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spk06: And welcome to today's Planet 13 second quarter 2024 conference call. At this time, all participants have been placed on a listen-only mode, and we will be conducting a question-and-answer session with the covering analysts after the presentation. It is now my pleasure to turn the floor over to your host, Mark Kindersma, Head of Investor Relations.
spk05: Mark, the floor is yours. Thank you. Good afternoon, everyone, and thanks for joining us today. Plan 13 Holdings' second quarter 2024 financial results were released today. The press release, the company's quarterly report to NQ, including the MD&A and financial statements, are available on the SEC website, EDGAR, and CDAR+, as well as on our website, plan13holdings.com. Before I pass the call over to management, we'd like to remind listeners that portions of today's discussion include forward-looking statements. The forward-looking statements in this conference call are made as of the date of this call. There can be no assurances that such information will prove to be accurate, but if management's expectations or estimates of future developments, circumstances, or results will materialize. Risk factors that could affect results are detailed in the company's public filings that are made available with the United States Securities and Exchange Commission and on CDR+. We encourage listeners to read those statements in conjunction with today's call. As a result of these risks and absurdities, the results or events predicted and forelooking statements made different materially from actual results or events. In addition, we will refer to both GAAP and non-GAAP financial measures. For information regarding our non-GAAP financial measures and reconciliation to the most directly comparable GAAP measures, please refer to today's press release posted on our website. My 13 financial statements are presented in U.S. dollars, and the results discussed during this call are in U.S. dollars unless otherwise indicated. On the call today, we have Larry Scheffler, co-chairman and co-CEO, Bob Groszak, co-chairman and co-CEO, and Des Logan, CFO. I'll now pass the call over to Larry Schaffler, co-chairman and co-CEO of Planet 13.
spk02: Larry? Good afternoon, everyone, and thank you for participating in our second quarter call. Q2 was an exciting period for Planet 13, marked by significant developments and strong financial performance. We successfully closed the transformational acquisition of Vitacan and and opened the completely unique Days Consumption Lounge. Turning to our performance in the quarter, in Q2 2024, the Superstore generated 15.1 million and 11% sequential improvement. This strong performance is directly related to our focus on delivering unique entertainment and experiential value to our customers. We opened Days Consumption Lounge in April, and the results are clear. both as a direct revenue driver with sales from the lounge and as a traffic driver that increased customer visits and sales for the superstore. We are still learning and experimenting with the type of events, marketing, and occasions that work best, but what's clear is that customers love Dazed. Since opening on April 7th, we've hosted fight night watch parties, private events, and podcast tapings. This is just the beginning. We envision big opportunities for events like NFL Sundays, comedy shows, brand-sponsored tasting events, and countless other innovative ideas. This platform stands out in its unparalleled potential in marketing, brand building, and driving traffic. Revenue from our Superstore network increased by 143% sequentially, with us consolidating in Florida on May 10th. It contributed a month and a half to our consolidated financials, resulting in $12.3 million from our neighborhood store network compared to $5.1 million in Q1. If we look at the organic growth by including a full quarter from Florida's store network for both Q1 and Q2, we grew total neighborhood revenue by 2% sequentially. The Florida team continues to push themselves to improve this product in quality and service levels, and the results are obvious. Along with strong performance from Florida, our team in Illinois continues to mature in their operations. They grew sales by 18% sequentially as they build both their reputation and brand equity in the state. Between the Superstore and our neighborhood network, we generated total retail revenues of $27.4 million, a 47% sequential increase. Excluding Florida, retail revenue grew 8% sequentially. We also generated $3.7 million from wholesales, lifestyle, and other things. According to BDSA, we had the fifth most branded sales of any company in Nevada during Q2 and ranked second in our edible portfolio sales, led by Haha Gummies. This continued success is a testament to the product quality and brand equity that we built. With that, I'll pass it over to Dennis to discuss our financials.
spk07: Thanks, Larry. Before I begin, I'd like to remind everyone that all numbers on today's call are in U.S. dollars unless specifically stated otherwise. Planet 13 generated $31.1 million in revenue in Q2 2024. compared to $22.9 million in revenue in Q1 of 2024. This large growth was driven by multiple factors, both organic and M&A related. We saw strong performance at our Superstore and Illinois Neighborhood Store, along with contribution from the Vitacan acquisition. It is important to note that while Vitacan did approximately $12.9 million in revenue in the quarter, only seven weeks of the results were included in our consolidated revenue and the Vitacan Network contributed $7.2 million to revenue in Q2 2024. We will benefit from a full quarter of Florida operations in Q3 2024, as well as anticipated continued strength across our neighborhood stores, our superstore, and our wholesale verticals. We expect to continue to drive growth in Florida and long-term growth in the wholesale and lifestyle verticals, although off a smaller base. We are cautious about revenue growth in the second half of 2024 and the beginning of 2025 based on what we see as a weakening demand from the consumer as there are signs of stress that may impact our top line as consumers trade down, buy in bulk, or generally look for discounts. Gross profit was $15.8 million in Q2 2024 compared to $10.5 million in Q1 2024. This translated into a gross margin of 50.1% in the quarter, compared to 45.8% in Q1. The 430 basis point improvement in gross margin is a testament to the team who have worked incredibly hard to bring down our internal costs of cultivation through higher yields and increased utilization, as well as the sell-through of our house brands and our store networks. This has a double impact of enabling higher levels of vertical integration, as we introduced Ha Ha Gummies in California, and increased first-party sales of our house brands across our dispensary network. Along with these improvements in operations, during the quarter we benefited from a shift in mix with wholesale making up a lower overall proportion of total sales. And as everyone knows, wholesale revenue comes with a lower gross profit margin. Sorry, we expect to see some improvement in Q3 2024 as a higher proportion of our total revenue is driven by Florida and fully vertical sales. Overall, we are targeting to keep gross margins in the 50 plus percent range with continued efficiency improvements, offsetting pricing pressures. There will be some variability quarter to quarter as the state and product mix impacts the margins. Sales and marketing expense was $1.5 million during the quarter, up from $1.3 million in the prior quarter. As a percentage of revenue, sales and marketing fell from 6% to 5%, representative of how marketing efficient our Florida operations are. Looking ahead, we have a couple of growth opportunities that we plan to invest marketing dollars behind, including our wholesale and lifestyle brands. Having said that, part of the benefit of the lifestyle brand that Bob will speak to later is how it works as a cost-efficient marketing strategy. The company spent $12.3 million on G&A in Q2 2024, up from $10 million spent in Q1 2024. As part of that, we had to spend approximately $1 million on one-time costs in the quarter related to M&A and legal fees related to the El Capitan matter. Overall general and administrative expense was 39% of revenue compared to 44% of revenue in Q1. With the addition of Florida and the continued execution of our growth strategy, we are finally starting to benefit from operating leverage. We generated 3.2 million of adjusted EBITDA in the quarter compared to zero in Q1 2024. This translated into a 10.3% adjusted EBITDA margin. We expect to see continued improvement in both the absolute level of adjusted EBITDA and the adjusted EBITDA margins throughout the remainder of the year as we benefit from the inclusion of the Florida operations, continued improvement in vertical integration across our stores, and growth in our wholesale and lifestyle segment. As of June 30, 2024, the company had a cash balance of $26.7 million. In the Q2, we generated $4 million in operating cash flow and used approximately $4 million in CapEx for upgrades to our cultivation facility in Florida, the build-out of additional dispensaries in Florida, and the finishing of the day's consumption lounge that opened on April 7th. We have approximately 1 million in construction commitments as of June 30, 2024, and plan to spend an additional 3 to 5 million over the course of the next 6 to 12 months, focused on upgrades to the cultivation and manufacturing in Florida, along with turning on additional Florida neighborhood stores. The company has approximately 3 million in bank debt at our Vitacan subsidiary due in February 2025, 5 million in notes payable under the terms of the Vitacan acquisition due in May of 2025, and approximately 1.5 million in notes payable at Vitacan. We anticipate cash proceeds from the sale of surplus land and equipment in Florida, coupled with positive cash flow from operations and cash on hand will be sufficient to fund debt maturities over the next 12 months. As a reminder for this year, we have been accruing our taxes as before on the income statement as if we are subject to 280E, but we've been paying based on an estimated tax liability under normalized non-280E treatment. This will have a significant positive impact on our cash flow over the course of the year, and we are encouraged by the overwhelming positive response to the DOJ comment period and feel confident in the approach we are taking with our taxes. With that, I'll turn the call over to Bob to discuss the execution of our growth plan.
spk01: Thank you, Dennis, and good afternoon, everyone. As indicated earlier, Q2 was a solid quarter. with good financial performance and strong progress on our growth initiatives. Last quarter, we introduced a multi-pillar growth strategy to significantly increase both our wholesale and retail revenue over the next couple of years. Let me walk you briefly how we are executing against each pillar. The first pillar of our retail growth plan was closing on our Florida acquisition. We accomplished that on May 10th and are well into the integration process. It is not an easy process integrating into a new state 26 stores and hundreds of employees. The team has been great about working collaboratively to get systems and procedures in place to facilitate reporting, data integration, and execution of our growth plans. They've handled these additional responsibilities without missing a beat and continuing their track record of sequential revenue growth. To continue supporting the rapid growth of our Florida operations, we're well underway on construction to improve and add canopy to our Florida greenhouses and adding indoor cultivation. Upon completion in Q4, we expect our square footage under cultivation to increase by 25%, with yield increases upwards of 40%. This will enable us to increase supply to support our growing network of stores and bring our incredibly popular brands into the state. In fact, just last week, we started planning our most popular medicine brand, Flower Strains. The second pillar of retail growth is expanding our neighborhood store network. We have three dispensaries in Florida that are sitting at the starting line, ready to open, and are just awaiting final state regulatory approvals. Additionally, we have three more that are nearing completion, which would bring our Florida store network count to 32 stores. We're also actively pursuing more dispensaries through cost-effective M&A in Nevada. A Nevada dispensary is a good strategic fit for us as it increases our operating leverage in the state, creates opportunities to increase verticalization, and complements our superstore tourist-focused customer base with a more local, historical customer base. The third pillar of our retail growth plan is the continued leveraging of the superstore as a one-of-a-kind lifestyle experience and brand building platform. We opened dazed on April 5th, as Larry indicated. We're very excited about that opportunity, both as a revenue generator and as a draw for customers. But we're still at the starting line in terms of figuring out how how to best utilize the potential for the lounge. We're going to continue leveraging this space for innovative public and private events, to bring people into the store, interact with our brands, and deepen their love for Planet 13. Along with the lounge, we are continuing to leverage every inch of the Superstore to increase traffic, offset lease expenses, and create a must-visit destination in one of the greatest tour cities in the world. That includes a third-party operated tattoo parlor and our expanded grand hallway, Plaza 13, which has already hosted numerous unique events, celebrity appearances, and brand exhibitions. The second part of the growth plan is growing our wholesale business. We've introduced HaHa Gummies into California, starting with our own dispensary and limited trials. This has created instant benefits from increased verticality, We're also on the verge of a much wider launch of this product for wholesale customers throughout California. We are also actively in discussions with third-party manufacturers and distributors to bring this brand to Illinois. We look at wholesale as a long-term growth opportunity that will build slowly but with big upside potential. At the end of July, we launched our Lifestyles brand worldwide. The Lifestyle brand is a strategic pillow for us. It gives Planet 13 fans another way to interact with us deepening the relationship with Planet 13 merchandise, and turning them into brand ambassadors. It also acts as a cost-efficient way to get national and international brand awareness. It allows us to take part in traditional advertising channels and traditional costs instead of the limited options available to the cannabis market. I kicked off the Lifestyles brand with UFC fighter Chito Vera as the first sponsored athlete. Chito was part of a thrilling fight on August 3rd and has been a great brand spokesman for Planet 13. This is the first in a new strategy to target up-and-coming athletes, entertainers, and influencers with strong followings, crossover appeal to cannabis users, and online presence to cost-effectively market and expose the Planet 13 brand. Long-term, we think this could be a meaningful contributor to our financials. In addition to the strategic value, we'll start to recognize right away. To conclude, We are continuing to exercise on an exciting two-pronged growth strategy. In Q2, we've made significant progress in both wholesale and retail, increasing revenue by 20% year over year with a clear pathway to further improvement. We're innovating as a cannabis and lifestyle company to create a national brand with substantial underlying value. And we're generating operational leverage to becoming more profitable and to generate more cash. And with that, I want to thank everybody again for participating today. and I'll ask the operator to open the call for questions from covering analysts. Thank you.
spk06: Thank you. The floor is now open for questions. If you wish to join the queue to ask a question at this time, please press star 1 on your telephone keypad. We do ask if listening on speakerphone today that you pick up your handset while asking your question to provide optimal sound quality. Once again, please press star 1 on your keypad at this time If you wish to join the queue to ask a question, please hold a moment while we poll for questions. And the first question today is coming from Yuwan Kang from Canaccord Genuity. Yuwan, your line is live. Please go ahead.
spk00: Hi. Good evening. This is Yuwan Kang on behalf of Matt Bottomley. Thank you for the question. So, my first question here is regarding the outperformance within the Nevada and Illinois. um could you talk about the um initiatives that you guys had in place for days whether it was a sports watching event or anything like that that led to this growth for the superstore as well as the illinois neighborhood store thank you sure yeah i'll take the first part of that question um so with respect to the superstore the initiatives we focused on
spk07: We're driving much better penetration of our host brands in the store itself. You know, this is excluding days. It sells 100% of our own brands in days. So it was a combination of increasing, you know, flower sales to 50 plus percent in total volume from our own internal cultivation. Our ability to, you know, leverage that and the higher margins we get from that in the store as well as days You know, obviously, it sells 100% of our own product in the lounge at, you know, call it 80% to 85% margins. Events in dazed drove traffic both at dazed and to the superstore itself. And so, you know, it's having the effect that we had hoped, along with the addition of the tattoo parlor that's, you know, they're doing, you know, I want to say a few hundred people a day in terms of tattoos. Right. when they're active and busy, and those people are also customers at the store. So it's a combination of a bunch of things driving that Nevada operational improvement. And then Illinois, you know, we have dialed in pricing, have dialed in, you know, promotions to veterans and other initiatives in that marketplace. We expect to benefit further in Illinois as we introduce our house brands into that marketplace. And so it's a combination of trying to dial in the marketing, dial in the targeted audience in Illinois, and the fact that it's been open now and generating its own traffic and awareness that we're continuing to expand on that's driving that improvement.
spk01: This is Bob. If I can just add to that, as Dennis indicated, Days is its own traffic driver and it's continuing to grow, but it's also a nice complement to the Plaza 13. and we recently hosted Fight Week. We've had a number of MMA fighters in the UFC pipeline come through. So it's been really special to have that space for press conferences and for interaction with the athletes. And then, of course, we've had live view events hosted in the lounge, which have been very, very popular with our customers, and we're going to continue to really expand upon that.
spk00: Got it. Thank you. And if I could just have another follow up question to that. So, obviously, nice to see the sequential margin lift and adjust, but so just wondering how much of this number was attributed to the benefits realized from consolidating the vertically into operations in Florida stemming from the Vita can transaction versus the other markets be helpful just to triangulate the number better for expectations going forward. Thank you.
spk07: Yeah, I think we'll get back to you with a detail on that. But the Florida operations are in that 50% plus margin range. And then we've, again, moved our product mix, more vertical integration in Nevada, driving higher margins there, with leaving fewer revenue dollars coming from the wholesale market. I think our wholesale margins are in that 35% range, and our dispensary margins in Nevada are 52% to 55%. So we are targeting to keep the Nevada margins where they are and expand the Florida margins somewhat as we dial in improvements there and add more products and greater product offering there that we can get higher margins from. So we expect margin, you know, when we commented on the call, in the 50-plus percent range, It's really going to depend on how successful we are on the wholesale growth and strategy and how much revenue comes from the wholesale side of the equation as we launch HAHA further into California and into Illinois. So it's going to depend, as we said on the comments on the call, state variability and product mix variability will determine that overall margin level.
spk00: Great. Thank you so much. I'll jump back into it, too.
spk04: Thank you.
spk06: Thank you. Thank you. Your next question is coming from Pablo Juanich. Pablo, your line is live. Please go ahead.
spk03: Thank you. Good afternoon, everyone. Look, I just want to focus on Florida, and you gave us a lot of numbers. I don't know if I took proper notes here. I think you said $19 million pro forma for the quarter for Florida. If that's the case, right, divided by 26, that's almost $3 million. To my knowledge, that would be at the state average, which would be a big accomplishment. And also, if I compare with the volume from OMU, in terms of flour per store and extracts per store, you are below. So if you're in dollars in line with the state average, that means you have a better mix. But any color you can give in terms of how you – we don't know exactly what's the size of the Florida market in dollars. Headset has one number. BDS has another number. But talk about if you're going about, you know, do I get the right numbers? Are you at $3 million per dollars? How do you think that compares with the state? And remind us of what was done over the last year in terms of improvements and how much more is left to improve that in terms of revenue per store. Thank you.
spk07: Yeah, Pablo, it's Dennis. I quoted $12.9 million and not, I think you said $19. I just want to clarify that.
spk03: Okay, so I got that wrong. Okay, so there we go. Yeah, you got that wrong. Yeah, yeah. So the question, yeah, but the question would still apply, meaning there's been significant improvement year on year, right, in terms of revenue per store. So remind us, you know, how much of that, how was that accomplished, a reminder of that. And then although you gave color in your prepared remarks, also in terms of what's the upside here, what's left that would drive revenue per store to get you closer to the state average as we look at the year ahead. Thanks.
spk07: Sure. Yeah. Yeah. And so, you know, just as a reminder, you know, if you look at the vita can, we have a pro, we have pro form information, uh, in the financial statements themselves in terms of where, you know, where the revenue was, uh, you know, pro formal wise as reported, I think it's no, no six of the, of the financial statements. Um, there's lots of upside still in Florida, as, as you noted, Pablo, we're not at the overall, If we take Trulieve as the state leader, we're not anywhere near on a revenue per store basis where Trulieve is. The guys in Florida, the team in Florida, Vitacan, have accomplished a great deal in the last 12 months, driving significant improvements in revenue up almost double from where it was. And that's really from increasing product quality, increasing the flour mix, adding new products, We still have a bunch of new products to start hitting those stores. The Planet 13 strains are in the greenhouse. I think the first crop should come off and we'll have our own strains in the Planet 13 branded stores that we're going to open. And as we roll out the rebrand to the stores, the existing 26 store network, we'll have the Planet 13 strains, the improved Vitacan strains, additional product. We're putting in expansion of our of our capabilities to make the product offering that we have in Nevada available in Florida. So I think with an abundance of product availability and the continuing improvement in product quality, we expect it to have additional growth in that marketplace in Florida. I know the Vitacan team have targeted sort of a 3% month-over-month growth at each of the stores. They hit and miss that, but largely hit
spk03: on it for the for the first half of the year and we continue to see some upside on that store revenue per store basis as you as you commented on thank you and then just to follow up on that i think uh in terms of the yield increase they expect by the fourth quarter and the growth in terms and the addition of grow rooms that works out about 70 percent again correct my math if i'm wrong but it sounds like you have a significant output increase for Q. Obviously, you have six more stores you are adding, but if you can confirm that, intense your output outlook for Florida by end of the year.
spk07: Yes, I confirm that, Pablo, and that's part of the issue with us growing our revenue in that Florida market is the availability of flour. Historically, they have sold out of the flour as it hits the stores, and You know, the reorders happen, but there are some times where we don't have as much product as we need. With the expansion of the cultivation capacity and the yield improvements, we should be able to have product available when customers want to come and buy it, which will further enhance the revenue upside of all those store networks.
spk03: Right. And just to be clear, Florida right now, it's all greenhouse and you are adding indoor or it's a mix of both?
spk07: We're expanding the greenhouse. We will likely add, you know, we haven't added it yet, but we'll likely add one sort of segment of indoor. But the quality we're getting from the greenhouse improvements, the lighting, the HVAC, the dehumidification, you know, the water improvements is really driving great improvements in the product quality that we're getting out of that Florida operation. So it's It's a combination of both. We see that we'll eventually need that indoor for the ultra-premium, but we're getting some very, very high-quality flour out of the current operations. Right, right, okay.
spk03: And, you know, some of your peers are still very confident that Florida, if the ballot passes, that sales could start May 25th last year. Of course, it would be great for everybody. You sounded more cautious on that. You've talked about 2026. I don't know if you want to update your thoughts on your commentary on that front.
spk07: Well, you know, it's my personal opinion versus, you know, where we are as a group. But, you know, I think, you know, Bob, I'll let you handle that one in terms of what you think the – turning on Florida if it passes in November.
spk03: Yeah, I mean, you turning on, I don't mean you, maybe, I don't mean you.
spk07: Yeah, recreational passing on November, when is it going to be, you know, when does the legislation pass? I mean, you saw comments from Trump today about him supporting it, DeSantis still opposing it, so, but, you know, I think, you know, I'm a little more cautious in terms of timing, but, I mean, Bob, you go ahead.
spk01: No, no, Pablo, look, I haven't changed. I'm still very conservative. I'm optimistic. Look, anything we can do to accelerate the process is fantastic for the entire sector, but we've been in this rodeo before, and nothing at the state level, regardless of state, happens quickly, and it's typically the process. We've got a whole new round of licenses that we'll issue in conjunction with that. I'm sure there's going to be quite a bit of litigation, and... It's going to take quite some time for the legislature to get together a comprehensive regulatory package. So, again, we're going to get positioned and be ready to take part in that, but I don't think we've changed our timeline.
spk03: Right. And just one last one on that front. According to the current rules, will there be a wholesale market or is it going to remain as now, you know, just vertical or that's not defined yet because the rules are not out? Do we have a sense?
spk01: Yeah, that's a great question. We don't know that. We hear from different camps that, you know, they want to open the market up and make it, you know, more competitive in different segments. There's, you know, other talk, of course, keeping it exactly the way it is. So, but... And a lot of things can happen when the politicians get around the table and the bureaucrats. So we're just going to sit back and position and operate on the premise that it will happen. And when it does, we're going to be able to take advantage of that immediately.
spk03: And one last one, just going back to the Superstore. I mean, great, 11% sequential growth. I know the question was asked before, but I was looking at the numbers from prior quarters. I mean, was there a seasonal effect that helped that 11% or that 11% can really be pretty much fully attributed to a launch opening? And if so, you know, how much of that lift is the launch itself and how much more sales in the store itself due to a traffic that went to a launch?
spk04: Dennis, I don't know if you want to jump in there.
spk07: Yeah, I'll try. I'll estimate it by this week. It's a tough one, Pablo, because, you know, you can't, as you know, you can only consume what you buy in the lounge in the lounge, and then you go across the hallway and buy the product, or you come back and buy the product in the superstore, at the dispensary. It's also being driven by the other venues and events that Bob mentioned. Like, we have Plaza 13, which is the hallway that is licensed, you know, versus... driving people, I think we hosted a Pauly Shore YouTube session there. So there are a bunch of traffic drivers. There is some seasonality. The day's consumption lounge, probably $500,000 in revenue of the million improvements, so half of the improvement probably coming directly from the lounge. And then it's hard to say the rest of the improvement, if it's customers from the lounge coming into the superstore, there's probably some of that. There are two tattoo customers coming in, you know, so it's a mix on the other half of that improvement. But yes, there is some seasonality to it. You know, in the summer months in Vegas, it gets a little bit choppy depending on the weather and traffic patterns coming in from California and the tourists.
spk03: And the launch opened April 1st, right? And I think you, in your preparing margin, implied that there was still a lot of room for growth. I mean, it would seem to me already the benefit, it's great, but it already played out. Or maybe you're going to expand in terms of why we should expect more benefit in terms of delta to sales.
spk07: Yeah, I think, you know, for the quarter, it all opened April. You know, April 1st, the majority, you know, 100% of the quarter, it was open, but there was a ramp-up period in there. We're fine-tuning the product mix. We've got reservations now, as Larry mentioned. We have viewing events and other promotional events happening inside the lounge. We're going to try and take advantage of both promotions outside the lounge and inside the lounge to help drive some additional traffic. It's not full 100% of the time, but it's getting there. We've got reservations. that we're taking for things. And so it's still got upside growth to it, but it's performing as we expected it would. Right. Thank you.
spk02: Dennis, I'm just going to add that in my point, there's a lot of upside growth left in that lounge. Just what, again, I'll just repeat what Dennis says. With comedy shows, we've got a plan that are coming in there, different tasting events, the NFL Sundays and so on. In my mind, A ton of growth left inside there. It's past what we expected when we first opened it. It surpassed that. But now that it's going that direction, we've got a lot more going on and a lot more things planned for it. So it's going to be a great driver.
spk03: Okay, that's great. All right, that's all for me. Thank you very much. Thanks, Doug.
spk06: Thank you. Your next question is coming from Doug Cooper from Beacon Securities. Doug, your line is live. Please go ahead.
spk08: Good evening, guys. Can you hear me? My headphone sometimes doesn't work as well. Can you hear me? I sound great, Doug. Here you go. Okay, perfect. Okay, perfect. Sorry, I think I might have joined a few minutes late. I just wanted to confirm a couple things. Revenue, $31.1 million, of which $7.2 million is from Florida. So just the existing operations prior to Florida, $23.9 million. Is that right, versus $22.9 million in Q1? Yes, that's right, Doug. Okay, so the million-dollar uptick was due primarily to the Superstore in Illinois?
spk07: Yeah, as we commented on, you know, from the lounge, from additional Nevada, from the Superstore itself, and then some from Illinois. Obviously, Illinois is a smaller starting point, so it's more impact from the Superstore. Okay, and then California? You know, California is, is flat to slightly up, but we've improved profitability there as we continue to focus on costs and drive traffic. It is a challenging market in California, so it's not as robust as we were hoping. Okay.
spk08: So $31.1 million, but you weren't able to recognize $7.2 million, right? Right. So we're able to recognize $5.7 million, I guess, right?
spk07: Yeah, for the first half of the quarter that we didn't know invite again.
spk08: Yeah, you're correct. Right, so pro forma is kind of almost $37 million, right? Yes. What would be the incremental lift to EBITDA from that incremental $5.7 million of revenues? Yeah.
spk07: As the Florida operations continue to get better and the margins improve, it's hard to speculate where that 5.7 in the first half of the quarter would have gone because there are costs in there associated with the acquisition that we have, obviously, that was incurred at that operation. So I'm going to hold off speculating on that one, Doug. I know where you're going with it, but I'll hold off and we'll look at it in Q3. Okay. Okay.
spk08: Maybe just getting back to Pablo's point. So the company's running, the Florida operations are running about, what's that, 52 million annualized, if there's no seasonality, on 26 stores. So about 2 million in their stores.
spk07: Yeah. Your math is right.
spk08: Okay. And then you've got six stores, Bob, you mentioned three ready to go in Florida, three nearing completion. So you think you'd have, how many stores do you think you'll have in Florida in 2025?
spk07: Well, we'll finish this year, Doug, with those six open. So we'll have 32. And then, you know, there are plans for, you know, another six to 10, depending on where we can find and where we can open them up. I mean, the team is pretty active in scouting out new locations and really driving the growth in that network. as well as driving the growth in revenue from the existing store footprint with new product offerings.
spk05: Okay.
spk08: So assuming it continues to be medical only, how long does it take a store to ramp up to the average $2 million a year?
spk07: Yeah, I'd have to get the Florida guys on to get that question answered, Doug. We'll get back to you on that one. I'm not 100% on the actual timing. They would know better based on when they open the last set of stores, so I'll get back to you.
spk08: Okay.
spk07: Okay.
spk08: And the CapEx for the six you just mentioned, Dennis, you mentioned you've got three to five million earmarks for CapEx over the next six to nine months. Is that including those six stores?
spk07: Yes. It's including the stores, too.
spk08: Okay. Okay. And then you were a bit cautious, you said about in the second half in 2025 based on consumer behavior. Is that across the board? Is that in Florida, in Nevada, or is that primarily in Nevada and Illinois, do you think? Or is Florida, because it's medical only, is that under the same sort of restraints? Yeah, it's much more...
spk07: yeah it's more it's more than nevada superstore market that you know that comment was really directed at i mean florida medical only if if rec does go through you know 25 could be you know a boon if it if it opens where everybody thinks in may or people think in may but if it gets delayed into 26 and we continue with that medical market uh there's still a lot of upside in that medical market and for us to drive the the this per store revenue closer to the to the state's average So there's upside there for sure for us in Florida, but the cautious nature of that comment was really directed at the Nevada operations. Okay.
spk08: And just so I'm clear, what is the state average in Florida per store?
spk07: It depends. If you look at, if you look at Trulieve as the leader, I think they're around 4 million. We're at two, the state's average. So it's going to depend on how, what you exclude because there are operators with, you know, minimal number of stores, but doing well. Others that, Same number of stores doing smaller, but I just look at if we can target and try to achieve somewhere with what Trulieve is doing on a per-store basis, we have a lot of upside still.
spk08: Yeah, no doubt. Their stores are similar size in terms of footprint?
spk07: Yeah, I believe across the network. They may have some larger format stores, but overall, I think the stores in Florida are all roughly around the same size.
spk08: Okay. And, Bob, you talked about Nevada. You and I have talked about this before, but potentially picking off some of these independent operators. What is the current store count in Nevada, and how many are feeling really stressed right now?
spk01: Yeah, Doug, I don't know the exact number right now, but I would say it's about 110 stores statewide. I would say probably 80% of those are... experiencing moderate to severe distress, it's a very, very tough market. And we're fortunate that, again, because our model focuses primarily on the tourist customer, but there's a hell of a battle going on amongst operators for that local customer. And we're seeing a lot of price compression. We're going to continue to weather the storm, but as I said in my comments, I'm still optimistic if we pick up another store or two to really kind of fill it into the network here and help with our cultivation in particular. So there's upside, but a lot of these folks just need to get serious about their pricing. They've got to get real with respect to where the market is now. And we've had some pretty meaningful conversations with several groups, and hopefully something will come together here.
spk08: You want to stick in Clark County kind of area or would you head up to Reno or anything like that?
spk01: Yeah, no, I think we'd prefer to stay in Metro Clark County. I think Reno has got its own challenges and there's a saturation up there. But again, for the right deal, you know, look, we're not opposed to looking statewide. It's just we've been primarily focused in urban Clark County.
spk08: I'm assuming your opening salvo is I'll take over your lease and buy your inventory.
spk01: I'm sorry, say that again?
spk08: I'm assuming your opening bid is sort of I'll take over your lease. Yeah, yeah, pretty close. Exactly. Okay, that's it for me.
spk01: Great, thanks, Doug. Good talking to you.
spk06: Thank you. And there are no further questions in queue at this time. And this does conclude our question and answer session, as well as today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.
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