This morning, $TCNNF completed its acquisition of $HRVSF. A big moment for the company, and congrats to @rivers_kim and team for closing the deal in under 5 months. Some highlights and thoughts from their call this morning:
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1. PF company is the largest and most profitable MSO (by a small amount on revenue and by a meaningful amount on Adj. EBITDA)
2. PF Company has 149 stores (37% more than nearest comp) and 3.1mm sq. ft. of cultivation (~2mm is in FL)
3. Core markets: FL, AZ, PA
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2. PF Company has 149 stores (37% more than nearest comp) and 3.1mm sq. ft. of cultivation (~2mm is in FL)
3. Core markets: FL, AZ, PA
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4. The biggest new (and positive) thing on the call was that the PA regulator did not require any divestitures. The PF company will have 15/16 open stores in PA with the opportunity to have up to 21 stores. They will also hold 3 cultivation licenses
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5. For those who haven't been following, Trulieve has gone from no presence in PA to being the largest retail operator (with a growing cultivation footprint) in under one year
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6. I read this as a positive for the other MSOs in PA as well. There were signs the PA regulator was looking at "caps" differently than investors were, but their blessing of the Harvest deal is the biggest validation that MSOs likely have more runway in PA
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7. That said, I continue to be a little cautious on PA's competitive dynamics. MSOs prepping for AU which would be a big tailwind for everyone, but until then, we could see pressure ratchet up
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8. $TCNNF working on re-branding all acquired stores to "Trulieve." Company also talked up Harvest's brand portfolio and the opportunity to integrate them into Trulieve's footprint
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9. Last night $TCNNF announced it raised $350mm of 8% sr. notes. Excellent paper. Company will be retiring $240mm of Harvest debt. PF company will be well capitalized going forward
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10. FL: discounting pressure has been well-chronicled over the past qtr. Apparently, Harvest accelerated discounting recently to shed inventory to avoid taking an accounting markdown. I need to think through this a bit more, but I think the point is some price pressure...
...will ease (bc Harvest now part of Trulieve), but there are other players discounting and that is likely to continue in the near-term
11. Trulieve will provide PF guide on 4Q call (so Feb/Mar 22). Did say opex as % of sales shouldn't change materially
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11. Trulieve will provide PF guide on 4Q call (so Feb/Mar 22). Did say opex as % of sales shouldn't change materially
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12. I wouldn't be surprised to see $TCNNF make a move in NJ. NJ is going to be one of the focal points of 2022 for investors and several MSOs have a presence in the state
In summary, big day for Trulieve. PF Co has major scale in FL, AZ, and PA with a growing presence in other states. PF financial profile will look strong. While no NJ presence means Co won't get that bump in 2022, when FL/PA go rec, $TCNNF is going to be a lead horse.
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