Planet 13 Hldgs Inc Nev

Good day, everyone, and welcome to the Planet 13 Q1 2025 Financial Results Conference call. Just a reminder, today's call is being recorded. At this time, I would like to hand the call over to Mr. Mark Kindersma. Please go ahead, sir.

Thank you. Good afternoon, everyone, and thanks for joining us today. Planet 13 Holdings, first quarter, 2025 financial results were released today. The press release, the company's quarterly report 10Q, including the NB&A and financial statements are available on the SEC website. Edgar and Cedar Plus, as well as on our website, plan13.com. Before I pass the call over to management, I'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 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 violence that are made available with the United States Securities and Exchange Commission's and on CDAR+. We encourage listeners to read those statements in conjunction with today's call. As a result of these risks and concerns, the results or events predicted in these four clicking statements may differ materially from actual results or events. In addition, we'll 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. 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 Gronsbeck, co-chairman and co-CEO, and Dennis Logan, CFO. I'll now pass the call over to Larry Scheffler, co-chairman and co-CEO of Plan 13. Larry, go ahead.

Hello, everyone, and welcome. We appreciate you taking the time to be with us. I'll start with a look at our operational performance before handing things over to Dennis for a deep dive into our financials. Bob will then take you through how we're adapting and executing on our strategy in today's volatile environment. In Q1 2025, the Superstore, including Dazed, delivered $11.2 million in revenue. Q1 was a challenging quarter in Las Vegas, with our visitor volume, per the Las Vegas Visitors Authority, reported down 7% year over year, in what is already a seasonably low part of the year. This translates into cannabis sales statewide for all operators down 9% year over year, with a disproportionate impact on the Las Vegas area. Despite the broader headwinds, our teams executed with discipline. Our diversified product mix, unique celebrity-focused products and events, and superior location are helping us defend our market share. Revenue from our neighborhood store network came in at $13.4 million, reflecting a 5% sequential decline from Q4, largely driven by seasonal trends. Declines in Nevada, California, and Illinois were offset by encouraging growth in Florida. This is early signs of the impact we're seeing from the upgrades and improvements we started making late last year. These new cultivation rooms are producing significantly improved flower quality, potency, and yield, which is fundamental to us regaining the market share in Florida, a core priority to us. Across the Superstore and our neighborhood network, total retail revenue reached $24.6 million compared to $26.9 million in Q4 2024. While this market is certainly challenging, we are pleased with our relative performance, especially in our core states of Nevada and Florida. We generated $3.4 million from wholesale in Q1, consistent with 3.4 million in Q4. In a quarter where both our wholesale markets were down over 3% sequentially, this is a strong performance, illustrative of the difference of our branded products in Nevada. Our performance was led by our medicine and ha-ha brands, which both saw strong growth year over year. In addition, We augmented our popular in-house brands with celebrity brands that have significant built-in customer following, like Khalifa Kush. In California, our performance is driven by our ability to flex a low-cost cultivation facility in California to maximize our yields. While consumer softness and industry-wide price compression continue to pressure the market, we remain confident in our ability to execute. Backed by commitment to product quality and brand strength, excuse me, we are taking proactive measures to adapt, innovate, and reinforce our leadership in this dynamic environment. With that, I'll turn it over to Dennis to walk through our financials.

Thank you, Larry. In Q1 2025, Planet 13 generated $28 million in revenue. up from $22.9 million in revenue in Q1 2024, and down from the $30.3 million we generated in Q4 2024. The sequential decline mimics what happened across most of our markets, with Nevada, California, and Illinois being down sequentially, driven by seasonality, consumer weakness, and persistent pricing pressure. The year-over-year increase was the result of the inclusion of revenue from our acquisition of Vitacan, which closed in May of 2024. and was not included in our Q1 2024 results. Looking forward, we expect the operating landscape to remain volatile, shaped by sustained competition and pricing pressure that will likely continue to affect top-line performance. Industry dynamics are being further disrupted by the growing prevalence of intoxicating hemp products and ongoing illicit market activity, particularly in California and Nevada. These challenges are compounded by the notable decline in tourism in Las Vegas, and heightened competitive activity in Florida. Gross profit was 12 million in Q1 2025 compared to 13.1 million in Q4 of 2024. This translates into a gross margin of 42.8% in the quarter compared to 43.2% in Q4 of 24. Gross margin continues to be under pressure industry-wide driven by price compression across all our markets. with price down for equivalent grams on average of around 5% year over year. On the positive side, we are seeing improved product quality coming out of our Florida cultivation facility from the recently completed upgrades. This will help us reduce the amount of discounting in the state and drive gross margin expansion for us across our store network. Sales and marketing expense increased marginally to fit $1.5 million in Q1 up from $1.4 million in Q4. The increase in expenditures can be attributed to specific marketing actions in Nevada, along with costs associated with transferring the Vitacan website and e-commerce platforms to the Plan 13 platform. G&A was down marginally from $14.1 million in Q4 to $14 million in Q1 2025. At the end of the quarter, we initiated a comprehensive cost-saving program aimed at driving long-term operational efficiency and preserving cash in the more challenging macro environment that we're in. These efforts span across our organization and include streamlining our supply chain, renegotiating and consolidating vendor relationships, reducing discretionary spending, and optimizing our workforce structure. While some of these actions have resulted in near-term restructuring costs, we expect to realize meaningful savings over the next several quarters. The revenue deleveraging we saw this quarter ahead of the actions we have taken to right-size the costs resulted in adjusted EBITDA loss of 2.5 million. Our goal is to rectify this in the quarters to come by aligning our costs and focusing on our most productive and profitable assets. Turning to the balance sheet, as of March 31st, 2025, the company had a cash balance of 17.6 million. In addition, as part of the El Capitan lawsuit, we have a property that we are in the act of selling that is currently valued on our balance sheet at just over 4.5 million. We are significantly slowing our CapEx plans for the year, as we've largely reached the retail footprint in Florida that we are happy with. As of the quarter end, we had approximately $10 million in short-term debt outstanding, and subsequent to the quarter, we successfully refinanced $5 million in notes payable, originally due April 1, 2025, under the terms of the Vitacan Acquisition Agreement with a local banking partner. With reduced capital expenditure requirements, greater flexibility in our debt obligations, and a company-wide cost reduction initiative underway. We are sharply focused on improving cash flow and strengthening our balance sheet. With that, I'll turn the call over to Bob to discuss the steps we're taking as we focus on profitability.

Thank you, Dennis, and good afternoon, everyone. We entered 2025 with a realistic view of volatility in the cannabis market. Consumer environment remains challenging, as mentioned earlier, pressured by macroeconomic uncertainty, price compressions, and an increasingly competitive landscape across many of our markets. Yet we've seen these cycles before. The scheme has proven it can navigate turbulence, make the tough decisions, and emerge stronger. That's exactly what we're doing. The cannabis industry is evolving quickly, and we're evolving with it. We're executing a focused, disciplined strategy centered on profitability, operational efficiency, and free cash flow generation, starting with our two core markets, Florida and Nevada. We're conducting a full bottom-up review of our portfolio, state by state, asset by asset, dispensary by dispensary. This is a comprehensive realignment effort with a clear mandate, optimize margins, enhance efficiency, and improve returns on every dollar of capital deployed. Since the end of Q1, we've already taken decisive steps to right-size our cost structure, aligning with current revenue levels and market realities. driving greater accountability and visibility across every layer of the business, from corporate overhead to cultivation operations. At the same time, we are doubling down on what is working, our profitable core markets of Florida and Nevada. Florida continues to be our most important growth and profitability engine. In Q1, we expanded our retail footprint by opening three new dispensaries, increasing our market reach to cover the majority of the state's population. At the same time, we completed a major upgrade of our cultivation and manufacturing infrastructure. The improvements in yield and potency from our enhanced cultivation rooms have exceeded our expectations, boosting THC content and improving grams per square foot. These enhancements are already translating to improved competitiveness, reduced reliance on promotional pricing, and healthier gross margins. The next unlock is our investment in targeted automation. particularly in post-harvest processing and packaging, to improve throughput and cost efficiency. These upgrades will allow us to better match our SKU mix to consumer demand, including broader size formats for flour, pre-roll, and vape cartridges. Everything we're doing in Florida, whether it's expanding retail, upgrading infrastructure, or improving product mix, is focused on one thing, generating more cash from every dollar of revenue. turning to Nevada or other core markets. We remain focused on maximizing cash flow and sustaining our leadership position in a competitive retail environment. Our partnerships with celebrity and entertainment brands continue to differentiate us and attract new customers. We are actively leveraging these alliances to deepen loyalty and capture incremental market share while optimizing costs across our dispensaries and cultivation facilities. We're balancing our tourist-focused offering, which dominates Thursday through Sunday, with a more local-focused offering mix during the rest of the week, prioritizing what matters to our everyday shoppers, good products at low prices. Across the company, our operating mantra is simple, do more with less. While these changes won't yield results overnight, we are confident that they will materially improve our profitability and cash flow profile over the coming quarters. We remain disciplined in capital allocation, focused on cash flow, and committed to building a leaner, more resilient business. As the year progresses, we expect to return to profitability led by rationalization of assets, enhanced cultivation yields, tighter cost control, and smarter retail execution. We are not chasing growth for growth's sake. We are prioritizing durable, capital-efficient performance. To our employees, We want to say thank you for your resilience and commitment during this period of transformation. To our customers and patients, we remain dedicated to delivering high-quality cannabis products and outstanding service. And, of course, to our shareholders, we appreciate your continued trust as we execute our plan to drive long-term value for the company. And with that, I again want to thank everybody for participating today, and I'll now turn it over to the operator and open the line for questions from covering animals.

Thank you, sir. And everyone, if you have a question, it's star one on your telephone keypad. We will take a question from Frederico Gomez, ATB Capital Markets.

Hi, good evening. Thanks for taking my questions. First question on your cash flows. Negative operating cash flow this quarter, obviously a very tough environment. Do you expect to turn positive cash flow from operations through the year? You know, how do you see that progressing? If you could help us understand the drivers here, that will take you there. Thank you.

Hey, Fred. Thanks for the question, Dennis. You know, we do anticipate being cash flow positive operationally, obviously excluding any 280E tax payments, you know, how we're filing, so take that out of the equation. We are, you know, reducing costs at any call. at the retail level, wholesale level, at the cultivation level, as well as rationalizing our overall cost structure and trying to deliver more with less. We are making progress. April was promising as we instituted these changes. And I think we're aiming to be cash positive from operations from Q2, Q3 for sure. So our goal is Q2. And then, you know, kind of going forward, we are laser focused on minimizing any planned CapEx. As we said, we've got the store network in Florida fully built out to where we want it to be. We have one upgrade in Florida that we're working on, but largely all the remaining CapEx in our other markets are finished and finalized. So that's sort of the plan to go forward for the year.

Got it. Thanks for that. Second question on your Nevada position, I can see that you decided to not move forward with that. Can you talk about, you know, why, you know, what drove that decision?

You know, it was really, we were, from a technical perspective in the discussions, and I don't want to get into the detail on it, but suffice to say, we contractually decided didn't meet the conditions that we put into the acquisition agreement. And given where the market had gone to, we decided that it was in our best interest at that point to not to renegotiate the acquisition. The Nevada market, as Larry indicated, has been very challenging. Q1, more so than usual with the sequential declines in visitors in an already slow seasonal period. So I think we made the right decision there, saving that cash on a balance sheet for operations and go forward in Florida. And so focusing on existing operations in Nevada and our Florida network as the main focus.

Perfect. And then final question for me here. How should we think about the assets that you have, the operations that you have in California and Illinois, given that they don't look like their core assets. How should we think about that in terms of profitability and your strategy regarding those two states? Thanks.

Bob, do you want to take that one or do you want me to keep going?

Yeah, let me jump in. Thank you. That's kind of, as I indicated in my comments, that's part of our comprehensive review of all of our business units, including California. California has been a drag for quite some time on the balance sheet. It's a very difficult market, very challenging. There are some bright spots there. But, again, we're not married to anything. Moving forward, if they're not making money for the company, then we're going to look at alternatives. And California is not unique in that respect. Same with Illinois. We're taking a very deep dive to see what fits within the portfolio as we move forward.

Perfect. Appreciate the caller. Thank you.

The next question is from Pablo Zuanek, Zuanek & Associates.

Thank you. Good afternoon, everyone. Just understand better in the case of Florida, what's the upside here going forward? So it seems they're going to stop at 33 stores, but you have all these cultivation improvements that are coming through. But can you put a number on that in terms of, you know, are you expanding rooms? Do you still have room to improve yields? You know, are we talking about a doubling of output, a 50% increase? If you can try to quantify that. And related to that, at what point do you start rolling in more brands from your portfolio in Florida, or has that already happened? Thank you.

Well, let me jump in, and, Dennis, you can get a little more detail with Pablo, and Pablo is going to talk to you. Yeah, on the brand side, we are moving brands into the market now. We've seen a lot of our genetics have now gone through the system. We've received approvals from OMMU. Recently, for instance, we just got our Dreamland product lines approved, so we're moving ahead aggressively to start getting products to the shelves. It's a slow process down there, as you certainly know, and it takes a long time to get approvals. But we're comfortable with the strain mix that's coming in. We've brought a lot of genetics in from Nevada that are adapting quite well to that grow environment. And, you know, the cultivation side, as we said, and Dennis can talk more to the specifics, but, you know, these were substantial improvements to, you know, multiple rooms, with the latest state-of-the-art LED lighting, cooling, and environmental control. And we're seeing substantial increases in not only potency but yield. And we're very excited about that because we didn't have that last year. And so we're starting now. We're in a position where we can actually feed the store network with quality products consistently. We're not running out like we were last year. A lot of upside there. And, again, you know, integrating the new stores, you know, into the Planet 13 family has been a bit challenging. The new stores, it's been slow to get them rolled out, again, just because of the regulatory hurdles that we need to overcome. But we're very comfortable with the network that's in place now, and we're evaluating each and every store, you know, including all the legacy stores. So we're doing a deep dive analysis to see which stores can, you know, can be improved upon. And we're also going to look at, you know, whether some of those, you know, we need to think about moving them out of the portfolio. So a lot of things moving, but we're going in the right direction. So Dennis, I'm going to pass you on. Yeah, sure.

Yeah. And Pablo, just, you know, focusing on the, on the Florida capacity question, you know, the, the improvements we implemented in Florida were really meant to enhance product quality. As Bob mentioned, you know, we got caught last summer with, greenhouse-grown flower in a very hot, humid environment, and we saw THC testing levels drop substantially, as well as the quality of the overall flower decline way more than we anticipated. The new houses have rectified that. While it's not premium indoor flower quality like we have in Nevada, it has vastly improved over what was there. We've had the second of the two houses that we upgraded last It's come online. You know, I think we've got our first harvest off of it. So doing the yield analysis, as Bob mentioned, it's up substantially. We have enough capacity to feed the existing store network, and we do have substantial excess biomass on hand that we're going to feed into our planned BHO lab that is in process. That's one piece of CapEx that I mentioned in my comments on the call that we're still going ahead with. That will give us a full suite of products across our store network. Right now, we don't have the BHO concentrate products that all of our competitors do, and we're noticing patient demand for that in the Florida market, so we would rather be a one-stop shop, give them quality flour that we're getting out of our newly revamped houses as well as then have the BHO product categories in each of the stores to help draw customers into that one-stop shopping situation. So, I'm hoping to have that BHO lab online this year towards the end of the year. If we can accelerate it, we will. But we do have substantial biomass to start feeding through that. And with the existing capacity, both un-upgraded grow rooms and the upgraded grow houses that we have, we have more than enough to feed the SOAR network we have in Florida.

Right. Thank you. And look, I mean, this is more a comment, maybe, you know, for you to comment on my comment. But so when we check the SKUs per store, right, the Vitacom stores have very few SKUs compared to other competing stores, right, from the competition. But we are beginning to see the OMU flower numbers for you improve significantly. So that's being taken care of. And there's still a lot of room, however, on the non-flour side for all those extracts products. But what you're saying, you see room to improve that in terms of SKUs later in the year. So that's a good thing, but not in the short term, at least in terms of non-flour products. Is that correct?

Yeah, that's correct. I mean, we don't have the – Florida, as you know, is a fully vertical market. We don't have the capacity to go out and buy or source non-flour SKUs in the categories that we don't have, as you point out. And so – We're sort of, in the short term, we're stuck with what we have. We've done some analysis, you know, using the OMMU data on competing stores and have a pretty good idea as to what revenue we're missing on a per-store basis annually from lack of those products available on our shelves. And so, again, that should generate, you know, less than a 12 to 18-month payback on the CapEx we're spending, so.

All right, thank you. And then one for Larry, in terms of, you know, the focus on entertainment, the press releases continues to drive relative outperformance, so that's good. But can you give an update in terms of where are we with Fight Club, the focus on the apparel strategy? What's happening with that? Or when we talk about entertainment, it's mostly these celebrity-type related events.

Well, we backed off a little bit in the Fight Club. We didn't get as much success as we had hoped for. But we're doing a lot of other things to drive more people in here and get awareness from the tourists before they even get here. So we've implemented about two weeks ago where if you, on TikTok, which is going crazy all over around here, if you'll do a video and show us why you come in and you get a free pre-roll. It costs us very little to do the pre-roll, and right now we're getting 1,000 TikTok posts per week and increasing. So that's been a huge success for us since all the younger generation doing so much of the TikTok videos and what's going on. We're continuing to enhance that. We think it will be a big plus. So that's one of it where we're trying to kind of think outside the box and do more guerrilla marketing. which we're doing. We're also implementing a lot of, I like to say, guerrilla marketing on the EDC, pushing a lot for our consumption lounge, where we're hoping to even have that maxed out over this weekend with EDC through different guerrilla marketing tactics and where we're actually approaching the people as they're getting out of the ride chairs and so on and actually giving them a tour through the consumption lounge, even if the lounge is full. As long as they post a video again, they get a discount on there or another pre-roll. We're also utilizing, and it just started today, utilizing that if they spend, customers come in and get a $20 tattoo from the tattoo parlor in here, and then they come in two hours and spend at least $20 to get a free pre-roll. They think they can flood the market with that. The several locations that are around Las Vegas, they're going to help us promote that free of charge, giving the coupons out to all their customers. So those are a few things we're doing, again, to drive the different things here in Vegas that we think are going to be a very big success.

Right. That's great. Because, I mean, historically, the superstore has catered more to tourists, right, or it's been the bulk of the business has been with tourists. But you're saying that, I don't know if you can track the numbers, but are you seeing, you know, a greater percentage of local buyers coming to the stores?

No, it's still saying the same about 80-20 for 80% tour just because of where we are. But we want to capture more of the tourists that are coming to town. It's just so many that come in, and we'll stand there and watch them even coming in the front door. And if they're amazed and can't believe the floor, interactive floor they walk on, then they were here for the first time if they're that amazed with it. Otherwise, they walk across it and go inside there. the Planet 13. So it's still a constant battle with the number of tourists around the world that come here, and that's why we're trying to get more people aware of what's going on. We did a survey here the last few weeks, me and a couple other people down by the tattoo parlor. Hey, what are you guys here for? Oh, tattoo. How did you hear about it? How did you hear about the tattoo? Are you here to get cannabis? Are you going to shop for cannabis even though you're here? And every person that we've done a survey on for the tattoo parlor has been through TikTok, every single one. So we want to capture those people that maybe didn't come here to get a THC product or a clothing product and capture them through what I was just talking about with the coupon that the tattoo is going to help us with and capture some of those people, too. There's a lot coming in and leaving on that that It's low-hanging fruit that we think we're able to bring in and turn into basket sizes.

That's great. Thank you. That's all.

We'll hear next from Paul Penny, Partner Capital Group.

Hey, gentlemen. Any updates on the regulatory environment in Nevada, specifically on any efforts to curtail the hemp-derived THC products that seem to be increasingly prevalent and readily available on the strip?

Yeah, hey, Paul, it's Bob. You know, our session, of course, our legislature is in session now. Things are really kind of heating up. They've just got three weeks left, I believe. Initially, there wasn't really any significant language that we thought would reign this in. But then we did see a couple of bills that died, actually. were resurrected with some pretty significant hemp language. And again, we're monitoring that. We're going to just see where things go. My gut tells me that there's not an appetite to get a comprehensive bill passed this session, similar to what we just saw happen in Florida. But we're hopeful that there will be something on the books and they're There will be some regulatory oversight. But, again, you know, it's crazy up there. And as they get into the 11th hour, it's difficult to really gauge how things go until they actually, you know, pass out or fail. Fair enough.

There has been a little bit in Arizona, a little bit of a change there, a little regulatory change that's helped the last couple weeks. I'm sure you're watching that as well. Changing gears. All the help we can give, rather. Exactly. Just one quick one. When you look at potential cost-cutting efforts going forward, can you maybe force-rank maybe the two to three biggest focus areas? And is there an aspirational operating margin or gross margin you guys are trying to back into?

Yeah, Paul, it's Dennis. So we've always talked about maintaining a 50-plus percent gross margin percentage across the retail network and across, you know, and higher in Nevada where we have, you know, vertical integration and sort of more control over that market environment. And so the cuts that we're, you know, the cuts that we are making are both on the cultivation side, you know, controlling those costs. Obviously, it's mostly labor that we can control. We've got a lot of fixed costs in those operations. And the same thing on the production side of the equation. And then at the retail level, you know, consolidating stores and, you know, in the network to have one general manager run more than one store kind of thing. So trying to optimize optimizing revenue per employee at the retail end of the equation and maximizing yield per employee on the cultivation and production side of it. So that's sort of the core focus as well as reducing the non-cannabis SG&A and corporate overhead costs. Kind of looking at everything from getting concessions on our professional fees and audit fees and tax fees to everything in between.

Perfect. Thanks, guys. Appreciate it.

At this time, there are no further questions. Ladies and gentlemen, that does conclude our conference for today. We would like to thank you all for your participation. You may now disconnect.