Planet 13 Holdings Q3 2025 Earnings Call - Strategic Exit from California and Focus on Core Markets Drive Turnaround

Speaker 5: Thank you for standing by. Welcome to the Planet 13 Q3 2025 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. If you would like to ask a question during this time, please press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press the star one again. Thank you. I would now like to turn the conference over to Mark Kuindersma, Head of Investor Relations. Please go ahead, sir.

Mark Kuindersma, Head of Investor Relations, Planet 13 Holdings: Thank you. Good afternoon, everyone, and thanks for joining us today. Planet 13 Holdings’ third quarter 2025 financial results were released today. The press release, the company’s quarterly report, and 10-Q, including the MD&A and financial statements, are available on the SEC’s 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 or 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 reconciliation to the most directly comparable GAAP measures, please refer to today’s press release posted on our website. Planet 13 financial statements are presented in U.S. dollars, and the results discussed during this call are in U.S. dollars unless otherwise indicated. For the call today, we have Larry Scheffler, Co-Chairman and Co-CEO, Bob Groesbeck, Co-Chairman and Co-CEO, and Steve McLean, Interim 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, and thank you for joining us. I’ll cover our operational performance across the quarter. Steve will detail the financials, and Bob will discuss our strategic repositioning, including our decision to exit California and concentrate resources on our highest market returns. Highest return market, sorry. In Q3, our superstore, including Days, generated $9.8 million. Las Vegas faced significant headwinds. Visitor volume was down roughly 10% year over year in the quarter, with notable weakness in both tourist and local spending. As a destination experience historically focused on tourists, we felt these impacts acutely. In a typical quarter, we service approximately 80% tourists and 20% local. In Q3, this was down closer to 50/50 as the number of tourists declined. However, our efforts to attract more local traffic are beginning to gain traction, and we’re seeing signs of a pickup in tourism as well.

October revenue increased 5% month over month, an early but encouraging sign that repositioning is working. Our neighborhood store network delivered $11.3 million in revenue, with Florida representing $7.6 million of that total. Q3 marked the low point for our Florida operations as we worked through the final impacts of our previously discussed flower quality issues. We are now seeing tangible improvements. October sales were 8% higher than the average Q3 month, as better flower quality drives customer reacquisition. Our BHO lab comes online by year-end, completing our product portfolio with a full range of concentrates and extracts that Florida customers expect available in Q1 2026. This should build on the Q4 momentum we’re already seeing. Outside our two core markets, Illinois was a bright spot, with revenue up 9% sequentially from Q2.

Combined, our superstore and neighborhood network generated $21.1 million in total retail revenue, compared to $23.9 million in Q2. Wholesale revenue was $2.2 million, down from $2.7 million in Q2. This decline reflects two primary factors. First, we purposely began winding down California operations during the quarter, which resulted in selling through aged inventory at reduced prices. Second, in Nevada, the combination of our wholesale team restructuring that began in late Q2 and softer statewide retail performance impacted our ability to negotiate with larger dispensary chains. Q3 was undoubtedly a challenging quarter, marked by difficult market conditions and our two largest markets. But we’re already seeing signs of stabilization. October showed sequential improvement in both Las Vegas and Florida.

Our BHO lab will be operational by year-end, and our decision to exit California removes a drag on resources and profitability, allowing us to focus capital and attention where we can deliver the strongest returns. We are far from where we want to be, but we are seeing the early indications in October that our strategic adjustments are taking hold. With that, I’ll turn it over to Steve to walk through our financials.

Steve McLean, Interim CFO, Planet 13 Holdings: Thank you, Larry. In Q3, Planet 13 delivered $23.3 million in revenue, down from $26.6 million in quarter two. As Larry outlined, two factors drove this decline: the outgoing tourists and economic downturn in Nevada impacting our superstore, and Florida reaching its low point. Based on October’s performance, we’re optimistic that we’ve turned the corner in both markets. Our local customer initiatives in Nevada are gaining traction, and improved flower quality in Florida is winning back customers. Looking ahead, we expect stronger performance from our core states in Q4, even accounting for typical seasonal headwinds. California will remain in our Q4 results, with the divestiture expected to close in Q1 2026. Gross profit was $5 million, with a gross margin of 21.3%. This figure includes significant one-time impacts. As part of the California divestiture, we sold flower below costs to clear inventory and convert it to cash.

This had about a $1.1 million impact on our gross profit in the quarter. We also recorded a $3.5 million inventory reserve in Florida related to lower quality flower and distillate accumulated earlier this year. Excluding these items, our gross margin would have been approximately 45%, which reflects our strategic use of promotional pricing in Nevada and Florida to drive customer traffic and rebuild market share. This is consistent with the strategy we outlined last quarter, leveraging our scaled cultivation to compete on price where necessary. We expect meaningful margin improvement in Q4 as we move past these one-time charges and as Florida benefits from higher quality flower and our expanded product portfolio. Sales and marketing expense decreased 24% sequentially to $1.2 million as the cost reduction actions we initiated last quarter begin to flow through.

G&A declined 14% to $12 million, from $14 million in Q2, reflecting our ongoing focus on operational efficiency. We continue taking a disciplined approach to expenses and identifying additional opportunities for savings. Adjusted EBITDA loss was $4.1 million in Q3, impacted by the gross margin charges I just described, along with lower operating leverage from reduced revenue. We view this quarter as a low point. Q4 should show meaningful improvement as we eliminate these one-time impacts and benefit from revenue recovery in our core markets. Turning to the balance sheet, as of September 30, 2025, we had $17.2 million in cash. With our BHO lab construction essentially complete, we don’t expect meaningful capital spending for the remainder of the year. Total remaining CapEx is estimated at less than $1 million.

At quarter end, we had approximately $10.6 million in short-term debt, with $9.7 million of that in the form of a revolving credit line at a very favorable interest rate. Subsequent to quarter end, we sold our Orange County, California store. Now, while this transaction doesn’t materially impact our near-term cash position, it will have a positive impact on our margins in 2026 once the sale closes. With that, I’ll turn the call over to Bob to discuss the strategic actions we’re taking to return to profitability.

Bob Groesbeck, Co-Chairman and Co-CEO, Planet 13 Holdings: Thank you, Steve, and good afternoon, everyone. We’ve been transparent all year about the headwinds facing cannabis operations and our Nevada consumers. Rather than wait for conditions to improve, we’re taking decisive action to restructure the business around sustainable cash flow generation. That drove our decision to exit California. Despite our market position, the state’s combination of unchecked illicit competition, compressed pricing, and regulatory burden made it nearly impossible to consistently generate positive cash flow for any but the largest, most skilled operators. We made this strategic call to divest our retail assets and wind down wholesale operations. Exiting California eliminates a persistent cash drain, improves our consolidated margins, and reduces operational complexity. Most importantly, it frees our team up to focus capital assets and attention on the assets with the clearest path to profitability.

We expect to have completed winding down operations and closing the sale of the dispensary in Q1 2026, as Steve mentioned. Chief among those opportunities, we want to redirect focus to Florida. We’re in the final stages of completing the BHO extraction lab, the last major infrastructure investment needed to unlock the full productivity potential of our Florida operations and drive meaningful top-line and margin expansion. Our cultivation upgrades have delivered substantial improvements in both yield and potency. We’ve enhanced post-harvest processing and packaging to increase throughput while lowering unit costs. We leaned into pricing to attract customers and reintroduce them to our much higher quality, more potent flower. As Larry touched on, in October, we’ve been able to increase prices while retaining customers, leading to increased revenue and a testament to the improving quality that we’re finally starting to benefit from.

While we made significant changes to our approach to leverage pricing to attract customers, we haven’t changed what is core to us. Our customer and entertainment experience has been a bright spot for us in the quarter. Dazed! is a perfect example. We’ve had a record quarter in Q3. We’ve got some exciting stuff lined up for Q4 and next year, and we’re excited to continue building on this. Q3 marked a trough. We’ve made difficult but necessary decisions: exiting California, restructuring our cost base, and completing critical infrastructure in Florida. October’s sequential improvements in both Nevada and Florida are encouraging early signals, but we’re clear-eyed about the road ahead. There’s still significant work to do. Our mandate remains unchanged: operate with discipline, protect cash flow, and build a more resilient, higher-margin business. We’re not chasing growth. We’re focused on profitable, sustainable operations.

Every decision is grounded in capital efficiency and durable returns. The transformation is underway but far from complete. We’re rationalizing underperforming assets, driving cultivation productivity, tightening costs, and sharpening retail execution. These are structural changes, not quick fixes. They won’t deliver overnight results, but they’re already positioning us for materially improved performance, and with that, I want to thank everybody for participating today, and I’ll now turn the call over to the operator and open the line for questions from covering analysts. Thank you.

Speaker 5: Thank you, and we will now begin the question and answer session. If you have dialed in and would like to ask a question, simply press the star followed by the number one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press the star one again. If you are called upon to ask your question and are listening by a loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Your first question comes from the line of Kenric Tyghe with Canaccord Genuity. Please go ahead.

Speaker 2: Thank you and good evening. Just with respect to the timing on the BHO lab, I think expectations initially were for it to come online sometime this month. Could you provide some insight there? Is it simply a regulatory delay or something else on the delay? And second to that, just in terms of the cadence and ramp into the new year, how should we think about your product suite and the timing of you having a full suite in Florida in 2026?

Bob Groesbeck, Co-Chairman and Co-CEO, Planet 13 Holdings: Yeah, Kenric. It’s Bob. I’ll attempt to address that. We’re not far off track. I mean, our projections originally were to have the facility completed in November, so we’re on target for that. The issue of quarter versus regulatory approvals. So we unfortunately can’t account for that. When we build a timeline, we anticipate dates for approvals. We just realistically, we won’t get there in November. That’s not going to happen. This is when do we expect to see? I anticipate that’ll be in, but in the first of February, so. Great. Thank you for that. So I want to go on and forward to the size of the inventory reserve relative to the revenue generated. I mean, is this product that is literally just aging up as it reads in proceedings, or is it something else to the provision you’ve taken there at $3.5 million?

Yeah, Steve, I’ll let you address that.

Steve McLean, Interim CFO, Planet 13 Holdings: Sure. And some of this issue is kind of a carry forward from right from the acquisition date as we took on a lot of sort of excess concentrates and flower at that time, and we’ve been working through it. And then with the sales decline that we experienced in Q3 and some of the plans we had to move some of that excess concentrate have been a lot slower than we anticipated. So we gathered it was time to kind of take those adjustments now. And the amount of a lot of it is excess trim just that’s accumulated. And from a space standpoint, bringing in the lab and having to make a choice on what’s the best use of resources, we’re going to end up moving out a lot of that trim that really just doesn’t have any value anymore to us. So that’s really what that is.

Once that adjustment’s made, we should be in a good place.

Speaker 2: Appreciate it. And a quick final one, if I could, just switching to Nevada. If we look at that, how much more is there that you believe you can do? I think you called out in your prepared remarks some exciting initiatives, but how much more realistically can you do on the ground before you just need to ride out this tourism storm and hope it turns? What levers are there that you can still pull? And do you think you’re at the point where you’re as optimized as you can be and from here on in, it’s just try and ride the storm?

Larry Scheffler, Co-Chairman and Co-CEO, Planet 13 Holdings: This is Larry. I dropped it a little bit.

Speaker 2: Sorry.

Larry Scheffler, Co-Chairman and Co-CEO, Planet 13 Holdings: We’ve got a lot that we can pull. What we’ve done here in the last two months, we’ve assembled a team where we’re getting different events. We’ve got a plaza back there about 4,000 sq ft on the new plaza we did. We started this, I guess, in October, and we had Soulja Boy here, which drew 220 people. We had the pre-game show. It was in our bar that drew 300 people. All of that gave us a tremendous uptick for about two weeks straight. We then had a little issue with the clarification on whether or not our liquor license was renewed or wasn’t renewed. To play it safe, we held off on that and had to go through about a 30-day process to get our liquor license back and our theatrical license for the bars in back also.

So we kind of got a delay for 30 days, but we’ve got a big plan on creating events, not just for Planet 13, but drawing a tourist here for different smaller concerts, pre-game shows for, like I said already, with the Raiders. People are loving that and really coming to the location to do it. Again, two weeks straight of doing it in October, and it was just very, very successful. So we’ve got all that starting up now. About a week ago, we finally got all of our liquor licenses in place, and we’re looking forward to even a great second half of November and a lot of events, two or three events going on in December yet and increasing even more next quarter. So it’s going to be a different game for us completely with all of that.

Speaker 2: Great. Thank you. I’ll get back in here.

Speaker 5: Thank you. And the next question comes from Pablo Zuanic with Zuanic & Associates. Please go ahead.

Speaker 0: Thank you. I guess, Larry, let me follow up on that. So you said that typically for the superstores, 80% tourists, 20% locals. So in the second quarter, you did $12 million, right? So that means $2.4 million local in terms of sales. And then 50/50 in the third quarter, that’s $4.9 million. Sorry to be so precise on the numbers, but roughly, it seems that your sales to locals in the third quarter doubled, right? Which is great. And from what you were saying, the activation even began more aggressively in October, right? So the outlook with, if I’m right, in terms of the math, your sales to locals doubled in the third quarter, and in the fourth quarter, you seem to have even more momentum with locals. Or are my numbers wrong?

Larry Scheffler, Co-Chairman and Co-CEO, Planet 13 Holdings: Right. We had a great success in October for two weeks until we had the liquor license issues.

Speaker 0: No, no, no. I’m not talking, I’m sorry to interrupt, Larry. I’m sorry to interrupt, but I’m talking about the third quarter. The third quarter, based on the numbers you gave us, right? 80/20 in the second quarter, 50/50 in the third quarter in terms of tourists and locals. That means that your sales to locals in the superstores in the third quarter doubled. So you probably had a lot of activation already in the third quarter in place.

Larry Scheffler, Co-Chairman and Co-CEO, Planet 13 Holdings: Well, it doubled. So you’re wondering why the revenue didn’t go up? Is that your question?

Speaker 0: No, no, no. I’m just saying that your sales to locals, it seems that from the numbers you gave us, your sales to locals in the superstore in the third quarter doubled, right? Which is very good. So a lot of your activation already began in July, August, and September. So I’m just trying to understand what’s different in October, November versus the third quarter. It seems that you have even more activation. Or the activation already began in July and August for the superstore in terms of activities aimed to locals.

Larry Scheffler, Co-Chairman and Co-CEO, Planet 13 Holdings: I guess I’m not following the line of questioning. I’m sorry.

Speaker 0: Okay. All right. Maybe I’ll just follow up offline. No, okay. I’m just saying that you guys said that the superstore sales. I’ll move on, but superstore sales in the second quarter were $12 million, and 80% was tourists, 20% was local sales, right? And the third quarter was $9.8 million, and that was 50% tourists, 50% locals. So it means that the sales to locals from the superstore doubled, right? But don’t worry. I mean, I’ll move on. So I’m just saying it seems that the activation you had in the third quarter already worked great. And now you seem to have even more activation in the fourth quarter.

Bob Groesbeck, Co-Chairman and Co-CEO, Planet 13 Holdings: Yeah, Pablo, I’ll jump in maybe. Just real quick. When you think about the change kind of Q2 to Q3 and the increase in locals, part of that was driven by pricing more than—and more local-focused events. What Larry’s talking about in Q3 is also—I mean, or in Q4 in October is also bringing back more of the tourist-focused events. So adding.

Larry Scheffler, Co-Chairman and Co-CEO, Planet 13 Holdings: Right. I see. Yes, because locals, we get 50% off for locals. So even though it doubled, we didn’t get that much more revenue with the locals even though we doubled the activation, how many people came in? Our biggest thing is getting the tourists back. Now, I would say during the two weeks in October, we hit again 80% tourists and 20% locals once we had the bars and the events, Soulja Boy, the pre-game. Again, that fell off. I think in fourth quarter, or the balance of fourth quarter, we’re going to be back at 80% tourists and 20% locals again is what we’re going to have. The big money is when we get the tourists in here at full price.

The locals are good, but we give a 50% discount to match all the rest of our competitors that give you discounts other than what we charge at Planet 13 because of the tourist destination.

Speaker 0: Right. Got it. Okay. Thank you. And then just one for Steve. Can you try to quantify the cash flow benefit going forward from the California exit?

Steve McLean, Interim CFO, Planet 13 Holdings: Sure. And this kind of starts at the beginning of next year. We’re waiting again to get approval on the license transfer to complete the sale of the California store. But once it’s all complete, we’re expecting approximately $300,000-$350,000 a month of cash flow upside and profitability upside. And given the trajectory of that market and the pricing that we were experiencing and seeing, I think it would have been more had we continued, that the losses in that market would have been even more than that. So we’re kind of heading that off in advance. But there are some months where we would have experienced an even larger impact, but on average, we’re thinking $300,000-$350,000 a month.

Speaker 0: All right. Thank you. And a related question in terms of what you can disclose publicly. Is the Illinois operation, I know it’s still in a ramp-up mode, but is that a cash drain, or is it neutral to cash flow right now, Illinois?

Steve McLean, Interim CFO, Planet 13 Holdings: Illinois is cash positive.

Speaker 0: It’s cash positive. Okay. That’s great. Thank you. And one last one, Bob. I mean, some people are getting very excited with this potential Hemp ban that may be signed today. And you’ve discussed this at length in prior calls. Some people quantify the Hemp derivatives industry close to 20 billion, right? So it could be a big uptake for the cannabis industry, but particularly in the case of Florida. But any thoughts in terms of whether those numbers begin to accrue, whether in terms of pricing or in terms of revenues for operators like yourself on the cannabis side?

Bob Groesbeck, Co-Chairman and Co-CEO, Planet 13 Holdings: Yeah, so that’s an excellent question. I mean, obviously, we’ll see what happens in the vote here today, whether any of that’s stripped out on the house. But look, as a THC operator, I’m encouraged by that because intoxicating hemp, as we’ve discussed many times, as you mentioned, has had a dramatic negative impact on the regulated industry. And with respect to what the uptake is in Florida, for instance, I don’t know what that is, but I know it’s going, I anticipate it’ll be significant because we’ve been crushed in Florida. Just about every other storefront down there has intoxicating hemp sold at retail. And it’s incredibly hard to compete against that, especially with the regulatory burdens we deal with every day. Look, I’m guardedly optimistic. I never count anything until it happens. And this is politics.

But Pablo, as I’ve said to you in the past and to your listeners, I don’t mind competition. I just want it to be fair competition. And if they want to be in the space, they should play by the same rules that we do and be accountable like we are. So I’m going to keep my fingers crossed here till I have a chance to see what happens on the vote today. The president’s indicated he’s going to sign it, whatever it is. And I think he messaged briefly today that he thought that some hemp reform is probably necessary, or he could support it, rather. So let’s see what happens. Fingers crossed.

Speaker 0: Yeah. No, that’s good. Thank you. Look, let me add one more if you don’t mind. I know in the past, I know you’ve been very disciplined in terms of cash allocation, but in the past, you’ve talked about potentially acquiring dispensaries in Nevada to allocate more production internally to capture more margin. But after divesting California, it seems that you don’t have a lot of wholesale revenue, right, to third parties. So you don’t have a lot of product to be selling to third parties. So I’m wondering whether there’s a need to be buying Nevada dispensaries if you don’t have a lot of additional product to sell to third parties right now?

Bob Groesbeck, Co-Chairman and Co-CEO, Planet 13 Holdings: In Nevada, we’ve got plenty of capacity. We’re actually dealing with that now, trying to figure out how we’re going to better try to balance the supply to demand in the wholesale market. Again, it’s a challenging market. But to the first part of your question, are we looking to actively purchase dispensaries? We’re not now. We’re kind of pivoting. We’re trying to just get more efficient internally in how we operate. We’ll see how the market shakes out here in the mid-2026, and then we can revisit that.

Speaker 0: Right. Okay. Thank you. That’s all.

Bob Groesbeck, Co-Chairman and Co-CEO, Planet 13 Holdings: Thanks, Pablo.

Speaker 5: The next question comes from Brenna Cunnington with ATB Capital Markets. Please go ahead.

Speaker 7: Hey, this is Brenna for Frederico. Thanks for taking our questions. So just looking at the pending divestiture from California, what type of financial improvements could we expect to see once that’s been divested?

Bob Groesbeck, Co-Chairman and Co-CEO, Planet 13 Holdings: Yeah, Steve, why don’t you jump in here?

Steve McLean, Interim CFO, Planet 13 Holdings: Yeah. I think we kind of talked a little bit about that. But what we’re looking at is about, let’s call it $350,000 approximately of sort of profitability enhancements, given that the one facility is a cultivation facility, and we were near the end having to sell a lot of the product basically at cost or below. This will have a big impact on our margins going forward. So we’re going to see a margin improvement and basically a profitability improvement of about $300,000-$350,000 a month.

Speaker 7: Okay. That’s helpful. Thank you. And then just looking at Florida, from a pricing standpoint, what are you seeing there?

Bob Groesbeck, Co-Chairman and Co-CEO, Planet 13 Holdings: It’s still a very challenging market right now. A lot of compression, so we’ve had to get very creative on how we promote products to our customers and how we price to be competitive, so I anticipate there will be continued price compression in the near term, and again, I think for us, we’re fortunate with the improvements to our cultivation facility. We’ve seen much, much better products coming out consistently, so it makes us more competitive in the flower market, but we’re particularly excited, as we mentioned, about BHO coming online. It gives us an entirely new product category to go into, and so we’re excited, and we know there’s a lot of upside in that segment.

Speaker 7: Okay. Perfect. And then last one for us is just, are there any plans to open any new stores in Florida or potentially closing stores in Florida?

Bob Groesbeck, Co-Chairman and Co-CEO, Planet 13 Holdings: We’re continually analyzing the store performance individually, and we’re going to continue to monitor that. My guess is right now, we’ve got a couple of openings scheduled here, but we’ve taken a much slower delivery path there going forward. We’re just, again, our focus is to get profitable. And then we’ll take a look at adding additional stores. That’s probably going to be the latter part of 2026. We’ve got some opportunities or locations in our inventory now. Again, we’re not prepared to put the CapEx out there now to get these stores built out. We’re in good shape with what we have. We just need to make those stores profitable.

Speaker 7: Understood. Thank you so much. I’ll jump back in the queue.

Bob Groesbeck, Co-Chairman and Co-CEO, Planet 13 Holdings: Thank you.

Speaker 5: Thank you. And this does conclude our question-and-answer session. I’d like to thank our speakers for today’s presentation, and we thank you all for joining us. This now concludes today’s conference call. You may now disconnect.