We finally get to see a full quarter of Planet 13’s ($PLTH) second (2nd!) dispensary included in these financials, as well as how their Superstore has been performing.

Readers will know how much I enjoy reading this outfit’s financials, and our first cut at them noted how clean the shop looked. Last time, we spotted a potential misstep in WCDN (a grow op acquisition), saw edible throughput crater, and a spiralling of G&A. Some margin issues surfaced as well – and I’m interested to see if any of these are showing signs of being addressed.

No time to waste. All dollars in USD unless otherwise noted.

To the financials!

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• Cash at $141MM. Those raises were needed and timely. Cashed up right now. Operations generated another $4MM during the quarter.
• Inventory drifting higher to $9MM (from $7.4MM). Revenue at $23.8MM, margin back to 54%, which sorta follows their longer term trend. We’ll have to wait 11 months to find out if its’ real.
• Hey – call me cynical – but Blue and I have seen enough juice pressed in 4th quarters across this sector to supply a cafeteria. I remark because of $PLTH’s relative margin collapse last Q.
• SBC coming in at $203k. $644k in management/director compensation. It could be seen as reasonable given sales run rate, yet, they’ve only got 2 stores to run. Even if one of them is big….I mean, really.
• Something I hadn’t noted before, they have co-CEOs. One of those CEO’s also leases 2k ft² of office space to $PLTH, and also owns a printing company that sells stationary items and marketing materials to $PLTH. $6k and 10k/mo respectively. I’m not a fan of these side hustles on principal. Even if arms-length and all….but seriously. It’s in the same category as as CEO building their husband’s construction company.
• The WCDN acquisition – was only for cultivation and distribution licenses. Seems WCDN still owned the facility. The day that that sale closed, one of the co-CEO’s purchased the facility for $3.3MM, wrote a lease to WCDN, then assigned the lease to one of $PLTH’s subsidiaries (Medezin). Sigh. Perhaps regulatory design related to resident status (doubtful). Seriously though, I’m going to ask IR about this. They’ve been responsive to me in the past.
• Warrants got lit up – 3MM out at $4.64. That’s a third of the total number of shares issued under financings done in the quarter. Another 800k at the same price were issued in the weeks following the date of these financials. 852k in free RSU’s were issued during the quarter as well. The RSU’s come in at around ~=$7MM in compensation.
• Well, if these guys had been modest in the past, they are certainly making up for lost time.
• A batch of restricted shares were swapped into subordinates. Looks like mainly housekeeping related to domiciling.
• G&A status: UP! Now at $7.7MM. More below.
• Interest expense a modest $470k. Taxes an ungainly $2.4MM. All in, they report $440k in net income before forex.
• Edibles continue their decline as percentage of sales, from 15.8% to 11.7%. Concentrates relatively flat. Yet flower sales increased again as a percentage of total by 1.5%. Wholesale up $200k to $1.0MM (largely immaterial. Those numbers are a little different from below with inter-company eliminations).
• The second superstore’s opening has been set back a quarter, and budget has increased by 6%. Putting up a good sized project rarely follows the spreadsheets.
• Medezin is running about $1.1MM/mo. First month open was at $640k. Looks like its’ beginning to plane. More below.

Some of the G&A and capital spend (~=$3.5MM) are being put into expanding the Superstore no less. They’re adding 40 POS terminals, expanding floorspace by 7k ft², and adding ‘entertainment’ features. That’s Vegas for you. They’ve even begun referring to the Superstore as the ‘Planet 13 Cannabis Entertainment Complex’.

They weren’t operating 24/7. That was expected to change June 1st as Nevada begins reopening. I’m beginning to think that this is where the enthusiasm for this outfit comes from – is that they’re really still operating at 50% capacity in Vegas. Perhaps.

Regarding G&A – it’s all over the map. Misc. charges down by a half a million, but compensation up by $600k. Like, $200k/month? For a 2 store operation? I can see professional fees rising due to financial market interactions. But, I can’t find reference to headcount. Medezin (their 2nd store near the stadium) isn’t supersized. Perhaps it’s the nature of the business they run (premium presence/millwork). I note it because G&A itself is 60% of their average gross margin QoQoQoQ:

As to Medezin’s sales, here’s disclosure that’s missing in almost every other cannabis sector shop out there. From a line in their Q4 F2020 MD&A: “The Superstore served an average of 1,528 customers per day in-store with an average
ticket size of approximately $107″ – that’s gone this quarter, and $PLTH also cites Jan/Feb as having slowed down due to CA lockdowns:

Q4 v Q1 I see as relatively flat – with the increase in totals coming straight from Medezin and seasonality (Vegas is dead in NOV/DEC).

If one envisions a back-to-normal hopping Vegas and a decent Orange County initiation, $PLTH night be running around $220MM/yr in sales and generating some ~=$100MM in GM. A rough valuation on that business with cannabis sector capital cost pegs that worth around ~=$350MM. That’ll go up as sector risk subsides, but we’re a ways off. The thing these guys do have is one of the only true moats I’ve seen in cannabis, at least in Las Vegas. And at least for now.

Look next quarter for sales to be $26MM-$28MM. G&A is the big question here – as in whether or not it can be contained. A high cost/premium service costs money – and as Vegas figured out in the early 2000’s – ‘If you build it, they will come. If you build it really expensive, they’ll still come’. The cheap buffets and downmarket places on the Strip all but disappeared. In this environment and location….$PLTH might have a structural floor which G&A can’t penetrate.

That’s it for now.

The preceding is the opinion of the author, and is in no way intended to be a recommendation to buy or sell any security or derivative. The author holds no position in $PLTH