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spk01: Greetings, everyone, and welcome to Planet 13 Holdings' 2021 First Quarter Financial Results Conference Call. As a reminder, this conference call is being recorded on May 27, 2021. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for research analysts to queue up for questions. If anyone has difficulty hearing the conference, please press star followed by the number zero on your telephone keypad for operator assistance at any time. I would now like to turn the call over to Mark Kinderswa, Head of Investor Relations for Planet 13.
spk04: Thank you. Good afternoon, everyone, and thanks for joining us today. Planet 13 Holdings First Quarter 2021 financial results were released today. The press release, financial statements, and MB&A are available on CDAR as well as on our website, planet13holdings.com. Before I pass the call over to management, we'd like to remind listeners that portions of today's discussion, including forward-looking statements. 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. As a result of these risks and uncertainties, the results or events predicted in these forward-looking statements may differ materially from actual results or events. Risk factors that could affect results are detailed in the company's public filings that are made available on CEDAR. We encourage listeners to read those statements in conjunction with today's call. The forward-looking statements in this conference call are made as of the date of this call. Plan 13 disclaims any intention or obligation to update or revise such information, except as required by applicable law. It does not assume any liability for disclosure relating to any company mentioned herein. Plan 13's financial statements are presented in U.S. dollars, and the results discussed during this call are in U.S. dollars, unless otherwise noted. On the call today, we have Bob Brosbeck, co-chairman and co-CEO, Larry Scheffler, co-chairman, co-CEO, and Dennis Logan, CFO. I will now pass the call over to Larry Scheffler, co-chairman and co-CEO of Plan 13 Holdings.
spk05: Thank you, Mark. Good afternoon, everybody, and thank you for participating in our first quarter call. It's been a little more than a month since we last talked to you, and I'm happy to report that the trends we were starting to observe have continued. Vegas is back, finally. Earlier in May, Caesars Entertainment reported that their rooms were sold out for the foreseeable future, mirroring what we see on the ground. We followed up with a record 9.7 million in sales in March and 10.7 million in April and are seeing continued strong performance through May. After battling against macro headwinds for the last year, it feels great to have the wind at our back and to be able to focus on capturing as much of the overwhelming demand as possible. On June 1st, the Superstore will be open without any COVID restrictions. This allows us to increase our operating capacity back to 100%. We'll also be moving back to having the Superstore open 24-7. On the last conference call, we talked about how we were losing sales due to longer wait times and other restrictions we had to take to maintain social distancing. The removal of these restrictions should help us capture more sales, and improve the level of service we can provide to each customer. Digging into Q1 sales, revenue was broken down into $15.8 million from the Superstore, $3.4 million from curbside and delivery, $3.2 million from our medicine neighborhood dispensary, and $1.4 million from wholesale and other. Our largest growth in Q1 came from our medicine dispensary and from wholesale as the growth of the superstore only really kicked in high gear in March. When we shut the medicine dispensary in Q3 of 2018, it was generating approximately $3.8 million in revenue a year. I'm pleased to announce how quickly we were able to get back to that number, especially since during the last two years it was closed. Well, it was closed. Many new dispensaries opened, all competing for the same local customers. It was really testament to how our team's customer service, superior product selection, and as Bob and I always say, location, location, location. Even with the return of in-store sales, our delivery and curbside have maintained strong through March and April. This is great as we are able to give locals a fast, convenient shopping experience while freeing up resources to provide hands-on service to tourists. It's a win-win situation. as each customer gets an experience that matches their needs. The state hasn't released sales data yet for March, but we have grown market share sequentially every month since December and expect it with our outstanding performance in March and April that we may have achieved records for market share in Nevada. The addition of non-pandemic retail and expansion of the double dispensary floor is progressing well, and we expect to have the extra 43 cash registers open in Q3. We will also have two new entertainment features at that time to continue to distance the Superstore experience from any of our other competitions. After fighting for a year to attract as many customers as we could during the time when there was no tourism, we are now facing a very different problem. How do we keep up with the overwhelming demand? While this problem definitely feels better, there is still work to do for us to maintain the revenue and profit we generate in Nevada this year. The lifting of restrictions will help us, as will the expansion on the floor. We're doing a good job of incentivizing local customers to purchase midweek or to utilize curbside or delivery to maximize the space and time we're able to give our tourists on the weekend. All of this is to say that while 10.7 million in April was an amazing number, We think we can and we will do better. With that, I'll pass it off to Dennis to discuss our financials.
spk09: Thanks, Larry. Before I begin, I'd just like to remind everyone that all the numbers discussed on today's call are stated in U.S. dollars unless specifically stated otherwise. While sales during the quarter were still seasonally sluggish and impacted by COVID-19 related operating restrictions during the months of January and February, The month of March was the first of what we expect to be many very good months in Las Vegas as the U.S. rebounds from COVID-19 and Nevada returns to a fully open economy, expected as of June 1, 2021. We've heard from a number of casino operators across the Strip that the hotel rooms are booked throughout the year for the balance of the year, and we look forward to welcoming these tours back to Las Vegas and to the Planet 13 Superstore in the months ahead. The company generated $23.8 million of revenue in Q1 2021. The month of April also showed strong growth, generating, as Larry pointed out, $10.7 million in revenue. This almost equaled the entire revenue for Q2 2020 during the month of April. So suffice it to say, we're off to a strong start for Q2. The month of May is also on track to break another record of monthly revenue. And with the state of Nevada expected to return to 100% open as of June 1st, we anticipate the trend will continue throughout the summer. Gross margin for Q1 was 53.8%, and we expect continued improvement in this number as the tourists return to Las Vegas. We've seen consistent improvements in gross margin month over month as we move through 2021. Sales and marketing expense was $660,000 this quarter, up slightly from Q4 2020, but still well below what we expect to be a more normalized level as we move to market to the tourists as they return to Las Vegas. And we also expect to see an increase at the end of Q2 and Q3 as we start to spend marketing dollars in support of our Orange County store opening. The company spent $7.8 million on G&A in the quarter, up from $7.4 million last quarter. As anyone who's been following Planet 13 closely would have noticed, we've been fairly active in recruiting and hiring more sales and operational talent in both Las Vegas and Orange County as we ramp up the Planet 13 Orange County location and prepare for the additional 40 point of sale terminals in the planned expansion of the superstore dispensary floor space. We expect G&A to continue to increase as a percentage of revenue in Q2 and Q3 as we open the Orange County location and then have this number trend back down after that as the store starts to gain some traction. As of March 31st, 2021, the company had a cash balance of $141 million. This is up from $79 million as of December 31st, 2020. Cash increased over the Q4 number as a result of $3.9 million in cash flow from operations. and $60.8 million from financing and warrant exercises during the quarter, and this was offset by approximately $3.5 million that we spent on CapEx related to the Orange County store opening and other initiatives. As a reminder, our current outstanding growth CapEx commitments are approximately $8 million for the Orange County Superstore Phase 1 build-out, of which $3 million has already been spent, and $2 million for upgrades and additions at the Superstore with the expected completion date in Q3 2021 and approximately $500,000 on improvements at one of our cultivation facilities. The balance in funds of approximately $132 million as at March 31st, 2021 is earmarked for accretive M&A acquisitions and other expansion opportunities. And so with that, I'll pass the call back to Bob.
spk03: Great. Thank you, Dennis. And good afternoon, everyone. As Larry indicated earlier, the year is off to a great start. and we're seeing day-to-day growth as COVID restrictions are lifted and Americans are feeling more comfortable traveling and going on vacation after a year of staying home. We agree with America. Everyone deserves a trip to Las Vegas and certainly Plan 13, or hopefully soon to our beautiful Orange County operation, P130C as we fondly refer to it. P13OC is really Planet 13 Superstore 2.0. We learned a lot over the last two years running the Las Vegas Superstore and are excited to share that experience with Southern California with its next generation entertainment features, intelligently designed facility that improves parking, customer throughput, and enhances the overall shopping experience. Construction is rapidly progressing and we are on time and on budget for an opening in July. The Las Vegas Superstore is still showing incredible growth after being open for over two years, and I'm excited to watch how Orange County ramps up through the first couple of quarters and the first couple of years as it gains strength and traction with local and tourist customers alike. We also expect that, like our Las Vegas location, OC will benefit as well as tourists and locals alike visit the store and Instagram, or share their experience on other social media platforms, sharing our unique entertainment features. Larry and I always say that our customers are our best marketers. Switching to brands and wholesale for a minute. We grew wholesale by 24.5% sequentially. We are starting to get traction with dispensaries and customers across the state of Nevada. We launched HaHa Beverages with a new line of sodas on May 20th. We've done extensive product testing and are very excited to see the response as we roll it out across the state. Although beverages make up a small portion of the total market, we still think there is a lot of upside potential. In-house brands made up for about 23% of retail sales. It is important to note, however, that this is for all product categories. If we look at individual product types, in-house brands make up 40% of edibles and concentrates, and 30% of vape products well on our way to our goal of 50% of derivative products. While we've explained, rather while we've expanded cultivation capacity at our Bell Street facility over the last few quarters, we are still unable to keep up with the overwhelming demand for medicine flower at our stores. We continue not to wholesale flower and to restrict it to our stores only. Our medicine flower attracts local customers who then expand their basket purchasing other Planet 13 products. We're thrilled with the quality of the first harvest coming out of Bell and are excited to continue as those additional harvest rooms come online. I'm incredibly excited about the future. Our first out-of-state expansion is on track, as I mentioned. The Superstore, as well as our local offerings in Las Vegas, are performing well, and we have a balance sheet to execute on the accretive M&A opportunities we are working on. I'll echo Larry's Larry's earlier comments. After a year, it feels like 10 years, it feels incredibly good to have the wind at our back instead of constantly fighting against it. The improvements we've made to weather the storm are already starting to pay dividends, and now with the return of tourism, we expect 2021 to be a great year for Vegas, for cannabis, and especially for Planet 13. With that said, I would now like to ask the operator to open the call for questions. Thank you.
spk01: At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation zone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, as we call for questions. Our first question comes from the line of Bobby Broson with Canaccord.
spk08: Please proceed with your question. Mr. Burleson, your line is open. Hey, guys. Can you hear me? Yeah.
spk06: Can you guys hear me? Okay, great. Sorry. I was talking to myself for a second there. Congratulations on the EBITDA and the nice cash balance. So, yeah, just maybe focusing on California first. Obviously, you guys are doing well in Nevada with wholesale and Curious what the opportunity is in wholesale in California. I know that's not the main focus of what you guys are doing there this year, but curious what you see kind of longer term with your own brands wholesaling to other dispensaries there.
spk03: Yeah, Bobby. This is Bob. Good to chat with you again. Yeah, obviously when we opened the Superstore facility there in July, it was reliant upon third-party suppliers. But Larry and I and our team, we've been actively engaged in discussions with a number of cultivators and production assets that we look to bring into the portfolio at some point. And our intent there, of course, when that happens, is to bring in our ha-ha and our medicine brands, roll everything into the California market and grow it there as well. And the nice thing is, given the large number of California customers that we currently enjoy in Las Vegas, They're already familiar with the products, and they're already asking for them in California. So we're real excited about building that tire brand portfolio throughout the California region.
spk06: Great. Sounds like you'll hit the ground running. And then you're at 70% or so. I'm not sure what the latest figures are in terms of dispensary penetration in Nevada. Where do you see that peaking for you? Dennis, I'll pass that over to you.
spk09: Yeah, so Bobby, in terms of a penetration number, 70%, we may get slightly higher than that, but I think we're in all of the biggest dispensaries in the state. We've got customers up in Reno. There are a couple of smaller outlying dispensaries that we're not in. For us, I think we're really focused on turning those existing customers into bigger customers as we go forward. with the repeat orders and bigger orders as we go. We are seeing that, and you're seeing that in the numbers in terms of our wholesale growth in the quarter, and we expect similar type of growth in Q2.
spk06: Okay, and just one last quick one. In terms of the small format stores, kind of replicating what you've done with Medizin, but maybe with the Planet 13 brand, Do you expect to kind of infill into California metros, or are you looking to do that initially elsewhere in Nevada or maybe in an entirely different state?
spk03: Yes to all three, Bobby. We're very active in California. I'm looking at retail opportunities outside of the superstore context, but also look Looking for opportunities in Nevada, if something should fall in our lap that makes sense, we take a hard look at it. But we're also looking at a number of other jurisdictions from the East Coast, again, all the way to California.
spk06: Okay, great. Thanks and congratulations.
spk03: Thanks, Bobby.
spk01: Thanks, Bobby. Our next question comes from the line of Doug Cooper with Beacon Securities. Please proceed with your question.
spk07: Hi, good afternoon, guys. Congratulations on tonight's quarter. So let's start looking at the numbers. I think the superstore is 15.8 million versus 15 in Q4. So medicine, I think it was Barbara, Larry, you said obviously it was the biggest growth sequentially, $3.2 million, $650,000 for medicine in Q4, which is, I guess, was that all just December?
spk09: Yeah, that was just December. Yeah, it would open November 30, but that's all December revenue.
spk07: So 600 times three is at 1.8. So it's been a huge average increase in the daily traffic, clearly, in medicine, even from December. What, you know, 3.2 to 6.3, that's running about 13 million annualized. What do you think the potential there to get back up to, guys, is?
spk09: You know, you take that one, Bob.
spk03: No, I was just going to say, Doug, I think we're just getting started back in medicine. There's a lot more competition in the market, as Larry mentioned earlier. But our proximity to Allegiant Stadium, I think, is going to be the big game changer for us. In addition to the fact that I think I've mentioned on prior calls, the improvements to the 215 interstate have all been completed. So there's really no traffic issues over there anymore. So we're really excited about that. The first big event at Allegiant Stadium will be July 10 with Garth Brooks opening up the arena. So we're terribly encouraged and excited about what that's going to draw because a huge amount of that traffic is going to flow right past our front door as people exit off of the 215 to get onto Sunset. Larry, I don't know if you agree.
spk05: No, no, I agree, and I expect us to continue to grow We're looking at ways to even get new customers through the store, you know, even people carrying iPads to walk through bud tenders. And I'm very confident we'll surpass where we were when we shut it down. I think we did $18 million in the first 10 months, but we'll surpass that here by the end of the year. Perfect.
spk07: the gross margin associated with the tourist traffic i think we've discussed in the past is better uh because you don't have to get the discounts like you do to the locals um as we move forward say in april just as a benchmark or maybe we could just look at the 15.8 uh gross margin the superstore versus a 3.2 million revenue from this from medicine what is it can you talk about what the difference in gross margin is and how much of a say increase in gross margin we can expect i guess through more tourist traffic overall as percentage of revenue and maybe as you get more vertical integration from your growth. What do you think the delta can be on gross margin?
spk09: Yeah, like Doug, we always think that in terms of gross margin getting into the high 50s, sort of in that 58, 59 range on a gross margin basis, obviously it gets impacted and the company overall, not necessarily specifically to the superstore, Wholesale revenue does have a lower gross margin compared to the retail gross margins. And then the medicine store does have a discount to the gross margin just because of the lower average ticket size and the Nevada local discount. But we are comfortable in that 58 to sort of, I would even say 60, 61 range, depending on how vertical we can get on the cultivation. We are close to where we want to be on the concentrate products and the edibles and the beverages in terms of hitting that 50% of revenue coming from those brands and those SKUs in each of the product categories. Where we fall down is flour. And as Larry mentioned, we are improving and spending money trying to enhance our ability to grow more flour in the cultivation facilities we have. kind of working towards that. So I think we can see an increase in the gross margins if we got to the flower to the 50%. But that's not a short-term.
spk05: Yeah, and let me just add to that, Larry, that we're also in the planning stages right now of adding 20,000 more square feet of just cultivation, of course, on our 45,000 square feet building that we bought about nine months ago. Again, out of that $25,000 built out, we're in the plans of adding the $20,000 now, which will help dramatically.
spk09: Okay. It will help dramatically. It will move us on the way to that 50%, but we still may need a bit more flour to get there on that target.
spk07: So another 500, 600 basis points anyway from where you were at 53%, right?
spk09: We think so, yeah, as we go. Okay. Unless the wholesale market really takes off and we get massive holds filled in, I would I have to revisit that number, but I think the way everything is growing right now, we'll get comfortable with that.
spk07: Just a last word on the gross margin. Sorry. No, it's all right.
spk05: No, if I can just add, too, and we even had meetings this morning already on how to get out even maybe a quick stop and shop where you know what you want, but in that line of items that we do for a quick stop and shop where people don't want to wait in line. We'll be selling only medicine products, which is a much, much higher margin than reselling other people's products. Another way to drive up the profit for Planet 13 and get the people to a pastor without having to wait an hour on the weekends.
spk07: Right. Cash set at $141 million as of March. Is it different subsequent? Do you get some more warrant exercises in? Where does the cash stand now?
spk08: Yes.
spk09: Sorry about that. I was on mute. Yeah, so we have had more and more exercises come in since the end of March. I think we put it out in the MD&A in terms of the number of warrants that are coming in. But depending on where the share price is, we still have, I want to say, probably $380,000 to $400,000 of the July and September warrants that are priced at the $215,000 and $580,000 level. We're seeing some warrant exercises from the November financing as well, and then even had a couple from the February financing. So as the share price moves up, obviously, the better opportunity for us to take in more of those warrants in terms of cash. Okay.
spk07: And do you just have my final one, basket size? Is it published basket sizes anymore?
spk09: It's up to you. We haven't published them, Doug. I mean, you know, they're back getting, you know, July, January, February, they were obviously down given the slowdown still related to COVID. We've seen them return in March and April and then through May to where we had them kind of before the shutdown from COVID. So they're in that, I would say they're in that 110 to 125 range. Obviously a bit lower at medicine from the local customer versus the tourist customer like a superstore, but sort of overall blended in that range. Okay. Okay, I think that's it for me. Great work, guys.
spk07: Thanks, Doug.
spk09: Thanks, Doug.
spk01: And once again, as a final reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Once again, if you would like to ask a question, please press star 1 on your telephone keypad. Our next question comes from the line of Greg Gibbons. with Northland Securities. Please proceed with your question.
spk02: Hey, good afternoon, Larry, Bob, and Dennis. Thanks for taking the questions and congrats once again on the quarter and nice start to Q2 as well. Good to hear. I wanted to ask about kind of how you're thinking about sales and marketing ramping over the next several quarters with the overwhelming demand due to the tourist return. How are you thinking about kind of matching that with the increased
spk09: Greg, let me address the one part, Bob, and I'll turn it over to you. Just on the slowdown in January, February, in Q1, largely a result of the fewer tourists and the cab drops, et cetera. So all of that kind of dialed back as we focused our more immediate advertising on the local customers? But, you know, go forward in Vegas, I think you'll see it return to a similar percentage of revenue as it was, you know, kind of in Q4, Q3, Q4 of 20. And then I'll turn it over to Bob to talk about how we're going to ramp up Orange County in California.
spk03: Yeah, so, hi, Greg. Yeah, so Vegas, as Dennis indicated, you know, we're obviously, we're shifting that spin from, you know, from a local customer, again, back to the tourists. So we've reengaged, for instance, our WRAP cab program. It has upwards of 200 vehicles on the road with our new signage. They're rolling out every day. Put our vans back out onto the street to whisk customers to and from the facility. And as indicated in the MD&A, we're also going back, and I think Larry mentioned earlier, going back to 24 hours. So again, the spend now is really... directed primarily in Las Vegas to capture the tourist customer. And we'll continue to market aggressively for the locals at Medizin, but they already know us. They're familiar with us. For them, it's more about price. So we just need to be competitive there. California is an entirely different animal. It's a massive market. We're new to the market. So we're going to spend aggressively in the Orange County area in the greater region and focusing, again, where we can on, on the tourist sectors, the beaches, um, adjacent to the, uh, you know, to the amusement parks and of course shopping. So it's, uh, it's going to take a bit more time for that to ramp just given the size of the market, but, uh, we're pretty excited about the opportunities down there.
spk02: Got it. Yeah, that's helpful. And, um, yeah, you're, you're right. Um, I guess it's a bit different, but, uh, you've done a great job with it in Vegas in the past. So, um, You know, I remember last time I was there, it's kind of hard to miss those vehicles.
spk01: So good to hear.
spk02: You won't miss it next time.
spk01: Exactly right.
spk02: If I could follow up to while we're talking to OPEX, you talked about in your prepared remarks, Dennis, you know, DNA going up as a percentage of revenue once, you know, July hits and this California store comes online. You know, I guess I would just ask, you know, how much of a degree would you expect that to go up as a percent? And then maybe how long do you think it'll take to start declining again as a percentage of revenue?
spk09: Yeah, so in terms of how much, I look at the size of the operation in Orange County and the number of people we'll have there relative to the Superstore. Bob, how many, I can't remember the number of people we're hiring for. So you'll see some of that come in through Q2 leading up to that opening period. Obviously, no revenue associated with those people and employees that we're hiring there and the expansion of the superstore and the return to the 24-7 operating at the superstore. So, you'll see it kind of go back up, I guess, as to how much it will go up as a percentage of revenue. I think it's going to depend on how quickly you ramp revenue in California and how quickly we ramp additional revenue coming from the expansion in Las Vegas. So, I don't see it going, going above where we were on an operational basis in, uh, in Nevada, in, in, as I said, in sort of Q3, Q4, 2020, um, from a GNA perspective as a percentage of revenue. Cause I think the revenue will, will ramp significantly in Nevada. And from what I understand in terms of our plans in Orange County, we expect a similar type of ramp. So we may see a quarter to two quarters of slightly higher GNA, but should turn back down by the end of the year for sure.
spk02: Right. Okay, great. Yeah, that's helpful. You know, I did want to ask, too, if there's any, you know, rough expectations you'd be willing to share, whether it's, you know, type of customer traffic that you'd get at the Orange County location. You know, I know it's early and you haven't provided guidance or anything there, but, you know, maybe how many points of sale the store will have relative to the Las Vegas Superstore? You know, any commentary there?
spk03: Well, the Orange County facility, we're going to open with 50 registers. And to give you an idea on scope and scale with the Vegas expansion, we're adding another 43 registers here. So it's going to be considerably larger here initially. But the one thing that, Greg, I think is important to focus on down there, you've just got a lot more rooftops. And you've got roughly 6 million people just in Orange County. So we see the delivery opportunities down there to be even more significant than what we've built here in Las Vegas. So it's something that we're going to really focus on in conjunction, of course, with servicing the tourist customer and providing the entertainment experience at the OC facility.
spk02: Great. Yeah. I mean, nice to hear about that opportunity. Makes sense. And I guess the last one for me would just be following up. I hope I didn't miss this in your prepared remarks, but, um, Can you just remind us when that additional cultivation expansion or the harvest rooms are expected to come online?
spk03: Well, there are rooms coming online now with our genetics. So that has been happening here for the last 30, 45 days. It's the expansion that Larry was talking about, the physical expansion, that's going through permitting now. So we think we're close to seeing some light at the end of the tunnel there. And then once we receive all of our permits, of course, we'll move forward aggressively to build the balance of that space out.
spk02: Okay. Sounds good. Thank you.
spk03: Yep.
spk02: Thanks, Craig.
spk01: And with that, ladies and gentlemen, so there are no further questions left in the queue, this does conclude our question and answer session, as well as today's conference call. You may now disconnect your lines at this time. Thank you for your participation, and have a wonderful day. Thank you. Thank you all.
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