Planet 13 Holdings Inc. (PNK:PLNH) Q2 2024 Earnings Call Transcript

Planet 13 Holdings Inc. (PNK:PLNH) Q2 2024 Earnings Call Transcript August 8, 2024

Planet 13 Holdings Inc. misses on earnings expectations. Reported EPS is $-0.03 EPS, expectations were $-0.02.

Operator: Greetings, and welcome to today’s Planet 13 Second Quarter 2024 Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Mark Kuindersma, Head of Investor Relations. Mark, the floor is yours.

Mark Kuindersma: Thank you. Good afternoon, everyone, and thanks for joining us today. Planet 13 Holdings Second Quarter 2024 Financial Results were released today. The press release, the company’s quarterly report 10-Q, including the MD&A and financial statements are available on the SEC website, EDGAR and SEDAR+ 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. 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 and the management’s expectations or estimates of future developments, circumstances or results will materialize.

Risk factors that could affect results are detailed in the company’s public filings that are made available with the United States Securities and Exchange Commission and on SEDAR+. 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 and forward-looking 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 reconciliation to the most directly comparable GAAP measures, please refer to today’s press release posted on our website. Planet 13 financial statements are presented in US dollars and the results discussed during this call are in US dollars, unless otherwise indicated.

On the call today, we have Larry Scheffler, Co-Chairman and Co-CEO; Bob Groesbeck, 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 Planet 13. Larry?

Larry Scheffler: Good afternoon, everyone, and thank you for participating in our second quarter call. Q2 was an exciting period for Planet 13, marked by significant developments and strong financial performance. We successfully closed the transformational acquisition of VidaCann and opened a completely unique days consumption launch. Turning to our performance in the quarter. In Q2 2024, the SuperStore generated $15.1 million, an 11% sequential improvement. This strong performance is directly related to our focus on delivering entertainment and experiential value to our customers. We opened Dazed Consumption Lounge in April and the results are clear both as a direct revenue driver with sales from the lounge and is a traffic driver that increased customer visits and sales for the SuperStore.

We are still learning and experimenting with the type of events, marketing and occasions that work best. But what’s clear is that customers love Dazed. Since opening on April 7, we posted private night watch parties, private events in podcast tapings. This is just the beginning. We envision big opportunities for events like NFL Sundays, Comedy shows brand-sponsored tasting events and countless other innovative ideas. This platform stands out in its unparalleled potential in marketing, brand building and driving traffic. Revenue from our SuperStore network increased by 143% sequentially, with us consolidating in Florida on May 10. It can get 1.5 months to our consolidated financials, resulting in $12.3 million from our neighborhood store network $5.1 million in Q1.

If we look at the organic growth by including a full quarter from Florida store network, for both Q1 and Q2, we grew total neighborhood revenue by 2% sequentially. The Florida team continues to push themselves to improve this product in quality and service levels, the results are obvious. Along with strong performance from Florida, our team in Illinois continues to mature in their operations. They grew sales by 18% sequentially, as they build both their reputation and brand equity in the state. Between the Superstar and our network — our Neighborhood network, we generated total retail revenues of $27.4 million, a 47% sequential increase. Excluding Florida, rental — retail revenue grew 8% sequentially. We also generated $3.7 million from wholesale, lifestyle and other things.

According to BDSA, we had the fifth most branded sales of any company in Nevada during Q2 and ranked second in our edible portfolio sales led by HaHa Gummies. This continued success is a testament to the product quality and brand equity that we built. With that, I’ll pass it over to Dennis, to discuss our financials.

Dennis Logan: Thanks, Larry. Before I begin, I’d like to remind everyone that all numbers on today’s call are in U.S. dollars unless specifically stated otherwise. Planet 13 generated $31.1 million in revenue in Q2 2024, compared to $22.9 million in revenue in Q1 of 2024. This large growth was driven by multiple factors, both organic and M&A related. We saw a strong performance at our Superstore and Illinois neighborhood store, along with contribution from the VidaCann acquisition. It is important to note that while VidaCann did approximately $12.9 million in revenue in the quarter, only seven weeks of the results were included in our consolidated revenue and the VidaCann network contributed $7.2 million to revenue in Q2 2024.

We will benefit from a full quarter of Florida operations in Q3 2024 as well as anticipated continued strength across our Neighborhood stores, our Superstore and our Wholesale Verticals. We expect to continue to drive growth in Florida and long-term growth in the Wholesale and Lifestyle Verticals, although off a smaller base. We are cautious about revenue growth in the second half of 2024 and the beginning of 2025, based on what we see as a weakening demand from the consumer as there are signs of stress that may impact our top line, as consumers’ trade down buying bulk or generally look for discounts. Gross profit was $15.8 million in Q2 2024, compared to $10.5 million in Q1 2024. This translated into a gross margin of 50.1% in the quarter compared to 45.8% in Q1.

The 430 basis point, improvement in gross margin is a testament to the team who work incredibly hard to bring down our internal cost of cultivation, through higher yields and increased utilization as well as the sell-through of our house brands and our store networks. It had a double impact of enabling higher levels of vertical integration, as we introduce HaHa Gummies in California and increased first-party sales of our house brands across our dispensary network. Along with these improvements in operations, during the quarter, we benefited from a shift in mix with wholesale making up a lower overall proportion of total sales. And as everyone knows, wholesale revenue comes with a lower gross profit margin. Sorry, we expect to see some improvement in Q3 2024, as a higher proportion of our total revenue is driven by Florida and fully vertical sales.

Overall, we are targeting to keep gross margins in the 50-plus percent range with continued efficiency improvements, offsetting pricing pressures. There will be some variability quarter-to-quarter as the state and product mix impacts the margins. Sales and marketing expense was $1.5 million during the quarter, up from $1.3 million in the prior quarter. As a percentage of revenue, sales marketing fell from 6% to 5%, representative of how marketing efficient our Florida operations are. Looking ahead, we have a couple of growth opportunities that we plan to invest marketing dollars behind, including our wholesale and lifestyle brands. Having said that, part of the benefit of the lifestyle brand that Bob will speak to later is how it works as a cost-efficient marketing strategy.

The company spent $12.3 million on G&A in Q2 2024, up from $10 million spent in Q1 2024. As part of that, we had to spend approximately $1 million on onetime costs in the quarter related to M&A and legal fees related to the El Capitan matter. Overall, general and administrative expense was 39% of revenue, compared to 44% of revenue in Q1. With the addition of Florida and the continued execution of our growth strategy, we are finally starting to benefit from operating leverage. We generated $3.2 million of adjusted EBITDA in the quarter, compared to zero in Q1 2024. This translated into a 10.3% adjusted EBITDA margin. We expect to see continued improvement in both the absolute level of adjusted EBITDA and the adjusted EBITDA margin throughout the remainder of the year as we benefit from the inclusion of the Florida operations, continued improvement in vertical integration across our stores and growth in our wholesale and lifestyle segment.

As of June 30, 2024, the company had a cash balance of $26.7 million. In the quarter, in the Q2, we generated $4 million in operating cash flow and used approximately $4 million in CapEx for upgrades to our cultivation facility in Florida and the build-out of additional dispensaries in Florida and the finishing of the day’s consumption lounge that opened on April 7th. We have approximately $1 million in construction commitments as of June 30, 2024, and plan to spend an additional $3 million to $5 million over the course of the next six to 12 months, focused on upgrades to the cultivation of manufacturing in Florida, along with turning on additional Florida neighborhood stores. The company has approximately $3 million in bank debt at our VidaCann subsidiary due in February 2025, $5 million in notes payable under the terms of the VidaCann acquisition due in May of 2025 and approximately $1.5 million in notes payable at VidaCann.

We anticipate cash proceeds from the sale of surplus land and equipment in Florida coupled with positive cash flow from operations and cash on hand will be sufficient to fund debt maturities over the next 12 months. As a reminder, for this year, we have been accruing our taxes as before on the income statement as if we are subject to 2AE, but we’ve been paying based on an estimated tax liability under normalized non-2AE treatment. This will have a significant positive impact on our cash flow over the course of the year, and we are encouraged by the overwhelming positive response to the DOJ comment period and feel confident in the approach we are taking with our taxes. With that, I’ll turn the call over to Bob to discuss the execution of our growth plan.

Bob Groesbeck: Thank you, Dennis, and good afternoon, everyone. As indicated earlier, Q2 was a solid quarter with good financial performance and strong progress on our growth initiatives. Last quarter, we introduced a multi-pillar growth strategy to significantly increase both our wholesale and retail revenue over the next couple of years. Let me walk you briefly how we are executing against each pillar. The first pillar of our retail growth plan was closing on our Florida acquisition. We accomplished that on May 10 and are well into the integration process. It is not an easy process integrating into a new state, 26 stores and hundreds of employees. The team has been great about working collaboratively to get systems and procedures in place to facilitate reporting, that integration and execution of our growth plans.

They’ve handled these additional responsibilities without missing a beat, continuing their track record of sequential revenue growth. To continue supporting the rapid growth of our Florida operations, we’re well underway on construction to improve and add Canopy to our Florida greenhouses and adding indoor cultivation. Upon completion in Q4, we expect our square footage under cultivation to increase by 25% and with yield increases upwards of 40%. This will enable us to increase supply and to support our growing network of stores and bring our incredibly popular brands into the state. In fact, just last week, we started planning our most popular medicine brand flower strains. The second pillar of the retail growth is expanding our neighborhood store network.

We have three dispensaries in Florida that are sitting at the starting line ready to open and are just awaiting final state regulatory approvals. Additionally, we have three more that are nearing completion, which would bring our Florida store network count to 32 stores. We are also actively pursuing more dispensaries through cost-effective M&A in Nevada. Nevada dispensary is a good strategic fit for us as it increases our operating leverage in the state, creates opportunities to increase verticalization and complements our super tourist-focused customer base with a more local historical customer base. The third pillar of our retail growth plan is the continued leveraging of the superstores, a one-of-a-kind lifestyle experience and brand building platform.

We opened days on April 5, as Larry indicated, we’re very excited about that opportunity, both as a revenue generator and as a draw for customers. But we’re still at the starting line in terms of figuring out how to best utilize the potential for the launch. We’re going to continue leveraging space for innovative public and private events and to bring people into the store, interact with our brands and deepen their love for Planet 13. Along with the lounge, we are continuing to leverage every inch of the superstore to increase traffic, offset lease expenses and create a must-visit destination in one of the greatest tour cities in the world. That includes a third-party operated Tattoo parlor and our expanded Grand hallway, Plaza 13, which has already hosted numerous unique events, celebrity appearances, and brand exhibitions.

The second part of the growth plan is growing our wholesale business. We’ve introduced HaHa Gummies into California, starting with our own dispensary and limited trials. This has created instant benefits from increased verticality, and we’re also on the verge of a much wider launch of this product for wholesale customers throughout California. We are also actively in discussions with third-party manufacturers and distributors to bring this brand to Illinois. We look at wholesale’s long-term growth opportunity that will build slowly but with big upside potential. At the end of July, we launched our lifestyle brand worldwide. The lifestyle brand is a strategic pillar for us. It gives Planet 13 fans another way to interact with us, deepening the relationship with Planet 13 merchandise and turning them into brand ambassadors.

It also acts as a cost-efficient way to get national and international brand awareness. It allows us to take part and traditional advertising channels and traditional cost instead of the limit options available to the cannabis market. We kicked off the lifestyle brand with UFC fighter, Chito Vera, as the first sponsor to athlete. Chito is part of a drilling fight on August 3 and has been a great brand spokesman for Planet 13. This is the first and the new strategy to target up-and-coming athletes, entertainers and influencers with strong followings, crossover appeal to cannabis users and online presence to cost effectively market and expose the Planet 13. Long term, we think this could be a meaningful contributor to our financials. In addition to the strategic value, we will start to recognize right away.

To conclude, we are continuing to exercise on an exciting two-pronged growth strategy. In Q2, we’ve made significant progress in both wholesale and retail, increasing revenue by 20% year-over-year, with a clear pathway to further improvement. We’re innovating as a cannabis and lifestyle company to create a national brand with substantial underlying value. And we’re generating operational leverage to becoming more profitable and to generate more cash. And with that, I want to thank everybody again for participating today, and I’ll ask the operator to open the call for questions from covering analysts. Thank you.

Operator: Thank you. The floor is now open for question. [Operator Instructions] And the first question today is coming from Yewon Kang from Canaccord Genuity. Yewon, your line is live, please go ahead.

Q&A Session

Yewon Kang: Hi. Good evening. This is Yewon Kang on behalf of Matt Bottomley. Thank you for the question. So my first question here is regarding the out performance within the Nevada and Illinois. Could you talk about the initiatives that that you guys had in place for days, whether it was a sports watching event or anything like that, led to this growth, for the superstore as well as the Illinois neighborhood store? Thank you.

Dennis Logan: Sure, It’s Dennis here. I’ll take the first part of that question. So with respect to the superstore, the initiatives we’ve focused on, we’re driving much better penetration of our house brands in the store itself. This is excluding day that sells 100% of our own brands in days. So it was a combination of increasing flower sales to 50-plus percent in total volume from our own internal cultivation, our ability to leverage that and the higher margins we get from that in the store as well as days. Obviously, it sells 100% of our own product in the lounge at, call it, 80% to 85% margins. Events and days drove traffic both at days and to the superstore itself. And so it’s having the effect that we had hoped, along with the addition of the tattoo parlor, that they’re doing, I wouldn’t want to say a few hundred people a day in terms of tattoos.

So when they’re active and busy and those people are also customers of the store. So it’s a combination of a bunch of things driving that Nevada operational improvement. And then Illinois, we have dialed in pricing, have dialed in promotions to veterans and other initiatives in that marketplace. We expect to benefit further Illinois as we introduced our house brands into And so it’s a combination of trying to dial in the marketing, dial in the targeted audience in Illinois and the fact that it’s been open now and generating its own traffic and awareness that we’re continuing to expand on that’s driving that improvement.

Bob Groesbeck: This is Bob. If I can just add to that, as Dennis indicated days is its own traffic driver, and it’s continuing to grow. But it’s also a nice complement to the Planet 13. And we recently hosted FIGHT WEEK. We’ve had a number of MMA fighters in the UFC pipeline come through. So it’s been really special to have that space for press conferences and for interaction with the athletes. And then, of course, we’ve had live view events hosted in the lounge, which have been very, very popular with our customers. And we’re going to continue to really expand upon that.

Yewon Kang: All right. Thank you. And if I could just have another follow-up question to that so obviously, nice to see sequential margin lift in adjusted EBITDA. I was just wondering how much of this number was attributed to the benefits realized from consolidating vertically into operations in Florida, stemming from the VidaCann transaction versus the other markets. It would be helpful just to triangulate the number better for expectations going forward. Thank you.

Dennis Logan: Yeah, I think we’ll get back to you with the detail on that. But the Florida operations are in that 50% plus margin range. And then, we’ve again, moved their product mix, more vertical integration in Nevada, driving higher margins there, less so with leaving fewer revenue dollars coming from the wholesale market. I think our wholesale margins are in the 35% range and our dispensary margins in Nevada are 52% to 55%. So we are targeting to keep the Nevada margins where they are and expand the Florida margin somewhat as we dial in improvements there and add more products and have a greater product offering there that we can get higher margins from. So I expect — we expect margin when we commented in the — on the call the 50-plus range.

It’s really going to depend on how successful we are on the wholesale growth and strategy and how much revenue comes from the wholesale side of equation as we launch HaHa further into California and Illinois. So it’s going to depend, as we said, on the comments on the call. State variability and product mix variability will determine that overall margin level.

Yewon Kang: Great. Thank you so much. I’ll jump back into the queue.

Dennis Logan: Thank you.

Bob Groesbeck: Thank you.

Operator: Thank you. Our next question is coming from Pablo Zuanic. Pablo, your line is live. Please go ahead.

Pablo Zuanic: Thank you and good afternoon everyone. Look, I just want to focus on Florida, and you gave us a lot of number. I don’t know, if I took proper notes here. I think you said $90 million pro forma for the quarter for Florida. If that’s the case, right, divided by 26%, that’s almost $3 million. To my knowledge, it would be at a state average, which would be a big accomplishment. And also if I compare with the volume from Promu, in terms of flower per store and extra per store, you are below. So if you are in dollars, in line with the state average, that means you have a better mix. But any color you can give in terms of how you — we don’t know exactly what the size of the Florida marketing dollars. Headset has one number, BDS has another number.

But talk about if you can about, do I get the right numbers, are you at $3 million per dollar? How do you think that compares with the state? And remind us of what was done over the last year in terms of improvements? And how much more is left to improve that in terms of revenue per store? Thank you.

Dennis Logan : Yes. Pablo, it’s Dennis. I think I quoted $12.9 million and not. I think you said 19 million. I just want to clarify that.

Pablo Zuanic: Okay. So I got that wrong. Okay.

Dennis Logan : You got that wrong.

Pablo Zuanic: So the question. Yes. Okay. But the question would still apply, meaning there’s been significant improvement year-on-year, right, in terms of revenue per store. So remind us how much of that — how was that a complete reminder of that? And then although you gave color in your prepared remarks, also in terms of what’s the upside here, what’s left that would drive revenue per store to get you closer to the state average as we look at the year ahead? Thanks.

Dennis Logan : Sure. Yes. And so just as a reminder, if you look at the VidaCann, we have pro forma information in the financial statements themselves in terms of where the revenue was pro forma-wise as reported. I think Note 6 of the financial statements. There’s lots of upside still in Florida. As you noted, Pablo, we’re not at the overall — if we take Trulieve as the state leader, we’re not anywhere near on a revenue per store basis where Trulieve is the guys in Florida, the team in Florida, VidaCann have accomplished a great deal in the last 12 months, driving significant improvements in revenue, up almost double from where it was, and that’s really from increasing product quality, increasing the flower mix, adding new products.

. We still have a bunch of new products to start hitting those stores. The Planet 13 strains are in the greenhouse, I think the first crop should come off, and we’ll have our own strains in the Planet 13 branded stores that we’re going to open and as we roll out the rebrand to the stores, the existing 26 store network. It will have the Planet 13 strains, the improved VidaCann strains additional product. We’re putting in expansion of our capabilities to make the product offering that we have in Nevada available in Florida. So I think with an abundance of product availability and the continuing improvement in product quality, we expect it to have additional growth in that marketplace in Florida. I know the VidaCann team have targeted sort of a 3% month-over-month growth at each of the stores.

They hit and miss that, but largely hit on it for the first half of the year, and we continue to see some upside on that store revenue per store basis as you commented on.

Pablo Zuanic: Thank you. And then just to follow up on that. I think in terms of the yield increase that you expect by the fourth quarter and the growth in terms and the addition of store rooms. That was up about 70%. Again, correct my math if I’m wrong, but it sounds like you have a significant output increase by 4Q. Obviously, you have 6 more stores you are adding. But if you can confirm that in terms of your output outlook for Florida by the end of the year?

Dennis Logan : Yes. That’s — I’d confirm that, Pablo. And that’s part of the issue with us growing our revenue in that Florida market is the availability of flower. Historically, they have sold out of the flower as it hits the stores and the reorders happen, but there are some times where we don’t have as much product as we need with the expansion of the cultivation capacity and the yield improvements, we should be able to have product available when customers want to come and buy it, which will further enhance the revenue upside of all those store networks.

Pablo Zuanic: Right. And just to be clear, Florida right now, it’s all greenhouse and you are adding indoor or it’s a mix of both.

Dennis Logan : We’re expanding the greenhouse. We will likely add — we haven’t added it yet, but we’ll likely add one sort of segment of indoor, but the quality we’re getting from the greenhouse improvements, the lighting, the HVAC, the dehumidification, the water improvement is really driving great improvements in the product quality that we’re getting out of that Florida operation. So it’s a combination of both. We see that we’ll eventually need that indoor for the ultra premium, but we’re getting some very, very high-quality flower out of the current operations.

Pablo Zuanic: Right, right. Okay. And some of your peers are still very confident that Florida if the ballot passes that sales could start on May 25 last year. Of course, it would be great for everybody. You sounded more cautious on that. You’ve talked about 2026. I don’t know if you want to update your thoughts on your commentary on that front?

Dennis Logan: Well, it’s my personal opinion versus where we are as a group, I think Bob, I’ll let you handle that one in terms of what you think the — turning on Florida if it passes in November.

Bob Groesbeck: Yeah, I mean, Pablo.

Pablo Zuanic: You turning on. I don’t mean — maybe — I don’t mean…

Dennis Logan: Recreation, yes. Recreational passing on November, when is it going to be when is the legislation passed. I mean you saw comments from Trump today about him supporting it. DeSantis still opposing it. So I think I’m a little more cautious in terms of timing. But Bob, you go ahead.

Bob Groesbeck: No, no. Pablo, look, I haven’t changed. I’m still very conservative. I’m optimistic. Look, anything we can do to accelerate the process is fantastic for the entire sector. But — we’ve been in this rodeo before, and nothing at the state level regardless of state happens quickly. And this is typically the process. We’ve got a whole new round of licenses that we’ll issue in conjunction with that. I’m sure there’s going to be quite a bit of litigation, and it’s going to take quite some time for the legislature to get together a comprehensive regulatory package. So again, we’re going to get positioned be ready to take part in that. But I don’t think we’ve changed our time line.

Pablo Zuanic: Right. And then just one last one on that front. According to the current rules, will there be a wholesale market or is going to remain as now just vertical? Or that’s not defined yet because the rules are not out. Do we have a sense of that?

Bob Groesbeck: Yes. That’s a great question. We don’t know that. There’s — we hear from different camps that they want to open the market up and make it more competitive in different segments. There’s other talk, of course, keeping it exactly the way it is. So — but — and a lot of things can happen when the politicians get around table and the bureaucrats. So we’re just going to sit back and go position and operating under the premise that that it will happen. And when it does, we’re going to be able to take advantage of immediately.

Pablo Zuanic: Right. And one last one, just going back to the superstore. I mean great 11% sequential growth. I know the question was asked before, but I was looking at the numbers from prior quarters. I mean was there a seasonal effect that helped at 11% or 11% can really be pretty much fully attributed to the launch opening? And if so, how much how much of that lift is the launch itself and more sales in the store itself due to a traffic that went to a launch?

Bob Groesbeck: Dennis, I don’t know if you want to jump in there?

Dennis Logan: Yes. I’ll estimate it, but it’s a tough one, Pablo, because you can’t as you know, you can only consume what you buy in the lounge in the lounge and then you go across the hallway and the product or you come back and buy the product in the superstore, the dispensary. It’s also being driven by other venues and events that Bob mentioned that we have Plaza 13, which is the hallway that is licensed versus — driving people, I think we hosted a PolySure YouTube session there. So there are a bunch of traffic drivers. There is some seasonality. The days consumption lounge probably $500,000 in revenue of the 1 million improvement. So half of the improvement probably coming directly from the lounge. And then it’s hard to say the rest of the improvement, if it’s customers from the lounge coming into the superstore, there’s probably some of that.

There are two tattoo customers coming in. So it’s a mix on the other half of that improvement. But yes, there is some seasonality to it. In the summer months in Vegas, it gets a little bit choppy depending on weather and traffic patterns coming in from California and the tours.

Pablo Zuanic: And the launch on April 1, right? And I think in your prepared remarks you implied there was still a lot of room for growth. I mean it would seem to be already the benefit, it’s great, but it already played out? Or maybe you can expand in terms of why we should expect more benefit in terms of delta to sales.

Dennis Logan: Yeah. I think for the quarter, opened April, as you know, April 1, the majority — 100% in the quarter, it was open, but there was a ramp-up period in there. We’re fine-tuning the product mix. We’ve got reservations now. As Larry mentioned, we have viewing events and other promotional events happening inside the lounge. We’re going to try and take advantage of both promotions outside the lounge and inside the lounge to help drive some additional traffic. It’s not full 100% of the time, but it is getting to the — it’s getting there where we’ve got reservations that we’re taking for things. And so it’s still got upside growth to it, but it’s performing as we expected it would.

Pablo Zuanic: Right. Thank you.

Larry Scheffler: Dennis, I’m just going to add that in my point, there’s a lot of upside growth left in that launch. Just what — again, I’ll just repeat what Dennis says, with comedy shows we’ve got planned that are coming in there, the different tasting events, the NFL Sundays and so on. In my mind, a ton of growth left inside there. Where it’s past what we expected when we first opened it, it surpassed that. But now that is going in that direction, we’ve got a lot more going on and a lot more things planned for it. So it’s going to be a great driver.

Pablo Zuanic: Okay. That’s great. All right. That’s all for me. Thank you very much.

Dennis Logan: Thanks.

Operator: Thank you. Your next question is coming from Doug Cooper from Beacon Securities. Doug, your line is live. Please go ahead.

Doug Cooper: Good evening, guys. Can you hear me? My headphone sometimes doesn’t work as well as it should. Could you hear me?

Robert Groesbeck: Sound great, Doug.

Bob Groesbeck: Yeah. Hear you, Doug.

Doug Cooper: Okay. Perfect. Sorry, I think I might have joined a few minutes late. I just wanted to confirm a couple of things. So revenue, $31.1 million, of which 7.2 is from Florida. So just the existing operations started to Florida, 23.9 Is that right versus 22.9 in Q1?

Dennis Logan: Yes. That’s right, Doug.

Doug Cooper: Okay. So the $1 million uptick was due primarily to the superstore in Illinois?

Dennis Logan: Yeah, as we commented on, we got from the lounge from additional Nevada from the superstore itself and then some from Illinois. So obviously, Illinois is a smaller starting point. So it’s more impact from the superstore.

Doug Cooper: Okay. And then California?

Dennis Logan: California is flat to slightly up, but we’ve improved profitability there as we continue to focus on costs and drive traffic. It is a challenging market in California. It’s not as robust as we were hoping.

Doug Cooper: Okay. So, $31.1 million but you didn’t — weren’t able to recognize $7.2 million, right? And I’d say, will not recognize $5.7 million, I guess, right, Dennis?

Dennis Logan: Yes, that’s for the first — yes, the first half of the quarter that we didn’t know VidaCann. Yes, correct.

Doug Cooper: Right. So pro forma is kind of almost $37 million, right?

Dennis Logan: Yes.

Doug Cooper: What would that be the incremental lift to EBITDA from that incremental $5.7 million in revenue?

Dennis Logan: As the Florida operations continue to get better and the margins improve, it’s hard to speculate where that $5.7 million in the first half of the quarter would have gone, because there are costs in there that associated with the acquisition that we have, obviously, that we’ve incurred at operation. So I’m going to hold off speculating on that one, Doug. I know where you’re going with it, but I’ll hold off, and we’ll look at it in Q3, third quarter.

Doug Cooper: Maybe just getting back to Pablo’s points. So the company is running — the Florida operations are running about what that $52 million annualized over the seasonality, 26 stores, about 2 million shares?

Dennis Logan: Yes. Your math is right.

Doug Cooper: Okay. And then you’ve got six stores. Bob, you mentioned three ready to go in Florida, three nearing completions. So do you think you’d have — how many stores you think you’ll have in Florida in 2025?

Dennis Logan: Well, we’ll finish this year, Doug, with those six open and 20 still 30, 32 and then there are plans for another six to 10, depending on what we can find and where we can open them up. I mean the team is pretty active in scouting out new locations and really driving the growth in that network as well as driving the growth in revenue from the existing store footprint with new product offerings.

Doug Cooper: Okay. So assuming it continues to be medical only. How long does it take the store to ramp up to the average $2 million a year?

Dennis Logan: Yes. I would have to get the Florida guys on to get that question answered. Doug, we’ll get back to you on that one. I’m not 100% on the actual timing. They would know better based on when they opened the last set of stores. So I’ll get back to you.

Doug Cooper: Okay. And the CapEx for the three — the six that you just mentioned, Dennis, you mentioned in your — you’ve got $3 million to $5 million earmark for CapEx over the next six to nine months. Is that including those six stores?

Dennis Logan: Yes. It’s including the stores, too. Yes.

Doug Cooper: Okay. And then you’re a bit cautious. You said about in the second half and 2025 based on consumer behavior, is that across board? Is that in Florida and primarily in Nevada and Illinois, do you think it’s Florida because medical only? Is that under the restraint sort of a strength…?

Dennis Logan: It’s more than Nevada superstore market. That comment was really directed at. I mean Florida, medical only, if rec does go through 2025 could be a boon if it opens where everybody thinks in May or people think in May, but if it gets delayed into 2026 and we continue with that medical market, there’s still a lot of upside in that upside in that medical market and for us to drive this per store revenue closer to the state’s average. So there’s there for sure for us Florida, but the cautious nature of comment was really directed at the Nevada operations.

Q – Doug Cooper: Okay. And just what is the state average in flavor per store?

Dennis Logan: It depends. If you look at Trulieve as the leader, I think they’re around $4 million. We’re at the 2 the state’s average, so it’s going to depend on how — what you exclude because there are operators with minimal number of stores, but doing well, others that same number of stores doing smaller. But I just look at if we can target and try to achieve somewhere with what Trulieve is doing on a per store basis, have a lot of upside still.

Q – Doug Cooper: Yes, no doubt. Their stores are similar size in terms of footprint?

Dennis Logan: Yes. I believe across the network. They may have some larger format stores, but overall, I think the stores in Florida are all roughly around the same size.

Q – Doug Cooper: Okay. And Bob, you talked about Nevada. You all talked about this before about potentially putting off some of these independent operators. What is the current store count? What is the current store count in Nevada? And how many are feeling really stress right now?

Bob Groesbeck: Yes, Doug, I don’t know the exact number right now, but I’m saying it’s about 110 stores statewide. I would say probably 80% of those are experiencing moderate to severe distress. It’s a very, very tough market. And we’re fortunate that, again, because our model focuses primarily on the tourist customer. But there’s a hell of a battle going on amongst operators for that local customer. And we’re seeing a lot of price compression. And so we’re going to continue to other store. But as I said in my comments, I’m still optimistic if we pick up another store to really kind fill into the network here and help on our — with our cultivation in particular. So there’s upside. But a lot of these folks just need to get serious about their pricing. They’ve got to get real with respect to where the market is now. And we’ve had some pretty meaningful conversations with several groups and hopefully, something will come together here.

Q – Doug Cooper: Do you want to take any Metro Clark County kind of area? Or do you had up to Reno or anything like that?

Bob Groesbeck: Yes. No. I think we’d prefer to stay in Metro Clark County. I think Reno has got its own challenges, and there’s a saturation up there. But again, for the right deal, look, we’re not opposed to looking statewide. It’s just we’ve been primarily focused in urban Clark County.

Q – Doug Cooper: I’m assuming you start — you’re opening as I take over your lease and buy your inventories.

Bob Groesbeck: I’m sorry, say that again.

Q – Doug Cooper: I’m assuming you opening the bid is sort of take over your lease.

Bob Groesbeck: Yes. Yes. We’re pretty close. Exactly.

Q – Doug Cooper: Sure I’ll take that. Thanks. That’s it for me.

Bob Groesbeck: Great. Thanks, Doug. Good talking to you.

Operator: Thank you. And there are no further questions in queue at this time, and this does conclude our question-and-answer session as well as today’s conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.

Bob Groesbeck: Thank you, Tom [ph].