Later this year, we are relaunching our customer loyalty program with enhanced features, including a points-based rewards program designed to increase brand loyalty and customer retention. The power of our scale and service was evident during 420 with new records set for transactions and units sold across our branded retail network.

On 420, we sold approximately 360,000 units and completed over 68,000 individual transactions, up 10% and 9% respectively from last year. Our dedicated retail and customer service staff, wide-ranging product assortment, depth of inventory, and data and technology infrastructure all contributed to our success on 420.

Alongside initiatives to optimize scale and service, we are making strategic investments to prepare for future growth. First, we are investing in new markets and expansion opportunities within our footprint. Second, we are allocating resources to build out critical infrastructure to provide a stronger foundation for our strategic plan.

Near-term growth opportunities include new market expansion in Georgia and Ohio in Q2, the launch of adult sales in Maryland in July, an adult east sale in Florida in mid-2025.

We recently celebrated the grand opening of two medical dispensaries in Georgia, the first to operate in the state. We plan to open three more this year supported by our production facility in Adel. The Georgia program is reminiscent of the initial market in Florida, and we look forward to participating in market development and growth.

In Ohio, we will open our first medical dispensary soon pending regulatory approvals. In Maryland, we truly operate a production site in three retail locations. We're preparing for the launch of recreational sales on July 1.

The adult use opportunity in Florida is the most significant near-term catalyst for Trulieve. We continue to support smart and safe Florida, an adult-use ballot initiative. As of early May, the campaign has gathered sufficient raw signatures for inclusion on the November 2024 ballot with 22 million residents and 138 million annual tourist visits. We believe Florida will be a top legal cannabis market, reaching $6 billion in annual revenue.

Trulieve outsized leading market share of 40% eclipses the next three closest competitors at 10% to 12% market share. Given our leading market share, scale, and service, an ability to quickly flex up production with minimal investment truly is uniquely positioned for this opportunity.

Turning now to our data and technology infrastructure, we are continuing to invest in expanding our capabilities this year. Driving improved customer experiences and retention are critical components of our long-term strategy. In-house data collection and analytics capabilities enhance our customer outreach. Providing a meaningful competitive edge, hyper-personalized marketing, geo-targeting, and strategically driven promotional activity are all made possible by our advanced data and technology platforms.

We believe these investments are necessary to remain one step ahead in today's evolving landscape and set the foundation for a future defined by integrated commerce. In summary, our team is laser focused on cash preservation and generation as we set the stage for the next phase of accelerated growth. With our scale and service operational flexibility, and strong balance sheet. I'm fully confident in our strategic positioning and our team's ability to unlock the full potential of Trulieve.

With that, I'll turn the call over to Alex.

[Alex D’Amico, Chief Financial Officer]

Thank you, Kim, and good morning, everyone. Turning to our results, the first quarter revenue was $289 million. Retail results were influenced by continued wallet pressure on consumer behavior. The first quarter GAAP gross profit was $150 million or 52% margin compared to 50% during the fourth quarter. The impact of inventory reduction efforts was more than offset by fewer 1-time expenses. Gross margin will continue to fluctuate quarter-to-quarter, depending on product and market mix and inventory flow through.

SG&A expenses in the first quarter were $102 million or 35% of revenue, an improvement of $24 million or roughly 20% from $126 million or 42% during the fourth quarter. Reduced SG&A expenses are the result of ongoing efforts to lower quarter business expenses.

First quarter net loss was $64 million compared to net loss of $77 million in the fourth quarter. First quarter loss per share was $0.34 compared to the loss of $0.41 in the fourth quarter. Net loss includes non-cash impairment charges of $30 million associated with our Massachusetts operations, including $27 million tied to the impairment of dispensary licenses.

Excluding non-recurring charges, first quarter loss per share would've been $0.11 compared to a loss of $0.18 in the fourth quarter. First quarter adjusted EBITDA was $78 million or 27% compared to $85 million or 28% during the fourth quarter. First quarter adjusted EBITDA reflex optimization efforts to maximize cash preservation and generation. We ended the quarter with $195 million in cash. Trulieve is well positioned to retire the only near-term debt outstanding of $130 million due in June 2024. This debt carries a 9.75% rate and can be repaid without penalty within one year of maturity.

Absent and off cycle cash tax payment, cash from operations would've been $47 million. In addition, cash generation would've been even higher, if not for the outperformance at our new 750K indoor facility. In 2023, we expect to realize improved operating cash flow through a combination of expense and inventory reduction. Second quarter results will include two tax payments. Capital expenditures totaled $14 million in the first quarter. We expect 2023 capital expenditures will be at least 50% lower than 2022.

We plan to open 15 to 20 new dispensaries and relocate up to six doors this year. Factoring in results quarter to date and limited visibility, we anticipate second quarter revenue will be down low single digits sequentially, while April included strong traffic around the 420-holiday. We expect continued wallet pressure on consumer behavior and strategic promotions to drive inventory reduction will impact revenue and gross margin. Given the complexity of our business and the timing of various initiatives throughout the year, we expect operational improvements, inventory reduction, and cash generation will be non-linear throughout 2023.

And with that, I'll turn the call back over to Kim.

[Kim Rivers, Chief Executive Officer]

Thanks Alex. With increasing adoption and expanding state level access, the industry is well beyond the tipping point. It is only a matter of when and not if meaningful federal reform will happen. Recent activity in Congress has been encouraging. Two weeks ago, a bipartisan group introduced to safe legislation in both the House and Senate through a coordinated effort. Tomorrow, the Senate Banking Committee will hold a hearing on safe banking.

Separately in the house, representative Nancy Mace secured a committee debate and vote on the State's Reform Act. We believe that any reform represents a meaningful step in the right direction towards legalization. We continue to advocate for prohibition, repeal and remain optimistic that eventually change will come.

Tremendous growth opportunities remain ahead for companies that can successfully adapt within evolving landscapes. Trulieve has the strategy, scale, and service, and capital necessary to navigate the current climate while investing for the future. Thank you for joining us today and as I always say onward.

At this time, Kim Rivers, Alex D’Amico, and Steve White will be available to answer any questions. Operator, please open up the call for questions.

[Operator]

[Operator Instructions]. First question comes from Derek Dley with Canaccord Genuity. Please go ahead.

[Derek Dley, Canaccord Genuity]

Hi. Good morning. I just wanted to follow-up on some of the commentary on inventory, which is flat quarter-over-quarter, and it appears like that was just mainly driven to some outperformance from Jefferson. But should we expect this inventory to move downwards or drawdown over the balance of a year? And is that going to be a big portion or at least a portion of how you get to positive free cash flow in the back half of the year?

[Kim Rivers, Chief Executive Officer]

Yes. Thanks, Derek. Absolutely. Again, we call it champagne probable. I'm here at Trulieve and having outperformance at our 750K facility at Jeffco. We were incredibly pleased with the performance of that facility and I think that it's obviously bodes very well for Trulieve future, as it relates to harnessing those efficiencies through the back half of the year, as that facility continues to come online.

Obviously, that needs to be balanced with our existing production footprint and that balancing will continue to occur. And yes, to answer your question directly, inventory wind down continues to be a core initiative for the organization throughout 2023 and will absolutely be a contributor to cash generation, as we continue to execute against those plans, and would have been more evident in Q1, if not for again the overproduction of higher efficient capacity out of that 750K building.

[Derek Dley, Canaccord Genuity]

Okay. So then in terms of the idealization, of some of the legacy facilities. Is that something that we would expect to happen more in the back half of the year as you get a little bit more comfortable with the production levels and capacity levels and efficiency levels at Jefferson? And have you started some of that already?

[Kim Rivers, Chief Executive Officer]

Yes. We have started that. That actually began in the last quarter or so of last year. And we will continue as we are ramping Jeffco. Those facilities has correspondingly been idled up to our projected output. Again, we have exceeded that output. And so, we are of course, making sure that we are comfortable with that as an ongoing trend, not only for the existing footprint that's online, but of course monitoring how the remaining footprint comes online and how that produces.

It will take a little while to get that dialed in. It's a large facility and there is significant output. And so, we want to make sure that, again we are confident as it relates to a trend line as we again meter down legacy capacity as a result. But yes, those efforts -- that balancing effort, if you will, will happen throughout 2023.

[Derek Dley, Canaccord Genuity]

Okay. That’s helpful. And then just one more, just on the SG&A side, obviously there was some significant cost savings. Should we think about this new level $102 million as an appropriate run rate for the balance of the year? Or do you think there's more to come on that, Brent?

[Alex D’Amico, Chief Financial Officer]

Yeah, I think we're always -- we're happy with being able to $24 million quarter to quarter. We talked about annualized cost savings, reduction of core business expenses at year end. We were able to make significant headway on that in the first quarter. We're always assessing our cost structure as market dynamics dictate. But yeah, I mean, that's something we're always assessing. We're proud of where we are in Q1 and those savings should carry throughout the year.

[Derek Dley, Canaccord Genuity]

Okay. Great, thank you, very much.

[Operator]

The next question comes from Matt McGinley with Needham. Please go ahead.

[Matt McGinley, Needham]

So, it's pretty unusual for you to see a quarter-to-quarter decline from the first quarter to second quarter given seasonality and promotion around 420. So, I have two questions on that. One is, should we assume that you have these modest quarter-to-quarter declines in revenue throughout ‘23? I think you'll likely have ongoing price compression in really only big offsets that I see are the store growth and the retail units that you'll add or the retail units that'll convert in Maryland and Connecticut to adult-use sales.

And then to specific to the second quarter, if the revenue is down quarter over quarter how should we expect the EBITDA trend? Would this quarter look like the first quarter, or do you have more in terms of the G&A cuts or gross margin benefits that you may see in the second quarter relative to what we saw in the first?

[Kim Rivers, Chief Executive Officer]

So, I mean, look, we're in an environment where we're controlling the controllables, and that's really the theme of our execution focus for 2023. It's been widely reported. Obviously, there's pricing compression in the market. I think, what we're seeing that is a positive is the continued resilience of our customer base and the fact that we are retaining that base and they are coming back. But what we're also seeing is pressure on category and quite frankly, just wallet pressure and that they're spending less on a per visit basis. So, I would say that even with strong traffic on 420 and outperforming as it relates to transactions and units sold, right, it's not necessarily the same basket that we've seen in the past.

And so, I think with that realization and reality, we're again focused on bringing those costs of production down, focused on efficiencies across throughout the platform. As we go into the second quarter and throughout the remainder of the year limited visibility as I'm sure you can appreciate throughout the remainder of the year. So not here today to stay that where we'll be throughout the remainder of the year.

Certainly, I would say 420 is encouraging for us because it was a stress test in terms of us having the ability to move higher volumes throughout the combined platform and of the company. And certainly, as we think about, again, consumer patterns and potentially well not even potentially with value being the highest growth category currently being able to again, handle that volume and those number of units is really important differentiator in our platform.

As it relates to margin, Matt, we certainly again will see the benefit of cost savings particularly as it relates to our cost program come through back half of the year as that 750K facility continues to ramp. Again, I think that going to be compounded or coupled with our inventory wind down efforts, which we'll be leaning into. And so those things may offset a bit.

And then of course we have to overlay consumer preferences. So, we need to make sure that we're making the products and that we're bringing to market those products at that value proposition that are -- that is attractive to today's consumer. So those three things work interchangeably and we'll have -- and we'll show up right in margin throughout the year.

[Matt McGinley, Needham]

Great. And then on the comment you get on the Jeffco facility ramping with the expectation fully, we planted, I think you said by the end of the second quarter and then fully ramp by year-end, you're obviously going to bleed down that older inventory with that higher cost basis. When would you expect the peak of that inventory depletion to occur? I mean, is that something that you'd have to wait really until the fourth quarter to begin that when it's fully ramped? Or is that something we should see probably over the next quarter or two to see that higher rate of compression as you kind of work through the older stuff before the new lower-cost inventory is in the system?

[Kim Rivers, Chief Executive Officer]

So not all inventory is the same, right? So even though you have a single plant, if you will, that, the components of that plant go into many different products. And so, those have different velocities and different again, consumer absorption rates. And so even today we're seeing some benefit from Jeffco, particularly on the flower side of the business. The oil inventory we believe will take a bit longer to work through. I can't sit here today and give you a prediction again because you have the consumer dynamic that's layered on top of all of this. But -- and that's why we're saying throughout 2023, we'll obviously give you all updates and you'll see it in the numbers as we work through it.

And you're starting to see that now when you look at the table of what we have in raw material versus work in progress versus finished goods. So that's going to continue to progress, Matt. I can't sit here today and give you a definite on it, but obviously our goal is to work through as soon as possible so that we can begin to get full benefit, if you will from that Jeffco facility. But it should be steadily increasing throughout the year.

[Matt McGinley, Needham]

Great. Thank you.

[Operator]

The next question comes from Russell Stanley with Beacon Securities. Please go ahead.

[Russell Stanley, Beacon Securities]

Good morning, and thank you for taking my question. Congrats on the progress on the adult use front in Florida. I guess I'm thinking about next steps, assuming it clears a Supreme Court review. I guess, what kind of further investments do you envision making in the campaign in order to build awareness before a potential vote in November ‘24?

[Kim Rivers, Chief Executive Officer]

Yes, and we are certainly excited to be at a point where the signature phase is coming to an end, and the campaign will transition to a more public-facing posture, which will of course ramp as we get closer to the actual election, which is November of course of next year.

I would say that some of that -- some of the answer depends of course on investment from peers. We certainly would welcome and would hope that, particularly as other companies for example, during this earning cycle are talking about how excited they are as it relates to Florida and the opportunity ahead that now that we've cleared this phase folks would potentially be interested in investing in the next part of the campaign rest. But again, to be determined, but certainly, we are committed to continuing to support and get this across the finish line hopefully with some help from the peer set here.

[Russell Stanley, Beacon Securities]

Understood there. And maybe if I put a question on Georgia. Congrats on the launch there, and you have mentioned how the market is reminiscent of Florida's early days. Just wondering in terms of the barriers to accelerating growth of the medical market be it THC content or form factors, what have you. I guess, where are your efforts likely to focus in a relatively near-term on lobbying for change or growth there?

[Kim Rivers, Chief Executive Officer]

Yes. We are certainly going to be focused on education and think it's really important for the patients in the State of Georgia, which look there over 25,000 patients that actively have cards today. And I was able to interact with some of those during the grand opening, and we have folks who are very interested to get involved and to work alongside of us as well as the physician community, to educate the legislature around what is needed to adequately provide medication to address specific conditions that are already approved in the State of Georgia, and to make it a more robust an adequate quite frankly program again for patients who have cards that the legislature has determined that their particular conditions qualify under the program.

So, I think that there is going to be efforts on a couple of fronts. But it really is going to be a lot of education, and I believe powerful and most powerful tool is really those patients coming in and being on the front lines, which I'm very encouraged that, that group is ready and willing to lean in with us as we approach next session.

[Russell Stanley, Beacon Securities]

That's great. Thanks. I'll get back in the queue.

[Operator]

The next question comes from Andrew Partheniou with Stifel GMP. Please go ahead.

[Andrew Partheniou, Stifel]

Thanks. Good morning and thanks for taking my questions. Maybe just going back to gross margin here and thinking about how that could trend for the rest of the year. You talked about Jeffco outperforming in Q1. So, one would think that maybe that translates to lower-than-expected production costs, but you still have some efficient buildings online and you are still ramping up Jeffco.

So, understand there is a lot of dynamics here. But wondering if you could give a little bit more detail on where you are maybe with just Jeffco on production costs versus your expectations for Jeffco when it's at steady state. Obviously, I wouldn't expect exact numbers or anything, but maybe in broad strokes. And the second part of the question is, how could this maybe offset or partially offset gross margin pressure from market dynamics?

[Kim Rivers, Chief Executive Officer]

Yes. I mean again, I think that we have got three components of gross margins. And so, while you have Jeffco that obviously is a positive, you also have pressure from our inventory wind-down efforts as well as, again, while our pressure on a macro from in consumer dynamics. So, it really is kind of we call it a three-dimensional puzzle and it depends on product mix where and how velocities are moving through a quarter as it relates to that product mix.

As well as of course, market dynamics and quite frankly, price compression overall. So, there will continue -- I don't want folks to mistier me. There will continue to fight margin pressure throughout this year, but again, that is to be expected given the business focus on cash generation and preservation. That is what we are focused on as an organization. And that is the goal for 2023. Winding down that inventory and getting inventory to study state exiting 2023 is a measure of success for us. And again, the margin will be a metric that is going to flux alongside of those prime goals.

[Andrew Partheniou, Stifel]

Thanks, for that. And if I could think about more at a high level, the $100 million 2023 of CF guidance. I believe, you mentioned next quarter will have two tax payments, correct me if I'm wrong, but Q3 and Q4 may have one tax payment each as well. So, this sets up for a second half weighted cash flow profile, which I think you also referred to as non-linear, which makes sense. But it also seems that OCF may need to increase from current levels for you to reach the $100 million, main drivers could be expense reduction and an inventory reduction. I'm just wondering if you could compartmentalize the two. Should we be thinking about kind of like a 50-50 or above, below, anything, any kind of color there would be helpful?

[Kim Rivers, Chief Executive Officer]

Sure. I think that, obviously, we are going to continue to pay our taxes on time, and that's something that we've done historically and that we are going to continue to do in 2023. We had the deferral because of the hurricane for, which was realized this quarter. We absolutely are going to continue our efforts around expense reduction, which we've talked about a little bit. That's going to include core business expense reduction continued effort and focus around streamlining business operations as well as that capacity rationalization both on the production and supply chain side of the business.

So, all of those efforts are going to continue along with, again, that strategic priority of rationalizing inventory throughout the year to get to a run rate that we're comfortable with and accelerating the ability to bring in that lower costed inventory as a higher part of our inventory portfolio. Not prepared to give you a exact number as it relates to splits, but both of those efforts are absolutely, key to our business resilience and again, our stated goals of both cash generation and cash preservation.

[Operator]

The next question comes from Scott Fortune with Roth MKM. Please go ahead.

[Unidentified Analyst]

This is Nick on for Scott. First question from us, just looking for some more color on the transaction volume side, you mentioned 420 volume up, which is encouraging. So just kind of looking for a sense of the quarterly cadence overall and maybe what you've seen so far in Q2 outside of the 420 holiday. Thank you.

[Kim Rivers, Chief Executive Officer]

Sure. Basically, as we mentioned, certainly 420 was record-breaking as it relates to transactions and units sold again. We did highlight in the prepared remarks that the fastest-growing category that we're seeing across all markets is value. And again, with value products being at the fastest growing segment, certainly, transactions and units, right? Increasing as a result making additional units in that category, introducing new form factors in that category, and having the ability and capability to continue to service an increase number of customers in that category specifically.

So, I think natural certainly when we see price compression and looking to continue to grow or study state, the business volumes then naturally need to come up in that environment and that is certainly what we're continuing to see across the platform.

[Unidentified Analyst]

Okay. Thank you for that color. And then second from us just around Twitter and the advertising opportunity there, congrats on being the first U.S. cannabis company to advertise on the platform. Can you just kind of call out any puts and takes you've seen from the early campaigns there and just kind of give us a sense on how you're looking to leverage that platform moving forward?

[Kim Rivers, Chief Executive Officer]

Yes, absolutely. We have been really encouraged by our initial launch and initial results. So much so that we actually expanded into other markets with Twitter. And so, we really are looking forward to being able to share more as we've got some additional months and data sets behind us.

So, look for that probably on the next call actually. But certainly, as we think about the future of cannabis marketing and the restrictions that we have given the checker board regulations as well as the federal through kind of more traditional channels, right? Federal restrictions as it relates to traditional tv, radio, et cetera. Really being able to lean into digital as well as thinking about other potential channels that quite frankly are becoming more and more mainstream.

As we think about how Americans today are absorbing information and utilizing media, so really encouraged is what I can say strong returns and excited about our relationship with Twitter and the opportunity that we've had to expand that relationship.

[Operator]

The next question comes from Aaron Grey with Alliance Global Partners. Please go ahead.

[Aaron Grey, Alliance Global Partners]

Good morning, and thanks, for the question. Just one for me here. So, it kind of tails off that last one. So just want to talk a little bit more about the loyalty program. I know it's something that we've talked about in the past and changes that you guys were looking to make as you look to kind of protect your Motion state, particularly in Florida. So just want to get any color in terms of how you feel about the program today. Potential improvements that you might be able to make as you continue to look to defend your market leadership in Florida, and how potentially these new marketing tactics such as Twitter could then be used in tandem what changes to the loyalty program. Thank you.

[Kim Rivers, Chief Executive Officer]

Yes. Thanks, Aaron. So, we are really excited to be relaunching a new loyalty platform in the back half of this year. We have been working on this for quite some time, and actually, we paused it, because we wanted to get further down the road as it relates to our consumer profile roadmap and really define in more detail the customer journey so that we can make the program more focused and personalized and really intuitive for specific personas that we've been working to build out.

So, I'm really excited and that we are at a point finally, that we are going to be able to launch that officially in the back part of the year. And it will be, I think a game changer for us as again we are able to combine a bunch of different aspects of our data insights into that platform and really again speak more directly to our consumer base.

And then, of course, being able to leverage some different platforms to invite folks to take advantage of that program certainly will be something that we are also going to be utilizing with the launch. So more to come, but certainly excited to be able to do that in the back half of the year.

[Aaron Grey, Alliance Global Partners]

Okay, great. Thanks very much for the color and we look forward to more details on that. I'll jump back in the queue.

[Kim Rivers, Chief Executive Officer]

Thanks, Aaron.

[Operator]

This concludes our question-and-answer session. I would like to turn the conference back over to Christine Hersey for any closing remarks.

[Christine Hersey, Vice President, Investor Relations]

Great. Thank you, everyone, for your time today. We look forward to sharing additional updates during our next earnings call. Thanks again, and have a great day.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.