Planet 13 outlines margin improvement and strategic Florida expansion following California exit

Earnings Call Insights: Planet 13 Holdings Inc. (PLNH) Q3 2025

MANAGEMENT VIEW

* Co-Chairman & Co-CEO Larry Scheffler highlighted, “In Q3, our SuperStore, including DAZED!, 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 tourists and local spending… However, our efforts to attract more local traffic are beginning to gain traction, and we are seeing signs of a pickup in tourism as well.”
* Scheffler stated that October revenue increased 5% month-over-month, signaling early momentum in repositioning efforts. The neighborhood store network delivered $11.3 million, with Florida representing $7.6 million. He noted, “Q3 marked the low point for our Florida operations as we work through the final impacts of our previously discussed flower quality issues. We are now seeing tangible improvements.”
* Scheffler also announced, “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.”
* Interim Chief Financial Officer Steve McLean stated, “In Q3, Planet 13 delivered $23.3 million in revenue, down from $26.6 million in quarter 2… Gross profit was $5 million with a gross margin of 21.3%. This figure includes significant onetime impacts… As part of the California divestiture, we sold flower below cost 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%.”
* McLean continued, “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.”
* Co-Chairman & Co-CEO Robert Groesbeck announced, “We made the strategic call to divest our retail assets and wind down wholesale operations [in California]. Exiting California eliminates a persistent cash drain, improves our consolidated margins and reduces operational complexity.” Groesbeck emphasized a focus on Florida and infrastructure investments: “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.”

OUTLOOK

* The company expects stronger performance from core states in Q4, anticipating meaningful margin improvement as one-time charges subside and flower quality in Florida continues to recover. Management stated, “We expect meaningful margin improvement in Q4 as we move past these onetime charges and as Florida benefits from higher quality flower and our expanded product portfolio.”
* The BHO lab in Florida is scheduled to be operational by year-end, with products expected to hit shelves in Q1 2026.
* California divestiture is expected to close in Q1 2026, with its removal projected to positively impact margins in 2026.

FINANCIAL RESULTS

* Planet 13 reported $23.3 million in Q3 revenue and $5 million in gross profit. Gross margin was 21.3%, affected by a $1.1 million impact from selling California flower below cost and a $3.5 million inventory reserve in Florida.
* Adjusted EBITDA loss was $4.1 million in Q3. As of September 30, 2025, the company had $17.2 million in cash and $10.6 million in short-term debt, with $9.7 million of that as a revolving credit line.
* Sales and marketing expense was $1.2 million, and G&A expense was $12 million, both reflecting sequential declines.

Q&A

* Kenric Tyghe, Canaccord Genuity: Asked about the BHO lab timeline and product suite rollout in Florida. Co-Chairman & Co-CEO Robert Groesbeck responded, “We’re on target… The issue, of course, is regulatory approvals… We anticipate that [products] will be in mid-January, maybe even a little earlier. But in any event, we don’t think it will be any later than the 1st of February.”
* Tyghe asked about the $3.5 million Florida inventory reserve. Interim CFO Steve McLean explained, “A lot of it is excess trim just that's accumulated… 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.”
* Tyghe inquired about further operational levers in Nevada. Scheffler described new event-driven traffic strategies and local engagement, including, “We started this… in October, and we had Soulja Boy here, which drew 220 people. We had the pregame show was in our bar that drew 300 people.”
* Pablo Zuanic, Zuanic & Associates: Questioned the shift in sales mix and local activation in Las Vegas. Scheffler explained, “Locals, we get 50% off for locals. So even though it doubled, we didn't get that much more revenue… Our biggest thing is getting the tourists back.”
* Zuanic asked about cash flow benefits from the California exit. McLean stated, “Once it's all complete, we're expecting approximately $300,000 to $350,000 a month of cash flow upside and profitability upside.”
* Zuanic also asked about Illinois operations. McLean confirmed, “Illinois is cash positive.”
* Brenna Cunnington, ATB Capital Markets: Asked about margin improvements post-California exit. McLean reiterated, “We're going to see a margin improvement and basically a profitability improvement of about $300,000 to $350,000 a month.”
* Cunnington also asked about Florida pricing. Groesbeck responded, “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.”

SENTIMENT ANALYSIS

* Analysts focused on the specifics of the California exit, Florida improvements, and margin recovery, often pressing for detailed breakdowns and timing, indicating a neutral to slightly negative tone given the challenging environment and need for operational clarity.
* Management maintained a tone of guarded optimism, repeatedly referencing “early but encouraging” signs in October and confidence in the strategic repositioning. Phrases such as “we are seeing the early indications… that our strategic adjustments are taking hold” and “we're not chasing growth. We're focused on profitable, sustainable operations” underline a disciplined but cautious approach.
* Compared to the previous quarter, analysts remain focused on operational turnaround and cash flow, while management’s language has shifted from stabilizing to repositioning and executing on structural changes with a focus on profitability.

QUARTER-OVER-QUARTER COMPARISON

* Q3 saw the announcement and execution of a California exit, whereas in Q2, management only alluded to restructuring and margin preservation.
* The margin decline in Q3 was driven by significant one-time charges, in contrast to Q2’s more stable gross margin profile.
* Q3 featured a more pronounced focus on Florida operational recovery and the BHO lab launch, while Q2 focused on price competition and loyalty programs.
* Analyst inquiries in both quarters centered on Florida’s recovery, margin impacts, and cost controls, but Q3 included more direct questions about the timeline and financial impact of the California divestiture.
* Management’s confidence remains measured; however, the language in Q3 is more explicit about decisive actions and the expected positive effects in the coming quarters.

RISKS AND CONCERNS

* Management noted ongoing risks from weak tourism in Las Vegas and continued price compression in Florida.
* The California divestiture was triggered by “unchecked illicit competition, compressed pricing and regulatory burden [making] it nearly impossible to consistently generate positive cash flow.”
* Regulatory delays for the BHO lab in Florida could affect product launch timing.
* Analysts raised concerns about the timeline for margin improvement and the ability to reactivate tourist-driven revenue in Las Vegas.

FINAL TAKEAWAY

Planet 13 Holdings is executing a strategic reset by exiting California to eliminate cash drain and focusing on operational improvements in Florida and Nevada. Management is preparing for margin recovery as one-time inventory and divestiture impacts subside, while new product categories in Florida are expected to boost growth starting in Q1 2026. While challenges from tourism and local competition persist, disciplined cost controls and targeted investment are intended to drive profitability and strengthen the business in the coming quarters.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/plnh/earnings/transcripts]

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* Planet 13 Holdings Inc. (PLNH) Q3 2025 Earnings Call Transcript [https://seekingalpha.com/article/4842795-planet-13-holdings-inc-plnh-q3-2025-earnings-call-transcript]
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