Trulieve Cannabis Corp

Previous wording

All of the states in which we operate have developed programs to permit the use of cannabis products for medicinal purposes to treat specific conditions and diseases, which we refer to as medical cannabis. Recreational cannabis, or adult-use cannabis, is legal cannabis sold in licensed dispensaries to adults ages 21 and older. Thus far, of the states in which we operate, Arizona, Colorado, Connecticut, Maryland, and Ohio, have already or are in the process of developing and launching programs permitting the commercialization of adult-use cannabis products. Trulieve operates its business through its directly and indirectly owned subsidiaries which hold licenses and have entered into managed service agreements in the states in which they operate.

Current wording

All of the states in which we operate have developed programs to permit the use of cannabis products for medicinal purposes to treat specific conditions and diseases, which we refer to as medical cannabis. Recreational cannabis, or adult-use cannabis, is legal cannabis sold in licensed dispensaries to adults ages 21 and older. Thus far, of the states in which we operate, Arizona, Colorado, Connecticut, Maryland, and Ohio, have already launched programs permitting the commercialization of adult-use cannabis products. Trulieve operates its business through its directly and indirectly owned subsidiaries which hold licenses and have entered into managed service agreements in the states in which they operate.

Previous wording

In Florida and Georgia, Trulieve cultivates, processes, and manufactures all cannabis products sold in our dispensaries. In other markets including Arizona, Maryland, Pennsylvania, and West Virginia, we have achieved varying percentages of vertical integration with cultivation and processing operations to support our retail and wholesale businesses. Our investments in vertically integrated operations in several of our markets afford us ownership of the entire supply chain, which mitigates third-party risks and allows us to completely control product quality and brand experience. Trulieve employs an in-house quality team as well as testing laboratories in select markets, both of which allow us to more tightly control product quality.

Current wording

In Florida and Georgia, Trulieve cultivates, processes, and manufactures all cannabis products sold in our dispensaries. In other markets including Arizona, Maryland, Pennsylvania, and West Virginia, we have achieved varying percentages of vertical integration with cultivation and processing operations to support our retail and wholesale businesses. Our investments in vertically integrated operations in several of our markets afford us ownership of the entire supply chain, which mitigates third-party risks and allows us to completely control product quality and brand experience. Trulieve employs an in-house quality team as well as independent testing laboratories in select markets, both of which allow us to more tightly control product quality.

Previous wording

We utilize various extraction techniques including supercritical ethanol extraction, carbon dioxide extraction, hydrocarbon extraction, and mechanical separation. We have invested in light hydrocarbon extraction processes, allowing for concentrates that preserve the natural ratios of cannabinoids, terpenes, and other target compounds to better replicate the flower experience. Light hydrocarbon extraction also offers the benefit of greater extraction yields in many cases. In addition, we own CO 2 extraction, distillation, purification and manufacturing technology used to produce a line of cannabis topicals and vapes featuring cannabinoids.

Current wording

We produce a wide variety of oil derivative products featuring cannabinoids. We own manufacturing technology that utilizes various extraction techniques including supercritical ethanol extraction, carbon dioxide extraction, hydrocarbon extraction, and mechanical separation. We have invested in light hydrocarbon extraction processes, allowing for concentrates that preserve the natural ratios of cannabinoids, terpenes, and other target compounds to better replicate the flower experience. Light hydrocarbon extraction also offers the benefit of greater extraction yields in many cases.

Previous wording

Trulieve brands include premium tier brands Avenue, Cultivar Collection, and Muse; mid-tier brands Modern Flower, Alchemy, Momenta, and Sweet Talk, and value tier brands Co2lors, Loveli, Roll One, and Trekkers. Established relationships with brand partners allow for the sale of partner branded products in select markets and retail locations, providing our customers with access to greater variety and specialty brands. Brand partnerships include arrangements with Alien Labs, Bellamy Brothers, Binske, Black Tuna, Blue River, Connected, DeLisioso, Khalifa Kush, Love’s Oven, Miami Mango, Moxie, Seed Junky, and Sunshine Cannabis.

Current wording

Trulieve brands include premium tier brands Avenue, Cultivar Collection, and Muse; mid-tier brands Modern Flower, Alchemy, Momenta, and Sweet Talk, and value tier brands Co2lors, Roll One, and Trekkers. Established relationships with brand partners allow for the sale of partner branded products in select markets and retail locations, providing our customers with access to greater variety and specialty brands. Brand partnerships include arrangements with Alien Labs, Bellamy Brothers, Binske, Black Buddha, Black Tuna, Blue River, Connected, DeLisioso, Khalifa Kush, Love’s Oven, Miami Mango, Moxie, Seed Junky, and Sunshine Cannabis.

Previous wording

We understand each consumer has unique communication preferences and capabilities. As such, we engage with customers and physicians through a variety of methods including email, text, social media and online chat. In select markets we offer various purchase options, including phone ordering, online ordering, home delivery, and in-store. As Trulieve continues to expand, we have developed a standardized loyalty program to serve all markets as appropriate within existing regulatory frameworks, and this new program was completed in all markets in the second quarter of 2024. The program features fully stackable points which can be redeemed across all of our brands and markets. The rewards program itself was built inside of our customer data platform, allowing interconnectivity between rewards, website, and the customer data platform.

Current wording

We understand each consumer has unique communication preferences and capabilities. As such, we engage with customers and physicians through a variety of methods including email, text, social media and online chat. In select markets we offer various purchase options, including phone ordering, online ordering, home delivery, and in-store. As Trulieve continues to expand, we have developed a standardized rewards program to serve all markets as appropriate within existing regulatory frameworks, and this new program was completed in all markets in the second quarter of 2024. The program features fully stackable points which can be redeemed across all of our brands and markets. The rewards program itself was built inside of our customer data platform, allowing interconnectivity between rewards, website, and the customer data platform.

Previous wording

Our business operates year-round. Operations and sales trends in select markets where we operate do follow seasonal trends with various times of the year providing seasonal impacts on sales in summer and winter months in markets in the Southwest and Northeast and promotional activity increases around specific industry and holiday events including 4/20, 7/10, and Green Wednesday (the Wednesday before Thanksgiving).

Current wording

Our business operates year-round. Operations and sales trends in select markets do follow seasonal trends at various times of the year providing seasonal impacts on sales in summer and winter months and increases from promotional activity around specific industry and holiday events including 4/20, 7/10, and Green Wednesday (the Wednesday before Thanksgiving).

Previous wording

On April 30, 2024, the United States Department of Justice recommended marijuana be rescheduled from a Schedule I to Schedule III controlled substance, and published a notice of proposed rulemaking on May 21, 2024. There was a sixty-day comment period for the proposed rulemaking, which closed on July 22, 2024. Over 43,000 comments were received, with an overwhelming majority of comments advocating for Schedule III rescheduling or descheduling altogether. The notice of proposed rulemaking is but one step in a complex administrative and political process involving numerous stakeholders whose commitment to rescheduling marijuana is unclear.

Current wording

On April 30, 2024, the United States Department of Justice recommended marijuana be rescheduled from a Schedule I to Schedule III controlled substance, and published a notice of proposed rulemaking on May 21, 2024. There was a sixty-day comment period for the proposed rulemaking, which closed on July 22, 2024. Over 43,000 comments were received, with an overwhelming majority of comments advocating for Schedule III rescheduling or descheduling altogether. The notice of proposed rulemaking is but one step in a complex administrative and political process involving numerous stakeholders whose commitment to rescheduling marijuana is unclear. The preliminary hearing for rescheduling is currently scheduled for December 2, 2024.

Previous wording

On May 30, 2024, in connection with a litigation settlement, Trulieve acquired Harvest of Ohio, LLC, which holds licenses for medical cannabis dispensaries in Columbus and Beavercreek. Both dispensaries are eligible to convert the medical license to a dual-use license, which will allow for adult use sales. Also in connection with the litigation settlement, we entered into service agreements to provide operational support to a cultivation and processing facility. On August 2, 2024, the Company received notice from the Ohio Division of Cannabis Control that our dispensaries in Columbus, Westerville and Beavercreek were authorized to begin adult-use sales as of August 6, 2024.

Current wording

On May 30, 2024, in connection with a litigation settlement, Trulieve acquired Harvest of Ohio, LLC, which holds licenses for medical cannabis dispensaries in Columbus and Beavercreek. Both dispensaries are eligible to convert the medical license to a dual-use license, which will allow for adult use sales. Also in connection with the litigation settlement, we entered into service agreements to provide operational support to a cultivation and processing facility. On August 6, 2024, in accordance with approval received from the Ohio Division of Cannabis Control, our dispensaries in Columbus, Westerville, and Beavercreek began adult-use sales.

Previous wording

The Company’s accounting policies that we believe are the most critical to aid in fully understanding and evaluating our reported financial results are described in the Company’s fiscal 2023 Form 10-K, filed with the SEC on February 29, 2024, under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates.” Our senior management has reviewed these critical accounting policies and related disclosures and determined that there were no significant changes in our critical accounting policies during the six months ended June 30, 2024.

Current wording

The Company’s accounting policies that we believe are the most critical to aid in fully understanding and evaluating our reported financial results are described in the Company’s fiscal 2023 Form 10-K, filed with the SEC on February 29, 2024, under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates.” During the nine months ended September 30, 2024, there were no significant changes to our critical accounting policies and estimates.

Previous wording

This section of this Form 10-Q generally describes and compares our results of continuing operations for the three and six months ended June 30, 2024 and 2023.

Current wording

This section of this Form 10-Q generally describes and compares our results of continuing operations for the three and nine months ended September 30, 2024 and 2023.

Previous wording

Cost of goods sold for the three months ended June 30, 2024 was $121.8 million, a decrease of $18.4 million, or 13.1%, from $140.2 million for the three months ended June 30, 2023. The decrease was primarily due to year over year improvements in at-scale cost efficiencies from our production facilities.

Current wording

Cost of goods sold for the three months ended September 30, 2024 was $111.0 million, a decrease of $21.3 million, or 16.1%, from $132.3 million for the three months ended September 30, 2023. The decrease was primarily due to year over year improvements in at-scale cost efficiencies from our production facilities.

Previous wording

Gross profit for the three months ended June 30, 2024 was $181.6 million, an increase of $40.0 million, or 28.2%, from $141.6 million for the three months ended June 30, 2023. Gross profit as a percentage of revenue was 59.9% for the three months ended June 30, 2024 as compared to 50.3% for the three months ended June 30, 2023, which was driven by increased revenue and decreased cost of goods sold due to year over year improvements in at-scale cost efficiencies from our production facilities as well as reduced promotional activity in the current year.

Current wording

Gross profit for the three months ended September 30, 2024 was $173.3 million, an increase of $30.3 million, or 21.2%, from $142.9 million for the three months ended September 30, 2023. Gross profit as a percentage of revenue was 61.0% for the three months ended September 30, 2024 as compared to 51.9% for the three months ended September 30, 2023, which was driven by increased revenue and decreased cost of goods sold due to year-over-year improvements in at-scale cost efficiencies from our production facilities.

Previous wording

Sales and marketing expense for the three months ended June 30, 2024 was $63.2 million, an increase of $2.1 million, or 3.4%, from $61.1 million for the three months ended June 30, 2023. The increase is primarily due to the increase in overall store count. Sales and marketing expense as a percentage of revenues was 20.8% for the three months ended June 30, 2024, compared to 21.7% for the three months ended June 30, 2023. The decrease in the percentage of revenue is driven by cost improvements from retail payroll efficiencies as well as overall increases in same store revenue.

Current wording

Sales and marketing expense for the three months ended September 30, 2024 was $66.7 million, an increase of $7.3 million, or 12.3%, from $59.4 million for the three months ended September 30, 2023. The increase was primarily due to the increase in overall store count. Sales and marketing expense as a percentage of revenues was 23.5% for the three months ended September 30, 2024, compared to 21.6% for the three months ended September 30, 2023. The increase in the percentage of revenue was driven by 27 new stores opened since the end of the third quarter in 2023. Additionally, there was an increase in software expense associated with retail operations as the Company continues to enhance the customer retail experience.

Previous wording

Impairment and disposal of long-lived assets, net of recoveries was $1.2 million for the three months ended June 30, 2024, a decrease of $2.1 million, or 62.7%, from $3.3 million for the three months ended June 30, 2023.

Current wording

Impairment and disposal of long-lived assets, net of recoveries was a gain of $4.3 million for the three months ended September 30, 2024 compared to a gain of $1.2 million for the three months ended September 30, 2023. The change was primarily due to insurance recoveries received, partially offset by asset disposal activities.

Previous wording

Interest expense, net for the three months ended June 30, 2024 was $15.4 million, a decrease of $3.5 million, or 18.4%, from $18.9 million for three months ended June 30, 2023. The decrease is primarily the result of debt retirements of $57.0 million in September 2023 and $130.0 million in December 2023 which lowered interest expense in the second quarter of 2024.

Current wording

Interest expense, net for the three months ended September 30, 2024 was $17.5 million, a decrease of $3.4 million, or 16.2%, from $20.8 million for three months ended September 30, 2023. The decrease was primarily the result of debt retirements of $57.0 million in September 2023 and $130.0 million in December 2023 which lowered interest expense in the third quarter of 2024. This favorability was partially offset by the change in the fair value of our interest rate swap liability in the current period and interest expense associated with a $25.0 million mortgage note executed in December 2023.

Previous wording

Interest income for the three months ended June 30, 2024 was $4.0 million, an increase of $2.7 million, or 202.8%, from $1.3 million for the three months ended June 30, 2023. The increase is due to an increase in funds available to be invested into high-yield money market fund accounts compared to the same prior year period.

Current wording

Interest income for the three months ended September 30, 2024 was $4.2 million, an increase of $2.3 million, or 118.1%, from $1.9 million for the three months ended September 30, 2023. The increase was due to an increase in funds available to be invested in high-yield money market fund accounts and short-term certificates of deposit compared to the same prior year period.

Previous wording

Other expense, net for the three months ended June 30, 2024 was $1.8 million, a decrease of $2.5 million, from other income, net of $0.6 million for three months ended June 30, 2023.

Current wording

Other expense, net for the three months ended September 30, 2024 was $0.2 million, a change of $1.3 million, from other income, net of $1.1 million for three months ended September 30, 2023.

Previous wording

The provision for income taxes for the three months ended June 30, 2024 was$47.2 million, an increase of$13.4 million, or 39.5%, from$33.8 million for the three months ended June 30, 2023. The provision forincome taxes as a percentage of gross profit was 26.0% for the three months ended June 30, 2024, compared to 23.9% for the three months ended June 30, 2023. The increase in tax expense in the second quarter of 2024 was driven by an increase in gross profit for the period, as well as an increase in interest expense on uncertain tax positions.

Current wording

The provision for income taxes for the three months ended September 30, 2024 was$47.4 million, an increase of$10.7 million, or 29.3%, from$36.6 million for the three months ended September 30, 2023. The provision forincome taxes as a percentage of gross profit was 27.3% for the three months ended September 30, 2024, compared to 25.6% for the three months ended September 30, 2023. The increase in tax expense in the third quarter of 2024 was driven by an increase in gross profit for the period, as well as an increase in interest expense on uncertain tax positions.

Previous wording

Revenue for the six months ended June 30, 2024 was $601.1 million, an increase of $34.1 million, or 6.0%, from $567.0 million for the six months ended June 30, 2023. The increase in revenue is primarily driven by a $27.6 million increase in retail revenue and a $6.9 million increase in wholesale revenue.

Current wording

Revenue for the nine months ended September 30, 2024 was $885.3 million, an increase of $43.1 million, or 5.1%, from $842.2 million for the nine months ended September 30, 2023. The increase was primarily driven by a $33.6 million increase in retail revenue and a $10.0 million increase in wholesale revenue.

Previous wording

The increase in wholesale revenue was primarily driven by Maryland adult-use sales starting in July 2023 which drove an increase in 2024 compared to 2023 as well as improved order fulfillment efficiency.

Current wording

The increase in wholesale revenue was primarily driven by Maryland adult-use sales starting in July 2023 which drove an increase in the year-to-date 2024 period compared to the same period in 2023.

Previous wording

Cost of goods sold for the six months ended June 30, 2024 was $245.6 million, a decrease of $29.6 million, or 10.7%, from $275.2 million for the six months ended June 30, 2023. Cost of goods as a percentage of revenues was 40.9% for the six months ended June 30, 2024 compared to 48.5% for the six months ended June 30, 2023. The decrease was primarily due to year over year improvements in at-scale cost efficiencies from our production facilities.

Current wording

Cost of goods sold for the nine months ended September 30, 2024 was $356.6 million, a decrease of $50.8 million, or 12.5%, from $407.4 million for the nine months ended September 30, 2023. Cost of goods as a percentage of revenues was 40.3% for the nine months ended September 30, 2024 compared to 48.4% for the nine months ended September 30, 2023. The decrease was primarily due to year-over-year improvements in at-scale cost efficiencies from our production facilities.

Previous wording

Gross profit for the six months ended June 30, 2024 was $355.5 million, an increase of $63.6 million, or 21.8%, from $291.8 million for the six months ended June 30, 2023. Gross profit as a percentage of revenue was 59.1% for the six months ended June 30, 2024 as compared to 51.5% for the six months ended June 30, 2023, which was driven by increased revenue and decreased cost of goods sold due to year over year improvements in at-scale cost efficiencies from our production facilities as well as reduced promotional activity in the current year.

Current wording

Gross profit for the nine months ended September 30, 2024 was $528.7 million, an increase of $94.0 million, or 21.6%, from $434.8 million for the nine months ended September 30, 2023. Gross profit as a percentage of revenue was 59.7% for the nine months ended September 30, 2024 as compared to 51.6% for the nine months ended September 30, 2023, which was driven by increased revenue and decreased cost of goods sold due to year-over-year improvements in at-scale cost efficiencies from our production facilities.

Previous wording

Sales and marketing expense for the six months ended June 30, 2024 was $124.3 million, an increase of $2.5 million, or 2.0%, from $121.8 million for the six months ended June 30, 2023. The increase is primarily due to the increase in overall store count, which was partially offset by retail payroll efficiencies. Sales and marketing expense as a percentage of revenue was 20.7% for the six months ended June 30, 2024 compared to 21.5% for the six months ended June 30, 2023. The decrease in the percentage of revenue is driven by cost improvements from retail payroll efficiencies as well as overall increases in same store revenue.

Current wording

Sales and marketing expense for the nine months ended September 30, 2024 was $191.0 million, an increase of $9.8 million, or 5.4%, from $181.2 million for the nine months ended September 30, 2023. The increase was primarily driven by 27 new stores, which was partially offset by retail payroll efficiencies. Sales and marketing expense as a percentage of revenue was 21.6% for the nine months ended September 30, 2024, compared to 21.5% for the nine months ended September 30, 2023. Even though there was an increase in the number of operating stores, sales and marketing expense as a percentage of revenue remained consistent as a result of retail payroll efficiencies.

Previous wording

General and administrative expense for the three months ended June 30, 2024 was $39.4 million, an increase of $4.5 million, or 12.9%, from $34.9 million for the three months ended June 30, 2023. The increase is primarily from share-based compensation due to the timing of award grants and forfeitures as well as increased expenses for information technology upgrades, which was partially offset by decreased legislative campaign contributions.

Current wording

General and administrative expense for the nine months ended September 30, 2024 was $161.5 million, an increase of $52.8 million, or 48.6%, from $108.7 million for the nine months ended September 30, 2023. The increase was primarily from legislative campaign contributions totaling $62.7 million for the nine months ended September 30, 2024 as compared to $19.6 million for the same period in 2023, as well as increased expenses for information technology upgrades.

Previous wording

Impairment and disposal of long-lived assets, net of recoveries for the six months ended June 30, 2024 was a gain of $0.1 million, a decrease of $6.8 million, from a loss of $6.7 million for the six months ended June 30, 2023. The change was primarily due to 2023 asset disposal activities associated with underperforming assets where 2024 included impairment charges related to assets moved to held for sale which were offset by insurance recoveries received in the first quarter of 2024 associated with property damage in 2023.

Current wording

Impairment and disposal of long-lived assets, net of recoveries for the nine months ended September 30, 2024 was a gain of $4.4 million compared to a loss of $5.5 million for the nine months ended September 30, 2023. The change was primarily due to 2023 asset disposal activities associated with underperforming assets where 2024 included insurance recoveries received associated with property damage in 2023, which was partially offset by impairment charges related to assets moved to held for sale.

Previous wording

Impairment of goodwill was zero for the six months ended June 30, 2024, a decrease of $307.6 million, or 100.0%, from $307.6 million for the six months ended June 30, 2023. During the six months ended June 30, 2023, based on the results of the Company's goodwill impairment procedures, the Company recorded a $307.6 million goodwill impairment for its single reporting unit.

Current wording

Impairment of goodwill was zero for the nine months ended September 30, 2024 compared to $307.6 million for the nine months ended September 30, 2023. During the nine months ended September 30, 2023, based on the results of the Company's goodwill impairment procedures, the Company recorded a $307.6 million goodwill impairment for its single reporting unit.

Previous wording

Interest expense, net for the six months ended June 30, 2024 was $30.1 million, a decrease of $10.0 million, or 24.9%, from $40.1 million for six months ended June 30, 2023. The decrease is primarily the result of debt retirements with $57 million of debt retired in September 2023 and $130.0 million of debt retired in December 2023 driving lower interest expense in the first six months of 2024. This favorability was partially offset by interest associated with the $25.0 million mortgage note executed in December 2023.

Current wording

Interest expense, net for the nine months ended September 30, 2024 was $47.6 million, a decrease of $13.3 million, or 21.9%, from $60.9 million for nine months ended September 30, 2023. The decrease was primarily the result of debt retirements with $57.0 million of debt retired in September 2023 and $130.0 million of debt retired in December 2023 driving lower interest expense in the first nine months of 2024. This favorability was partially offset by interest associated with the $25.0 million mortgage note executed in December 2023.

Previous wording

Interest income for the six months ended June 30, 2024 was $7.3 million, an increase of $4.9 million, or 204.5%, from $2.4 million for six months ended June 30, 2023. The increase is due to an increase in funds invested into high-yield money market fund accounts compared to the same prior year period.

Current wording

Interest income for the nine months ended September 30, 2024 was $11.5 million, an increase of $7.2 million, or 166.0%, from $4.3 million for the nine months ended September 30, 2023. The increase was due to an increase in funds invested in high-yield money market fund accounts and short-term certificates of deposit compared to the same prior year period.

Previous wording

Other expense, net for the six months ended June 30, 2024 was $4.6 million, a decrease of $9.3 million, from other income, net of $4.7 million for six months ended June 30, 2023. The decrease is primarily a result of the provision for credit losses recorded on non-operating notes receivable in the current year, compared to gains recognized on sales of non-operating assets in the prior year.

Current wording

Other expense, net for the nine months ended September 30, 2024 was $4.8 million, a change of $10.7 million, from other income, net of $5.9 million for the nine months ended September 30, 2023. The change was primarily a result of the provision for credit losses recorded on non-operating notes receivable in the current year, compared to gains recognized on sales of non-operating assets in the prior year.

Previous wording

The provision for income taxes for the six months ended June 30, 2024 was $102.6 million, an increase of $33.3 million, or 48.1%, from $69.3 million for the six months ended June 30, 2023. The provision for income taxes as a percentage of gross profit was 28.9% for the six months ended June 30, 2024, compared to 23.7% for the six months ended June 30, 2023. The increase in tax expense for 2024 was driven by an increase in gross profit for the period, the one-time impact of changing certain state tax filing methods which requires us to revalue deferred taxes in those states, and an increase in interest expense on uncertain tax positions.

Current wording

The provision for income taxes for the nine months ended September 30, 2024 was $150.0 million, an increase of $44.1 million, or 41.6%, from $105.9 million for the nine months ended September 30, 2023. The provision for income taxes as a percentage of gross profit was 28.4% for the nine months ended September 30, 2024, compared to 24.4% for the nine months ended September 30, 2023. The increase in tax expense for 2024 was driven by an increase in gross profit for the period, the one-time impact of changing certain state tax filing methods which requires us to revalue deferred taxes in those states, and an increase in interest expense on uncertain tax positions.

Previous wording

Our management uses a financial measure that is not in accordance with generally accepted accounting principles in the U.S., or GAAP, in addition to financial measures in accordance with GAAP to evaluate our operating results. This non-GAAP financial measure should be considered supplemental to, and not a substitute for, our reported financial results prepared in accordance with GAAP. Adjusted EBITDA is a financial measure that is not defined under GAAP. Our management uses this non-GAAP financial measure and believes it enhances an investor’s understanding of our financial and operating performance from period to period because it excludes certain material non-cash items and certain other adjustments management believes are not reflective of our ongoing operations and performance. Adjusted EBITDA adjusts the following items from net income: interest expense, interest income, provision for income taxes, and depreciation and amortization to arrive at EBITDA. This is then adjusted for items that we do not believe represent the operations of the core business such as acquisition, transaction and other non-recurring costs including major system changes as well as contributions to specific initiatives (e.g., contributions to Smart and Safe Florida), impairments and disposals of long-lived assets including goodwill, discontinued operations, share-based compensation, and other income and expense items.

Current wording

Our management uses a financial measure that is not in accordance with generally accepted accounting principles in the U.S., or GAAP, in addition to financial measures in accordance with GAAP to evaluate our operating results. This non-GAAP financial measure should be considered supplemental to, and not a substitute for, our reported financial results prepared in accordance with GAAP. Adjusted EBITDA is a financial measure that is not defined under GAAP. Our management uses this non-GAAP financial measure and believes it enhances an investor’s understanding of our financial and operating performance from period to period because it excludes certain material non-cash items and certain other adjustments management believes are not reflective of our ongoing operations and performance. Adjusted EBITDA adjusts the following items from net income: interest expense, interest income, provision for income taxes, and depreciation and amortization to arrive at EBITDA. This is then adjusted for items that we do not believe represent the operations of the core business such as acquisition, transaction and other non-recurring costs including major system changes as well as contributions to specific initiatives (e.g., contributions to Smart & Safe Florida), impairments and disposals of long-lived assets including goodwill, discontinued operations, share-based compensation, gain on debt extinguishment, and other income and expense items.

Previous wording

Adjusted EBITDA for the three months ended June 30, 2024 was $107.0 million, an increase of $28.3 million, or 35.9%, from $78.7 million for the three months ended June 30, 2023. The increase is primarily attributed to increased revenue and improved gross profit.

Current wording

Adjusted EBITDA for the three months ended September 30, 2024 was $96.1 million, an increase of $18.3 million, or 23.6%, from $77.7 million for the three months ended September 30, 2023. The increase primarily resulted from increased revenue and improved gross profit.

Previous wording

Adjusted EBITDA for the six months ended June 30, 2024 was $212.8 million, an increase of $56.0 million, or 35.7%, from $156.8 million for the six months ended June 30, 2023. The increase is primarily attributed to increased revenue and improved gross profit.

Current wording

Adjusted EBITDA for the nine months ended September 30, 2024 was $308.8 million, an increase of $74.3 million, or 31.7%, from $234.5 million for the nine months ended September 30, 2023. The increase primarily resulted from increased revenue and improved gross profit.

Previous wording

Since our inception, we have funded our operations and capital spending through cash flows from product sales, third-party debt, proceeds from the sale of our capital stock and loans from affiliates and entities controlled by our affiliates. We are generating cash from operations and are deploying our capital reserves to acquire and develop assets capable of producing additional revenues to support our expected business growth. Our current principal sources of liquidity are our cash and cash equivalents provided by our operations as well as debt and equity offerings. The Company has and expects to retain additional cash from operations, due in part to the Company's position that it does not owe taxes attributable to the application of Section 280E of the Internal Revenue Code. Cash and cash equivalents consist primarily of cash on deposit with banks and money market funds.

Current wording

Since our inception, we have funded our operations and capital spending through cash flows from product sales, third-party debt, proceeds from the sale of our capital stock and loans from affiliates and entities controlled by our affiliates. We are generating cash from operations and are deploying our capital reserves to acquire and develop assets capable of producing additional revenues to support our business growth. Our current principal sources of liquidity are our cash and cash equivalents provided by our operations as well as debt and equity offerings. The Company has and expects to generate additional cash from operations, due in part to the Company's position that it does not owe taxes attributable to the application of Section 280E of the Internal Revenue Code. Cash and cash equivalents consist primarily of cash on deposit with banks and money market funds.

Previous wording

Our primary uses of cash are for working capital requirements, capital expenditures, debt service payments, and income tax payments. Additionally, from time to time, we may use capital for other investing and financing activities. Working capital is used principally for our personnel expenses as well as costs related to the cultivation, processing and distribution of our products. Our capital expenditures consist primarily of additional cultivation and processing facilities and retail dispensaries, and improvements to existing facilities to support the expected long-term growth in markets with adult-use catalysts. In the current period, our debt service payments consist primarily of interest payments.

Current wording

Our primary uses of cash are for working capital requirements, capital expenditures, debt service payments, and income tax payments. Additionally, we may use cash to support cannabis market expansion related initiatives, such as Smart & Safe Florida. Working capital is used principally for personnel expenses as well as costs related to the cultivation, processing and distribution of our products. Our capital expenditures consist primarily of additional cultivation and processing facilities and retail dispensaries, and improvements to existing facilities to support the long-term growth in markets with adult-use catalysts. In the current period, our debt service payments consist primarily of interest payments.

Previous wording

Cash and cash equivalents were $355.2 million as of June 30, 2024. We believe our existing cash balances will be sufficient to meet our anticipated cash requirements from the date of this Quarterly Report on Form 10-Q through at least the next 12 months. Any additional future requirements would likely be funded through the following sources of capital:

Current wording

As of September 30, 2024, cash and cash equivalents were $237.7 million and short-term investments were $80.2 million. We believe our existing cash balances and short-term investments will be sufficient to meet our anticipated cash requirements from the date of this Quarterly Report on Form 10-Q through at least the next 12 months. Any additional future requirements would likely be funded through the following sources of capital:

Previous wording

Net cash provided by operating activities was $210.5 million for the six months ended June 30, 2024, an increase of $233.5 million as compared to $23.1 million net cash used in operating activities for the six months ended June 30, 2023. This improvement is primarily due to the $169.8 million impact from the Company's position that it does not owe taxes attributable to the application of Section 280E of the Internal Revenue Code (inclusive of $52.4 million in refunds received from amended returns based on this position in the first half of this fiscal year) and a $63.6 million improvement in gross profit driven by higher revenues and improved gross margin, which was only partially offset by the comparative change in inventories. Operating cash flows in the comparative period benefited from the $40.3 million decrease in inventories versus the $5.0 million decrease for the current period.

Current wording

Net cash provided by operating activities was $240.8 million for the nine months ended September 30, 2024, an increase of $170.4 million as compared to $70.4 million net cash provided by operating activities for the nine months ended September 30, 2023. This improvement was primarily due to the reduction in net tax payments of $159.9 million, primarily related to the impact from the Company's position that it does not owe taxes attributable to the application of Section 280E of the Internal Revenue Code (inclu sive of $52.4 million in refunds received from amended returns based on this position) and a $94.0 million improvement in gross profit driven by higher revenues and improved gross margin, which was only partially offset by the comparative change in inventories of $74.8 million and a $43.1 million increase in payments for legislative campaign contributions. Operating cash flows in the comparative period benefited from the $66.5 million decrease in inventories versus the $8.3 million increase for the current period.

Previous wording

Net cash used in investing activities was $51.9 million for the six months ended June 30, 2024, an increase of $26.6 million, compared to the $25.3 million net cash used in investing activities for the six months ended June 30, 2023. The increase primarily reflects higher current year purchases of property, plant and equipment and internal use software to support the expected profitable long-term growth of the business. A reduction in proceeds received this year compared to the same prior year period from the sale of long-lived and held for sale assets, partially offset by non-recurring payments for a cannabis license made in the prior year also contributed to the increase in net cash used in investing activities for the current period.

Current wording

Net cash used in investing activities was $183.4 million for the nine months ended September 30, 2024, an increase of $153.1 million, compared to the $30.3 million net cash used in investing activities for the nine months ended September 30, 2023. The increase primarily reflects the Company's $80.0 million investment into certificates of deposit, higher current year purchases of property, plant and equipment and internal use software to support the long-term growth of the business.

Previous wording

Net cash used in financing activities was $10.7 million for the six months ended June 30, 2024, an increase of $1.4 million, compared to $9.3 million net cash used in financing activities for the six months ended June 30, 2023. The increase is driven primarily from the payment made for the consolidated VIE settlement transaction and the related costs incurred, which was partially offset by proceeds from the redemption of non-controlling interest and a decrease in payments made on notes payable as a note was paid off in the prior year.

Current wording

Net cash used in financing activities was $27.1 million for the nine months ended September 30, 2024, a decrease of $33.5 million, compared to $60.6 million net cash used in financing activities for the nine months ended September 30, 2023. The decrease was primarily driven from the payment made in the comparative period on the open market repurchase of 57,000 of the Company's USD $1,000 senior secured notes, due October 6, 2026, for a purchase price of $47.6 million, excluding fees and accrued interest. This was partially offset by payments made in the current period for taxes related to net share settlement of equity awards and the consolidated VIE settlement transaction and the related costs incurred.

Previous wording

For information on our commitments for financing arrangements, operating leases, claims and litigation, contingencies, and other obligations, see Note 3. Supplementary Financial Information, Note 4. Financing Arrangements, and Note 6. Income Taxes in Part I. Item 1 of this Quarterly Report on Form 10-Q. Other than the $152.8 million increase in our uncertain tax position liabilities and the $19.0 million increase in our future minimum lease payments under non-cancellable operating leases, there were no other material changes to our contractual obligations as set forth in Part II Item 7 of our 2023 Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

For information on our commitments for financing arrangements, operating leases, claims and litigation, contingencies, and other obligations, see Note 3. Supplementary Financial Information, Note 4. Financing Arrangements, and Note 6. Income Taxes in Part I. Item 1 of this Quarterly Report on Form 10-Q. Other than the $203.8 million increase in our uncertain tax position liabilities and the $39.4 million and $11.8 million increase in our future minimum lease payments under non-cancellable operating and finance leases, there were no other material changes to our contractual obligations as set forth in Part II Item 7 of our 2023 Annual Report on Form 10-K for the year ended December 31, 2023.