M&A Announcement

May 10, 2021

Good morning, and welcome to the Trulieve Cannabis Corporation's Harvest Acquisition Call. My name is Deborah, and I will be your conference operator today. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Ms. Christine Hershey, Director of Investor Relations of Harvest. You may begin. Thanks, Deborah. Good morning, ladies and gentlemen, and thank you for joining us today to We announced definitive arrangement agreement to acquire Harvest Health and Recreation. With me on the call today are Kim Rivers, Chief Executive Officer of TrueLeaf and Steve White, Chief Executive Officer of Harvest. Following their prepared remarks, We will open the call to questions. Before we get started, I would like to note that today's call is being recorded for the benefit of investors, individual shareholders, The media and other interested parties. Please remember, statements made during this call are not 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 forecasts, 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 ks for the year ended December 31, 2020. 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. A presentation on today's announcement may be found on both companies' websites trulieve.comandharvesthoc.com. In addition, a webcast of today's conference call Will be available on the Trulieve website later today. Now, I will turn the call over to Trulieve's CEO, Kim Rivers. Good morning, everyone, and thank you for joining us on short notice. I have the pleasure to be with you today from Harvest headquarters in Arizona. I'm here with Steve White, Chief Executive Officer of Harvest, who just announced a fantastic quarter, beating consensus by a wide margin with revenue of $88,800,000 and tripling their adjusted EBITDA from Q4 to $26,900,000 a 30% margin. Congratulations, Steve and the entire Harvest team. As you have seen from this morning's news, we have reached an agreement to acquire all the issued and outstanding shares of Harvest. Harvest is a multi seat operator in 9 states With 39 operational dispensaries that include a leading presence in Arizona and nearly 880,000 square feet of active cultivation And processing at 12 state of the art facilities throughout the country. The combined company's footprint will include over 3,100,000 square feet of cultivation and production 126 dispensaries opened today are pending acquisition with more stores to open in 2021 and we will be in 11 states Across 3 hubs, including a presence in 6 cannabis states that had a combined market of $9,000,000,000 in 2020. We are bringing together 2 leading cannabis companies who by joining forces will create one of the world's largest cannabis companies by operational retail and cultivation footprint And the most profitable public cannabis company in the U. S. Ready for accelerated growth. Harvest strengthens our financial profile. On a combined basis, 2020 revenue was approximately $753,000,000 with $266,300,000 of adjusted EBITDA. Based on 2021 consensus, we have a leading revenue profile with a combined revenue of $1,240,000,000 and an adjusted EBITDA of $461,000,000 And that was before Harvest adjusted EBITDA margin increase announced earlier this morning, easily the most profitable U. S. MSO based on adjusted EBITDA. Triliev and Harvest share similar philosophies regarding ensuring customer engagement, building scale and understanding the supply chain. We are very much aligned as companies and we believe those fundamental values in a combined MSO will deliver substantial benefits. Our disciplined approach of not aggressively putting up flags across the U. S. Or internationally, but instead focusing on going deep in our home states It's a strategy that has worked well for Harvest in Arizona and it has worked well for Trulieve in Florida. As our shareholders have come to expect from us, we are doing this deal the Trulieve way, Relying heavily on our M and A criteria of a strong management team with local expertise, similar core values with a customer centric approach, Strong brand awareness and an accretive deal that delivers shareholder value. Harvest brings all of that to the table and much more. This deal will create one of the world's leading cannabis companies focused on being the brand of choice for consumers. This transaction is more than a step forward. It is a significant leap towards Trulieve's stated goal of national expansion through our hub model and supports our strategy of going deep in the most attractive market to solidify our position. By entering the right states and understanding the customer preferences in those core markets, we can achieve more together than each of us could separately, Bringing our cannabis brands to a larger market stretching across the United States. The opportunity ahead is compelling for our shareholders. Harvest broadens the Truly National footprint, notably welcoming Arizona and Maryland to our portfolio. Further, this deal is important Not only because it deepens our Northeast and Southeast hubs, but this transaction establishes our entry into the Southwest hub anchored by Arizona. With 15 operating dispensaries and 3 additional opening within the next 12 months and nearly 330,000 square feet of cultivation and production facilities And more under construction, Harvest is the market leader in Arizona. Harvest will also add to Truly's broad product portfolio By offering patients and customers a wide array of products across all categories, including edibles created specifically for the adult use market. With branded products across value, mid market and premium categories and third party brand partners, we will deliver a full spectrum of products For every consumer choice in medical and recreational markets, having the opportunity to work with Harvest to combine innovation and customer insights We'll deliver market leading brands to our patients and customers in retail and give us broader depth as we look to wholesale opportunities. With our industry leading scale, depth in the markets we enter and strong product lines and brand opportunities, this is a compelling combination that offers an expanded runway for growth. Also key to this transaction, as mentioned earlier, is that it is accretive. Profitability is crucial as we build for our future and continue to invest in our business. Our strength in the capital markets, operational cash flow and industry leading profitability allow us the opportunity to invest in our business and we've done so smartly. Trulieve has established itself as a leader in this highly competitive industry, and we intend to leverage our combined financial and bench strength. Trulieve brings Harvest the option to retire all of its debt, while allowing Trulieve to maintain a healthy cash reserve. The Harvest team fortifies our extended bench strength nationally, Delivering a team with local community connections plus the experience building out operations across multiple markets simultaneously. Their team has the skills, enthusiasm and commitment to work alongside Trulieve to create the preeminent cannabis company. Turning to look at the specific terms of the agreement. Trulieve will acquire all of the issued and outstanding Harvest shares with Harvest shareholders receiving point 117 of a Trulieve share for each Harvest share. This implies a price per Harvest share of $4.79 which represents a 34% premium to the May 7, 2021 closing price. After giving effect to the transaction, Harvest shareholders will hold approximately 26.7 percent of the issued and outstanding Treleav shares on a fully diluted basis. We would encourage shareholders to refer to our press release issued this morning for further terms of the transaction. I'll now turn the call over to Steve White to add his perspective, and I'll return for a closing statement before opening for questions. Steve? Thanks, Kim. This is an exciting day for both of us, and I'm happy to have you here in Arizona for this monumental announcement. Since our founding in 2011, Harvest has had a long successful track record as a multistate operator. Our organization has won licenses and developed operating assets in 13 states over the past decade. Harvest spent years building its market leading presence in Arizona through Combination of organic license awards and targeted acquisitions. This morning, we reported record revenue of $88,800,000 and adjusted EBITDA Of $26,900,000 Our strong results reflect the positive impact of adult use sales in Arizona and underscores the benefit of achieving scale in core markets. As I've stated before, our team did a phenomenal job preparing for the launch in Arizona, and I'm confident that this experience will be Very useful as additional markets open up to allow adult use in the future in the next few years. We're very excited to be joining Trulief, Creating a leading cannabis company with scale and presence in core markets. This transaction affords us greater access to capital and the opportunity to more fully build out That's ahead of significant future catalysts. We strongly believe the combined organization will be extremely well positioned to identify attractive opportunities And build industry leading operations for years to come. I'll now turn the call back to Kim. Thanks, Steve. We're very excited about our acquisition of Harvest, creating an unparalleled platform for continuing growth and delivering value to our shareholders. It is our 1st major multi state acquisition and the most prominent U. S. Combined cannabis field to date. Harvest is aligned with our strategy to grow our national hub model presence, Gives us additional depth and reach in adult East markets and will position us as one of the largest and most experienced multistate operators in the world, Ready to generate significant growth opportunities. With that, I'd like to thank you all for joining us this morning. As I said recently regarding an award we won for 2020 growth, You ain't seen nothing yet. Today, this deal is the start to that promise, and we are thrilled to be sharing this news with you, our shareholders. And as I always say, onward. Thank you, Kim and Steve. Deborah, we'll now open the line for any questions. And your first question comes from the line of Kenric Tyghe. Thank you and good morning. Congrats on the transaction. Obviously, huge news for both the companies and in the space. If I could just very quickly, Tim, Arizona is and remains the Harvest Crown Jewel, but clearly there's a lot more to the story. When you look to 2021 or perhaps more relevant looking out to 2022, what are the biggest game changes this creates for you as a combined entity? And what are the opportunities you're most excited about over the 1st year to 18 months of being a combined entity? There's a lot to be excited about here. Certainly, I would say the fundamental Underlying strategy of the combined company to continue to focus on our core markets, which have incredible growth trajectories ahead In their current state, but also have pending catalysts. And having the ability to have a scaled platform to be able to fully take advantage Of those catalysts is very exciting. Of course, as we think about again further diversification in a smart way By going deep in those core markets and again focusing on profitability, it really sets us up to take advantage of the future, which We know it's going to continue to be a bright one. Thank you, Tim. And just on that note, are there any markets here where we should be mindful of? Will there risks to moving forward? Pennsylvania strikes me as one We will be bumping up against some of those limits. Anything you can sort of speak to in terms of how you will look to Proceed in your confidence with moving this through for a Q3 close? Yes. We of course did extensive diligence As anyone would do in a transaction of this magnitude, we look forward to working with regulators in each of the markets That we'll be moving into as a result of this deal to make sure that 1st and foremost, of course, we're in compliance with any State rules, but we are confident that we will receive the at the end of the day the value for this transaction as we anticipated, Again, through our diligence, the Northeast hub is an important hub for us, and it's been an important market for Harvest. And we believe that we'll continue to be able to take advantage of a strong platform in that market and the surrounding markets. Great. Thank you. Congrats here and I'll get back in the queue. I know it's a busy liner. Thank you. Thanks. And your next question comes from the line of Andrew Parthenough. Hi, congrats on this monumental deal and thanks for taking my question. Maybe the first one for Kim. You've taken a very Thoughtful approach on how you plan to announce your M and A over these past couple of years. This is obviously the largest in the industry and the largest for you as well. Could you give a little bit more color on as you scan the industry for potential acquisitions, What made Harvest really stand out versus the other competitors? And how do you see The integration of the 2 companies proceeding with any kind of potential synergies that you could talk to? Well, I've gotten to know Steve for a number of years. There's actually A bit of a funny story there. He was one of the first CEOs that I met after going public at a conference Down in Miami and we were on a panel together and at that point in time, I was just blown away that there weren't Any other companies that we're talking about profitability and specifically EBITDA, but then I met Steve and he was. And We have stayed in touch over the years and have been watching as Harvest has Really regained its footing and returned to its foundation with a focus on profitability and a focus Doing what it has always done historically, which is focusing on this core market, specifically in Arizona. We were blown away, as I'm sure most of you were, in terms of their execution and just the way that they moved into the recreational Market here in Arizona, it was seamless and it was really impressive to watch. And as we've watched Harvest over the last 12 months really reposition itself and learn from what many of our peers have I heard from right, which is that over extension, they were able to dial back. They've learned from that and now they're really dialed in and focused on their key markets and taking advantage Of their scale in those markets. And so for us, it was a natural fit. Trulieve has always focused, again, 1st and foremost on fundamentals. We focused on having deep relationships with our customers, understanding our patients and customers better than anyone else. And we saw in Harvest the same values and the same focus and the same discipline. So for us, when we talk about and turning to your integration part of Question. We think it's just it's going to be a natural fit. Our teams have worked incredibly well together over the course diligence and over the course of negotiating this transaction, we're excited to have them as partners moving forward. And the integration will be a thoughtful one because we obviously it's very important to get that right. And We'll be spending our time and making sure that folks are aligned and that we're bringing our operations into one combined company and we very much look forward to doing that. Thanks for that. And just following on the previous question, Just to make sure that we're interpreting this correctly, but we're in the markets where you have some overlap, Pennsylvania, Florida, do you envision a scenario where The combined company gets to keep some of those licenses or is there a plan to divest all of that? So again, we're going to be working with regulators on to make sure that we're 1st and foremost In compliance, right, the transaction has been previewed with regulators as appropriate in given markets and those conversations will begin in earnest this week. So I think that as I mentioned before, certainly there is we believe that there is a path to ensure that we're able to maintain the value as during the diligence and during the negotiations of the transaction. And really at the end of the day, it's going to be a conversation with the regulators. And we'll of course let you all know as soon as we have additional details. Thanks for that and I'll get back in the queue. Congrats again. Thanks so much. And your next question comes from the line of Derek Dley with Canaccord Genuity. Yes. Hi, thanks and congratulations on the announcement this morning. I've got a couple of questions. So one, I wanted to talk about Arizona in particular represents A new market for you. And just, yes, I'd be curious to hear your thoughts on how you intend to approach this market given that it is much more of a recently robust Rec markets and anything in your current footprint. So I'm just wondering how your approach to this market might be any different tactically than in any of your existing markets? Well, the great news with respect to Arizona is I'm sitting at the table with the CEO of the leading cannabis company in Arizona. So I think that Certainly, we're going to take our cues from the Harvest team who have done a phenomenal job in establishing themselves as the market leader In Arizona, with a focus on execution, we'll be here to support them and to make sure that we're adding any expertise that we can. And I think that's one of the other great About this transaction is having the ability to bring expertise from each of our teams and combine those and deploy them in other markets And cross functionally across the organization, which we're very much looking forward to. But Arizona is a fantastic opportunity and the Harvest team has done again a phenomenal job and we look forward to learning as much as we can from them and being here to support them as they continue their growth. Okay, great. And then turning a little bit to just the capital investment here. I mean, once this transaction closes, you're going to be the leader in 3 of the most, if not the 3 most attractive states within the U. S. So can you maybe just talk about some priorities for capital investment within those markets going forward? Sure. As you stated, we have the we're going to have the significant footprint In 3 different regions and 3 very attractive markets that we're going to continue to invest in. When you look at markets Like Florida, Pennsylvania, Arizona, Maryland, those are markets with incredible runway ahead of them And we look forward to being able to deploy capital strategically in those markets to achieve high ROI like we've had a track record of doing since inception at So certainly, and if you listen to the Harvest call this morning, we're very much aligned in injecting capital in core markets With expected return to increase value and we'll continue to do that. In addition, I should note that What's also exciting about this transaction that we haven't touched on is both of our teams experience and applications in new markets and we definitely look forward to again Working together on best practices and combining our strengths there to not only win in new attractive states, Also of course then to be able to quickly execute and we'll be deploying capital in those new markets as well, which I think will be there'll be plenty of those opportunities over the question comes from the line of Russell Stanley with Beacon Securities. Thank you. Good morning and Congratulations. I guess just following up on the prior comment around additional markets Harvest already has, I guess, Beachhead's In some markets outside of its core markets, just wondering do those markets now become a little more prioritized for growth capital going forward? Yes. Thanks Russ. Again, we share, I would say, the core value Of going deep and identifying markets that we believe have significant runway and significant are attractive So we're going to continue to focus on those core markets, 1st and foremost. Not to say that of course additional markets may not become attractive right with additional catalysts that could come into those markets, which would then we reserve the right To reshuffle these priorities, but for now, we're very much aligned in ensuring that the markets that we've jointly identified as those core markets that We're continuing to focus to ensure that we're maximizing opportunity and return there. Great. And Just my last question, just wondering on the regulatory front. First, when do you anticipate Making your initial filings with respect to HSR. And secondly, I apologize if I missed it, but have you pegged an anticipated closing date, I understand there are a lot of moving pieces here. Yes. We'll be filing HSR here very shortly. So our teams, of course, are working on that and have been working on that in the background. I don't have any and wouldn't want to speculate in terms of dates just Because there are of course unknowns, we're going to be moving and it's our joint kind of goal to move as quickly as possible On all filings and all approvals. And again, we'll let you guys know as that progresses. Excellent. Thank you for the color. And your next question comes from the line of Matt McGinley with Needham. Good morning. Thanks for taking my question. On the state regulatory caps, can you walk us through what the statutory caps are in Pennsylvania for dispensaries and cultivation? And in Florida, if you can't control to the MMTC license in Florida, can you transfer assets or are they locked in with the operating license? Yes. Thanks, Matt. Again, I think it's probably best for us to update you all after we've had conversations with regulators and We'll happily give you all additional color as we have additional color. I don't want to speculate or Assume anything before having those appropriate filings and subsequent conversations with regulators. In Florida, certainly there is a path for asset transfer that has been successful in the past with other folks And something that we will be talking with our regulator about in Florida. And on the debt, Ken, I believe you said in the prepared remarks, but are there any Change of control provisions on Harvest debt will truly refi that debt or use existing cash balances to retire it? Yes. So the great thing around the debt is that we have a lot of flexibility and plenty of options around the debt. So we're looking forward to getting through, of course, regulatory approvals that are required And then working alongside Harvest to reposition the debt at significantly more attractive rates and or potentially Partial cash. So again, more to come on that. But we certainly feel that we're in a good spot with Increased flexibility around options to deal with the debt. Okay, great. Thank you very much. And your next question comes from the line of Vivien Azer with Cowen. Hi, good morning and congrats on the transaction. My first question please, more of a strategic one. As Kim, you and Steve are have come together to build more of a national footprint in Now with exposure to the West Coast, how are you thinking about brand alignment over time? Obviously, you don't want to enfranchise any of The existing Harvest customers that I would think now that you have both presence on the East Coast and the West Coast over time brand alignment might be a consideration. Can you speak to Vivian, that's exactly right. First of all, we're not rushing into anything here. So I think it's very important for us to be thoughtful and for us to be strategic as we think about brand. We'll be doing a deep dive into Brand equity and evaluating that brand equity and certainly the thought would be that over time we would be moving towards a unified brand platform. However, I will say that I think more quickly, we certainly will be working on product brands And product brand alignment across states and across markets. And That would be reciprocal with the Trulieve and Harvest branded products, which we're very excited about being able to offer that additional depth of product selection to our customers and patients. Perfect. That makes sense. Thanks. And then just for my follow-up in terms of best practices, are there any kind of Capabilities that you saw inside of Harvest that you at Trulieve would try to leverage. I know, Kim, you speak a lot about Your consumer loyalty program, so that seems like that's pretty well intact on the Truly side, but is it is SAP implementation, Anything that you think kind of can accelerate the flywheel of fuel? Thanks. Yes, of course. I mean, I think 1st and foremost, right, again, going back to their incredible execution in the launch of recreational sales In Arizona and watching that rollout, certainly, we think we have lessons to be learned there that will be applicable As that catalyst hits across other markets in this combined portfolio, focus on KPIs, certainly they've got customer insight team that we're very excited to work with, not only of course in Arizona, but across All of our other markets. And so there are a lot of areas where we believe that our combined teams are going to be Sharing and expertise and really again being able to accelerate that ROI in our market. I think that from our side, certainly excited to get in and assist where we can on cultivation expansion I'm in a scaled platform and continuing to accelerate a scaled cultivation platform in Arizona, along with other core markets. But the Arizona opportunity really cannot be understated at this point and learning as much as we can from one another Because this is exactly the roadmap that's going to play out in other markets on the East Coast. Perfect. Thank you and congrats again. And your next question comes from the line of Pablo Zuniak with Cantor Fitzgerald. Good morning and congratulations Kim and Steve. Kim, I guess The question I would the way I would ask the question is, yes, congratulations, but $2,100,000,000 is a lot of money. And I understand that truly this is not your last transaction. You have aspirations of being a large, very profitable MSO. But one would think why not assets in New York or New Jersey, and I understand it's not eitheror, right? But in very simple terms and tell me Why I'm thinking about this the wrong way? I would say Harvest doesn't add anything really to you in Florida. Pennsylvania, you already have 6 stores with affiliate deals, so you're adding 9 stores. They are going for $20,000,000 so it will be 180,000,000 Maryland, free stores. So I'm getting $1,800,000,000 for the Arizona franchise, and they are going for about 20,000,000 So I'm sure I'm wrong about that, and I'm not factoring cultivation. But I'm just saying strategically, maybe this sets you back about future deals in other regions that may be more strategic. And it doesn't in terms of footprint, you are already in PA and of course in Florida. So the value for to me is Arizona, But $1,800,000,000 for Arizona for 15 stores. I mean, tell me why I'm wrong. Thank you. Yes, Pablo. So first and foremost, This isn't an asset collection. So I just I want to start there and say that this is a successful going concern business With well over a 1,000 employees and extensive operations, not just in Arizona, not just a number of stores, not just The particular assets again, but it's a combined this is a combined company Transaction and so I think I would take issue by saying that one each store is created equally. I mean I think we've proven time and time again Particularly with our footprint in Florida that all stores are not created equally and you can't just say because someone has X number of stores or X amount of footprint Therefore that translates or should be translated into X dollars of value without looking at it on a holistic basis. And certainly I think that our track Record is strong in terms of how we vet M and A, how we vet management teams, how we look at transactions, again, through that Holistic Lens. We really looked at this we looked at this deal as 1 on a relative basis and a relative contribution basis. And with Harvest's recent performance, which again was unbelievable in terms of both their not only their top line, but importantly for us, Their bottom line profitability, we're very, very comfortable that this deal is Again, 1, it's accretive and 2, it's a great deal for today, but it's an even better deal for the future. We are setting up A company that can take advantage of, 1, the current markets that we're in and certainly growth opportunity in those current markets. But more importantly, we're poised for catalysts that are yet to come, but we all know and we can see them on the horizon. So from my perspective, I would tell you that it's again, it's not a collection Of things, instead it's a phenomenal company that we're very excited to be combining with and I'll let Steve add his thoughts on that as well. Yes. Thanks, Kim. Pablo, the reason I mean, I think we've as an industry moved beyond kind of looking at this as a collection of assets. If you actually flip Your question on its head and you were to ask me that we basically sold the company for Florida assets. You would realize that the question itself doesn't fully understand the scale and that A store isn't a store, a cultivation facility isn't a cultivation facility. So you have to look you really do have to look holistically at it. We don't think From our side that Trulieve is a Florida license or a Florida business. And so when So that is I mean, I guess we kind of look at the presumption or the assumption behind the question and would challenge That as a way to look at valuation on the whole. Okay, understood. Thank you very much. Your next question comes from the line of Graeme Kreindler with 8 Capital. Hi, good morning and thank you for taking my question and I'll echo congratulations on the announcement this morning. Kim, I wanted to follow-up with your comments earlier on the call regarding taking some cues from the Harvest team with respect to continuing the growth seen in Arizona. And just in general, when you look The hub model that's being built out in the various regions across the United States. Can you give any more detail in terms of what the management team It will look like moving forward given the various individuals at Harvest with expertise how they fit in with the existing team at Trulip? Thank you very much. Yes. We are so excited to be able to have this combined Company footprint not only again from a state and an operations perspective, but Probably most importantly from a management perspective and from a team and employee perspective, I mean, we as many of you can appreciate are in a bit of a Talent starved industry and we look at this as bandwidth expansion being a significant contributor to value here. So we're excited to welcome all of the Harvest employees, along with of course, along with Management into the Truly family. And certainly we'll be partnering with them now and in the future. Thanks for the question. Okay. Thank you very much. And just another question here. With respect You're talking about a number of significant catalysts across states in the combined portfolio. Increasingly Considering the possibility of interstate commerce being a part of the industry moving forward at some point in time or in some way, shape or form, As you're building out a significant or acquiring a significant presence on the West Coast here, and again going back to exposure to certain regions, Does that does a world in which we have potential for interstate commerce, does that factor in at all in terms of the rationale of this transaction here? Or how might that play in, in the event that that becomes a reality? Would appreciate some thoughts there. Thank you very much. Yes. I think we've been very consistent in talking about and executing on this hub model philosophy, Whereby we're looking at the United States divided into 5 hubs or regions. And while certainly that would be important for interstate commerce When that comes, which I think it's not a matter of if it's when. However, it's also important And significant in the short and mid term from a distribution and an operational efficiencies perspective. We have certainly learned in Florida the value of having Scale and the ability to utilize that scale in a meaningful way and believe that that is a differentiator from a skill set and from Execution perspective that truly has vis a vis the competition. Similarly, we have been looking and are with this transaction have found opportunities To replicate that same focus and depth in other markets that will be distribution hubs and centers for us Across regions and across the U. S. So I would say that certainly, it will be important to have positioning When interstate commerce happens, but it's also very important in the near term as we think about being able to adequately serve markets With large population centers and again, those markets that have significant catalysts of growth ahead of them. Also, I'll say the reason that that hub strategy is important because while we can't ship cannabis products across state lines currently, what we can do It has opportunity savings with personnel and all kinds of non cannabis Elements to our business and so you gain efficiencies by having centers of concentrated Our focus across the country which this deal certainly provides. Understood. Appreciate the thoughts. Thank you very much. Yes. And your next question comes from the line of Erik DeSalleres with Craig Hallum. Okay, great. Thanks for taking my questions guys and congrats on very exciting news. So some of these synergies as you guys talked about readily apparent, You guys will be number 1 in the Southeast and number 1 in the Southwest. But I'm wondering if you could just shed a bit more insight into some of the synergies that Might not be readily apparent, whether that's some data collection or consumer insights, maybe some unique production capabilities or genetics. Just wondering if you could help us understand some of those sort of behind the scenes synergies that you guys are excited about? Thanks. Sure. So I'll kick it off and then I'll let Steve come in with his thoughts on this one as well. Really all of the things that you just mentioned are certainly synergies that we would expect to realize. Data insights, customer insights, We, as some of you know, just completed an SAP S-four implementation. We're excited to be able to offer that system Over time across the entire combined company, which will of course allow us to do additional data mining and impact Our product mix and of course having the right products in the right locations at the right time. Also, of course, as I mentioned, Personnel and expertise across functions. So the Truly team being able to bring scales, cultivation Expertise to the Harvest team in Arizona, particularly the Harvest team being able to bring their experience With not only of course recreational market and transition in recreational market, but also their experience in deploying over markets simultaneously and having management expertise in that multifaceted, Multiple Market Arena. So certainly a lot of combined synergies on my end that are that go below the surface, if you will, of just You know, PublicCo to PublicCo, Steve? Yes. So across the last decade or so, we've had operations at One point or another in 13 different jurisdictions, 13 different states. So we have collected a lot of information about customer preferences and about customer behavior. We've also recently seen in a market where we've invested very heavily a transition to add recreational sales. We do a lot on our end of data mining and we constantly are asking ourselves different questions and we're looking at that lengthy transactional And trying to leverage that to make ourselves smarter in the future. And I'll just give you one example of that. So we do a Kind of a location analysis that we review on a quarterly basis. Most recently, we were able to account for and this is for Data geeks, this will really resonate that we can account for 88% of a store's revenue based on 8 factors That are tied solely to location. So when you think about that long operating history, really the key How we can mine and how we can leverage that data to make both organizations or the combined organizations smarter over time As we start to layer in some of the deep transactional history that Trulieve has, we will actually just get Smarter. And as we continue to be disciplined about doing various studies about locations, about consumers, about product sales, We will just be able to deliver better products and better experiences to customers across the country. Very helpful. Thank you. Okay. And your next question Will come from the line of Andrew Simple with Equion Capital Markets. Hi, good morning, everyone, and congrats On the transaction for both parties. My first question, this acquisition is being done on an all stock basis, Preserving Trulieve's strong cash balance. I presume M and A activity does not stop here. So Kim, I'd appreciate it if You could provide us with your updated outlook on M and A for Trulieve and whether this transaction changes your strategic Priorities at all. Should we continue to expect to focus on the Northeastern states? Or does the new Southwestern hub, You would now have open new opportunities for Trulieve that may have not been as exciting prior to this announcement. So thanks for the perfect plug for our earnings call. Coming to you on Thursday morning before market opens, We'll be giving a lot of additional color, of course, on all things Trulieve as well as our Q1 results. But to answer it high level, certainly we'll continue to focus on the Northeast. However, I will also say that we believe that Arizona is an incredibly exciting market and there may be additional opportunities here in Arizona That we would be very comfortable executing on given the strength of the management team that will be a part of the combined company as a result of this deal. So I think that the opportunities just got broader for us, which is a good thing. Appreciate that. Thanks for that. And my second question here, I don't believe I saw a targeted closing date specified for this transaction. Are there any concerns with the timing of HSR or regulatory approvals you think may cause this to drag out or I don't know if you had any high level commentary on the steps to closing and the timeline, the potential timeline that that could take. We'll update you all with the timeline as we move through the process. Certainly, we're going to be looking to file HSR as well as regulatory approval requests here very soon, and that will kick off, right, with the timeline. And as we move through Process, we'll be happy to update you all. I think both TrueLeaf and Harvest have good relationships with our respective regulators and plan to work Hand in hand with them to move through this to move through the processes as quickly as possible. Thanks for taking my questions. Congrats again. Thanks. Your next question comes from the line of Camilo Lyon with BTIG. Thank you and congratulations as well. Kim, as you think about now this presence with your Southwest hub, Outside of Arizona, how do you prioritize your other states that you want to focus on expanding that hub model into? So is California a focal point now or is it the other surrounding states are A little bit more targetable from your perspective, given the scale that you have now in that region. Yes. I mean, I think as we've approached similarly with our other hub markets, we'll be looking For additional opportunities, however, those markets have to meet our very specific criteria For investment, we certainly have our core markets as we've clearly identified that we're going to continue to focus on. And we'll be watching, of course, surrounding markets closely for additional opportunity in the future. In the Southwest, we certainly are excited about having the other states as well. But right now, there's a lot of opportunity and a lot of runway in Arizona, and we want to make sure that we don't lose focus And that we appropriately take advantage of those opportunities as while they exist. Got it. And I'm going to ask a question a different way that it's not before, but I'm going to ask it in a slightly different way, see if I can get you to Reveal something here. You've been very active over the last few months. There's definitely a lot on your plate with the strike to integrating multiple assets, both big and small now. Does this implicitly mean that you will focus on your current combined footprint and not try to tackle opportunities In very large markets like New York, New Jersey, forthcoming with Virginia, do you have the bandwidth To do so, if you do choose to go into those markets via M and A? Yes. So I mean, what I would tell you about the two Stacy, you mentioned specifically, right? Those would more than likely be more greenfield type opportunities even if it is M and A. There's very little Currently that's built out in either of those markets and we do ground up build really, really well. What people forget sometimes is that we're putting up 100,000 square feet of cultivation, opening Half a dozen stores every quarter in Florida at a minimum. And so that's something that we're very, very comfortable with. And so I wouldn't make that assumption that certainly as it relates to new markets and certainly as it relates to new markets Greenfield opportunities that this means that we would not participate in those if and this is an asterisk, If the correct opportunity presented itself, in New York, I've been very vocal at saying that there are a lot of regulatory issues that We worked out there for it to be considered an attractive market that we would want to invest capital in. Specifically, we're looking for What the regulations are around Canopy? Currently in the law, there's pricing controls and the availability for regulators to come in and Change your licensing status if you are too successful. So that we're looking for some clarification on that market as a whole. But our focus on the Northeast remains. It's an important hub for us and we're going to continue to take advantage of opportunities As they present themselves so long as they meet our criteria and are in line with our stated goals. Got it. Thanks so much. Congrats again. Yes. Thanks. The next question comes from the line of Scott Fortune with ROTH Capital. Hey, good morning. This is Nick stepping on for Scott. I just wanted to focus on Florida and Pennsylvania on the cultivation side. How are you guys looking at consolidating your cultivation operations here? And do you have any expected cost synergies once any integration is completed? Sure. So I think our teams are very much looking forward to working together, Again, to share best practices and to have best in class operations, both of our all of our cultivation assets are very In both of those markets and we look forward to working 1st and foremost with our regulators to ensure that that can continue And our team is working together to ensure that we're providing the best product to our customers in both of those markets. Okay, great. And then just one more for me on the gross margin side. It looks like Harvest reported gross margins of about 54% for Q1 And guided for 2021 margins of around 50%, which potentially indicates the consolidated leading pro form a margin structure here upon the close. Can you just touch on the margins being recent Arizona or Maryland on the harvest side? And how are you guys looking at consolidated margins moving forward here? Yes. So just and this is Steve. I'll address the first part and then turn over the remainder of the answer to Kim. What we guided on our call before this one was that we expect gross margins to be at or exceed 50%. We did not say that they would be at 50%. We did say that they would be That they would vary quarter to quarter, but that we expected them to be at or greater than 50%. Yes. And certainly on a combined basis, We've got and Steve, obviously, his team has been very focused on this as well. Trulieve has, I think, Notable track record with respect to having, I believe, the best margins in the industry or close to it. And so we'll be looking to work with the Harvest team and certainly anywhere where we can gain efficiencies That would result in margin increase. We'll be looking to do that as a combined company. Great. That's it for me. Great. Thank you. I would like to turn the call over to Aaron Grey for his question from Alliance Global. And that's our final question for today. Hi, thanks for the question and congrats To both teams, Kim and Steve. Yes, just one question for me. Most have been answered. Just regarding the rewards program Potentially, so Kim, you guys have done a great job obviously in Florida, guarding half of the market share in that market. Steve, Harvest is leading retailer Within Arizona, so wondering what are your thought about kind of leveraging the rewards programs. Kim, on your last earnings call, you mentioned Making tweaks to your own, so love to hear about potential opportunities there, especially when you think about those 2 markets, do you guys have a notable market share advantage? Thanks. Yes. 1st and foremost, it's going to be really important that our customers and our patients Don't feel this transaction in a negative way, right. And so anything that we do as it relates to something like a loyalty program We'll certainly be thoughtful as we look at, of course, combining a platform over the combined company. We certainly want the program to be Seamless and also usable, right? So when someone is traveling from Florida to Pennsylvania to Arizona, etcetera, right, that they have the ability Utilize a singular platform, but that's going to I mean that's going to take time and we want to make sure that it's done the right way and that we're sensitive To the existing programs that our respective patients and customers have come to love. And so I think we're both very excited About the possibility of really being able to take the best elements from both programs and combining them into a singular platform over time. Great. Thanks and congrats again. Thanks so much. I would now like to turn the call over to management for closing remarks. Thank you everyone for joining us today. Have a great day. This does conclude today's call. You may now disconnect your lines.