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spk01: Hi, everyone. Welcome to Planet 13 Holdings 2021 Fourth Quarter and Annual Financial Results Conference Call. As a reminder, this conference call is being recorded on March 28, 2021. At this time, all participants are on a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at the time for research analysts to queue up for questions. If anyone has any difficulty hearing the conference, please press star followed by the zero for operator assistance at any time. I will now turn the call over to Mark Gundersma, Head of Investor Relations for Planet 13.
spk05: Thank you. Good afternoon, everyone, and thanks for joining us today. Planet 13 Holdings' fourth quarter and full year 2021 financial results were released today. The press release, the company's annual report on Form 10-K, including the NDNA, financial statements are available on the SEC's website, EDGAR, and CEDAR, 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 include 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 with the United States Securities and Exchange Commission and on CDER, and we encourage listeners to read those statements in conjunction with today's call. The forward-looking statements in the conference call are made as of the date of this call. Plan 13 disclaims any intention or obligation to update, revise such information, except as required by applicable law. It does not assume any liability for disclosure relating to any company mentioned herein. 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. 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 indicated. On the call today, we have Bob Grosbeck, co-chairman and co-CEO, Larry Scheffler, 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 16 Holdings.
spk03: Larry Scheffler Good afternoon, everyone, and thank you for participating in our fourth quarter and full year call. Today, I'm going to discuss the performance in Nevada and California and have Bob provide an update on our other growth initiatives later on the call. As predicted, after a very strong October, traffic slowed in November and December, driven by a slower tourist traffic, increased concerns around COVID, and the traditional seasonality. Overall for the quarter, Nevada statewide sales were down 5% from Q3. Despite the slower macro market and significantly less tourist traffic, we were able to maintain market share north of 10% for the quarter. It's a testament to the strength of our team that even in a quarter with significantly fewer tourists who are traditionally our main customers who are able to maintain our market share. In Q4 in Nevada, We generated $19.9 million from the Superstore, $2.6 million from curbside delivery and delivery, and $2.9 million from medicine, and $1.9 million from wholesale and other. For the full year, we generated $82.7 million from the Superstore, compared to $53 million in 2020. The increase was driven by the expanded floor area and points of sale, along with higher tourist traffic. million from curbside and delivery compared to 13.9. The lower curbside delivery is consistent with our expectations as many shoppers prefer the in-store experience. 12.7 million for medicine and 7 million from wholesale and other compared to 0.7 and 2.7 respectively in 2020. Both medicine and wholesale were effectively new revenue streams for us in 2020. examples of us executing our plan to diversify our revenue streams. Overall, we grew Nevada revenue by 62.4% in 2021. The typical trend in Las Vegas is for a slow January and February, with traffic picking up in March and into the summer, trailed by a slow November and December. Last year followed this pattern, and so far this year it's also been shadowing that trend. if not more exaggerated due to Omicron and consumer fears. The good news is that we're starting to see a pickup in traffic as we get into spring and closer to the summer. With concerns around COVID subsiding, we expect many events and conferences to be returning in full this year, leading to a strong bounce back in customer traffic. This isn't the first time we've had to deal with COVID-related slowdown in traffic. And what we proved last time is that as the market returns, Planet 13 will be there to capture the growth. Our owned brand performed exceptionally well during the quarter, growing 21% sequentially in Q4 with strength continuing into Q1 when it broke a half a million dollars in wholesale revenue two months in a row. This is especially impressive since the market as a whole has slowed down during this time. According to research firm Headset, Trendy had 5% of the Nevada market for both the concentrate and vapor category in Q4. HaHa had 10% of the edibles and 5% of the beverages. During the California, we saw month-over-month sales growth throughout Q4 with 7.2% sequential growth over Q3. This is despite continued construction-related obstacles that are constraining traffic. Sales have been slower during the start of Q1 2022, as California was hit particularly hard by Omicron in January, leading to staffing issues and slower sales. I'll let Bob add more detail to that. But we closed the acquisition of Next Green Wave on March 2nd, which will allow us to bring our incredibly popular brands into California, increase vertical integration to improve margins, and drive wholesale, increasing top-line revenue. We've taken further steps during the quarter to improve the margin profile at the store and expect improvement in our California operations with the addition of Next Greenway, both on a gross margin basis and as operating profit basis. And we're going to be able to achieve greater operating leverage. With that, I'll pass it over to Dennis to discuss our financials.
spk08: Thanks, Larry. Before I begin, I'll just remind everyone that all numbers discussed in today's call are stated in U.S. dollars and less specifically stated otherwise. So Q4 2021 is the first quarter that we are reporting under U.S. GAAP, having transitioned to U.S. domestic issuer status in February of this year. One of the main differences in our financial statements is the accounting for warrants. The company has adopted U.S. dollars as its functional currency under U.S. GAAP, and since the warrants outstanding other than the broker warrants are priced in Canadian dollars, It means that they are treated as a derivative liability as opposed to equity. Any changes in the underlying warrant values are recognized through the income statement as opposed to the statement of changes in equity. One of the other main differences is the treatment of our cannabis under cultivation. It's no longer subject to the fair value accounting under the IFRS biological asset standards. And the other change is to the treatment of leased assets. Leasing costs are expensed as opposed to being capitalized and amortized as they were under IFRS. The treatment of warrants as a derivative liability results in a large non-cash swings in value that flow through the income statement. An example of this is in our 2024 year results, where the large net loss was mainly driven by the change in the warrant valuation. As Larry mentioned, Q4 in the Nevada market was seasonally slow overall. However, we continued to maintain 10% plus statewide market share, which is our ongoing target. We believe that we have the ability to exceed our 10% market share target during the more tourist-heavy months of April through October. In California, we saw growth at the Planet 13 Orange County store where increased customer awareness and our near-perfect Google reviews translated into more customer traffic at the store. Overall, the company generated $29.9 million of revenue in Q4, a 48% increase over last year's quarters. Revenue for the full year was $119.5 million, representing a 70% increase over 2020. Over the course of the year, we saw strong growth in our core Nevada market at our medicine and superstore locations, as well as growing contributions from wholesale sales in Nevada and the addition of California revenue from a Plan 13 Orange County store. Looking at Q1 2022, as you've heard from most of our peers, we are seeing a softer market due to a mix of traditional seasonality constrained consumer wallets, and COVID disruptions, leading to some lost revenue. We are starting to see the traditional pickup of tourists into Las Vegas in the back half of March, and if past years are any indication, summer should be an exciting time for Las Vegas and Planet 13. Gross margins in Q4 increased to 54.3%, up from 53.4% over Q3 2021. The increase in gross margin was primarily driven by a shift in the promotional mix our products across our retail locations as we look to maximize gross profit dollars and profitability over revenue. Gross margin for the full year was 55.2% compared to 49.8% in 2020. This was partially driven by the increase in our in-house brand as a share of sales, something we are continuing to focus on as a lever to increase our gross margins. Across our business, we continue to target gross margins in excess of 50% for the long term. Sales and marketing expense in Q4 was $1.8 million, down marginally from $1.9 million in Q3. We are working hard on maximizing profitability over top-line revenue and are focusing our marketing spend accordingly. Excluding share-based compensation, G&A expenses was higher than we would like for both the quarter and the year. The increase was based in part on significant cost increases related to our transition to U.S. GAAP and SEC registrations. Along with that, we are seeing some pricing pressure for labor, but remain focused on cost control and generating cash flow over the long term. As of December 31st, 2021, the company had a cash balance of $61.8 million, no debt, and effectively fully paid up on our tax obligations. In a constrained capital market, one where you can't write off interest expense due to 280E, we continue to have one of the cleanest balance sheets in the industry to support our further growth. As Bob will discuss in his comments, The company is progressing with the rollout of its Florida roadmap, expanding our Nevada cultivation, and working on integrating the recently closed next green wave acquisition. We will continue to update the market periodically on the build-out and CapEx requirements of each. The plans we have in place focus our CapEx spend on the cultivation build-outs in Florida, the expansion of cultivation in Nevada. Each planned Florida retail location will be relatively inexpensive, an inexpensive neighborhood-style store until that market transitions to an adult-use market. We have sufficient cash on hand to fund all of our current growth initiatives. And with that, I'll pass the call over to Bob.
spk10: Thank you, Dennis, and good afternoon, everyone. We've been relatively quiet over the last few months, primarily because we've been focused on driving future growth for Planet 13 and shareholders. For instance, in Florida, We've got our expansion roadmap, which will take us to our six neighborhood style dispensaries, which we expect to open in the first and second quarters of 2023, with 12 more to follow closely thereafter. All of these will be supported by cultivation and production to bring our award-winning flower strains and product brands to the market. We are planning to build our cultivation in Central Florida, a prime for efficient distribution across the entire state, using modular and prefab building for indoor cultivation and built basically the same specs as the Next Greenway facility in California. This allows us to significantly speed up our time to market, reduce costs, and build in a modular fashion to meet our supply needs, all the while maintaining the quality Planet 13 and Next Greenway have become known for. Delivery of the building materials has already commenced at the selected site with its targeted assembly by the end of Q4. allowing us to get plants in the ground and ready for sale as soon as the first quarter of 2023. This lines up well with our planned retail build-out of our first six neighborhood dispensaries. After a heavy due diligence period and looking at many locations across the state, we started announcing where some of these locations will be. This has been focused on major population and retail areas. This is a template that has led us to success for medicine in Las Vegas attracting the local customer, and that's what we anticipate replicating in Florida. To put it simply, we are on track with the plan we had in place when we acquired the license to have cultivation and six retail stores up and running with the year. As was said earlier, we expect these six neighborhood stores to be followed by 12 more, and then by two to three super stores as the Florida market gets closer to an adult use transition. And of course, we'll have the supply to support a wider variety of products at that time. Turning to California and our acquisition of Next Green Wave, this acquisition was one of the few adjusted EBITDA and after-tax cash flow positive cultivation and distributors in the state. Their management team and cultivation staff have produced positive cash flows for over 18 consecutive months, and we look forward to having that efficiency and consistency not only implemented in our operations but also our financial statements and resulting enhanced cash position. We see multiple synergies with that acquisition. For instance, it gives us a chance to expand our popular brands in California, including Trendy and AHA Edibles and Beverages, which Larry mentioned earlier, all of which are top five brands in their respective categories in Nevada per an independent source headset. And back to Florida, with respect to that expansion, it'll allow us to utilize the Next Green Wave executive team to take their proven cannabis construction background and operational successes in California and implement those in Florida. As a result, Michael Jennings, Next Green Wave CEO and founder, will be leading this exciting project for Planet 13. We couldn't have picked a more suitable candidate for this position. Similar to Nevada, one of our priorities is to increase our our own grand share of shelf space. This increased vertical integration drives higher gross margins, increases our brand equity, and acts as a differentiated draw for our retail locations. In Nevada, for instance, our medicine flower line is a regular reason for locals to visit our store. In fact, it is one of the things our investor email inbox gets asked about most often. In Illinois, while the license is still held up by regulatory and legal delays, We have been talking with landlords and local regulators at various locations in the region while we continue to narrow it down to an ideal location. In Nevada, we expect the lounge legislation to be finalized in the coming months. And in the interim, we are working through various potential approaches in both the short and long term to maximize profitability. We expect to receive approval and begin build out of the cultivation expansion in Las Vegas within a matter of days. This expansion will add an additional 22,000 feet of indoor premium cultivation space that we've reserved for medicine flower. Once again, we believe this will unlock improved gross margins, increase customer traffic, and ultimately more profitability. 2021 was a pivotal year for Planet 13. We acquired the pieces to take us from a single-state operator to a multi-state operator with vertical integration in three states and retail in a fourth. 2022 is all about keeping our heads down and executing as we turn those pieces into the assets that will generate Planet 13's growth and profitability for the future. And with that, I again want to thank everybody for participating in the call and would now ask the operator to open the line for questions.
spk01: Thank you. The floor is now open for questions. If you have any questions or comments, please indicate so by pressing star 1 on your touchtone phone. Pressing star two will remove you from the queue should your question be answered. And lastly, while posing your question, please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we poll for questions. Once again, that's star one if you have a question or a comment. And the first question is coming from Bobby Burleson from Canaccord. Bobby, your line's live.
spk07: Yeah, good afternoon.
spk01: I'm curious about the...
spk07: The Florida build-out, what do you see as the most difficult to predict constraints in terms of how smoothly and how quickly you're able to ramp in 2023 and going forward? Is it like permitting and construction around cultivation or the actual retail site permitting, etc.? ?
spk10: Well, this is Bob. Let me jump in, Bobby. Good question. So obviously, you know, with respect to building the cultivation facility and the ancillary production facilities, you know, as I said earlier, you know, we've got material actually on site now. We did that in advance, as far advance as we could because of the supply chain issues that are affecting everyone in business now. So we think we've done a pretty good job of staying ahead of that and the uncertainty associated with supply chain issues. With respect to the retail stores, it's just a function of finding the locations and securing the local approvals. Now that's not always easy and it's not always quick, but we're pretty good at navigating that process. And again, with having Michael on the ground there with us every day and working with our consultants and real estate representatives, we've had some pretty good success and we don't anticipate that That's going to change. We're very optimistic about meeting the schedules we set with the OMMU when we purchased the license.
spk07: Okay, great. And then maybe just switching gears to Las Vegas. It looks like this is a good tourist season, and you guys should benefit in a big way. Curious kind of. What capacity is of the superstore, you know, visa V, you know, a big surge in tourist traffic and any kind of early indications that you have in terms of what You know what the season is going to look like.
spk10: Well, yeah, look, we're optimistic. Again, you know, we've been hit over the head with multiple strains of COVID for the last few years, as you know. And we've had a lot of, you know, a lot of steps forward. And then, you know, unfortunately, we had to take a step back or two. I'm encouraged now. I see, you know, I see the town starting to fill up again. I'm very encouraged to see the bookings for concerts and conventions, you know, coming back. to pre-COVID numbers. But, you know, look, there's, you know, the inflation aspect that we haven't addressed here that I think is something we all need to take into account. And we've seen soaring gas prices, you know, just costs in general have gone up considerably. We're going to continue to monitor that. But, you know, even with those pressures, we've been pretty excited to see a return to normalcy with respect to tourists here in Vegas. certainly as we come into the summer months.
spk07: Okay, great. Thank you.
spk01: Okay, the next question is coming from Doug Cooper with Beacon Securities. Your line's live.
spk06: Good afternoon, everybody. I think I missed the quarterly revenue from California. Sorry, I didn't quite catch that number.
spk09: Dennis, you got it?
spk08: Yeah, I'm here. Doug, just give me a second and pull it up. I don't think we mentioned the actual breakout of California. Part of the SEC requirements is we're considered one segment, and we don't provide the segmented detail anymore. Let me dig it up for you.
spk09: Go to your next question, and I'll come back to you.
spk06: Oh, okay. Bob, just on the lounges, I think in your – Your speech there, you talked about in the coming months. I think we were hoping to have this sort of done by the end of Q1. Has this sort of been delayed? And what are your thoughts on how this progresses?
spk10: Well, yeah, look, it was my expectation that we would have had something here in Q1, but it's government. But I'm encouraged. We've had some very significant process or movement rather in progress We've had a number of workshops. I anticipate based on the last workshop a week ago, there may be one more. Then I actually see this going into final form. So we do see light at the end of the tunnel, and we're going to continue to push as aggressively as we can with our colleagues in the industry. But at the end of the day, the CCB will make that determination. But we're getting close, getting really close.
spk06: Okay. Dennis, you obviously had a number of sort of, I'll call them one-time costs in 2021, you know, through the conversion to U.S. registrant or U.S., I guess, registrant. Out of the sort of $44.4 million of G&A expenses in the year, how many of that would you deem would be non-recurring? We're just trying to get a run rate for fiscal 22, I guess. Yeah.
spk08: So let me go back to your first question. It's $2.6 million for California for the quarter. It's a little over $5 million for the year or the back half of the year. And then in terms of those costs, I'm guessing if I add it all up, we're still waiting for some of the final bills to come in on the Form 10 filing, et cetera. But it was approximately $3.5 million to do that conversion in the U.S. GAF. do the three-year audits and go forward filing that Form 10. So that was one of the big chunk of costs there. There were some other one-time costs. We had a couple of failed acquisitions in there, probably added up to another $2 million in legal fees that we had to write off during the year, probably about $44 million. Obviously, if you look at the G&A and the G&A breakdown and the MD&A, you can get a sense of where those buckets are. We talked about salary increases. You know, being there, we are focusing, uh, quite heavily on, on trying to get our costs under control. Obviously, you need to have those costs under, under much tighter control in order to continue to make money. I mean, our revenue is up, up 70% of costs or we're up higher than that. So that was part of the problem here. We're actively working on that to keep it bringing it down.
spk06: Okay. So as we look forward into 2022, obviously 2023 is going to be the group, you're going to get the impact of Florida in 2023, potentially Illinois, and I guess potentially the consumption lounge in 2023. As we sit here in 2022, if Las Vegas picks up in the tourist season and you guys gain some share there, you'll get there. But California obviously is a big, the major growth, avenue i guess in 2022 uh next green wave being a good start there and building infrastructure what what is the plan i mean california seems to me you know it's always been a bit of a you know an anomaly it seems like it's such a huge market but nobody seems to be making any money and at some point there's going to be a return to rationality and you know there's nobody no clear winners there in in such a big market like what what are you how are you I guess, what are your thoughts in California about what you want to be in the next few years there?
spk10: Well, yeah, Doug. California is a challenge right now. I mean, there are a lot of headwinds. No question about that, particularly on the cultivation side. What it's going to take in the near term is the state of California to get serious about regulating the industry and about taking meaningful action to curb the black market. I mean, it's out of control. And the tax rates down there are just unacceptable as well. So those are all hurting our ability to be competitive. That said, I still think the location for the Superstore makes sense. As we start transitioning our products through the next Ringway facility into the store, we think that's going to help. I'm down there just about at least one week a month now. I'm seeing a lot of improvement on the freeway construction. and just an overall sense of um you know positive behavior from the consumers people are you know the they're starting to put the mass away starting to come out um i haven't seen the tours pick up yet but you know talking with you know other operators and other industries you know everybody remains uh optimistic that things are going to swing to the upside here pretty quick so yeah there's a lot of positive it's just taking much longer than we thought and um But we're going to continue to push forward, and we think we'll make significant improvement with the next green wave acquisition.
spk06: Yeah, I guess I'm just curious. You have the one store, obviously, and the next green wave is a very profitable company in the cultivation side and brings that vertical integration aspect to it. But do you want to open maybe more greenfield stores or like in Florida, obviously you're obligated to open at least six, but from the license, but you know, do you want to open more stores in California? Maybe where would those be if you're going to continue to increase your infrastructure in the state?
spk10: Yeah. I mean, look, the challenges of California have obviously also created some opportunities. There are a lot of distressed assets down there that are becoming more and more distressed every month. So, We're continuing to field inquiries, and we're looking at deals. Nothing's really hit our plate yet that gets us terribly excited. But we think that there will be additional opportunities. And to your other question, we think most of those will be a mix in the larger metro areas. And then we've seen some stores that have done quite well in the smaller, mid-sized communities. It's just a function of the right deal. We've got our plate full just trying to get Florida moving and getting next green wave integrated, but that doesn't mean we won't take a hard look at the right deal.
spk06: Maybe just my last one, then we all get back to Nevada. You talked about 10% statewide. I'm assuming in Clark County, you're continuing to be more than that. Can you talk a little bit about the competitiveness landscape there. Obviously, MedMen is having, you know, continues to have difficulty, you know, just maybe the competitive aspect for the tourist dollar. And then maybe just some comment on the medicine, how, you know, how they're doing for the local market.
spk10: Well, Doug, if you've looked, and I'm sure you have, you've looked at the state's numbers or less. I think they've published through December now. It's been very... and we've seen a pretty significant drop in revenue statewide. Look, there's much more competition here in the Valley, particularly for the local customer, and that's not going to abate anytime soon. You know, the state is still allowing operators to open, and, you know, we're just going to have to deal with that. But as Dennis said earlier, and I think even Larry alluded to in his comments, uh, we've held our own and, you know, we're, we're continuing to move forward. Um, and we think that, uh, we'll continue to be a significant or dominant player in the space. Uh, but again, with respect to the superstore, which is our biggest revenue driver, you know, it's a function of how the tourist market looks. So we're encouraged by that. And we'll, we'll just deal with the competition, um, you know, as best we can. That's, that's right.
spk06: Is there, is there any way you can quantify sort of the number of, uh, You know, conferences, say, for example, that are booked in 2022 versus this time 2021, you know, any sort of indicators to show that Las Vegas is going to be that much fuller sort of coming up than it was in the prior two years?
spk10: Yeah, I don't have that data in front of me, but you can look to, for instance, the Las Vegas Convention Visitors Authority, and then you can look into, you know, concert sort of booking, for instance, Allegiant Stadium and some of the larger venues. Their bookings are up significantly over last year. And so we're very, you know, like I said, we're very encouraged with that because those are real drivers for us. You know, there are certain shows and certain events that, you know, are fantastic for us, you know, historically EDC, for instance. Whereas others, you know, World of Concrete, for instance, that drives no traffic to us. So with concerts, though, we get a very nice mix. It seems like for, you know, for every large scale concert, we get a nice bump. So. We're very excited to see that. We're very excited to see Allegiant Stadium being utilized in that respect. So it's much more than just a football venue.
spk06: Okay. Thanks very much, gentlemen. I'll pass it along. Yep. Thanks, Doug.
spk01: Once again, if there are any remaining questions or comments, please press star 1 on your touchtone phone. The next question is coming from Greg Gibbous with Northland Securities. Your line's live.
spk04: Hey, good afternoon, Larry, Bob, and Dennis. Thanks for taking the questions. You mentioned some staffing issues in the quarter. Have they since improved, and if so, maybe what steps do you take there to remediate those issues?
spk08: I'll take part of it, Bob, and then you can do the front line stuff. We're seeing significant pressure in the back office area and the accounting staff and the administrative staff. The Nevada market is really heating up for talent, so we're having I think it's been a challenge keeping people from that perspective. We did get hit pretty hard with COVID, I think, at one point. At one point or another throughout the quarter and the back half of 21, where probably 50% of our employees overall had COVID and were out with COVID. So we did have some challenges there. But, you know, Bob, you want to talk to your specifics on the store itself and the storefront there?
spk10: Yeah, no, Greg, good afternoon. Dennis is exactly right. The other thing we had, though, kind of more falling into Q4, we really staffed up for Santa Ana. So we were pretty heavy on staff there initially. We paired that back considerably to make a more reflective traffic volume that we're seeing. So, you know, challenges there as well. A little different in Vegas, but we think we're starting to get our hands around that. And, you know, but there is a lot of pressure right now particularly with respect to, as I said earlier, increases in gas. A lot of our employees are coming in now, obviously bringing those issues to our attention, and we're trying to manage that as best we can. But it's not unique to our company.
spk04: It's unique to all employers. Right. Got it. That's helpful. And I guess along those lines in California, can you just remind us, when some of those headwinds like the freeway construction are expected to, you know, no longer affect business?
spk10: Well, when I was down with our managers last time, the number I heard is they're about eight to 12 months out for full completion of the 405 there. But, you know, based on what I saw, what I've seen the last few times I've been down there, they've made significant progress in the Santa Ana corridor where we are. So, you can now actually get off the Fairview ramp quite easily in the harbor ramp. So that's very encouraging. So, you know, and the whole focus, of course, now is to be able to get Warner over the freeway into beach cities like Seal Beach. So, you know, that's going to be, you know, many more months. But, again, you know, things are improving from my perspective considerably.
spk04: Okay, got it. And, you know, I guess in relation to the sales – impact from COVID? You know, probably hard to quantify, but if we were to maybe, you know, if you think about it being a slower season anyway near the end of the year, you know, how much did you maybe see from that in December? And I guess in relation to Q1, you know, I'm guessing a lot of it was January. And just wondering if you could try to maybe quantify or discuss, you know, how sales were impacted from COVID, you know, to the best of your knowledge and, you know, maybe how February has kind of trended since.
spk10: So, Dennis, I'll pass that to you.
spk08: So, Greg, it's kind of harder. The COVID impact has been ebbing and flowing throughout the year. We've typically seen more seasonality in Q4. Obviously, October is strong. November is kind of 10% down on October, and December 10% down on November. We've seen that now for the last three years. January kicks back up. It improves. This January and February were not as big of improvements as they were this time last year. March, we're starting to see significant increases in March as the tourists come back. I look at that more COVID, but as Bob mentioned too, it's also shrinking wallet due to the high price of gas and the high price of inflation are causing some of that and the lack of stimulus checks for some of our customers compared to last year. It's kind of hard to pinpoint exactly what is pure COVID versus others, but, you know, it's all having an impact. But we are seeing the uptick in their kind of back to more normal levels of visitors and spend in average tickets.
spk04: Okay, great. And I guess last one for me relating to the gross margins. You know, nice improvement, I guess, in the quarter despite the lower top line sequentially. Just wanted to ask maybe what you attribute that to and how you're thinking about gross margins in 2022?
spk08: Yeah, so the increase in gross margins is basically a larger share of the in-store sales at the superstore will come from our own brand overall as we push through our own capabilities and our own products into that marketplace. We also did see a softening in the wholesale side of the equation from a B and C grade flower, so we were able to pick up left expensive flour to process through our production facility. So we pick up some margin there as well. And we continue to completely sell out of our premium indoor flour and have not seen any price reduction in that premium segment of our flour market compared to the rest of the flour market. So picking up some margin there as our costs come down, our yields improve at the Bell Drive facility that we're currently continuing to expand.
spk02: Got it. Thank you.
spk08: Great. Thanks, Craig.
spk02: Thanks, Craig.
spk01: There are no further questions in queue. This concludes the Q&A portion of the conference call. Thank you, ladies and gentlemen. This does conclude 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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