Planet 13 Holdings Inc. (PNK:PLNH) Q4 2024 Earnings Call Transcript

Planet 13 Holdings Inc. (PNK:PLNH) Q4 2024 Earnings Call Transcript March 26, 2025

Operator: Good afternoon, ladies and gentlemen, and welcome to the Planet 13 Fourth Quarter 2024 Earnings Conference Call. At this time, all lines are in listen only mode. Following the presentation we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded on Wednesday, March 26, 2025. I would now like to turn the conference over to Mark Kuindersma. Please go ahead.

Mark Kuindersma : Thank you. Good afternoon, everyone, and thanks for joining us today. Planet 13 Holdings Fourth Quarter 2024 financial results were released today. The press release, the company’s Annual Report 10-K, including the MD&A and financial statements are available on the SEC website, EDGAR and SEDAR+, as well as on our website planet13.com. Before I pass the call over to management, I would like to remind listeners that portions of today’s discussion include forward-looking statements. 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 so that management’s expectations or estimates of future developments, circumstances or results will materialize.

Risk factors that could affect results are detailed in the company’s public filings that are made available 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 in these 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 reconciliations to the most directly comparable GAAP measures, please refer to today’s press release posted on our website. Planet 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 Larry Scheffler, Co-Chairman and Co-CEO; Bob Groesbeck, Co-Chairman and CEO; and Dennis Logan, CFO. I’ll pass the call over to Larry Scheffler, Co-Chairman and Co-CEO. Larry, go ahead.

Larry Scheffler: [Audit Start 2:03] Good afternoon, everyone, and thanks for being with us today. I’ll start with a look performance in Q4 before handing things over to Dennis for a deeper dive into our financials. Bob will then walk you through how we are executing on our strategy and positioning ourselves for success in 2025 and beyond. In Q4 2024 [delivered] (ph) $12.8 million in revenue contributing to a full year of $55.7 million. While we navigated typical seasonal trends in Q4, and broader economic pressures affecting consumer spending, our commitment to offering premium products and unique shopping experience that allow us to maintain our leadership position in [the market]. This [indiscernible] reinforces our brand strength and the attractiveness of the superstore shopping entertainment and first destination.

Revenue from our neighborhood store network came in at $14.1 million reflecting the $1.3 million sequential decline from Q3. We saw encouraging growth in Nevada and California, demonstrating the resilience of our model in those markets and the value of having owned brands and vertical operations to help protect margin. Florida presented short-term challenges, primarily due to the failure of the amendment fee for adult use in the subsequent relinquishment of inventories being pushed out into the marketplace causing significant price compression along with the impact of selling to lower-quality products from the summer growing season. That’s a challenge we address via score. The good news is that our two newly upgraded greenhouses are already showing strong early results, assisting us for improved quality and supply going forward.

While we anticipate continued pricing pressure, the market recalibs under medical regulations, we remain confident in our ability with that and capture long-term upward swings. Across the superstore and our neighborhood network, total retail revenue reached $26.9 million compared to $29 million in Q3 2024 and $19.2 million in Q4 of 2023. While sequential performance reflected temporary headwinds. Our year-over-year growth underscores the significant progress we’ve made in expanding our footprint. With a strong foundation in place, we remain focused on delivering value to our customers and shareholders. We generated $3.4 million from wholesale, lifestyles and other revenue in Q4 up from $3.2 million in Q3. According to BDSA, we ranked as the fourth highest branded sales in Nevada during the quarter, demonstrating the strength of our portfolio.

We secured the #2 spot in edible sales, led to the continued success of HaHa Gummies and rank #3 in concentrates. Additionally, we remain a confident player in both [flower and vapes] (ph) despite increased competition in our product portfolio and sales performance of that remain resilient. Our ability to drive higher sales volume has helped mitigate pricing pressure, leveraging our scale operational expertise to maintain a strong market position. Despite our industry-wide environment of pricing compression, we continue to navigate challenges with competition and focus. Our retail expertise, commitment to product quality and strong brand building capability set us apart in the evolving market, taking decisive steps to adapt, innovate and defend our leadership positions.

With that I’ll turn it over to Dennis to walk through our financials.

Dennis Logan: Thank you, Larry. Before I begin, I’d like to remind everyone that all the numbers on today’s call are in U.S. dollars unless specifically stated otherwise. In Q4, Planet 13 generated $30.3 million in revenue, up from $23 million a year ago, and down from $32.2 million in Q3 2024. The sequential decline was in-line with expected seasonal trends in Nevada and broader pricing compressions across key markets, including Florida, following the failure of the adult use initiative in November. The year-over-year increase was the result of the inclusion of revenue from our acquisition of VidaCann closed in May of 2024. The prior year Q4 2023 EBITDA did not include any results from VidaCann. For the full year, revenue grew 18% year-over-year to $116.4 million.

The increase was, as mentioned previously driven by the expansion of our state footprint to include Florida. This helped to offset some of the softness we saw in Nevada. Looking ahead into 2025, we anticipate continued competitive pressure and pricing headwinds impacting top-line revenue, increasing presence of intoxicating hemp and the illicit market activity, particularly in California, Nevada and in Florida is creating challenges across the industry. However, our focus remains on differentiation through product quality, strategic brand positioning and driving scale in our core markets to help us navigate these market dynamics more effectively. Gross profit was $13.1 million in Q4 2024 compared to $16.7 million in Q3 2024. This translates into a gross margin of 43.2% in the quarter compared to 51.9% in Q3.

The decline in gross margin was driven by two main factors. One was the ongoing industry-wide price compression across all our* markets and the second, discounting and sell-through of lower quality flower in Florida that we spoke about on last quarter’s call. We expect to see a bounce back in future quarters, specifically Q2 and Q3 of 2025, as our product quality and consistency continue improving. Pricing pressure will remain a factor and it is imperative that we continue to optimize our costs and drive efficiency to maintain healthy margins moving forward. Sales and marketing expenses declined to $1.4 million in Q4, down from $1.6 million in Q3 as we continue to optimize our cost structure. We are taking a disciplined approach to this area aiming expanding both as a percentage of revenue and on an absolute basis.

A key component of this strategy is our lifestyle brand, which as a non-cannabis-touching business, enables us to advertise Planet 13 through more traditional, higher ROI channels. This initiative is already helping us extend our brand reach while improving marketing efficiency. G&A was down approximately $700,000 in the quarter to $14.1 million from $14.8 million in Q3. This decline underplays our progress that we’ve made in the quarter where salaries and wages were down almost $2 million. This marks the first step in a broader effort to streamline our cost structure. We are taking targeted action to reduce corporate overhead while improving efficiencies in our retail operations. While Q1 will reflect higher legal costs associated with the recovery of funds in the El Capitan matter, we expect these improvements to be fully evident as the year progresses.

We delivered breakeven adjusted EBITDA in Q4, compared to $1.3 million in positive EBITDA in Q3 2024 as lower operating leverage impacted our results. [Audit End 10:11] However, for the full year, adjusted EBITDA increased 49% year-over-year to $3.5 million, reflecting our ongoing focus on our operational efficiency and the benefit of additional operating leverage from Florida. Looking ahead, we are committed to enhancing our productivity in both our Nevada and Florida operations and driving cost savings across the organization to strengthen adjusted EBITDA margins. Turning to the balance sheet. As of December 31, 2024, the company had an unrestricted cash balance of $23.4 million. During Q4, we used approximately $1.4 million in operating cash flow.

And for the full year, we generated $5.2 million in operating cash flow. Since the end of the year, we have spent approximately $3 million in CapEx, largely on new store openings in Florida and have an additional $3 million to $5 million planned for the next 12 months for targeted upgrades to manufacturing in Florida and additional store openings in that market. We’ve also paid-off in February of 2025, [$3.3 million] (ph) in bank debt that we assumed as part of the VidaCann acquisition. And in March, we reached a settlement and a recovery of $2.1 million of funds held by the Orange County, Sheriff that were reflected in the balance sheet as restricted cash. And we’ve obtained real estate value at approximately $5 million that we are in the process of listing for sale.

In total, including the expected value of the sale of the real estate, we have now recovered approximately $10.5 million related to the El Capitan matter. We have an additional $5 million in notes payable due April 1 under the terms of the VidaCann acquisition and another $1.5 million in notes payable at VidaCann to mature in 2029. Other than these debt instruments, our balance sheet is clean and advantageous position compared to the rest of the cannabis industry that faces over $1 billion in debt refinancing and refunding over the next two years. With our lower future CapEx needs and a strong balance sheet, we are well positioned for sustainable execution. With respect to 280E in income tax payable, we have adopted the position of many of our peers and have had filed or will imminently file amended income tax returns for 2020, 2021, 2022 and 2023 seeking a recovery of excess taxes paid.

Since September of 2023, we have taken a position that 280E does not apply, and we have been making estimated tax payments as such. From an income statement perspective, we are still recording the tax provision as if 280E applies but since we are no longer paying 280E income tax, you will continue to see the uncertain tax position balances on our balance sheet increased quarter-over-quarter until we have a resolution on this matter. There are several pending income tax cases ahead of us, and we anticipate that we will have a better understanding of the potential outcome and the position we have taken in the near future. The uncertain tax balances as of December 31, 2024 stood at $19.3 million and is included as a separate line item and long-term liabilities on our balance sheet.

With that, I’ll turn the call over to Bob to discuss the execution of our growth plan.

Bob Groesbeck: Thank you, Dennis. Good afternoon, everyone, and greetings from sunny Florida. While 2024 presented industry-wide challenges, including competition from the illicit market, the rise of intoxicating hemp products and significant price compression putting pressure on margins. Planet 13 was a year defined by strategic execution. We remain focused on a few key priorities that have positioned us for long-term success, both in ’24 and now as we head into 2025. Our first priority was expanding our retail footprint to deliver greater scale and help navigate ongoing margin pressures. We were thrilled to bring Florida into our state mix, significantly enhancing our growth potential. Over the course of the year, we added 30 new dispensary, bringing our total including the superstore, to 34.

This expansion provides a solid foundation for long-term success. With a strong retail presence now in place, both in Florida and Nevada, we are well positioned to drive sustainable economics. While we’ve had a few more dispensary openings planned for this year, including one this week, we are intentionally slowing the pace of new openings for the balance of the year. And we feel confident on the size and coverage of our footprint and are now shifting focus on maximizing the performance of our existing operations on a store-by-store basis. In 2025, our focus is on increasing productivity of our footprint, particularly here in Florida. Key step in the strategy has been the expansion and upgrades to our cultivation facility. These enhancements are designed to improve yields, potency and overall product quality, especially for high-end flower.

Ensuring we deliver the premium products that our customers demand. Early harvest are underway and the results are quite encouraging. I’m excited about the impact of higher quality and more diverse product selection will have on store productivity starting in Q2. This improvement continue downstream. We are making investments in automation, especially in post-harvest functions like packaging and [trim room] (ph) efficiencies, while at the same time addressing gaps in our SKU lineup, particularly in a variety of sizes for pre-rolls and cartridges. Another important piece is strengthening our manufacturing capabilities by making investments in our kitchen and lab here in Florida to expand product variety. We are also looking to extend the successful strategy we’ve utilized in Nevada by partnering with celebrity and third-party brands to further diversify our offerings.

This approach will fully leverage our cultivation assets while driving greater consumer engagement and brand loyalty. That dovetails nicely with our second key priority, our wholesale business. In addition to our Nevada market-leading brands like Haha Gummies, we are a contract manufacturer and wholesaler of choice for brands like Wiz Khalifa’s — Khalifa Kush in Nevada. Similar to the plan in Florida, adding new stores with established following and built in marketing support an efficient way to drive better utilization in our cultivation facilities. We are also leveraging our lifestyles brand to expand national marketing efforts. As mentioned earlier, the non-cannabis platform that allows us to promote Planet 13 through traditional marketing channels, increasing brand awareness efficiently.

Throughout the year, we’ll use this platform, along with our award-winning product brands to forge partnerships and expand in the next states. The third priority is enhancing efficiency across the corporate side of our business. As we improve productivity in both retail and wholesale, we’re also taking a very disciplined approach to streamlining operations, reducing costs and ensuring where operating as lean and as effectively as possible. To summarize, 2025 will be a year of productivity and efficiency. While the impact of these initiatives will take a few quarters to fully materialize, we are making meaningful strides to increase revenue per store in Florida, strengthen diversify our wholesale business and drive efficiencies at every level from corporate to cultivation to retail.

These actions position us for stronger financial performance and long-term success. And with that, I’ll open the call for questions from covering analyst.

Q&A Session

Operator: Thank you. Ladies and gentlemen, we’ll now begin the question-and-answer session. [Operator Instructions] Your first question is from Matt Bottomley from Canaccord Genuity. Please go ahead.

Matt Bottomley : Good afternoon everyone. Thanks for taking the questions and all the comment so far. Just wondering if we could get a little more commentary on the change in the margin profile quarter-over-quarter. So I know you gave the characteristics of what’s been happening in the market as well as some targeted discounts in Florida. Can you just give us, unless I missed it in the prepared remarks, which I apologize, but just a little bit of an update on exactly what you guys were working through when it comes to some of this quality product in Florida that need to be discounted versus what we can expect in Q2, Q3 and Q4? And just trying to get an idea where the steady-state margin profile is outside of that issue?

Dennis Logan : Sure. Dennis, sorry Matt, as we mentioned on our Q3 call, we hadn’t opened our new greenhouses yet. We had two upgraded houses with HVAC, lighting, because we are [greenhouse ] (ph) from flower, and we had in Q4 an excess amount of lower testing THC product that we needed to sell through at steeper discounts than otherwise would have had to had we had the flower that we’re now getting out of our upgraded greenhouses that came online, one of them came online that we’ve seen product come in and testing in the mid- to high 20s. [Audit Start 19:59] The second one was approved and it’s got plants in it. We should see a harvest come out here in Q2 with that one. So both those houses are up and running and should be fully operational in supplying quality flower to the store network in Q2, Q3 over the summer.

We are seeing pricing headwinds, as we mentioned on the call, in Florida continue, although we are mitigating some of that by introducing new brands, we’re taking our Planet 13 brands from Nevada down to Florida. We have the strains down there. We’re going for a more tiered pricing moving away from the old everyday best pricing model that VidaCann had prior to our acquisition, we’re seeing and expecting kind of mid-to-low 50% like kind of 50% to 53% gross margins coming out of Florida. We are seeing high 50s out of our retail operations in Nevada that gets pared down a little bit with some of the wholesale in Nevada and California that we have. Obviously, wholesale carries a much lower margin than retail. So, going forward, we’re still targeting that 50% plus across the board and especially across our retail network.

Matt Bottomley : Got it. Thank you for that. And so maybe just moving one line lower to the overall free cash flow. So, you guys have the benefit, one of the only MSO certainly that doesn’t have any debt overhang to speak of or meaningful maturities in really any sort of time frame, but still working towards free cash flow positivity. So, just your continued expansion in Florida relative to maybe closing that gap. I’m just curious where — maybe you can speak to where CapEx might be this year more specifically or just the overall strategic initiative to kind of inflect into positivity versus still trying to carve out what will certainly be a higher market share in Florida in the years to come?

Dennis Logan : Yes. And as we mentioned in — I’ll take the first part, Bob, and you can talk the different — we mentioned on our call — so in ’25, we spent $3 million, to date, opening new stores, opening four stores in the Florida market. I have a couple more on the go. We’re looking at between $3 million to $5 million in total CapEx across the company for the balance of the year. And then as we pointed out in the remarks, working diligently and aggressively to bring down our costs, both on an SG&A level salary and wages level at the retail end of the spectrum, getting our costs back in line with where the current revenue run rate is, so we can achieve that cash flow positive aspect and at the same time as complementing that growth in the footprint. But Bob is in Florida and is much closer to the Florida expansion than I am so over to you, Bob.

Bob Groesbeck : Yes. So Matt, what we’re trying to do, as Dennis indicated, it we’re going to slow out the new store openings, as I mentioned in my remarks, we’ll probably get by the tail end of the year, probably 38, 39 stores open. But what we’re really doing now is just kind of getting completely refocused on store over store growth. And so the neighborhoods we’re in, the new locations we think are ideally suited. We’ve just got to do a better job creating awareness and so that’s really going to be the focus here going forward this year to drive revenue per store up considerably versus where we stand currently in the hierarchy of the other operators.

Matt Bottomley : Got it. Okay. Thaks. Sorry, I missed some of those metrics you provided. So thanks for repeating I’ll leave it there and get back in queue. Thanks all.

Larry Scheffler: Thanks Matt.

Operator: Your next question is from Pablo Zuanic from Zuanic & Associates. Please go ahead.

Pablo Zuanic: Thank you and good afternoon everyone. This is a general question, but given the challenges in Florida, you made a VidaCann deal, assuming that we would have Reg, right, although, of course, you knew it wasn’t necessarily a certainty. So, given the challenges and the fact that you have a very strong balance sheet and that supposedly private valuations have come down, would you look to expand in other states and add to the portfolio or that would not make sense in the current environment. It’s more about executing based on what you have?

Bob Groesbeck : Hi, Pablo, it’s Bob. Good to chat with you. Look, we’ll take a look at anything. We’ve got in-bounds on a fairly regular basis in other jurisdictions. But really, right now, our focus has to be Florida. And as indicated, we’re disappointed with the vote in November, but we still have close to 1 million cardholders here in Florida. And it’s a challenging market right now. And I think it requires our complete focus to really build these stores up and drive revenue and of course, get to the margins that we need. So that’s our focus. But if we can backfill in Nevada, and we’ll take a look at that, if a great opportunity should present itself in Illinois, we’d consider that as well. But it’s a tough market to buy right now and it’s incredibly dilutive given our current stock value. So, it has to be a fantastic deal. And we just haven’t seen anything come across the desk yet that meets that [criteria] (ph).

Larry Scheffler: Just to add bob, — add to that Pablo as well, we don’t want to spend cash on any of that stuff. So, to the extent that the share price continues where it is, I don’t see us using stock to make an acquisition at these levels, and we certainly do not want to spend cash on an acquisition in any market and just focus that cash more strategically on our existing network.

Pablo Zuanic: Yeah, understood and make sense. Look, just in the case of Florida, particularly at the store level, is there an image program with the VidaCann network in terms of weather locations, the fact that the chain in the past had been very promotional. The fact that you recently had to dump some of these lower-quality product. I mean is that part of a struggle? Or am I exaggerating that concern?

Bob Groesbeck : No. I think that’s a legitimate issue. VidaCann — there’s a good operation. I’m really glad that we’re able to do the deal. The problem was, as Dennis kind of alluded to in his comments, the product consistency has been a real issue for the company for quite some time and got seasonal degradation and it’s impacted sales, particularly as we move into the summer months, historically. It’s been a very, very real issue. And that’s why we made the commitment to put CapEx into the improvements in Jacksonville. And I’m glad we did because we are seeing some significant improvements there, as I said, but it’s going to take a bit of time. And ultimately, in my perfect world, if* an indoor grow came along that was met the criteria that we are looking for, we’d probably try to grab that too just to augment and supplement the seasonality, but we’re comfortable moving forward, Pablo.

And the integration has taken a lot of time. It’s been very difficult to deal with the state. It’s a very slow process. When it’s taken two or three months to get a store approved, that put some pressures on the operators. But we’re navigating as best we can, and we’re comfortable we’re going to make the turn here and really start to grow the business in Florida. [Audit End 28:01]

Pablo Zuanic: And just one last one, Dennis. Regarding 280E, I understood in terms of your amended filings. What I’m hearing is that there could be some concern with the statute limitation in some cases, that [indiscernible] 3-year period, you no longer can ask for the refund say on 2020. But correct me if I’m wrong. Is that a concern or it hasn’t come out as an issue yet?

Dennis Logan : When I — in my comments where I say we have filed or about to file imminently. We filed 2020 to 2022 and they’re in the process of filing ’23. So we filed what we’ve needed to and we’ve not gone not had any issues with that statutory limitations problem. So we’re — that’s not — that part of it is not an issue for us.

Pablo Zuanic: All right. Thank you. That’s all.

Operator: [Operator Instructions] We had a question and then the backed out. So there are no further questions at this time. Please proceed with closing remarks.

Larry Scheffler: Thanks, everyone, for participating, and I don’t think we have any other closing remarks. Operator, you can end the call. Thanks very much.

Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.