Planet 13 Holdings Inc. (OTC:PLNH) Q2 2025 Earnings Call Transcript

Planet 13 Holdings Inc. (OTC:PLNH) Q2 2025 Earnings Call Transcript August 13, 2025

Planet 13 Holdings Inc. misses on earnings expectations. Reported EPS is $-0.04043 EPS, expectations were $-0.02046.

Operator: Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Planet 13 Q2 2025 Financial Results Conference Call. [Operator Instructions] I would now like to turn the call over to Mark Kuindersma, Head of Investor Relations. Mark, please go ahead.

Mark Kuindersma: Thank you. Good afternoon, everyone, and thanks for joining us today, Planet 13 Holdings second quarter 2025 financial results for release 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, planet13.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 that management’s expectations or estimates of future developments, circumstances or results will materialize.

Risk factors that could affect the 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 Co-CEO; and Steve McLean, Interim CFO. I’ll now pass the call over to Larry Scheffler, Co-Chairman and Co-CEO. Larry?

Larry Norman Scheffler: Thank you, Mark. Good afternoon, and thank you for joining us. I’ll kick things off with an overview of our recent operational performance. And I’ll pass it to Steve, who will walk you through the financial results in a little more detail. Finally, Bob will share how we’re navigating the current market landscape and putting our strategy into action. In Q2 2025, of our SuperStore including DAZED! generated $12 million in revenue, up 7% from Q1. This is a strong performance as Las Vegas remains a highly challenged market. With the June visitor traffic volume in Las Vegas, down 11% and revenue per room is up 14% year-over-year, according to Las Vegas Visitors and Convention Authority. This slowdown in tourism, combined with softer local incomes, continues to weigh on retail demand.

Statewide cannabis flower sales were down 14% from last year, with Las Vegas hitting the hardest. Flower prices also declined 18% year-over-year, further impacting top line performance. In this environment, our team executed well. Our diverse product mix, strong brand partnerships and unmatched location continue to drive customer traffic and performance despite the downturn. Our neighborhood store network delivered $12.2 million in revenue, a 9% sequential decline from Q1. We’ve made significant gains in Florida flower quality with potency up 20% from last year and yields up 45%. That said, it still takes time to win back customers, and that is a situation we’re in today, winning back trust. We’re also being impacted by a lack of full suite of products.

Bob will speak to that later. We’re on track to have the complete set of products by Q4 once our BHO lab comes online. In the meantime, we’ve implemented targeted pricing adjustments and upgraded our loyalty program, all with the goal of rebuilding and strengthening our customer base. Combined, our SuperStore and neighborhood network generated $24.2 million in total retail revenue compared to $24.4 million in Q1. Wholesale revenue came in at $2.7 million, down from $3.4 million in Q1. This is driven by both market factors and internal decisions. On the market side, price compression and softer consumer demand continued to affect overall state sales. Internally, turnover in our Nevada wholesale team had a temporary impact, and we made the strategic choice to push more products through our own dispensaries.

This protects margin and limits credit risk as many independent Nevada dispensaries are under pressure. Our brands continued to perform well. Medizin grew 21% year-over-year and HaHa maintained its spot as the third best-selling brand in Nevada. We’re also seeing strong traction from our celebrity-led partner brands. We’re adapting to market conditions by leaning into our core strengths, a great experience, premium products and trusted brands, while actively evolving our approach around pricing to meet the moment and strengthen our competitive position. With that, I’ll turn it over to Steve to walk through our financials.

Steve McLean: Thank you, Larry. In Q2, Planet 13 delivered $26.9 million in revenue, down modestly from $28 million in Q1, demonstrating disciplined execution in the face of a challenging macro backdrop. Las Vegas tourism and statewide cannabis sales were both down double digits year-over-year, with price compression continuing to intensify across the industry. In Nevada, softer consumer demand and declining flower prices created additional headwinds. Internally, our decision to prioritize margin and channel more products through our own retail network, reduced wholesale volumes but helped protect profitability. Our strong brand equity, differentiated retail experience and targeted pricing and loyalty initiatives cushioned much of the market-driven pressure.

As we enter the back half of the year, our focus is on offsetting price compression with higher volumes, particularly in Florida and the Las Vegas SuperStore, while maintaining operational discipline in what remains one of the most difficult operating environments we faced in our two core markets. Gross profit came in at $11.6 million with gross margin of 43.4%, up slightly from 42.8% in Q1. Margin stability benefited from directing a greater share of Nevada production to our own retail stores. That said, pricing pressure is accelerating, driven in part by undercapitalized operators, liquidating inventory at unsustainable levels. We are evolving our pricing strategy to reflect this reality, leveraging our scaled cultivation to compete on price where necessary.

While this approach will compress gross margin percentages, the goal is to grow total gross profit dollars. Sales and marketing expense increased slightly to $1.6 million from $1.5 million in Q1. Actions taken late in the quarter along with strategic shifts in our approach are expected to reduce this line item in future periods. G&A declined to $13.6 million from $14.1 million in Q1, reflecting early benefits from the cost reduction program we initiated at the end of Q1. These initiatives are essential to improving cash flow and will yield more meaningful results in the second half of the year. We expect to see savings in excess of $1 million in G&A in each of Q3 and Q4 as well as substantial savings in marketing expenses in the second half of the year.

Adjusted EBITDA loss was $2.4 million, a slight improvement from a $2.5 million loss in Q1. While revenue deleveraging remains a headwind, cost actions taken this year are beginning to take hold. We expect continued improvement as these savings flow through the P&L in upcoming quarters. Importantly, we significantly improved operating cash used in this quarter compared to quarter 1. In the quarter, we used $1.2 million in operating cash flow as we’ve been reorienting our full team focus on this metric above everything else. Turning to the balance sheet. As of June 30, 2025, the company had a cash balance of $15.9 million. Subsequent to the quarter end, we sold the property received as part of the recovery from the El Capitan lawsuit for $4.1 million net of fees.

With the construction of our BHO lab in Florida nearing completion, capital spending for the remainder of the year will be limited to a few small production enhancements also nearing completion. Total remaining CapEx is estimated at less than $1.5 million for the year. At quarter end, we had approximately $10.6 million in short-term debt outstanding with $9.75 million as a revolving line of credit with 5.5% interest rate, a very favorable rate. And with that, I’ll turn the call over to Bob to discuss the steps we are taking to focus on profitability.

Robert Allen Groesbeck: Thank you, Steve, and good afternoon, everyone. We’ve been clear all year about the challenges facing the cannabis sector and the Nevada consumer environment. Unfortunately, those headwinds intensified in Q2 with tourist volumes in Nevada continuing to decline even as we entered now what is typically deemed a busy part of the season. We are confident this is temporary, however. Historical patterns point to recovering Nevada tourism and spending as we move through the balance of the year. We’ve weathered worse in the past, including a full shutdown during COVID and our track record in responding to adversity speaks for itself. This team knows how to navigate uncertainty, take decisive action and emerge stronger.

That’s exactly the course we’re on now. In Q2, we took a hard comprehensive look at every aspect of our business with one goal, drive cost savings and efficiency. While the full impact of these actions isn’t visible in this quarter’s results due to timing and severance expenses, this was a pivotal period for aligning our cost structure to the realities of today’s market. On the revenue side, we are rolling out a new pricing strategy alongside a refreshed loyalty program. Our commitment is simple. We will not be beaten on price. Across our footprint, we’re implementing a price match guarantee, so customers can be confident that they’re getting not only the best experience in products, but also the best value in the market. This is especially critical in Florida, where we’re working hard to rebuild trust now that our flower and product quality are back to the standards that our customers expect.

We’ve invested heavily in cultivation improvements, delivering significant gains in both yield and potency. On the operations side, we’ve upgraded post-harvesting processing and packaging to improve throughput and lower cost. The final step, as mentioned, our BHO extraction lab remains on track for completion in Q4, enabling us to offer a full suite of high-quality products. We’ve also streamlined our discount loyalty programs, making them simpler, more transparent and more rewarding for our members. We’re not taking our eye off the value of the customer experience. We’re using low-cost events that leverage our dispensary space to bring the community together. That includes things like our Planet the 13th Night Market series, a monthly indoor art and makers market at Planet 13 SuperStore Entertainment Complex.

Tonight marks the very first of these events, bringing local artists together with the community in an engaging environment. These events, combined with our new pricing strategy marks a much more focused effort on being a destination of choice for local customers. We’re also continuing to leverage celebrity partner brands to attract customers through celebrity meet and greet and special events. I do want to take a moment to thank our employees for their commitment during this period of transformation and our customers and patients for their loyalty as well. Our focus is straightforward: Operate with discipline, protect cash flow and build a more resilient, high-margin business. We are not pursuing growth for its own sake. Every decision we make is grounded in capital efficiency and the potential for durable returns.

The work is well underway. We are rationalizing our asset base, improving cultivation yields, implementing tighter cost controls and enhancing retail execution. These are targeted structural actions designed to have lasting impact on short-term fixes. While they will not be fully reflected overnight, they are already positioning us to deliver improved profitability in the quarters ahead. Underlying all of this is a simple operating principle, do more with less. By maintaining discipline and capital allocation and a relentless focus on efficiency, we are setting the foundation for long-term value creation and sustained performance. And with that, I’ll now turn it over to the operator and open the line for questions from covering analysts.

Q&A Session

Operator: [Operator Instructions] Your first question comes from Pablo Zuanic with Zuanic & Associates.

Pablo Ernesto Zuanic: Look, just before I ask my questions, I want to start by saying that I think we analysts appreciate all the transparency, right? I think you’ve been very clear about the challenges, and it sounds that you’re trying to address them the best you can. So I think that’s a class that should be highlighted. Two-part question regarding Florida. In the case of the cultivation improvements in terms of more yield, more potency, are you done? Or is there still room to add more? And I ask the question from the angle that when I look at the flower SKUs in your stores menus compared to other stores, you still have very few flowers SKUs. So is there still a lot of opportunity left in terms of expanding your flower suite in your stores in Florida?

And then the second question, I know we’re waiting for the BHO extract lab in — extraction lab. When do you start actually — you said completed by the fourth quarter. So does that mean that sales begin in the first quarter? And if you can talk about how — I don’t know if you can give color on the capacity of that lab, how big a suite of extract type of products you will have? If you can touch on both those questions, please.

Robert Allen Groesbeck: Yes. Pablo, it’s Bob. Let me take a stab at it initially. With respect to the first part on yield and potency constraints. Yes, we are looking to continue to integrate strains from the West Coast into the market. We’ve been working very closely with our internal lab to get those genetics into the pipeline. So there will be more to come. You’ll see that. You’ll see a lot more drops in the near term in that respect. As for the BHO lab, I’d like to give you an exact date. Unfortunately, we’ve got to live with the regulators on getting inspection. We anticipate that it will be fully operational by early November, and staff will be trained up and ready to go. It’s — again, it’s just a function of when the regulators will get on site and inspect the equipment and give approvals. So we’re shooting for that early November time frame.

Pablo Ernesto Zuanic: All right. And then more just a macro question regarding Florida. For the other states, we have more precise data about pricing from Headset and other sources. In the case of Florida, the data is a bit more conflicting, but — if you can talk about what type of magnitude of price pressure are you seeing in Florida? And then the second question, again, related to Florida, everyone has a view in what may happen with the ballot in November 2026, with rec go into a ballot again or not and the eventual result, if you want to share any thoughts you may have on that front. But let’s start with the first question first.

Robert Allen Groesbeck: I don’t know, Steve, do you want to talk to the first part.

Steve McLean: Yes. As far as the — I mean, I think we have a combination of, yes, the pricing contraction, difficult to put an exact number on it as well as fighting for the customer from a product assortment standpoint, and as mentioned, limited strains and whatnot. So this is multifaceted. We are looking at increasing the strain numbers, increasing the suite of products through BHO. We’re also introducing the creams, new line of creams that we’re bringing into the market. So all those things are going to help. And the pricing piece, I know it’s just part of it, but there’s several things at play there.

Robert Allen Groesbeck: Pablo, Bob again. With respect to the second part, the 2026 ballot question, obviously, we want to see that happen again. I mean, so it’s a bit difficult because it’s my understanding the administration was able to get on an increase to that threshold from 60% to 65%. But we’re going to continue as a company, and I’m sure as an industry to move that forward aggressively. It should have passed last time, and we remain optimistic that we will get this to adult use at some time here in the near term.

Pablo Ernesto Zuanic: Right. And then just one last one, if I may. I mean, obviously, it’s nice to see the share price uptick in — across the sector, right, because of the rescaling news. You know what I’m hearing and what we’ve seen in other cycles when share prices went up, is that bankers start calling companies, offering them to issue equity, make use of the higher prices. Is that happening this time? And is that something you would be considering or not at these levels anyway? And that’s the last question.

Robert Allen Groesbeck: Well, obviously, the phone does start to ring when you start seeing significant increases over a period of several days that — again, that’s just natural. But we’ll talk to anybody if it makes sense for our shareholders. But — look, we’re optimistic, and I’m very, very pleased to hear the President’s comments the other day as is everyone in the space. It will be interesting to see what he does here in the next couple of weeks. And if history is any indication, he’s been true to his word, since roughly 2016 that, one, he thought this should be a state rights issue. But more importantly, he thinks it needs to be — the rescheduling issue needs to be addressed. And we applaud him for that. We just want to see what the details look like.

Operator: Your next question comes from the line of Brenna Cunnington with ATB Capital Markets.

Brenna Cunnington: It’s Brenna on for Frederico. I’m actually just going to second, Pablo’s comments about your transparency with the various headwinds and the company’s action plans to address them. We do really appreciate it. So thank you for that. Just starting off with Florida. We noticed in the weekly own new data that Planet 13 now has 31 stores operating, down from 33 last month. So I was just curious, are these temporary closures for relocations or is just the typo in the data?

Robert Allen Groesbeck: Yes. Brenna, it’s Bob. No, we did close two stores in Miami and they were part of our legacy inventory. They were simply nonperforming. We didn’t see a pathway to profitability with those locations anytime in the near future. So — we made a difficult choice to take them out of the inventory, and we think it was the right choice.

Brenna Cunnington: Okay. Understood. And then the legacy Planet 13 location in Vegas, we’ve seen that they’ve been hosting various unique events. And so we just love some color on how these events have done and increasing the traffic and sales. And just any other commentary that you would like to highlight for us?

Robert Allen Groesbeck: Well, again, this is Bob. I’ll jump in. We’re trying to maximize the facility. I mean it’s large. It’s exciting. There are a lot of things to see. Yes, we’re doing — as indicated, our first event is tonight with this new program we’re launching geared primarily to locals. And it’s really just to create awareness and drive traffic. We’ll see. It’s early days. And again, in light of this recent downturn with the tourist customer, where the team is working very hard to pivot toward to a local customer base in the interim. So it’s exciting. We’ve got a lot of things going on. We’re going to have plenty of vendor days moving forward and market type operations, again, to create awareness and just get people to the facility again, that are locals primarily.

Operator: That completes the question-and-answer session. Ladies and gentlemen, this concludes today’s call. Thank you all for joining. You may now disconnect.