Exclusive Interview with Planet 13 Co-CEO Robert Groesbeck (Left) and CFO Dennis Logan (Right)
When Planet 13 (CSE: PLTH) (OTC: PLNHF) Co-CEO Larry Scheffler and CFO Dennis Logan spoke with New Cannabis Ventures in April 2020, the company was ramping up its delivery operations in response to the pandemic. Now, Co-CEO Robert Groesbeck and Logan checked in to discuss how the company has managed through the pandemic and how it is positioning for the likely resurgence of tourism in its key markets. The audio of the entire conversation is available at the end of this written summary.
Growth During the Pandemic
Prior to the COVID-19 pandemic, approximately 85 percent of the company’s customers were tourists from outside of Nevada. After the pandemic hit, the company had to pivot to serve a primarily local customer base through delivery and curbside pickup. It ramped up its delivery platform from two vehicles to 30 within a matter of weeks, according to Groesbeck.
During this time, the Planet 13 leadership team has remained consistent, but the company is growing its employee count. Prior to the pandemic, the company had 280 to 300 employees. Now, that number is closer to 400.
Nevada Market Position
Planet 13 generates roughly 10 percent of Nevada’s cannabis sales, a market share that has remained fairly steady throughout the pandemic, according to Groesbeck. Since last checking in with New Cannabis Ventures, the company has re-opened its Medizin dispensary in the state, supplementing the footprint it has with its Las Vegas superstore, which is in the midst of an expansion.
The company is expanding the superstore by approximately 7,000 square feet and adding more point-of-sale terminals. Even with limited capacity in the store, Planet 13 is experiencing some bottlenecks. The expansion of the superstore will position it for the expected demand once tourism can ramp up in Las Vegas. It is also adding a standalone retail store with merchandise and supplies to enhance the overall consumer experience.
Within the past year, Planet 13 has also launched its wholesale business. It has products in more than 40 dispensaries throughout the state, and it continues to look for ways to grow its retail distribution channels, according to Logan.
Opportunity in California
Planet 13 is in the process of constructing a superstore in Orange County. The Santa Ana location is in close proximity to major highways and attractions, making it another attractive tourist destination, according to Groesbeck.
Neighborhood Retail
Initially, Planet 13 intended to focus solely on the superstore model, but it has since broadened its approach. The company is also focusing on a neighborhood retail concept. It is aggressively considering opportunities in southern California and other markets.
While the company is monitoring the potential for federal legalization, Groesbeck doesn’t expect any change in the near-term. Planet 13’s goal right now is to develop its superstores in major metro markets with its neighborhood stores filling an ancillary role.
Winning and Acquiring Licenses
For its superstore model, Planet 13 is focusing on adult-use markets. The metro Boston area, the Detroit metro area and, now, Arizona are of particular interest to the company. It will also continue to look for additional opportunities in California.
While Florida is an interesting market, it won’t be a true priority for the company until it makes the transition to adult-use.
In its markets of interest, the company is considering both opportunities for its superstores and its neighborhood locations. Planet 13 is open to both the license application process as well as acquiring partners that could give them some vertically integrated presence and retail licenses.
The company is open to smaller tuck-in acquisitions like this as well as exploring deals with companies that are almost the same size.
Raising Equity
Planet 13 completed four bought deals from July 2020 to February of this year, according to Logan. Now, the company has approximately $140 to $150 million in cash at its disposal. With cash on hand, the company will be able to fund further build-outs and M&A activity.
During the April 2020 interview, Logan discussed why debt capital is not a priority for the company, and that remains the case. Debt has its place, but it remains expensive, according to Logan. For now, Planet 13 will focus on raising equity for its funding needs.
Looking to Future Demand
The company reported $22.8 million in revenue for Q3, and it expects to report Q4 results at the end of March. With the addition of its Medizin store, expansion of its Las Vegas superstore and its position in Santa Ana, the company expects significant revenue growth in 2021, according to Logan.
With vaccines rolling out and restrictions beginning to ease, the Planet 13 team is looking forward to the pent-up demand likely to come to Las Vegas. While the company has focused on the local market during the pandemic, it expects that focus to shift back toward the tourist market.
Planet 13 looks at metrics like room occupancy rates, number of flights coming into the city and conventions booked to help it serve those out-of-state consumers.
The return of tourism is a big opportunity for Planet 13, but it also presents challenges. The company needs to be in a position to serve that demand. On Fridays and Saturdays, consumers have waited close to an hour to see a budtender at the Las Vegas superstore. The Planet 13 team learned they were losing 30 percent of those consumers to competitors.
In response, the company is expanding the superstore and putting systems in place to better manage the store’s traffic. As tourism begins to rebound, Planet 13 will be ready.
To learn more, visit the Planet 13 website. Listen to the entire interview:
