Planet 13 Holdings Q1 2026 Earnings Call - Federal Rescheduling and Hemp Crackdown Drive Strategic Pivot

Operator: Good day everyone, welcome to the Planet 13 Q1 2026 financial results conference call. At this time, I would like to hand the call over to Mr. Mark Kuindersma. Please go ahead, sir.

Mark Kuindersma, Moderator/Operator, Planet 13 Holdings: Thank you. Good afternoon, everyone, and thanks for joining us today. Planet 13 Holdings 1st quarter 2026 financial results were released today. The press release, the company’s quarterly report, Form 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, 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 post on our website. Planet 13’s financial statements are presented in U.S. dollars, and the results 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 Steve McLean, Interim CFO.

We’ll now pass the call over to Larry Scheffler, Co-chairman and Co-CEO. Larry.

Larry Scheffler, Co-chairman and Co-CEO, Planet 13 Holdings: Good afternoon, and thank you for joining us. Q1 was a transition quarter that reflected the cost of the strategic repositioning we’ve executed over the past several quarters in quest for better cash flow. With the benefits beginning to show up in our April results. I’ll walk through our operational performance. Steve will take you through the financials, and Bob will cover the strategic picture, including the exciting federal regulatory developments that have changed the landscape for our industry. In Q1, the SuperStore, including DAZED!, generated $9.3 million, up marginally from Q4. The Las Vegas tourism environment showed early signs of stabilization in the quarter, with visitor volume returning in modest year-over-year growth in March. That said, the broader market remains approximately 7% below the 2024 levels, and visitor spending behavior continues to reflect that softer baseline.

The remaining headwind at the SuperStore is cannabis-specific, unlicensed hemp operators on the strip, and continued illicit market activity. Clark County passed an ordinance in March implementing stricter regulations on intoxicating hemp products with an effective date in mid-July. That action, combined with the federal hemp restrictions taking effect in November, addresses what has been a structural competitive imbalance in the Las Vegas market. We expect to see operational benefits emerge in the back half of the year as enforcement takes effect. DAZED! continued to perform well, with revenue up approximately 47% year-over-year, demonstrating what a true cannabis destination experience can deliver. Our neighborhood store network generated $10.9 million in revenue in Q1, with Florida representing $8 million of that total. As a reminder, Q4 included a one-time benefit from the Florida loyalty accrual adjustment that did not repeat.

Adjusting for that item and for our California exit, the underlying neighborhood network was approximately flat sequentially, consistent with Q1 being the trough on a like-for-like basis. April results showed sequential improvements across all 3 neighborhood markets: Florida, Illinois, and Nevada. Combined, our SuperStore had a neighborhood network and generated $20.2 million in total retail in Q1. April monthly retail performance was track consistent with the operating plan we built for Q2, and we expect Q2 to be the first quarter that reflects our repositioned portfolio, without the transition drag. Wholesale revenue was $0.9 million, down from $2 million in Q4, with decline entirely attributable to our California wholesale exit.

The story underneath that headline is in Nevada, where wholesale revenue grew approximately 41% sequentially in Q1, the third consecutive quarter of sequential growth in a direct result of the wholesale team restructuring what we executed in 2025. That progress is in a Nevada market that remains structurally pressured, reflects the operational work that this team is delivering. Q1 was the cost of doing the structural work, exiting California, completing the Wagon Trail consolidation, and rationalizing our cost base. Q2 is the first quarter where the repositioned business operated without those transitions weighing with or under the results. The macro environment is not going to help us. We’re still dealing with the weak tourist traffic, a tough pricing environment, and now at least the impact of illicit hemp.

The operating model is now where we’ve been working to get it, and the early Q2 data is encouraging. With that, I’ll turn it over to Steve to walk through our financials.

Steve McLean, Interim CFO, Planet 13 Holdings: Thank you, Larry. The transition Larry described is reflected in our Q1 financial results. I’ll walk you through the details and then address the impact of the federal restructuring rule on our financial framework before handing to Bob. In Q1, Planet 13 generated $21.1 million in total revenue compared to $25.2 million in Q4, a sequential decline of approximately $4.1 million. As Larry described, that decline was almost entirely explained by two non-recurring items: the California divestiture, which removed approximately $2.5 million of quarterly revenue, and the absence of the Florida loyalty accrual benefit recognized in Q4. Adjusting for those two items, our underlying revenue base was approximately flat sequentially, and our April retail performance has tracked consistent with our internal Q2 plan.

Gross profit in Q1 was $9.4 million, representing a gross margin of 44.6%, flat with Q4 as reported, but an increase of 5.4% when excluding the benefit of the one-time loyalty adjustment in Q4. As we discussed last quarter, this is where we expect this business to operate, and we continue to see additional upside ahead. The BHO lab in Florida, with revenue beginning in Q2, will expand our higher-margin product mix in our largest market. We sold our remaining inventory below cost in California this quarter, diluting margins, which won’t reoccur next quarter, and the Wagon Trail consolidation in Nevada removes a persistent fixed cost drag from our cultivation footprint. We continue to expect gross margin to reflect those tailwinds in a material way as 2026 progresses.

Sales and marketing expense was $1.2 million in Q1, roughly flat with Q4 and 22% lower year-over-year. G&A declined to $11.2 million from $12 million in Q4, a sequential reduction of approximately $800,000, reflecting the elimination of California overhead and continued cost discipline across the organization. G&A is now down nearly $3 million year-over-year, and we expect to continue to find efficiencies through the balance of 2026. Adjusted EBITDA was a loss of $2.3 million in Q1 compared to a loss of $0.3 million in Q4. The $2 million sequential decline was driven by non-operational and one-time items, primarily the absence of the Florida loyalty accrual benefit recognized in Q4 and the California revenue exit, particularly offset by the $0.8 million sequential reduction in G&A.

On a year-over-year basis, our Q1 2026 results represent an improvement from a loss of $2.4 million in Q1 2025, even with the $2.5 million California revenue exit absorbed in the period. Path to positive Adjusted EBITDA, as we described last quarter, remains the trajectory, with Q2 being the first quarter that operates without the transition drag from the California wind down. Turning to the balance sheet, we ended Q1 with $16.3 million in cash and restricted cash, up modestly from $15.6 million at year-end. We spent $0.7 million in CapEx, which included the remaining construction payments for the Florida BHO lab and construction payments on the new store build in Sarasota. We have minimal CapEx for the rest of the year.

Operating cash flow this quarter was essentially break even, consistent with our internal plan, and proceeds from the divestiture of our Orange County retail assets contributed approximately $1.5 million in the period. We continue to expect our cash position to improve through 2026 as the operational improvements Larry described translate into stronger cash generation. Before I hand it to Bob, I want to address the financial implications of the federal rescheduling rule that took effect in late April. As Bob will discuss in detail, this rule moved marijuana subject to state medical marijuana license from Schedule I to Schedule III. Our Florida operations, which represented approximately 40% of Q1 revenue, operate under a state medical marijuana license and are therefore directly within the scope of the rule. On a go-forward basis, this fundamentally changes the federal tax treatment of our Florida business.

The Q1 tax provision of $4.2 million reflects pre-rescheduling 280E treatment for our entire footprint. We are working with our tax advisors and auditors on the appropriate treatment going forward, including the implications for the uncertain tax position liability of approximately $37 million currently on our balance sheet. Treasury and IRS guidance, particularly on the retrospective relief, will be the key items, and we expect to be in a position to provide additional clarity on our Q2 call. In summary, Q1 reflected the transition costs Larry described, with gross margin increasing as expected, G&A declining materially year over year, and our cash position modestly improved. Federal regulatory environment has shifted in a way that materially benefits the business. With that, I’ll hand it to Bob.

Operator: Bob, your line is open.

Bob Groesbeck, Co-chairman and Co-CEO, Planet 13 Holdings: Thank you, Steve, and good afternoon, everyone. I want to spend most of my time today on the federal regulatory developments that have happened over the past several weeks because they are the most consequential thing that has happened in the industry in the past five years. On April 22, the acting attorney general signed a final order rescheduling medical marijuana from Schedule I to Schedule III of the Controlled Substances Act. The rule was issued under the treaty pathway, which means it was not subject to notice and comment rulemaking. It is a final rule. For Planet 13, this is a direct, immediate, and material change. As indicated, our Florida operations operate under a state medical marijuana license, and now we sit on a Schedule III setting.

The most important consequence, as Steve described, is that 280E, the federal tax provision that has imposed a punitive effect rate on licensed operators for decades, no longer applies to our Florida business on a go-forward basis. Separately, the Department of Justice has initiated an expedited proceeding to move all cannabis to Schedule III through the standard rulemaking process. The hearings for that proceeding are scheduled to begin June 29 and conclude no later than July 15. We are not predicting an outcome or a final timeline, but the direct action and the direction of federal policy is clearly continuing to move in a positive direction, and we believe will have positive implications for our Nevada and Illinois operations. On the hemp side, 2 changes are taking effect.

Clark County’s ordinance, passed in March and effective mid-July, as Larry Scheffler indicated, implements stricter regulations on intoxicating hemp products in our home market. The federal hemp restrictions in the 2026 Farm Bill take effect November 12 and likewise address the same problem at a national level. State-licensed cannabis operators have long operated under strict testing, packaging, taxation, and age verification requirements that the intoxicating hemp market has largely ignored or avoided. Closing that gap is appropriate, but is one issue among several, and getting this industry to a level playing field will require continued progress on banking access, the broader 280E question, and the adult use issue I just described. Stepping back, the combination of medical rescheduling and the hemp normalization moving through Clark County and at the federal level addresses 2 of the 3 structural issues we’ve been operating against.

The third, the broader macro landscape across all our markets, and especially in Nevada, is starting to show signs of stabilization and improvement. Turning to operations, our BHO concentrate facility in Florida has completed final state inspections and received partial approvals. We are awaiting final state approval, which we expect to receive in the near term. Once approved, BHO will expand our higher-margin product mix in our largest market and address what has been a meaningful product gap relative to the broader Florida concentrate category. We expect BHO to be a meaningful contributor to gross margin and to comparable store sale performance in Florida through the back half of 2026. Q2 will be the first quarter that reflects a repositioned company operating without transition cost, as mentioned by Larry and Steve, with respect to the run rate.

The macro and competitive environment is not yet showing meaningful tailwind, and our 2026 outlook does not depend on a recovery in tourism. Our outlook is built on the operating model Larry and Steve have previously described: the cleaner cost structure, the normalized gross margin, the BHO contribution, and the operational benefit from the regulatory cascade beginning to take effect in mid-July in Clark County and continuing through November and into 2027 at the national level. I do want to take a moment to thank our team, every member of Planet 13 who has carried the work of this repositioning through what has been a very difficult period for the industry and for our company. We are positioned today better than at any point in the past 18 months. Again, I want to thank everybody for participating in the call today.

With that, I’ll ask the operator to open it up for questions.

Operator: Thank you, sir. Just a reminder, it is star one if you have a question. We’ll go to Pablo Zuanic from Zuanic & Associates.

Pablo Zuanic, Analyst, Zuanic & Associates: Thank you. Good afternoon, everyone. Look, regarding the competition from the hemp derivatives, obviously, you know, it’s going to be effective July, as you said in Clark County, Las Vegas, November at the federal level. We are hearing that in some cases, because of a state-level crackdown, some retailers are beginning to destock and not reorder. In a way, you will already be seeing some benefits. Can you comment on that, whether in Florida or Nevada, or too early to tell?

Bob Groesbeck, Co-chairman and Co-CEO, Planet 13 Holdings: No, Pablo, it’s Bobby. I’ll take a stab at that. We’re hearing that, you know, tangentially in Florida. We’re not actually seeing that translate to numbers in the stores yet. At Las Vegas not so much yet. We do expect as we get closer to that July timeframe, we’re gonna see some significant, you know, uptick in improvements on our end as those stores start to close.

Pablo Zuanic, Analyst, Zuanic & Associates: Okay. Thank you. Too early to tell. In the case of Florida, my question is more about what’s happening in the competitive landscape. We’re seeing, you know, more operators at stores, more so than in 2025, I would say. Some people have also been expanding capacity, pricing has stabilized, but there’s no much growth, right? Can you comment on that? As you see more peers add more stores, would you revise your plans and maybe add more stores also to your network in 2026?

Bob Groesbeck, Co-chairman and Co-CEO, Planet 13 Holdings: Larry, do you wanna jump in on that?

Larry Scheffler, Co-chairman and Co-CEO, Planet 13 Holdings: In Florida, we’re just holding tight on our stores in Florida right now until we see if and what is going to happen. I mean, just being honest with you now, cash is king. We’re gonna conserve as much cash as we can and stick with the 38 stores unless it really shows some huge improvements or increase in traffic and increase in customers. We’re gonna play it safe right now and then be stick at 38 stores till we see a little bit of the future.

Pablo Zuanic, Analyst, Zuanic & Associates: Okay. One last one, and maybe we’ll take it offline also. Can you explain maybe a bit more, this one-time impact you had in Florida in the fourth quarter with the loyalty accrual? I think I worked it out to about $1.5 million versus the color you had, the color you gave. You know, normalized for Q-sales would have been like $8.8 million. Can you just expand a little bit on that? Is that something that we would see again in 2Q or 3Q?

Steve McLean, Interim CFO, Planet 13 Holdings: No. I mean, Pablo, it was about a $2 million, a little over $2 million impact. It was basically we modified our loyalty program at the end of last year. We had accumulated a liability on our balance sheet that was basically relieved. A lot of that liability that had built up was brought over from the purchase accounting of VidaCann a couple of years ago. Basically it was just relieving that off the balance sheet. That’s a one-time item.

Pablo Zuanic, Analyst, Zuanic & Associates: All right. Thank you. Understood. That’s all for me.

Steve McLean, Interim CFO, Planet 13 Holdings: Yep.

Operator: Everyone, at this time, there are no further questions. This does conclude our conference for today. Thank you all for your participation. You may now disconnect.

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