Planet 13 Hldgs Inc Nev

Good day, everyone, and welcome to the Planet 13 Q1 2026 Financial Results Conference Call. 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 2026 Financial Results were released today. The press release of the company's quarterly report for 10Q, including the NDNA and financial statements, are on... They are available on the SEC website, EDGAR, and CR+, as well as on our website, plan13.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 or that 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 to the United States Securities and Exchange Commission and on CDER+. We encourage listeners to read those statements in conjunction with today's call. As a result of these risks and uncertainties, the results or events predicted in these four living statements may differ 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 reconciliations to most directly comparable GAAP measures, please refer to today's press release posted on our website. Plan 13's financial statements are presented in U.S. dollars and results during this call are in U.S. dollars unless otherwise indicated. On the call today, we have Larry Schaeffler, co-chairman and co-CEO, Bob Brozek, co-chairman and co-CEO, and Steve McClain, interim CFO. We'll now pose the call over to Larry Schaeffler, co-chairman and co-CEO. Larry?

Good afternoon and thank you for joining us. Q1 was a transition quarter. that reflected the cost of the strategic repositioning we've executed over the past several quarters in quest for better cash flow, with the benefits beginning to show up in our April results. I'll walk through our operational performance, Steve will take you through the financials, and Bob will cover the strategic picture, including the exciting federal regulatory developments that have changed the landscape of our industry. In Q1, the superstar, including Dazed, generated 9.3 million up marginally from Q4. The Las Vegas tourism environment showed early signs of stabilization in the quarter, with visitor volume returning in modest year-over-year growth in March. That said, the broader market remains approximately 7% below the 2024 levels, and visitor spending behavior continues to reflect that softer baseline. The remaining headwind at the Superstore is cannabis-specific, unlicensed hemp operators on the strip, and continued illicit market activity. Clark County passed an ordinance in March implementing stricter regulations on intoxicating hemp products with an effective date in mid-July. That action, combined with the federal hemp restrictions taking effect in November, addresses what has been structurally a structural competitive imbalance in the Las Vegas market. We expect to see operational benefits emerge in the back half of the year as enforcement takes effect. Days continue to perform well, with revenue up approximately 47% year over year, demonstrating what a Drew Cannabis destination experience can deliver. Our neighborhood store network generated $10.9 million in revenue in T1, with Florida representing $8 million of that total. As a reminder, Q4 included a one-time benefit from the Florida loyalty of cruel adjustment that did not repeat. Adjusting for that item and for our California exit, the underlying neighborhood network was approximately flat sequentially, consistent with Q1 being the trough on a like-for-like basis. April results showed sequential improvements across all three neighborhood markets, Florida, Illinois, and Nevada. Combined, our Superstore had a neighborhood network and generated $20.2 million in total retail in Q1. April monthly retail performance was tracked consistent with the operating plan we built for Q2, and we expect Q2 to be the first quarter that reflects our repositioned portfolio are without the transition drag. Wholesale revenue was 0.9 million down from 2 million in Q4 with decline entirely attributable to our California wholesale exit. The story underneath that headline is in Nevada, where wholesale revenue grew approximately 41% sequentially in Q1. The third consecutive quarter of sequential growth in a direct result of the wholesale team restructuring what we executed in 2025. That progress is in a Nevada market that remains structurally pressured, reflects the operational work that this team is delivering. Q1 was the cost of doing the structural work, exiting California, completing the wagon trail consolidation, and rationalizing our cost base. Q2 is the first quarter where the repositioned business operated without those transitions under the results. The macro environment is not going to help us. We're still dealing with weak tourist traffic, a tough price environment, and now at least the impact of illicit hemp. But the operating model is now where we've been working to get it, and the early Q2 data is encouraging. With that, I'll turn it over to Steve to walk through our financials.

Thank you, Larry. The transition Larry described is reflected in our Q1 financial results. I'll walk you through the details and then address the impact of the federal restructuring rule on our financial framework before handing to Bob. In Q1, Planet 13 generated $21.1 million in total revenue, compared to $25.2 million in Q4, a sequential decline of approximately $4.1 million. As Larry described, that decline was almost entirely explained by two non-recurring items, the California divestiture, which removed approximately $2.5 million in quarterly revenue, and the absence of the Florida loyalty accrual benefit recognized in Q4. Adjusting for those two items, our underlying revenue base was approximately flat sequentially and our April retail performance is tracked consistent with our internal Q2 plan. Gross profit in Q1 was $9.4 million, representing a gross margin of 44.6%, flat with Q4 as reported, but an increase of 5.4% when excluding the benefit of the one-time loyalty adjustment in Q4. As we discussed last quarter, this is where we expect this business to operate. and we continue to see additional upside ahead. The DHO lab in Florida, with revenue beginning in Q2, will expand our higher margin product mix in our largest market. We sold our remaining inventory below cost in California this quarter, diluting margins, which won't reoccur next quarter, and the wagon trail consolidation in Nevada removes a persistent fixed cost drag from our cultivation footprint. We continue to expect gross margin to reflect those tailwinds in a material way as 2026 progresses. Sales and marketing expense was $1.2 million in Q1, roughly flat with Q4, and 22% lower year over year. G&A declined to $11.2 million, $12 million in Q4, a sequential reduction of approximately $800,000. reflecting the elimination of California overhead and continued cost discipline across the organization. G&A is now down nearly $3 million year-over-year, and we expect to continue to find efficiency through the balance of 26. Adjusted EBITDA was a loss of $2.3 million in Q1 compared to a loss of $0.3 million in Q4. The $2 million sequential decline was driven by non-operational one-time items primarily the absence of the Florida loyalty accrual benefit recognized in Q4, and the California revenue exit, particularly offset by the $0.8 million sequential reduction in G&A. On a year-over-year basis, our Q1 2026 results represent an improvement from a loss of $2.4 million in Q1 of 2025, even with the $2.5 million California revenue exit absorbed in the period. Past the positive adjusted EBITDA, as we described last quarter, remains the trajectory, with Q2 being the first quarter that operates without the transition drag from the California wind down. Turning to the balance sheet, we ended Q1 with $16.3 million in cash and restricted cash, up modestly from $15.6 million at year-end. We spent $0.7 million in cap-backs, which included the remaining construction payments for the Florida VHO lab and construction payments on the new store building in Sarasota. We have minimal cap-backs for the rest of the year. Operating cash flow this quarter was essentially break-even, consistent with our internal plan, and proceeds from the divestiture of our Orange County retail assets contributed approximately $1.5 million in the period. We continue to expect our cash position to improve through 2026 as the operational improvements Larry described translate into stronger cash generation. Before I hand it to Bob, I want to address the financial implications of the federal rescheduling rule that took effect in late April. As Bob will discuss in detail, this rule moved marijuana subject to state medical marijuana license from Schedule 1 to Schedule 3. Our Florida operations, which represented approximately 40% of Q1 revenue, operate under a state medical marijuana license and are therefore directly within the scope of the rule. On a go-forward basis, this fundamentally changes the federal tax treatment of our Florida business. The QQ1 tax provision of $4.2 million reflects pre-rescheduling 280E treatment for our entire footprint. We are working with our tax advisors and auditors on the appropriate treatment going forward, including the implications for the uncertain tax position liability of approximately $37 million currently on our balance sheet. Treasury and IRS guidance particularly on the retrospective relief, will be the key items, and we expect to be in a position to provide additional clarity on our Q2 call. In summary, Q1 reflected the transition costs Larry described, gross margin increasing as expected, G&A declining materially year over year, and our cash position modestly improved. Federal regulatory environment has shifted in a way that materially benefits the business. With that, I'll hand it to Bob.

Bob, your line is open.

Thank you, Steve, and good afternoon, everyone. I want to spend most of my time today on the federal regulatory developments that have happened over the past several weeks, because they are the most consequential thing that has happened in the industry in the past five years. On April 22, the acting Attorney General signed a final order rescheduling medical marijuana from Schedule 1 to Schedule 3 of the Controlled Substances Act. The rule was issued under the treaty pathway, which means it was not subject to notice and comment rulemaking. it is a final rule. For Planet 13, this is a direct, immediate, and material change. As indicated, our Florida operations operate under a state medical marijuana license, and now we sit on a Schedule III setting. The most important consequence, as Steve described, is that 280E, the federal tax provision that has imposed a punitive effect rate on license operators for decades, no longer applies to our Florida businesses on a go-forward basis. Separately, the Department of Justice has initiated an expedited proceeding to move all candidates to Schedule 3 through the standard rulemaking process. The hearings for that proceeding are scheduled to begin June 29 and conclude no later than July 15. We are not predicting an outcome or a final timeline, but the direct action and the direction of federal policy is clearly continuing to move in a positive direction, and we believe will have positive implications for our Nevada and Illinois operations. On the hemp side, two changes are taking effect. Our county's ordinance passed in March and effective mid-July, as Larry indicated, implements stricter regulations on intoxicating hemp products in our home market. The federal hemp restrictions and the 2026 Farm Bill take effect November 12, and likewise address the same problem at a national level. State licensed cannabis operators have long operated under strict testing, packaging, taxation, and age verification requirements that the intoxicating hemp market is largely ignored or avoided. Closing that gap is appropriate, but is one issue among several. And getting this industry to a level playing field will require continued progress On banking access, the broader 2AE question, and the adult use issue I just described. Stepping back, the combination of medical rescheduling and the hemp normalization moving through Park County and at the federal level addresses two of the three structural issues we've been operating against. The third, the broader macro landscape across all our markets, and especially Nevada, is starting to show signs of stabilization and improvement. Turning to operations, our VHO concentrate facility in Florida has completed final state inspections and received partial approvals. We are awaiting final state approval, which we expect to receive in the near term. Once approved, VHO will expand our higher margin product mix in our largest market and address what has been a meaningful product gap relative to the broader Florida concentrate category. We expect PHO to be a meaningful contributor to gross margin and a comparable sale performance in Florida through the back half of 2026. Q2 will be the first quarter that reflects a repositioned company operating without transition costs, as mentioned by Larry and Steve, with respect to the run rate. The macro and competitive environment is not yet showing meaningful tailwind, and our 2026 outlook does not depend on a recovery in tourism. Our outlook is built on the operating model there, as Steve has previously described. The cleaner cost structure, the normalized gross margin, the DHO contribution, and the operational benefit from the regulatory cascade beginning to take effect in mid-July in Clark County and continuing through November and into 2027 at the national level. I do want to take a moment to thank our team, every member of Planet 13 who has carried the work of this repositioning through what has been a very difficult period for the industry and for our company. We are positioned today better than at any point in the past 18 months. And again, I want to thank everybody for participating in the call today. And with that, I'll ask the operator to open up questions.

Thank you, sir. And just a reminder, it is Star 1 if you have a question. We'll go to Pablo Zuranek from Zuranek & Associates.

Thank you, and good afternoon, everyone. Look, regarding the competition from the same derivatives, obviously, you know, it's going to be effective July, as you said, in Clark County, Las Vegas, and then November at the federal level. But we are hearing that in some cases, because of a state-level track down, some retailers are beginning to desolder and not reorder. In a way, you will already be seeing some benefits. And can you comment on that, whether in Florida or Nevada or too early to tell?

I'll take a stab at that. We're hearing that, you know, tangentially in Florida. We're not actually seeing that translate to numbers in the stores yet. Las Vegas, not so much yet. But we do expect as we get closer to that July timeframe, we're going to see some significant changes. you know, uptick in improvements on our end as those stores start to close.

Okay, thank you. It's too early to tell. And in the case of Florian, my question is more about what's happening in the competitive landscape. We are seeing, you know, more operators at stores, more so than in 2025, I would say. Some people have also been expanding capacity. And pricing has stabilized, but there's not much growth, right? So can you comment on that? And as you see more peers add more stores, would you revise your plans and maybe add more stores also to your network in 2026?

Larry, do you want to jump in on that?

Well, in Florida, we're just holding tight on our stores in Florida right now until we see it. if and what is going to happen. So, I mean, just to be honest with you now, cash is king. We're going to conserve as much cash as we can and stick with the 38 stores unless it really shows some huge improvements or increase in traffic and increase in customers. So we're going to play safe right now and stick at 38 stores so we see a little bit of the future.

Okay. One last one, and maybe we'll take it offline also, but Can you explain maybe a bit more this one-time impact you had in Florida in the fourth quarter with the loyalty accrual? I think I worked it out to about 1.5 million versus the color you had, the color you gave. So, you know, normalized for two sales would have been like 8.8 million. But can you just expand a little bit on that, and is that something that we would see again in 2Q or CQ?

No. I mean, Pablo, it was about a little over $2 million impact. It was basically we modified our loyalty program at the end of last year, and we had accumulated a liability on our balance sheet that was basically relieved. And a lot of that liability that had built up was brought over from the purchase accounting of Vitacan a couple years ago. Basically, just relieving that off the balance sheet. But that's a one-time item.

All right. Thank you. Understood. That's all for me.

Yep.

Everyone, at this time, there are no further questions. This does conclude our conference for today. Thank you all for your participation. You may now disconnect.

Thank you.