Earnings call transcript: Planet 13 Q4 2024 revenue rises, stock dips

Planet 13 Holdings Inc. reported its financial results for the fourth quarter of 2024, showing a year-over-year revenue increase but a slight decline from the previous quarter. The company’s stock, which has shown significant volatility according to InvestingPro data, is currently trading at $0.29, down nearly 45% over the past year. The company is navigating a challenging market environment with pricing pressures and regulatory hurdles, particularly in Florida.

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Key Takeaways

• Q4 2024 revenue increased to $30.3 million, up from $23 million year-over-year.
• Full-year 2024 revenue reached $116.4 million, an 18% increase from the previous year.
• Adjusted EBITDA for the full year was $3.5 million, a 49% improvement year-over-year.
• The company plans to focus on productivity and efficiency in 2025.

Company Performance

Planet 13 Holdings demonstrated resilience in a competitive market with significant revenue growth year-over-year. The company expanded its dispensary count significantly in 2024, although it plans to slow new store openings to concentrate on enhancing existing store productivity. The cannabis market’s pricing pressures and competition from alternative products continue to challenge the company, particularly in Florida.

Financial Highlights

• Q4 2024 Revenue: $30.3 million (up from $23 million YoY, down from $32.2 million QoQ)
• Full Year 2024 Revenue: $116.4 million (18% YoY growth)
• Q4 Gross Profit: $13.1 million (43.2% gross margin)
• Adjusted EBITDA: Breakeven in Q4, $3.5 million for the full year (49% YoY increase)
• Cash Balance: $23.4 million as of December 31, 2024

Outlook & Guidance

Looking forward, Planet 13 anticipates gross margins in Florida to range between 50% and 53%. The company has earmarked $3 million to $5 million for capital expenditures in 2025, with a strategic focus on enhancing store productivity and optimizing costs. The company is also exploring partnerships with celebrity and third-party brands to bolster product offerings. Based on InvestingPro’s Fair Value analysis, the stock appears to be undervalued at current levels, though investors should note the company’s Financial Health Score of 2.43 (FAIR) when considering investment decisions.

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Executive Commentary

Co-CEO Bob Groesbeck emphasized the importance of productivity and efficiency in 2025, stating, "2025 will be a year of productivity and efficiency." CFO Dennis Loewe highlighted the company’s strategy to counter pricing headwinds by introducing new brands: "We are seeing pricing headwinds... mitigating by introducing new brands." Groesbeck also underscored Florida’s critical role in the company’s strategy: "Our focus has to be Florida."

Risks and Challenges

• Pricing Compression: The cannabis market is experiencing significant pricing pressures, impacting profit margins.
• Regulatory Challenges: Florida’s market faces regulatory hurdles that could affect operations and profitability.
• Competition: Intense competition from intoxicating hemp products and the illicit market poses a threat.
• Expansion Risks: Slowing new store openings might limit growth opportunities if not managed effectively.
• Market Saturation: As the market becomes saturated, maintaining growth could become increasingly challenging.

Planet 13 Holdings is poised to navigate these challenges with a focus on innovation and strategic partnerships, aiming to enhance product quality and operational efficiency in the coming year.

Full transcript - Planet 13 Holdings Inc (PLTH) Q4 2024:

Conference Operator: Good afternoon, ladies and gentlemen, and welcome to the Planet thirteen Fourth Quarter twenty twenty four Earnings Conference Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Wednesday, 03/26/2025. I would now like to turn the conference over to Mark Kinersma.

Please go ahead.

Mark Kinersma, Investor Relations, Planet 13 Holdings: Thank you. Good afternoon, everyone, and thanks for joining us today. Plant13 Holdings’ fourth quarter twenty twenty four financial results were released today. The press release, the company’s annual report 10 K, including the MD and A and financial statements are available on the SEC website, EDGAR and SEDAR Plus, as well as on our website, plant13.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.

Forward looking statements in this conference call are made as of the date of this call. There should be no assurances that such information will prove to be accurate, that 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 Plus. 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. Plan thirteen’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 Co CEO and Des Loewe, CFO. I’ll now pass the call over to Larry Scheffler, Co Chairman and Co CEO. Larry, go ahead.

Larry Scheffler, Co-Chairman and Co-CEO, Planet 13 Holdings: Good afternoon, everyone, and thanks for being with us today. I’ll start with a look at our 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, positioning ourselves for success in 2020 and beyond. In Q4 twenty twenty, ForSure delivered $12,800,000 in revenue, contributing to a full year of $55,700,000 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 allowed us to maintain our leadership position in the marketplace. This enthusiasm is building us and reinforces our brand strength in the attractiveness of the Superstore shopping, entertainment and tourist destination.

Revenue from our neighborhood store network came in at $14,100,000 reflecting the $1,300,000 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 amendment three for adult use and 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, such a challenge we addressed last quarter. 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 spike in pressure, the market recalibox under medical regulations, we remain confident in our ability to adapt and capture long term opportunities.

Across the Superstore and our neighborhood network, total retail revenue reached $26,900,000 compared to $29,000,000 in Q3 twenty twenty four and $19,200,000 in Q4 of twenty twenty three. While the 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 $3,400,000 from wholesale, lifestyle and other revenue in Q4, up from $3,200,000 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 number to spot edible sales, led to the continued success of Gummies and ranked three in concentrates. Additionally, we remain a top 10 player in both flower and bakes. Despite increased competition and our product portfolio and sales performance have had remained 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 depression, we continue to navigate challenges with competence and focus.

Our deep 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 Loewe, CFO, Planet 13 Holdings: 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 $30,300,000 in revenue, up from $23,000,000 a year ago and down from $32,200,000 in Q3 twenty twenty four.

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 a result of the inclusion of revenue from our acquisition of Polychem that closed in May of twenty twenty four. The prior year Q4 twenty twenty three did not include any results for VidaKen. For the full year, revenue grew 18% year over year to $116,400,000 The increase was, as mentioned previously, driven by the expansion of our state footprint to include Florida. This helped 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. The 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 $13,100,000 in Q4 twenty twenty four compared to $16,700,000 in Q3 twenty twenty four. 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 twenty twenty five 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 $1,400,000 in Q4, down from $1,600,000 in Q3.

As we continue to optimize our cost structure, we are taking a disciplined approach to this area, aiming to be spending both as a percentage of revenue and on an absolute basis. A key component of this strategy is our Lifestyles brand, which as a non cannabis touching business enables us to advertise Plant thirteen through more traditional higher ROI channels. This initiative is already helping us extend our brand reach while improving marketing efficiency. G and A was down approximately $700,000 in the quarter to $14,100,000 from $14,800,000 in Q3. This decline underplays our progress that we’ve made in the quarter where salaries and wages were down almost $2,000,000 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 manner, we expect these improvements to be clearly evident as the year progresses. We delivered breakeven adjusted EBITDA in Q4 compared to $1,300,000 of positive EBITDA in Q3 twenty twenty four as lower operating leverage impacted our results. However, for the full year, adjusted EBITDA increased 49% year over year to $3,500,000 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 12/31/2024, the company had an unrestricted cash balance of $23,400,000 During Q4, we used approximately $1,400,000 in operating cash flow. And for the full year, we generated $5,200,000 in operating cash flow. Since the end of the year, we have spent approximately $3,000,000 in CapEx largely on new store openings in Florida and have an additional $3,000,000 to 5,000,000 planned for the next twelve months for targeted upgrades to manufacturing in Florida and additional store openings in that market. We’ve also paid off in February of twenty twenty five, ’3 million dollars in bank debt that we assumed as part of the VidaCann acquisition.

And in March, we reached a settlement and recovery of $2,100,000 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 $5,000,000 dollars 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 $10,500,000 related to the El Capitan matter. We have an additional $5,000,000 in notes payable due April 1 under the terms of the Vitacan acquisition and another $1,500,000 in notes payable at Vitacan that mature in 2029. Other than these debt instruments, our balance sheet is clean, an advantageous position compared to the rest of the cannabis industry that faces over $1,000,000,000 in debt refinancing and refunding over the next two years.

With our lower future CapEx needs and a strong balance sheet, we’re well positioned for sustainable execution. With respect to 280e and income tax payable, we have adopted the position of many of our peers and have filed or will imminently file amended income tax returns for 2020, ’20 ’20 ’1, ’20 ’20 ’2 and 2023 seeking a recovery of excess taxes paid. Since September of twenty twenty three, we have taken the position that two eighty e 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 two eighty e applies, but since we are no longer paying two ADE income tax, you will continue to see the uncertain tax position balances on our balance sheet increase 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 of the position we have taken in the near future.

The uncertain tax balances as of 12/31/2024 stood at $19,300,000 and is included as a separate line item in 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, Co-Chairman and Co-CEO, Planet 13 Holdings: 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 in intoxicating hemp products and significant price compression putting pressure on margins. The Plan of ’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 ’twenty four 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 dispensaries, 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 the 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. We feel confident in the size and coverage of our footprint and are now shifting focus to 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 of upgrades to our cultivation facilities. 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 harvests are underway and the results are quite encouraging. I’m excited about the impact this higher quality and more diverse product selection will have on store productivity starting in Q2. This improvement continues downstream. We’re making investments in automation, especially in post harvest functions like packaging and trim room 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 utilized in Nevada by partnering with celebrities 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 Gummy, we are contract manufacturer and wholesaler of choice for brands like Wiz Khalifa’s, Leafa Kusha in Nevada. Similar to the plan in Florida, adding new stores with established followings and built in marketing support is an efficient way to drive better utilization in our cultivation facilities.

We’re also leveraging our Lifestyles brand to expand national marketing efforts. As mentioned earlier, the non cannabis platform allows us to promote Planet thirteen 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 into new 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 our operating is 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 and 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

Conference Operator: Your first question is from Matt Bottomley from Canaccord Genuity. Please go ahead.

Matt Bottomley, Analyst, Canaccord Genuity: Good afternoon, everyone. Thanks for taking the questions and all the comments 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 discount 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?

Larry Scheffler, Co-Chairman and Co-CEO, Planet 13 Holdings: Sure.

Dennis Loewe, CFO, Planet 13 Holdings: As we mentioned on our Q3 call, we hadn’t opened our new greenhouses yet. We had two upgraded houses with HVAC, lighting. Greenhouse 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 testing in the mid to high 20s.

The second one was approved and it’s got plants in it. We should see a harvest come out here in Q1 sorry, Q2 with that one. So both those houses are up and running and should be fully operational and 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 Plant 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 Vitacan 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, go forward, we’re still targeting that 50 plus percent across the board and especially across our retail network.

Matt Bottomley, Analyst, Canaccord Genuity: Got it. Thank you for that. And so maybe just moving one line lower to overall free cash flow. So you guys have the benefit, one of the only MSOs certainly that doesn’t have any debt overhang to speak of or meaningful maturities in really any sort of timeframe, 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 Loewe, CFO, Planet 13 Holdings: Yes. And as we mentioned in I’ll take the first part, Bob, and you can talk the different we mentioned on our call, like so we’ve spent in $25,000,000 we’ve spent $3,000,000 to date opening new stores, open four new stores in the Florida market, have a couple more on the go. We’re looking at between $3,000,000 to $5,000,000 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 and 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 is complementing that growth in the footprint. But Bob is in Florida and he’s much closer to the Florida expansion than I am.

So, over to you, Bob.

Bob Groesbeck, Co-Chairman and Co-CEO, Planet 13 Holdings: Yes. So, Matt, what we’re trying to do, as Dennis indicated, is 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, 30 nine 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 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.

Conference Operator: Your next question is from Pablo Zuzhanick from Zuzhanick and Associates. Please go ahead.

Pablo Zuzhanick, Analyst, Zuzhanick and Associates: Thank you and good afternoon everyone. Look, this general question, but given the challenges in Florida, you made a buyback on deal assuming that we would have rec, 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 will not make sense in the current environment, it’s more about executing based on what you

Bob Groesbeck, Co-Chairman and Co-CEO, Planet 13 Holdings: have. Well, hey, Pablo, it’s Bob. Good to chat with you. Look, we’ll take a look at anything. We’ve got inbounds 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 a 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 come 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

Dennis Loewe, CFO, Planet 13 Holdings: And then I’d add to that, Bob, just 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 Zuzhanick, Analyst, Zuzhanick and Associates: Yes. Understood. That makes sense. Look, and just in the case of Florida, particularly at the store level, is there an image problem with the VidaGan 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 products. I mean, is that part of a struggle or am I exaggerating that concern?

Bob Groesbeck, Co-Chairman and Co-CEO, Planet 13 Holdings: No, I think that’s a legitimate issue. VidaCann, it’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 that 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’re 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 and three months to get a store approved, that puts some pressures on the operators.

And 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.

Pablo Zuzhanick, Analyst, Zuzhanick and Associates: Thank you. And just one last one, Dennis. Regarding to ADE, understood in terms of your amended filings, what I’m hearing is that there could be some concern with the statute of limitation in some cases, that after the three 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 Loewe, CFO, Planet 13 Holdings: I know. So in my comments, when I say we have filed or are about to file imminently, we filed 2020 to 2022 and they’re in the process of filing 2023. So we’ve filed what we’ve needed to and we’ve not gone not had any issues with that statute of limitations, Pablo. So that’s not that part of it is not an issue for us.

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