Greetings, everyone, and welcome to Planet 13 Holdings 2021 First Quarter Financial Results Conference Call. As a reminder, this conference call is being recorded on May 27, 2021. At this time, all participants are in a listen only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for research analysts to queue up for questions.
I would now like to turn the call over to Mark Kindersma, Head of Investor Relations for Plant 13.
Thank you. Good Good afternoon, everyone, and thanks for joining us today. Plant 13 Holdings' Q1 20 21 financial results were released today. The press release, financial statements The MD and A are available on SEDAR as well as on our website, plant13holdings.com. Before I pass the call over to management, We'd like to remind listeners that portions of today's discussion, including forward looking statements.
There can be no assurances that such information will prove Predicted in these forward looking statements may differ materially from actual results or events. Risk factors that could affect results are detailed in the company's public filings that are made available on SEDAR. We encourage listeners to read those statements in conjunction with today's call. The forward looking statements in this conference call are made as of the date of this call. Slide 13 disclaims any intention or obligation to update or revise such information, except as required by applicable law.
And does not assume any liability for disclosure relating to any company mentioned herein. Plant 13's financial statements are presented in U. S. Dollars, The results discussed during this call are in U. S.
Dollars unless otherwise noted. On the call today, we have Bob Brospek, Co Chairman and Co CEO Larry Scheffler, Co Chairman and Co CEO and Dennis Logan, CFO. I will now pass the call over to Larry Sheffler, Co Chairman and Co CEO of Plant 13 Holdings.
Thank you, Mark. Good afternoon, everybody, and thank you for participating in our Q1 call. It's been a little more than a month since we last talked to you and I'm happy to report that the trends we're starting to observe have continued. Vegas is back, finally. Earlier in May, Caesars Entertainment reported that their rooms were sold out for the foreseeable future, mirroring what we see on the ground.
We followed up with a record $9,700,000 in sales in March and $10,700,000 in April and are seeing continued strong performance through May. After battling against Macro headwinds for the last year, it feels great to have the wind at our back and then be able to focus on capturing as much of the overwhelming demand as possible. On June 1, the Superstore will be opened without any COVID restrictions. This allows us to increase our operating capacity back to 100%. We'll also be moving back to having the Super Tour open 20 fourseven.
On the last conference call, we talked about how we were losing sales due to longer wait times and other restrictions we had to take to maintain social distancing. The removal of these restrictions should help us capture more sales and improve the level of service we can provide to each customer. Digging into Q1 sales, revenue was broken down into $15,800,000 from the Superstore, dollars 3,400,000 from curbside and delivery, dollars 3,200,000 from our Madison Neighborhood Dispensary, and $1,400,000 from wholesale and other. Our largest growth in Q1 came from our medicine dispensary and from wholesale As the growth of the Superstar only really kicked in high gear in March. When we shut the Medicine Dispensary in Q3 of 2018, It was generating approximately $3,800,000 revenue a year.
I'm pleased to announce how quickly we're able to get back to that number, Especially since during the last few years it was closed while it was closed, many new dispensaries opened all competing for the same local customers. It was really a testament to how our team's customer service, superior product selection, and as Bob and I always say, location, location, location. Even with the return of in store sales, our delivery and curbside have maintained strong through March April. This is great as we are able to give locals a fast convenient shopping experience, while freeing up resources to provide hands on service to tourists. It's a win win as each customer gets an experience that matches their needs.
The state hasn't released sales data yet for March, But we have grown market shares sequentially every month since December and expected with our outstanding performance in March April that we may have achieved records for market share in Nevada. The addition of non cannabis retail and expansion of the double dispensary floor is progressing well We expect to have the extra 43 cash registers opened in Q3. We will also have 2 new entertainment features at that time to We could during the time when there was no tourism. We are now facing a very different problem. I would keep up with the overwhelming demand.
While this problem definitely feels better, there is still work to do for us to maintain the revenue and profit we generate in Nevada this year. The lifting restrictions will help us as will the expansion on the floor. We're doing a good job of incentivizing local customers to purchase mid week or to utilize curbside or delivery to maximize the space and time, we're able to give our tourists on the weekend. All of this is With that, I'll pass it off to Dennis to discuss our financials.
Thanks, Larry. Before I begin, I'd just like to remind everyone that all the numbers Related operating restrictions during the months of January February, the month of March was the first of what we expect to be many very good months in Las Vegas as the U. S. Rebounds from COVID-nineteen and Nevada returns to a fully open economy expected as of June 1, 2021. We've heard from a number of casino operators across the Strip that the hotel rooms are booked throughout the year for the balance of the year, And we look forward to welcoming these tours back to Las Vegas into and to the Planet 13 Superstore in the months ahead.
The company generated $23,800,000 of revenue in Q1 2021. The month of April also showed strong growth, Generating, as Larry pointed out, dollars 10,700,000 in revenue, this almost equaled the entire revenue for Q2 2020 during the month of April. So suffice it to say, we're off to a strong start for Q2. The month of May is also on track to break another record of monthly revenue And with the state of Nevada expected to return to 100% open as of June 1, we anticipate the trend will continue throughout the summer. Gross margin for Q1 was 53.8 percent and we expect continued improvement in this number as the tourists return to Las Vegas.
We've seen consistent improvements in gross margin month over month as we move through 2021. Sales and marketing expense was $650,000 this quarter, up slightly from Q4 2020, but still well below what we expect to be at a more normalized level as we move to market to the tourists as they return to Las Vegas. We also expect to see an increase at the end of Q2 and Q3 as we start to spend marketing dollars in support of our Orange County store opening. The company spent $7,800,000 on G and A in the quarter, up from $7,400,000 last quarter. As anyone who's been following Plant 13 closely would have noticed, we've been fairly active in recruiting and hiring more sales and operational talent in both Las Vegas and Orange County as we ramp up the Plant 13 Orange County location and prepare for the additional 40 point of sale terminals and the planned expansion of the superstores dispensary floor space.
We expect G and A to continue to increase as a percentage of revenue In Q3 Q2 and Q3, as we open the Orange County location and then have this number trend back down after that as the store starts to gain some traction. As of March 31, 2021, the company had a cash balance of $141,000,000 This is up from $79,000,000 as of December 31, 2020. Cash increased over the Q4 number as a result of $3,900,000 in cash flow from operations and $60,800,000 from financing and warrant exercises during the quarter, And this was offset by approximately $3,500,000 that we spent on CapEx related to the Orange County store opening and other initiatives. As a reminder, our current outstanding growth CapEx commitments are $8,000,000 approximately $8,000,000 for the Orange County Superstore Phase 1 build out, of which $3,000,000 has already been spent and $2,000,000 for upgrades and additions at the Superstore with the expected completion date in Q3 2021 and approximately $500,000 on improvements at one of our cultivation facilities. The balance in funds were approximately $132,000,000 as at March 31, 2021, is earmarked for accretive M and A acquisitions and other expansion opportunities.
And so with that, I'll pass the call back to Bob.
Great. Thank you, Dennis, and good afternoon, everyone. As Larry indicated earlier, the year is off to a great And we're seeing day to day growth as COVID restrictions are lifted and Americans are feeling more comfortable traveling and going on vacation after a year of staying home. We agree with America. Everyone deserves a trip to Las Vegas And certainly plan to attain or hopefully soon to our beautiful Orange County operation, P130C as we fondly refer to it.
P130C is really Planet 13 Superstore 2.0. We learned a lot over the last 2 years running the Las Vegas Superstore and are excited to share that experience with Southern California with its next generation entertainment features, intelligently designed facility that improves parking, customer throughput and enhances the overall shopping experience. Construction is rapidly progressing and we are on time and on budget for an opening in July. The Las Vegas Superstore is still showing incredible growth after being open for over 2 years, and I'm excited to watch how Orange County ramps up through the 1st couple of quarters and the 1st couple of years as they gain strength and traction with local and tourist customers alike. We also expect that like our Las Vegas location, OC will benefit as well as Tourists and locals alike visit the store and Instagram or share their experience on other social media platforms, sharing our unique entertainment features.
Larry and I always say that our customers are our best marketers. Switching to brands and wholesale for a minute. We grew wholesale by 24.5% sequentially. We are starting to get traction with dispensaries and customers across the state of Nevada. We launched Baja Beverages with a new line of sodas on May 20.
We've done extensive product testing and are very excited to see the response as we roll it out across the state. Although beverages make up a small portion of the total market, we still think there is a lot of upside potential. In house brands made up for about 23% of retail sales. It is important to note, however, that this is for all product categories. If we look at individual product types, in house brands make up 40% of edibles and concentrates and 30% of vape products, well on our way to our goal of 50% of derivative products.
While we've explained rather, while we've expanded cultivation capacity at our Bell Street facility over the last few quarters, We are still unable to keep up with the overwhelming demand for Medicine Flour at our stores. We continue not to wholesale flower and restricted to our stores only. Our Meadows and Flower attracts local customers who then expand their basket Purchasing other Planet 13 products. We're thrilled with the quality of the first harvest coming out of Bell and are excited to continue as those additional Harvest rooms come online. I'm incredibly excited about the future.
Our first out of state expansion is on track, as I mentioned. The Superstore as well as our local offerings in Las Vegas are performing well and we have a balance sheet to execute on the accretive M and A opportunities we are working on. I'll echo Larry's earlier comments. After a year, it feels like 10 years, It feels incredibly good to have the wind at our back instead of constantly fighting against it. The improvements we've made to weather the storm are already starting to pay dividends.
And now with the return of tourism, we expect 2021 to be a great year for Vegas, for cannabis and especially for Planet 13. With that said, I would now like to ask the operator to open the call for questions. Thank you.
At this time, we will be conducting a question and answer session. Our first question comes from the line of Bobby Brolson with Canaccord. Please proceed with your question. Mr. Grossman, your line is open.
Hey, guys. Can you hear me?
Yes. Hi, Bob.
You guys hear me? Okay, great. Sorry, I was talking to myself Talking to myself for a second there. Congratulations on the EBITDA and the nice cash balance. So, yes, just maybe focusing on California first.
Obviously, you guys are doing well in Nevada with wholesale. Curious what the opportunity is in wholesale in California. I know that's not the main focus of what you guys are doing there this year, but Curious what you see kind of longer term with your own brands wholesaling to other dispensaries there?
Yes, Bobby, this is Bob. Good to chat with
you again. Yes, obviously, when
we opened the Superstore facility there in July, it was reliant upon 3rd party suppliers. But Larry and I and our team, we've been actively engaged in discussions with a number of cultivators and production assets that we look to bring into the portfolio at some point. And our intent there, of course, when that happens is to bring in our and our Medison brands, roll everything into the California market and grow it there as well. And the nice thing is, Given the large number of California customers that we currently enjoy in Las Vegas, they're already familiar with the products and they're already asking for them in California. We're really excited about building that entire brand portfolio throughout the California region.
Great. It sounds like you'll hit the ground running. And then you're at 70% or so, not sure what the latest figures are In terms of dispensary penetration in Nevada, where do you see that peaking for you?
Dennis, I'll pass that over to you.
Yes. So, Bobby, in terms of a penetration number, 70%, we may get Slightly higher than that, but I think we're in all of the biggest dispensaries in the state. We've got customers up in Reno. There are a couple of smaller outlying Dispensaries that we're not in, for us, I think we're really focused on turning those existing customers into bigger customers as we go forward With repeat orders and bigger orders as we go, we are seeing that and you're seeing that in the numbers In terms of our wholesale growth in the quarter, and we expect similar type of growth in Q2.
Okay. And just one last quick one. In terms of the small format stores, you're kind of replicating what you've done with Medison, but maybe with the Planet 13, Brand. Do you expect to kind of infill into California Metros or are you looking to do that initially elsewhere in Nevada or maybe in an entirely different state?
Yes to all three, Bobby. We're very active in California, I'm looking at retail opportunities outside of the Superstore context, but also Looking for opportunities in Nevada, something should fall in our lap that makes sense. We take a hard look at it, but we're also looking at a number of other From the East Coast, again, all the way to California.
Okay, great. Thanks and congratulations.
Thanks, Bobby. Thanks, Bobby.
Our next question comes from the line of Doug Cooper with Beacon Securities. Please proceed with your question.
Hi, good afternoon, guys. Congratulations on a nice quarter. So let's start looking at the numbers. I think the Superstore is $15,800,000 versus 15 In Q4, so Medison, I think it was Bob or Larry, you said that obviously was the biggest growth Sequentially, dollars 3,250,000 for Medison in Q4, which is, I guess, was that all just December, Dennis?
Yes, that was just December.
Yes,
it would open soft opened November 30, but that's all December revenue.
So 600 times 3 is at 1.8. So you've been a huge average increase in the daily traffic clearly and that isn't even from December. What $3,200,000 to $6,000,000 that's running about $13,000,000 annualized. What do you think the potential there To get back up too, guys, please?
Doug, you take that one, Bob.
No, I was just going to say, Doug,
I think we're just getting started back at Medizin. There's a lot more competition in the market, as Larry mentioned earlier, but Our proximity to Allegiant Stadium, I think, is going to be the big game changer for us. In addition to the fact that I think I've mentioned on prior calls, The improvements to the 215 Interstate have all been completed, so there's really no traffic issues over there anymore. So we're really excited. The first big event at Allegiant Stadium will be July 10, with Garth Brooks opening up the arena.
So we're just we're terribly encouraged and excited about what that's going to draw because a huge amount of that traffic is going to flow right past our front door as people exit off of the 215 to get on to Sunset. Larry, I don't know if there's
No, no, I agree and I expect us to continue to grow. We're looking at ways to even get new customers through the store, Even people carrying iPads to walk through budtenders, and I'm very confident we'll surpass Where we were when we shut it down, I think we did $18,000,000 in the 1st 10 months, but we'll surpass that here by the end of the year. Good luck at month to
month.
The gross margin associated with the tourist traffic, I think we've discussed in the past is better, because you don't have to get the discounts like you do to the locals. As we move forward, say, in April, just as a benchmark, or maybe we could just look at the 15.8 Gross margin, the Superstore versus the $3,200,000 revenue from Meditin. What is it can you talk about what the difference in gross margin is and how much of a, So increase in gross margin we can expect, I guess, through more tourist traffic overall as a percentage of revenue and maybe as Get more vertical integration from your growth. What do you think the delta can be on gross margin?
Yes. Doug, we always think that in terms of gross margin getting into the high 50s, sort of in that 58%, 59% range On a gross margin basis, obviously, it gets impacted from company overall, not necessarily specifically to the Superstore. Wholesale revenue does have a lower gross margin compared to the retail gross margins. And then the Medison store does have a discount to the gross margin just because of the lower average ticket size and the Nevada local discount. But we are comfortable in that 58 to sort of I would even say 60, 61 range Depending on how vertical we can get on the cultivation.
We are close to where we want to be on the The concentrate products and the edibles and the beverages in terms of hitting that 50% kind of 50% of revenue coming from Those brands and those SKUs in each of the product categories where we fall down is flower. And as Larry mentioned, we are improving And spending money trying to enhance our ability to grow more flower in the cultivation facilities we have, kind of working towards that. So I think we
can see an increase in
the gross margins if we got to the flower to 50%, but that's not a short term.
Yes. And let me just add to that, just to Larry, that we're also in the planning stages right now of adding 20,000 more square feet of GIST cultivation, of course, on our 45,000 square foot building that we bought about 9 months ago. Again, out of that 25,000 built out,
we'll be we're in the
plans of adding the 20 now, which will help dramatically.
Okay. It will move us on the way to that 50%, but we still may need a bit more flower to get there on that target.
So another 500 basis points, 600 basis points anyway
from where you are 52%.
Yes. We think so, as we go. Okay. Unless the wholesale market really takes off and we get massive wholesale, then I would have to revisit that number. But I think the way everything is growing right now, we'll Comfortable with that?
Just the last word on the gross margin.
No, if I can just add to and we even have had meetings this morning already on how to get out even maybe A quick stop and shop where you know what you want, but in that line of items that we do for a quick stop and shop where people don't want to wait in line, We'll be selling only medicine products, which is a much, much higher margin than to be selling other people's products. And they're the way to drive up the profit for Planet 13 And get the people through a faster without having to wait an hour on the weekends.
Right. Cash, you said $141,000,000 as of March. Is it Different subsequent, you got some more warrant exercises in, where is the cash down
Yes. So we have had more and warrant exercises come in since the end of March. I think we put it in the MD and A in terms of The number of warrants that are coming in, but depending on where the share price is, we still have, I want to say, Probably 380,000 to 400,000 of the July September warrants that are priced at the 215,000 and 5.80 level. We're seeing some warrant exercises from the November financing as well and then even had a couple From the February financing. So as the share price moves up, obviously, the better opportunity for us to take in more of those warrants In terms of cash?
Okay. And do you just have a my final one is basket size. Does it publish basket sizes anymore?
We haven't published them, Doug. I mean, they're back getting July, January, February, they were Given the slowdown still related to COVID, we've seen them return in March April and then through May to where we had them kind of before the shutdown, from COVID. So they're in that I would say they're in that $110,000,000 to $125,000,000 range. Obviously, a bit lower and that is in from the local customer versus the tourist customer like Superstore, but sort of overall blended in that range.
Okay. I think that's
it for me. Great work, guys. Thanks, Todd. Thanks,
Our next question comes from the line of Greg Gibbs with Northland Securities. Please proceed with your question.
Hey, good afternoon, Larry, Bob and Dennis. Thanks for taking the questions and Congrats once again on the quarter and nice start to Q2 as well. Good to hear. I wanted to Ask about kind of how you're thinking about sales and marketing ramping over the next several quarters with the overwhelming demand due to The tourist return, how are you thinking about kind of matching that with the increased tourism?
Greg, it's Dennis. Let me address the one part, Bob, and I'll turn it over to you. Just on the slowdown In January, February, in Q1, largely a result of the fewer tourists and the cab drops, etcetera. So All of that kind of dialed back as we focused our more immediate advertising on the local customer. But go forward in Vegas, I think you'll see it return to a similar percentage of revenue as it was kind of in Q4, Q3, Q4 of 'twenty.
And then I'll turn it over to Bob to talk about how we're going to ramp up Orange County in California.
Yes. Hi, Greg. So Vegas, as Dennis indicated, we're obviously we're shifting that spin from a local customer, again, back to the tourists. So we've reengaged, for instance, our cap our wrap cap program, which has upwards of 200 vehicles on the road with our new Signage, they're rolling out every
day. Put
our vans back out onto the street to whisk customers to and from the facility. And as indicated in the MD and A, we're also going back, and I think Larry mentioned earlier, going back to 24 hours. So again, the spend now is really directed primarily in Las Vegas to capture the tourist customer. And We'll continue to market aggressively for the locals at Medizin, but they already know us, they're familiar with us. For them, it's more about price.
So we just need to be competitive there. California is an entirely different animal. It's a massive market. We're new to the market. So we're going to spend aggressively in the Orange County area in the greater region and focusing again where we can on the tour sectors, the beaches, adjacent to the amusement parks and of course shopping.
So it's going to take a bit more time for that to ramp just given the size of the market, but we're pretty excited about the opportunities down there.
Got it. Yes, that's helpful. And Yes, you're right. I guess it's a bit different, but you've done a great job with it in Vegas in the past. So I remember last time I was there, it's kind of hard to miss those vehicles.
So Good to hear
You won't miss it next time, Andrew.
Exactly. Right.
If I could follow-up to, while we're talking to OpEx, You talked about in your prepared remarks, Dennis, G and A going up as a percentage of revenue once July hits and this California store comes online. I guess I would just ask, how much of a degree would you expect that to go up as a percent? And then maybe how long do you think it will take to start
Yes. So in terms of how much, I look at the size of the operation in Orange County and the number of people we'll have there relative to the Superstore. Bob, how many I can't remember the number of people we're hiring So you'll see some of that coming through Q2 leading up to that opening. Obviously, no revenue associated with those people Employees that we're hiring there and the expansion of the Superstore and the return to the 20 fourseven operating at the Superstore. So you'll see it come kind of go back up, I guess, as to how much it will go up as a percentage of revenue, I think it's going to depend on how quickly you ramp revenue In California, and how quickly we ramp additional revenue coming from that, the expansion in Las Vegas.
So I don't see it going above where we were on an operational basis in Nevada in, as I said, in sort of Q3, Q4 2020, from a G and A perspective as a percentage of revenue, because I think the revenue will ramp significantly in Nevada. And from what I understand in terms of our plans in Orange County, we expect a similar type of ramp. So we may see a quarter To 2 quarters of slightly higher G and A, but should trend back down by the end of the year for sure.
Okay, great. Yes, that's helpful. I did want to ask too if there's any rough expectations you'd be willing to share, whether it's Type of customer traffic that you'd get at the Orange County location. I know it's early and you haven't provided guidance or anything there, but maybe how many points
of sale the store will have relative to Las Vegas Superstore,
any commentary there?
Well, The Orange County facility, we're going to open with 50 registers. And to give you an idea on scope and scale with the Vegas expansion, We're adding another 43 registers here. So it's going to be considerably larger here initially. But the one thing that, Greg, I think it's important to focus on down there. You've just got a lot more rooftops and you've got roughly 6,000,000 people just in Orange County.
So we see the delivery opportunities down there to be even more significant than what we've built here in Las Vegas. So It's something that we're going to really focus on in conjunction, of course, with servicing the tourist customer and providing the entertainment experience at the OC facility.
Great. Yes. I mean, nice to hear about that opportunity. Makes sense. And I guess the last one from me would just be following up.
I hope I didn't miss this in your prepared remarks, but can you just remind us when
that additional cultivation expansion or the harvest rooms are expected to come online? Well, there are rooms coming online now with our genetics. So that has been happening here for the last 30, 45 days. It's the expansion that Larry was Talking about the physical expansion, that is that's going through permitting now. So we think we're close to seeing some light at the end of the tunnel there.
And then once we receive all of our permits, of course, we'll move forward aggressively to build the balance of that space out.
And with that, ladies and gentlemen, as there are no further questions left in the queue, this does conclude our question and answer session as well as today's conference call. You may now disconnect your lines at this time. Thank you for your participation and have a wonderful day.
Thank you. Thank you all.