Planet 13 - Q2 2024
August 8, 2024
Transcript
Operator (participant)
Greetings, and welcome to today's Planet 13 second quarter 2024 conference call. At this time, all participants have been placed on a listen-only mode, and we will be conducting a question-and-answer session with the covering analysts after the presentation. It is now my pleasure to turn the floor over to your host, Mark Kuindersma, Head of Investor Relations. Mark, the floor is yours.
Mark Kuindersma (Head of Investor Relations)
Thank you. Good afternoon, everyone, and thanks for joining us today. Planet 13 Holdings' second quarter 2024 financial results will be released today. The press release, the company's quarterly report 10-Q, including the MD&A and financial statements, are available on the SEC website, EDGAR, and SEDAR+, as well as on our website, planet13holdings.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, 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 US dollars, and the results discussed during this call are in US 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 Dennis Logan, CFO. I'll now pass the call over to Larry Scheffler, Co-Chairman and Co-CEO of Planet 13. Larry?
Larry Scheffler (Co-Chairman and Co-CEO)
Good afternoon, everyone, and thank you for participating in our second quarter call. Q2 was an exciting period for Planet 13, marked by significant developments and strong financial performance. We successfully closed the transformational acquisition of VidaCann and opened a completely unique DAZED! Consumption Lounge. Turning to our performance in the quarter, in Q2 2024, the superstore generated $15.1 million, an 11% sequential improvement. This strong performance is directly related to our focus on delivering unique entertainment and experiential value to our customers. We opened DAZED! Consumption Lounge in April, and the results are clear, both as a direct revenue driver with sales from the lounge and as a traffic driver that increased customer visits and sales for the superstore. We are still learning and experimenting with the type of events, marketing, and occasions that work best, but what's clear is that customers love DAZED!.
Since opening on April seventh, we've hosted fight nights on, fight night watch parties, private events, and podcast tapings. This is just the beginning. We envision big opportunities for events like NFL Sundays, comedy shows, brand-sponsored tasting events, and countless other innovative ideas. This platform stands out in its unparalleled potential in marketing, brand building, and driving traffic. Revenue from our superstore network increased by 143% sequentially, with us consolidating Florida on May tenth. It contributed a month and a half to our consolidated financials, resulting in $12.3 million from our neighborhood store network, compared to $5.1 million in Q1. If we look at the organic growth by including the full quarter from Florida store network for both Q1 and Q2, we grew total neighborhood revenue by 2% sequentially.
The Florida team continues to push themselves to improve this product in quality and service levels, and the results are obvious. Along with strong performance from Florida, our team in Illinois continues to mature in their operations. They grew sales by 18% sequentially as they build both their reputation and brand equity in the state. Between the superstore and our network—our neighborhood network, we generated total retail revenues of $27.4 million, a 47% sequential increase. Excluding Florida, rental, retail revenue grew 8% sequentially. We also generated $3.7 million from wholesale, lifestyle, and other things. According to BDSA, we had the 5th most branded sales of any company in Nevada during Q2 and ranked 2nd in our edible portfolio sales, led by HaHa Gummies.
This continued success is a testament to the product quality and brand equity that we built. With that, I'll pass it over to Dennis to discuss our financials.
Dennis Logan (CFO)
Thanks, Larry. Before I begin, I'd like to remind everyone that all numbers on today's call are in US dollars, unless specifically stated otherwise. Planet 13 generated $31.1 million in revenue in Q2 2024, compared to $22.9 million in revenue in Q1 of 2024. This large growth was driven by multiple factors, both organic and M&A related. We saw strong performance at our superstore and Illinois neighborhood store, along with contribution from the VidaCann acquisition.
It is important to note that while VidaCann did approximately $12.9 million in revenue in the quarter, only seven weeks of the results were included in our consolidated revenue, and the VidaCann network contributed $7.2 million to revenue in Q2 2024. We will benefit from a full quarter of Florida operations in Q3 2024, as well as anticipated continued strength across our neighborhood stores, our superstore, and our wholesale verticals. We expect to continue to drive growth in Florida and long-term growth in the wholesale and lifestyle verticals, although off a smaller base.
We are cautious about revenue growth in the second half of 2024 and the beginning of 2025, based on what we see as a weakening demand from the consumer, as there are signs of stress that may impact our top line as consumers trade down, buy in bulk, or generally look for discounts. Gross profit was $15.8 million in Q2 2024, compared to $10.5 million in Q1 2024. This translated into a gross margin of 50.1% in the quarter, compared to 45.8% in Q1. The 430 basis point improvement in gross margin is a testament to the team, who have worked incredibly hard to bring down our internal costs of cultivation through higher yields and increased utilization, as well as the sell-through of our house brands in our, in our store networks.
This had the double impact of enabling higher levels of vertical integration as we introduced HaHa Gummies in California and increased first-party sales of our house brands across our dispensary network. Along with these improvements in operations, during the quarter, we benefited from a shift in mix, with wholesale making up a lower overall proportion of total sales. As everyone knows, wholesale revenue comes with a lower gross profit margin. We expect to see some improvement in Q3 2024, as a higher proportion of our total revenue is driven by Florida and fully vertical sales. Overall, we are targeting to keep gross margins in the 50%+ range, with continued efficiency improvements offsetting pricing pressures. There will be some variability quarter to quarter as the state and product mix impacts the margins.
Sales and marketing expense was $1.5 million during the quarter, up from $1.3 million in the prior quarter. As a percentage of revenue, sales and marketing fell from 6% to 5%, representative of how marketing efficient our Florida operations are. Looking ahead, we have a couple of growth opportunities that we plan to invest marketing dollars behind, including our wholesale and lifestyle brands. Having said that, part of the benefit of the lifestyle brand that Bob will speak to later is how it works as a cost-efficient marketing strategy. The company spent $12.3 million on G&A in Q2 2024, up from $10 million spent in Q1 2024.
As part of that, we had to spend approximately $1 million on one-time costs in the quarter related to M&A and legal fees, related to the El Capitan matter. Overall, general and administrative expense was 39% of revenue, compared to 44% of revenue in Q1. With the addition of Florida and the continued execution of our growth strategy, we are finally starting to benefit from operating leverage. We generated $3.2 million of adjusted EBITDA in the quarter, compared to 0 in Q1 2024. This translated into a 10.3% adjusted EBITDA margin.
We expect to see continued improvement in both the absolute level of adjusted EBITDA and the adjusted EBITDA margin throughout the remainder of the year, as we benefit from the inclusion of the Florida operations, continued improvement in vertical integration across our stores, and growth in our wholesale and lifestyle segment. As of June 30, 2024, the company had a cash balance of $26.7 million. In the quarter, you know, in the Q2, we generated $4 million in operating cash flow and used approximately $4 million in CapEx for upgrades to our cultivation facility in Florida, the build-out of additional dispensaries in Florida, and the finishing of the DAZED! Consumption Lounge that opened on April 7.
We have approximately $1 million in construction commitments as of June 30, 2024, and plan to spend an additional $3 million-$5 million over the course of the next 6-12 months, focused on upgrades to the cultivation and manufacturing in Florida, along with turning on additional Florida neighborhood stores. The company has approximately $3 million in bank debt at our VidaCann subsidiary due in February 2025, $5 million in notes payable under the terms of the VidaCann acquisition due in May 2025, and approximately $1.5 million in notes payable at VidaCann. We anticipate cash proceeds from the sale of surplus land and equipment in Florida, coupled with positive cash flow from operations and cash on hand, will be sufficient to fund debt maturities over the next 12 months.
As a reminder, for this year, we have been accruing our taxes as before on the income statement, as if we are subject to 280E, but we've been paying based on an estimated tax liability under normalized non-280E treatment. This will have a significant positive impact on our cash flow over the course of the year, and we are encouraged by the overwhelmingly positive response to the DOJ comment period and feel confident in the approach we are taking with our taxes. With that, I'll turn the call over to Bob to discuss the execution of our growth plan.
Bob Groesbeck (Co-Chairman and Co-CEO)
Thank you, Dennis, and good afternoon, everyone. As indicated earlier, Q2 was a solid quarter with good financial performance and strong progress on our growth initiatives. Last quarter, we introduced a multi-pillar growth strategy to significantly increase both our wholesale and retail revenue over the next couple of years. Let me walk you briefly how we are executing against each pillar. The first pillar of our retail growth plan was closing on our Florida acquisition. We accomplished that on May tenth and are well into the integration process. It is not an easy process integrating into a new state, 26 stores, and hundreds of employees. The team has been great about working collaboratively to get systems and procedures in place to facilitate reporting, data integration, and execution of our growth plans. They've handled these additional responsibilities without missing a beat.
Continuing their track record of sequential revenue growth. To continue supporting the rapid growth of our Florida operations, we're well underway on construction to improve and add canopy to our Florida greenhouses and adding indoor cultivation. Upon completion in Q4, we expect our square footage under cultivation to increase by 25%, and with yield increases upwards of 40%. This will enable us to increase supply and to support our growing network of stores and bring our incredibly popular brands into the state. In fact, just last week, we started planning our most popular medicine brand, flower strains. The second pillar of retail growth is expanding our neighborhood store network. We have three dispensaries in Florida that are sitting at the starting line, ready to open, and are just awaiting final state regulatory approvals.
Additionally, we have 3 more that are nearing completion, which would bring our Florida store network count to 32 stores. We're also actively pursuing more dispensaries through cost-effective M&A in Nevada. A Nevada dispensary is a good strategic fit for us as it increases our operating leverage in the state, creates opportunity to increase verticalization, and complements our SuperStore tourist-focused customer base with a more local, historical customer base. The third pillar of our retail growth plan is the continued leveraging of the SuperStore as a one-of-a-kind lifestyle experience and brand-building platform. We opened DAZED!, on April fifth, as Larry indicated. We're very excited about that opportunity, both as a revenue generator and as a draw for customers. But we're still at the starting line in terms of figuring out how to best utilize the potential for the lounge.
We're going to continue leveraging this space for innovative public and private events, and to bring people into the store, interact with our brands, and deepen their love for Planet 13. Along with the lounge, we are continuing to leverage every inch of the SuperStore to increase traffic, offset lease expenses, and create a must-visit destination in one of the greatest tourist cities in the world. That includes a third-party-operated tattoo parlor and our expanded grand hallway, Plaza 13, which has already hosted numerous unique events, celebrity appearances, and brand exhibitions. The second part of the growth plan is growing our wholesale business. We've introduced HaHa Gummies into California, starting with our own dispensary and limited trials. This has created instant benefits from increased verticality, and we're also on the verge of a much wider launch of this product for wholesale customers throughout California.
We are also actively in discussions with third-party manufacturers and distributors to bring this brand to Illinois. We look at wholesale as a long-term growth opportunity that will build slowly, but with big upside potential. At the end of July, we launched our Lifestyles brand worldwide. The Lifestyles brand is a strategic pillar for us. It gives Planet 13 fans another way to interact with us, deepening the relationship with Planet 13 merchandise and turning them into brand ambassadors. It also acts as a cost-efficient way to get national and international brand awareness. It allows us to take part in traditional advertising channels and traditional costs instead of the limited options available to the cannabis market. We kicked off the Lifestyles brand with UFC fighter Chito Vera as the first sponsored athlete.
Chito was part of a thrilling fight on August third and has been a great brand spokesman for Planet 13. This is the first in a new strategy to target up-and-coming athletes, entertainers, and influencers with strong followings, crossover appeal to cannabis users, and online presence to cost effectively market and expose the Planet 13 brand. Long term, we think this could be a meaningful contributor to our financials, in addition to the strategic value we'll start to recognize right away. To conclude, we are continuing to exercise on an exciting two-pronged growth strategy. In Q2, we've made significant progress in both wholesale and retail, increasing revenue by 20% year-over-year, with a clear pathway to further improvement.
We're innovating as a cannabis and lifestyle company to create a national brand with substantial underlying value, and we're generating operational leverage to becoming more profitable and to generate more cash. With that, I want to thank everybody again for participating today, and I'll ask the operator to open the call for questions from covering analysts. Thank you.
Operator (participant)
Thank you. The floor is now open for questions. If you wish to join the queue to ask a question at this time, please press star one on your telephone keypad. We do ask, if listening on speakerphone today, that you pick up your handset while asking your question to provide optimal sound quality. Once again, please press star one on your keypad at this time, if you wish to join the queue to ask a question. Please hold a moment while we poll for questions. The first question today is coming from Yewon Kang from Canaccord Genuity. Yewon, your line is live. Please go ahead.
Yewon Kang (Research Analyst)
Hi, good evening. This is Yewon Kang on behalf of Matt Bottomley. Thank you for the question. So my first question here is regarding the outperformance within the Nevada and Illinois. Could you talk about the initiatives that you guys had in place for DAZED!, whether it was a sports watching event or anything like that, that led to this growth for the superstore as well as the Illinois neighborhood store? Thank you.
Dennis Logan (CFO)
Sure. It's Dennis here. I'll take the first part of that question. So with respect to the superstore, the initiatives we focused on, we're driving much better penetration of our host brand in the store.
... itself, you know, this is excluding DAZED!. It sells 100% of our own brands in DAZED!. So it was a combination of increasing, you know, flower sales to 50+% in total volume from our own internal cultivation, our ability to, you know, leverage that and the higher margins we get from that in the store as well as DAZED!. You know, obviously, it sells 100% of our own product in the lounge at, you know, call it 80%-85% margins. Events in DAZED! drove traffic both at DAZED! and to the superstore itself.
And so, you know, it's having the effect that we had hoped, along with the addition of the tattoo parlor, that's, you know, they're doing, you know, I would want to say a few hundred people a day in terms of tattoos. So when they're active and busy, and those people are also customers at the store. So it's a combination of a bunch of things driving that Nevada operational improvement. And then Illinois, you know, we have dialed in pricing, have dialed in, you know, promotions to, to veterans and, and other initiatives in that marketplace. We expect to benefit further in Illinois as we introduce our house brands into that marketplace.
And so it's a combination of trying to dial in the marketing, dial in the targeted audience in Illinois, and the fact that it's been open now and, you know, generating its own traffic and awareness that we're continuing to expand on. It's driving that improvement.
Bob Groesbeck (Co-Chairman and Co-CEO)
This is Bob. If I can just add to that, as Dennis indicated, DAZED! is its own traffic driver, and it's continuing to grow, but it's also a nice complement to the Plaza 13. You know, we recently hosted Fight Week. We've had a number of MMA fighters, you know, in the UFC pipeline come through. So it's been really special to have that space for press conferences and for interaction with the athletes. Then, of course, we've had live view events hosted in the lounge, which have been very, very popular with our customers, and we're gonna continue to really expand upon that.
Yewon Kang (Research Analyst)
Got it. Thank you. And if I could just have another follow-up question to that. So obviously nice to see the sequential margin lift and Adjusted EBITDA. So just wondering how much of this number was attributed to the benefits realized from consolidating vertically integrated operations in Florida, stemming from the VidaCann transaction versus the other markets? It'd be helpful just to triangulate the number better for expectations going forward. Thank you.
Dennis Logan (CFO)
Yeah, I think we'll get back to you with the detail on that. But the, you know, the Florida operations, you know, are in that 50%+ margin range. And then we've again moved our product mix, you know, more vertical integration in Nevada, driving higher margins there, less so on the, you know, with leaving fewer revenue dollars coming from the wholesale market. I think our wholesale margins are in that 35% range, and our dispensary margins in Nevada are, you know, 52%-55%. So we are targeting to keep the Nevada margins where they are and expand the Florida margins somewhat as we dial in improvements there and add more products and a greater product offering there that we can get higher margins from.
So we expect margin, you know, when we commented on the call, in the 50%+ range, it's really gonna depend on how successful we are on the wholesale growth and strategy and how much revenue comes from the wholesale side of the equation as we launch HaHa further into California and into Illinois. So it's gonna depend, as we said in the comments on the call, you know, state variability and product mix variability will determine that overall margin level.
Yewon Kang (Research Analyst)
Great. Thank you so much. I'll jump back into the queue.
Dennis Logan (CFO)
Thank you.
Bob Groesbeck (Co-Chairman and Co-CEO)
Thank you.
Operator (participant)
Thank you. Your next question is coming from Pablo Zuanich. Pablo, your line is live. Please go ahead.
Pablo Ernesto Zuanic (Managing Partner)
Thank you, and good afternoon, everyone. Look, I just wanna focus on, on Florida, and, you gave us a lot of numbers. I don't know if I took, proper notes here. I think you said $90 million pro forma for the quarter for Florida. If that's the case, right, divided by 26, that's almost $3 million. To my knowledge, that would be at, the state average, which would be a big accomplishment. And also, you know, if I compare with the volume from OMMU, in terms of flower per store and extracts per store, you are below. So if you are in dollars in line with the state average, that means you have a better mix. But any color you can give in terms of how you... We don't know exactly what's the size of the Florida market in dollars.
Headset has one number, BDSA has another number. But talk about, if you can, you know, did I get the right numbers? Are you at $3 million per dollars? How do you think that compares with the state? And remind us of what was done over the last year in terms of improvements and how much more is left to improve that in terms of revenue per store. Thank you.
Dennis Logan (CFO)
Yeah, Pablo, it's Dennis. I think I quoted $12.9 million and not... I think you said $19 million. I just want to clarify that.
Pablo Ernesto Zuanic (Managing Partner)
Okay, so I got that wrong.
Dennis Logan (CFO)
Yeah.
Pablo Ernesto Zuanic (Managing Partner)
Okay, so there we go.
Dennis Logan (CFO)
Yeah, you got that wrong.
Pablo Ernesto Zuanic (Managing Partner)
Yeah. So the question, yeah, but okay, but the question would still apply, meaning there's been significant improvement year-over-year, right? In terms of revenue per store.
Dennis Logan (CFO)
Correct.
Pablo Ernesto Zuanic (Managing Partner)
So remind us, you know, how much of that, how was that accomplished, a reminder of that. And then, although you gave color in your prepared remarks, also in terms of what's the upside here, what's left that would drive revenue per store to get you closer to the state average, as we look at the year ahead? Thanks.
Dennis Logan (CFO)
Sure. Yeah, yeah. And so, you know, just as a reminder, you know, if you look at the VidaCann, we have pro forma information in the financial statements themselves in terms of where you know, where the revenue was pro forma-wise, as reported. I think it's Note 6 of the financial statements. There's lots of upside still in Florida. As you noted, Pablo, we're not at the overall. If we take Trulieve as the state leader, we're not anywhere near on a revenue per store basis where Trulieve is. The guys in Florida, the team in Florida, VidaCann, have accomplished a great deal in the last 12 months, driving significant improvements in revenue, you know, up almost double from where it was.
That's really, you know, really from increasing product quality, increasing the flower mix, adding new products. We still have a bunch of new products to start hitting those stores. The Planet 13 strains are, you know, in the greenhouse. I think the first crop should come off, and we'll have our own strains in the Planet 13 branded stores that we're gonna open. As we roll out the rebrand to the stores, the existing 26 store network, we will have the Planet 13 strains, the improved VidaCann strains, additional product. We're putting in, you know, expansion of our capabilities to make, you know, the product offering that we have in Nevada available in Florida.
So I think with an abundance of product availability and the continuing improvement in product quality, we expect it to have additional growth in that marketplace in Florida. I know the VidaCann team have targeted sort of a 3%, you know, month-over-month growth at each of the stores. They hit and missed that, but you know, largely hit on it for the first half of the year, and we continue to see some upside on that store revenue per store basis, as you commented on.
Pablo Ernesto Zuanic (Managing Partner)
Thank you. Then just to follow up on that, I think, in terms of the yield increase that you expect by the fourth quarter and the growth in terms and the addition of grow rooms, that works out about 70%. Again, correct my math if I'm wrong, but it sounds like you have a significant output increase by 4Q. Obviously, you have 6 more stores you're adding, but if you can confirm that in terms of your output outlook for Florida by end of the year.
Dennis Logan (CFO)
Yes, you know, that's, you know, we confirm that, Pablo, and, you know, that's part of the issue with us growing our revenue in that Florida market is the availability of flower. Historically, you know, they have sold out of the flower as it hits the stores, and, you know, the reorders happen, but there are some times where we don't have as much product as we need. With the expansion of the cultivation capacity and the yield improvements, we should be able to have product available when customers want to come and buy it, which will further enhance the revenue upside of all the store network.
Pablo Ernesto Zuanic (Managing Partner)
Right. And just to be clear, Florida right now, it's all greenhouse, and you are adding indoor, or it's a mix of both? Sorry.
Dennis Logan (CFO)
We're expanding the greenhouse. We will likely add, you know, we haven't added it yet, but we'll likely add one sort of segment of indoor. But the quality we're getting from the greenhouse improvements, the lighting, the HVAC, the dehumidification, you know, the water improvements, is really driving great improvements in the product quality that we're getting out of that Florida operation. So it's a combination of both. We see that we'll eventually need that indoor for, you know, the ultra-premium, but we're getting some very, very high-quality flower out of the current operations.
Pablo Ernesto Zuanic (Managing Partner)
Right. Right. Okay. And, you know, some of your peers are still very confident that Florida, if the ballot passes, that sales could start May 25th last year. Of course, it would be great for everybody. You've sounded more cautious on that. You've talked about 2026. I don't know if you want to update your thoughts on your, your, your commentary on that front.
Dennis Logan (CFO)
Well, you know, it's my personal opinion versus, you know, where we are as a group. But, you know, I think, you know, Bob, I'll let you handle that one in terms of what you think the turning on Florida, if it passes in November.
Bob Groesbeck (Co-Chairman and Co-CEO)
Yeah, I, Pablo-
Pablo Ernesto Zuanic (Managing Partner)
By you turning on, I don't mean you, maybe, I don't mean you-
Dennis Logan (CFO)
Recreational turning on. I hear you. Yeah, recreational passing on November, when is it gonna be, you know, when does the legislation pass? I mean, you saw comments from Trump today about him supporting it, DeSantis still opposing it, so... But, you know, I think, you know, I'm a little more cautious in terms of timing, but, you know, Bob, you go ahead.
Bob Groesbeck (Co-Chairman and Co-CEO)
No, no, Pablo, look, I haven't changed. I'm still very conservative. I'm optimistic. Look, anything we can do to accelerate the process is fantastic for the, you know, the entire sector. But, you know, we've been in this rodeo before, and nothing at the state level, regardless of state, happens quickly. And it is typically the process, you know, we've got a whole new round of licenses that we'll issue in conjunction with that. I'm sure there's gonna be quite a bit of litigation, and it's gonna take quite some time for the legislature to get together, you know, a comprehensive regulatory package. So, again, we're gonna get positioned and be ready to take, you know, part in that, but I don't think we've changed our timeline.
Pablo Ernesto Zuanic (Managing Partner)
Right. And just one last one on that front. According to the current rules, will there be a wholesale market, or is it going to remain as now, you know, just vertical, or that's not defined yet because the rules are not out? Do we have a sense?
Bob Groesbeck (Co-Chairman and Co-CEO)
We don't, yeah. That's a great question. We don't know that. There's... We hear from different camps that, you know, they want to open the market up and make it, you know, more competitive in different segments. There's, you know, other talk, of course, keeping it exactly the way it is. So, but and, you know, a lot of things can happen when the politicians get around the table, so, and the bureaucrats. So we're just gonna sit back and get positioned, you know, positioned, and, you know, operate under the premises that it will happen. And when it does, we're gonna be, you know, able to take advantage of that immediately.
Pablo Ernesto Zuanic (Managing Partner)
... One last one, just going back to the superstore. I mean, great, 11% sequential growth. I know the question was asked before, but I was looking at the numbers from prior quarters. I mean, was there a seasonal effect that helped that 11%, or the 11% can really be pretty much fully attributed to a lounge opening? And if so, you know, how much of that lift is the lounge itself, and how much more sales in the store itself due to a traffic that went to a lounge?
Larry Scheffler (Co-Chairman and Co-CEO)
Dennis, I don't know if you want to jump in there.
Dennis Logan (CFO)
Yeah. Yeah.
Larry Scheffler (Co-Chairman and Co-CEO)
Go ahead.
Dennis Logan (CFO)
I'll try. I'll estimate it, but it's a tough one, Pablo, because, you know, you can't, as you know, you can only consume what you buy in the lounge, in the lounge, and then you go across the hallway and buy the product, or you come back and buy the product in the superstore.
Pablo Ernesto Zuanic (Managing Partner)
Right
Dennis Logan (CFO)
... at the dispensary. It's also being driven by the other venues and events that Bob mentioned. Like, we have Plaza Thirteen, which is a hallway that is licensed, you know, versus driving people. I think we hosted a Pauly Shore, you know, video YouTube session there. So there are a bunch of traffic drivers. There is some seasonality. You know, the DAZED! consumption lounge, probably $500,000 in revenue of the $1 million improvements, so half of it, half of the improvement probably coming directly from the lounge. And then it's hard to say the rest of the improvement, if it's customers from the lounge coming into the superstore, there's probably some of that.
There are two tattoo customers coming in, you know, so it's a mix on the other half of that improvement. But yes, there is some seasonality to it. You know, in the summer months in Vegas, it gets a little bit choppy, depending on the weather and traffic patterns coming in from California and the tourists.
Pablo Ernesto Zuanic (Managing Partner)
The lounge opened April first, right? I think you, in your prepared remarks, you implied that there was still a lot of room for growth. I mean, it would seem to me already the benefit is great, but it already played out. Or maybe you can expand in terms of why we should, we should expect more benefit in terms of delta to sales.
Dennis Logan (CFO)
Yeah, I think, you know, for the quarter, it opened April, you know, as you know, April first, so the majority, you know, 100% of the quarter, it was open, but there was a ramp-up period in there. We're fine-tuning the product mix. We've got reservations now. As Larry mentioned, you know, we have viewing events and you know, other promotional events happening inside the lounge. We're gonna try and take advantage of both promotions outside the lounge and inside the lounge to help drive some additional traffic. It's not, it's not full 100% of the time, but it is getting to the, you know, it's getting there, where we've got reservations that we're taking for things.
And so it's still got upside growth to it, but it's performing as we expected it would.
Pablo Ernesto Zuanic (Managing Partner)
Right. Thank you.
Larry Scheffler (Co-Chairman and Co-CEO)
Yeah, Dennis, I'm just gonna add that in my point, there's a lot of upside growth left in that lounge. Again, I'll just repeat what Dennis says, though, with comedy shows we got planned that are coming in there, the different tasting events, the NFL Sundays, and so on. In my mind, a ton of growth left inside there, where it's past what we expected when we first opened it. It surpassed that, but now that it's going in that direction, we've got a lot more going on and a lot more things planned for it. So it's gonna be a great driver.
Pablo Ernesto Zuanic (Managing Partner)
Okay, that's great. All right, that's, that's all for me. Thank you very much.
Larry Scheffler (Co-Chairman and Co-CEO)
Thanks, Pablo.
Dennis Logan (CFO)
Thank you.
Operator (participant)
Thank you. Your next question is coming from Doug Cooper, from Beacon Securities. Doug, your line is live. Please go ahead.
Doug Cooper (Analyst)
Good evening, guys. Can you hear me? My headphones sometimes doesn't work as well as it should. Can you hear me?
Larry Scheffler (Co-Chairman and Co-CEO)
Hi, you sound great, Doug.
Dennis Logan (CFO)
Yep, hear you, Doug.
Doug Cooper (Analyst)
Okay, perfect. Okay, perfect. So I think I might have joined a few minutes late. I just wanted to confirm a couple things. So revenue, $31.1 million, of which, seven point two was from Florida. So just the existing operations, Florida to Florida, $23.9 million. Dennis, is that right, versus $22.9 million in Q1?
Dennis Logan (CFO)
Yes, that's right, Doug.
Doug Cooper (Analyst)
Okay, so the $1 million uptick was due primarily to the superstore in Illinois?
Dennis Logan (CFO)
Yeah, as we commented on, you know, we got it from the lounge, from additional Nevada, from the superstore itself, and then some from Illinois. Obviously, Illinois is a smaller starting point, so it's more impact from the superstore.
Doug Cooper (Analyst)
Okay, and then California?
Dennis Logan (CFO)
You know, California is flat to slightly up, but we've improved profitability there, as we continue, you know, continue to focus on costs and drive traffic. It is a challenging market in California, though, so it's, you know, not as robust as we were hoping.
Doug Cooper (Analyst)
Okay. So $31.1 million, but yeah, you didn't, you weren't able to recognize $7.2 million, right? Or no, sorry, you weren't able to recognize $5.7 million, I guess, right, Dennis?
Dennis Logan (CFO)
Yeah, that's for the first half of the quarter that we didn't own VidaCann. Yeah, you're correct.
Doug Cooper (Analyst)
Right. So, so pro forma is kind of almost $37 million, right?
Dennis Logan (CFO)
Yes.
Doug Cooper (Analyst)
What would be the incremental lift to EBITDA from that incremental $5.7 million in revenue?
Dennis Logan (CFO)
You know, as the Florida operations continue to get better and the margins improve, you know, it's hard to, hard to speculate, you know, where, where that $5.7 in the first half of the quarter would have gone because there are costs in there that are associated with the, the acquisition that we have, obviously, that, that we've incurred at the, at that operation. So I'm gonna, I'm gonna hold off speculating on that one, Doug. I know where you're going with it, but I'll, I'll, I'll hold off, and we'll look at it in Q3.
Doug Cooper (Analyst)
... Maybe, maybe just getting back to Pablo's point. So the company's running, the Florida operations are running about, what? About $52 million annualized, if there's no seasonality on 26 stores. About $2 million, $2 million there upstairs.
Dennis Logan (CFO)
Yeah, that's, yeah, it's your math is right. Yeah.
Doug Cooper (Analyst)
Okay. And then, you've got six stores, Bob, you mentioned three ready to go in Florida, three nearing completion. So you think you'd have how many stores you think you'll have in Florida in 2025?
Dennis Logan (CFO)
Well, we'll finish this year, Doug, with those 6 open. So, and so 2022, we'll have 30, 32, and then, you know, there are plans for, you know, another 6-10, depending on what we can find and where we can open them up. I mean, the team is pretty active in, in scouting out new locations and, and really driving the growth in that network, as well as driving the growth in the- in revenue from the existing store footprint with new product offerings.
Doug Cooper (Analyst)
Okay. So assuming it continues to be medical only, how long does it take a store to ramp up to the average $2 million a year?
Dennis Logan (CFO)
Yeah, I'd have to get the Florida guys on to get that question answered, Doug. We'll get back to you on that one. I'm not a hundred percent on the actual timing. They would know better based on when they opened the last set of stores. So I'll get back to you.
Doug Cooper (Analyst)
Okay. Okay. And the CapEx for the 3, for the 6 you just mentioned, you, Ben, if you mentioned in your that you've got $3 million-$5 million earmarked for CapEx over the next 6 to 9 months, is that, that's including those 6 stores?
Dennis Logan (CFO)
Yes, it's including the stores, too. Yeah.
Doug Cooper (Analyst)
Okay. Okay. And then you're a bit cautious, you said about, in the second half in 2025, based on consumer behavior. Is that across the board? Is that in Florida, in Nevada? Is that primarily in Nevada and in Illinois, do you think, or is Florida because it's medical only? That's, is that under the same sort of restraints, or-
Dennis Logan (CFO)
Yeah, it's more the Nevada superstore market that, you know, that comment was really directed at. I mean, Florida, medical only, if rec does go through, you know, 2025 could be a boon if it opens where everybody thinks in May or people think in May. But if it gets delayed into 2026, and we continue with that medical market, there's still a lot of upside in that medical market, and for us to drive this per store revenue closer to the state's average. So there's upside there for sure for us in Florida. But the cautious nature of that comment was really directed at the Nevada operations.
Doug Cooper (Analyst)
Okay. And just one second. What is the state average in Florida per store?
Dennis Logan (CFO)
It depends. If you look at Trulieve as the leader, I think they're around $4 million, we're at $2 million, the state's average. So it's gonna depend on how what you exclude, because there are operators with, you know, minimal number of stores, but doing well, others that same number of stores doing smaller. But I just look at if we can target and try to achieve somewhere with what Trulieve is doing on a per store basis, we could we have a lot of upsides to them.
Doug Cooper (Analyst)
Yeah, no doubt. Their stores are similar size in terms of footprint?
Dennis Logan (CFO)
Yeah, I believe, I believe across the network, they may have some larger format stores, but, you know, overall, I think the stores in Florida are all roughly around the same size.
Doug Cooper (Analyst)
Right. Okay. And Bob, Bob, you talked about Nevada. We, you and I have talked about this before, about potentially, you know, flipping off some of these independent operators.
Bob Groesbeck (Co-Chairman and Co-CEO)
Right.
Doug Cooper (Analyst)
What is the current store count? What is the current store count in Nevada, and how many are feeling, you know, really stressed right now?
Bob Groesbeck (Co-Chairman and Co-CEO)
Yeah, Doug, I don't know the exact number right now, but I would say it's about 110 stores statewide. I would say probably 80% of those are experiencing moderate to severe distress. It's a very, very tough market. We're fortunate that, again, because our model focuses primarily on the tourist customer, but you know, there's a you know, hell of a battle going on you know amongst operators at the at you know for that local customer. And we're seeing you know a lot of price compression. And so we're gonna continue to weather the storm, but as I said in my comments, I'm still optimistic if you know we can pick up another store or two you know to really-
Doug Cooper (Analyst)
Yeah
Bob Groesbeck (Co-Chairman and Co-CEO)
- kind of fill into the network here and, you know, help on our, you know, with our cultivation in particular. So there's upside, but, you know, a lot of these folks just need to get serious about their pricing. You know, they've got to get real, you know, with respect to where the market is now. And we've had some pretty meaningful conversations with, with several groups and, you know, hopefully something will come together here in the near term.
Doug Cooper (Analyst)
You sticking to... You wanna, you wanna stick in Clark County area, or would you head up to Reno or anything like that?
Bob Groesbeck (Co-Chairman and Co-CEO)
Yeah, no, I think we'd prefer to stay in Metro Clark County. I think Reno has got its own challenges, and there's a saturation up there. But again, for the right deal, you know, look, we're not opposed to looking statewide. It's just we've been primarily focused in urban Clark County.
Doug Cooper (Analyst)
I'm assuming your opening salvo is, I'll take over your lease and buy your inventories.
Bob Groesbeck (Co-Chairman and Co-CEO)
I'm sorry, say that again?
Doug Cooper (Analyst)
I'm assuming your opening bid is sort of, I'll take over your lease.
Bob Groesbeck (Co-Chairman and Co-CEO)
Yeah. Yeah. Well, pretty close. Exactly.
Doug Cooper (Analyst)
Okay. Okay, guys, thanks. That's it for me.
Bob Groesbeck (Co-Chairman and Co-CEO)
Great. Thanks, Doug. Good talking to you.
Operator (participant)
Thank you. There are no further questions in queue at this time, and this does conclude our question and answer session, as well as today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.