Planet 13 Holdings, Inc. (OTCQX:PLNHF) Q4 2021 Results Conference Call March 28, 2022 5:00 PM ET
Company Participants
Mark Kuindersma – Head, IR
Bob Groesbeck – Co-Chairman and Co-CEO
Larry Scheffler – Co-Chairman and Co-CEO
Dennis Logan – CFO
Conference Call Participants
Bobby Burleson – Canaccord
Doug Cooper – Beacon Securities
Greg Gibas – Northland Securities
Operator
Hi, everyone. Welcome to Planet 13 Holdings 2021 Fourth Quarter and Annual Financial Results Conference Call. As a reminder, this conference call is being recorded on March 28, 2021. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at the time for research analysts to queue up for questions. [Operator Instructions]
I will now turn the call over to Mark Kuindersma, Head of Investor Relations for Planet 13.
Mark Kuindersma
Thank you. Good afternoon, everyone, and thanks for joining us today.
Planet 13 Holdings’ fourth quarter and full year ‘21 financial results released today. The press release, the Company’s annual report on Form 10-K, including the MD&A, financial statements are available on the SEC’s 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. There can be no assurances that such information will prove to be accurate, whether management’s expectations or estimates of future developments, circumstances or results will materialize. 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. 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. And we encourage listeners to read those statements in conjunction with today’s call.
The forward-looking statements in the conference call are made as of the date of this call. Planet 13 disclaims any intention or obligation to update or revise such information, except as required by applicable law. It does not assume any liability for disclosure related to any company mentioned herein.
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’s financial statements are presented in U.S. dollars and the results discussed during this call are in U.S. dollars unless otherwise indicated.
On the call today, we have Bob Groesbeck, Co-Chairman and Co-CEO; Larry Scheffler, Co-Chairman and Co-CEO; and Dennis Logan, CFO.
I will now pass the call over to Larry Scheffler, Co-Chairman and Co-CEO of Planet 13 Holdings.
Larry Scheffler
Good afternoon, everyone, and thank you for participating in our fourth quarter and full year call.
Today, I’m going to discuss the performance in Nevada and California, and have Bob provide an update on our other growth initiatives later on the call.
As predicted, after a very strong October, traffic slowed in November, December, driven by a slower tourist traffic, increased concerns around COVID and the traditional seasonality. Overall, for the quarter, Nevada state-wide sales were down 5% from Q3. Despite the slower macro market and significantly less tourist traffic, we were able to maintain market share north of 10% for the quarter. It’s a testament to the strength of our team that even in a quarter with significantly fewer tourists who are traditionally our main customers who are able to maintain our market share.
In Q4, in Nevada, we generated $19.9 million from the SuperStore, $2.6 million from curbside delivery and delivery and $2.9 million from Medizin and $1.9 million from wholesale and other. For the full year, we generated $82.7 million from the SuperStore compared to $53 million in 2020. The increase was driven by the expanded floor area and points of sale along with higher tourist traffic, $12.1 million from curbside and delivery compared to $13.9 million. The lower curbside and delivery is consistent with our expectations as many shoppers prefer the in-store experience, $12.7 million from Medizin and $7 million from wholesale and other compared to $0.7 million and $2.7 million, respectively, in 2020. Both Medizin and wholesale were effectively new revenue streams for us in 2020, examples of us executing our plan to diversify our revenue streams.
Overall, we grew Nevada revenue by 62.4% in 2021. The typical trend in Las Vegas is for a slow January and February, with traffic picking up in March and into the summer, trailed by a slow November and December. Last year followed this pattern and so far this year sales have been shadowing that trend, if not more exaggerated due to Omicron and consumer fears.
The good news is that we’re starting to see a pickup in traffic as we get into spring and closer to the summer. With concerns around COVID subsiding, we expect many events and conferences to be returning in full this year, leading to a strong bounce back in customer traffic. This isn’t the first time we’ve had to deal with COVID-related slowdown in traffic. And what we proved last time is that as the market returns, Planet 13 will be there to capture the growth.
Our owned brand performed exceptionally well during the quarter, growing 21% sequentially in Q4 with strength continuing into Q1 when we broke $0.5 million in wholesale revenue 2 months in a row. This is especially impressive since the market as a whole has slowed down during this time. According to research firm Headset, TRENDI had 5% of the Nevada market for both, the concentrate and vapor category in Q4. HaHa had 10% of the edibles and 5% of the beverages.
Turning to California, we saw month-over-month sales growth throughout Q4 with 7.2% sequential growth over Q3. This is despite continued construction-related obstacles that are constraining traffic. Sales have been slower during the start of Q1 2022 as California was hit particularly hard by Omicron in January, leading to staffing issues and slower sales. I’ll let Bob add more detail to that.
But we closed the acquisition of Next Green Wave on March 2nd, which will allow us to bring our incredibly popular brands into California, increase vertical integration to improve margins and drive wholesale, increasing top line revenue. We’ve taken further steps during the quarter to improve the margin profile at the store and expect improvement in our California operations with the addition of Next Green Wave, both on a gross margin basis and operating profit basis, and we’re going to be able to achieve greater operating leverage.
With that, I’ll pass it over to Dennis to discuss our financials.
Dennis Logan
Thanks, Larry.
Before I begin, I’ll just remind everyone that all numbers discussed in today’s call are stated in U.S. dollars, unless specifically stated otherwise. So Q4 2021 is the first quarter that we are reporting under U.S. GAAP having transitioned to a U.S. domestic issuer status in February of this year. One of the main differences in our financial statements is the accounting for warrants. The Company has adopted the U.S. dollar as its functional currency under U.S. GAAP. And since the warrants outstanding other than the broker warrants are priced in Canadian dollars, that means that they are treated as a derivative liability as opposed to equity. Any changes in the underlying warrant values are recognized through the income statement as opposed to the statement of changes in equity.
One of the other main differences is the treatment of our cannabis under cultivation. It’s no longer subject to the fair value accounting under the IFRS biological asset standards and the other change is to the treatment of leased assets. Leasing costs are expensed as opposed to being capitalized and amortized as they were under IFRS. The treatment of warrants as a derivative liability results in a large noncash swing in value to flow through the income statement. An example of this is in our 2020 full year results where the large net loss was mainly driven by the change in the warrant valuation.
As Larry mentioned, Q4 in the Nevada market was seasonally slow overall. However, we continued to maintain 10%-plus state-wide market share, which is our ongoing target. We believe that we have the ability to exceed our 10% market share target during the more tourist-heavy months of April through October. In California, we saw growth at the Planet 13 Orange County store where increased customer awareness and our near perfect Google reviews translated into more customer traffic at the store. Overall, the Company generated $29.9 million of revenue in Q4, a 48% increase over last year’s quarter. Revenue for the full year was $119.5 million, representing a 70% increase over 2020.
Over the course of the year, we saw strong growth in our core Nevada market, at our Medizin and SuperStore locations as well as growing contributions from wholesale sales in Nevada and the addition of California revenue from a Planet 13 Orange County store.
Looking at Q1 2022, as you’ve heard from most of our peers, we are seeing a softer market due to a mix of a traditional seasonality, constrained consumer wallets and COVID disruptions, leading to some lost revenue. We are starting to see the traditional pickup of tourists in Las Vegas in the back half of March. And if past years are any indication, summer should be an exciting time for Las Vegas in Planet 13.
Gross margins in Q4 increased to 54.3%, up from 53.4% over Q3 2021. The increase in gross margin was primarily driven by a shift in the promotional mix of our products across our retail locations as we look to maximize gross profit dollars and profitability over revenue. Gross margin for the full year was 55.2% compared to 49.8% in 2020. This was partially driven by the increase in our in-house brand as a share of sales, something we are continuing to focus on as a lever to increase our gross margins. Across our businesses, we continue to target gross margins in excess of 50% for the long term.
Sales and marketing expense in Q4 was $1.8 million, down marginally from $1.9 million in Q3. We are working hard on maximizing profitability over top line revenue and are focusing our marketing spend accordingly. Excluding share-based compensation, G&A expenses was higher than we would have liked for both the quarter and the year. The increase was based in part on significant cost increases related to our transition to U.S. GAAP and SEC registration. Along with that, we are seeing some pricing pressure for labor, but we remain focused on cost control and generating cash flow over the long term.
As of December 31, 2021, the Company had a cash balance of $61.8 million, no debt and effectively fully paid up on our tax obligations. In a constrained capital market, one where you can’t write off interest expense due to 280E, we continue to have one of the cleanest balance sheets in the industry to support our further growth. As Bob will discuss in his comments, the Company is progressing with the rollout of its Florida road map, expanding our Nevada cultivation and working on integrating the recently closed Next Green Wave acquisition.
We will continue to update the market periodically on the build-out and CapEx requirements of each. The plans we have in place, focus on CapEx spend on the cultivation buildouts in Florida, the expansion of cultivation in Nevada. And each plan Florida retail location will be relatively inexpensive — an inexpensive neighborhood style store until that market transitions to an adult-use market. We have sufficient cash on hand to fund all of our current growth initiatives.
And with that, I’ll pass the call over to Bob.
Bob Groesbeck
Thank you, Dennis, and good afternoon, everyone.
We’ve been relatively quiet over the last few months, primarily because we’ve been focused on driving future growth for Planet 13 as shareholders. And for instance, in Florida, we’ve got our expansion road map, which will take us to our 6 neighborhood style dispensaries, which we expect to open in the first and second quarters of 2023, with 12 more to follow closely thereafter. All of these will be supported by cultivation production to bring our award-winning flower strains and product brands to the market.
We are planning to build our cultivation in Central Florida, a prime for efficient distribution across the entire state using modular and prefab building or indoor cultivation and basically the same specs as the Next Green Wave facility in California. This allows us to significantly speed up our time to market, reduce costs, and build in a modular fashion to meet our supply needs all the while maintaining the quality plan of Planet 13 and Next Green Wave have become known for.
Delivery of the building materials has already commenced at the selected site with its targeted assembly by the end of Q4, allowing us to get plants in the ground and rate for sale as soon as the first quarter of 2023. This lines up well with our planned retail build-out of our — our first 6 neighborhood dispensaries. After a heavy due diligence period and looking at many locations across the state, we started announcing where some of these locations will be.
This has been focused on major population and retail areas. This is a template that has led us to success for Medizin in Las Vegas, attracting the local customer, and that’s what we anticipate replicating in Florida. To put it simply, we are on track with the plan we had in place when we acquired the license, to have cultivation and 6 retail stores up and running with the year. As was said earlier, we expect these 6 neighborhood stores to be followed by 12 more and then by 2 to 3 SuperStores as the Florida market gets closer to an adult-use transition. And of course, we’ll have the supply to support a wider variety of products at that time.
Turning to California. In our acquisition of Next Green Wave. This acquisition was one of the few adjusted EBITDA and after-tax cash flow positive cultivation and distributors in the state. Their management team and cultivation staff have produced positive cash flows for over 18 consecutive months, and we look forward to having that efficiency and consistency, not only implemented in our operations but also our financial statements and resulting in enhanced cash position.
We see multiple synergies with that acquisition. For instance, it gives us a chance to expand our popular brands in California, including TRENDI and all edibles and beverages, which Larry mentioned earlier, all of which are top 5 brands in their respective categories in Nevada, per an independent source, Headset.
And back to Florida with respect to that expansion, it will allow us to utilize the Next Green Wave executive team to take their proven cannabis construction background and operational successes in California and implement those in Florida. As a result, Michael Jennings, Next Green Wave’s CEO and Founder, will be leading this exciting project for Planet 13. We couldn’t have picked a more suitable candidate for this position.
Similar to Nevada, one of our priorities is to increase our owned brand share of shelf space. This increased vertical integration drives higher gross margins, increases our brand equity and acts as a differentiated draw for our retail locations. In Nevada, for instance, our Medizin flower line is a regular reason for locals to visit our store. In fact, it is one of the things our investor e-mail inbox gets asked about most often.
In Illinois, while the license is still held up by regulatory and legal delays, we have been talking with landlords and local regulators at various locations in the region, while we continue to narrow it down to an ideal location. In Nevada, we expect the lounge legislation to be finalized in the coming months. And in the interim, we are working through various potential approaches in both, the short and long term to maximize profitability. We expect to receive approval and again build out of the cultivation expansion in Las Vegas within a matter of days. This expansion will add an additional 22,000 feet of indoor premium cultivation space that we’ve reserved for Medizin flower. Once again, we believe this will unlock improved gross margins, increase customer traffic and ultimately, more profitability.
2021 was a pivotal year for Planet 13. We acquired the pieces to take us from a single-state operator to a multistate operator with vertical integration in three states and retail in the fourth. 2022 is all about keeping our heads down and executing as we turn those pieces into the assets that will generate Planet 13’s growth and profitability for the future.
And with that, I again want to thank everybody for participating in the call, and would now ask the operator to open the line for questions.
Question-and-Answer Session
Operator
[Operator Instructions] The first question is coming from Bobby Burleson from Canaccord.
Bobby Burleson
Curious about the Florida build-out, what do you see as the most difficult to predict constraints in terms of how smoothly and how quickly you’re able to ramp in 2023 and going forward? Is it like permitting and construction around cultivation or the actual retail site permitting, et cetera?
Bob Groesbeck
Well, this is Bob. Let me jump in, Bobby. Good question. So obviously, with respect to building the cultivation facility and the ancillary production facilities, as I said earlier, we’ve got material actually on site now. We did that in advance, as far advance as we could because of the supply chain issues that are affecting everyone in business now. So, we think we’ve done a pretty good job of staying ahead of that and the uncertainty associated with supply chain issues.
With respect to the retail stores, it’s just a function of finding the locations and securing the local approvals. Now, that’s not always easy and it’s not always quick, but we’re pretty good at navigating that process. And again, with having Michael on the ground there with us every day and working with our consultants and real estate representatives, we’ve had some pretty good success, and we don’t anticipate that that’s going to change. We’re very optimistic about meeting the schedules we set with the OMMU when we purchased license.
Bobby Burleson
Okay, great. And then, maybe just switching gears to Las Vegas, and it looks like this is a good tourist season and you guys should benefit in a big way. Curious kind of what the capacity is of the SuperStore vis-à-vis a big surge in tourist traffic? And any kind of early indications that you have in terms of what the season is going to look like?
Larry Scheffler
All right. Go ahead.
Bob Groesbeck
Well, yes, look, we’re optimistic. Again, we’ve been hit over the head with multiple strains of COVID for the last few years, as you know. And we’ve had a lot of steps forward and then unfortunately, we had to take a step back or two. I’m encouraged now. I see the town starting to fill up again. I’m very encouraged to see the bookings for concerts and conventions coming back to pre-COVID numbers. But look, there’s the inflation aspect that we haven’t addressed here that I think is something we all need to take into account. And we’ve seen soaring gas prices, just costs in general have gone up considerably. We’re going to continue to monitor that. But even with those pressures, we’ve been pretty excited to see a return to normalcy with respect to tourists here in Vegas and certainly as we come in, in the summer months.
Operator
The next question is coming from Doug Cooper with Beacon Securities.
Doug Cooper
Guys, I think I missed the quarterly revenue from California. Sorry, I didn’t quite catch that number.
Larry Scheffler
Dennis, you got?
Dennis Logan
Yes, I’m here. Doug, just give me a second to pull it up. I don’t think we mentioned the actual breakout of California. Part of our — part of the SEC requirements were considered one segment and we don’t provide the segmented detail anymore when we pick it up for it.
We go to your next question, and I’ll come back to it.
Doug Cooper
Okay. Bob, just on the lounges, I think in your speech there, you talked about in the coming months. Is this — I think we were hoping to have this sort of done by the end of Q1. Is this sort of been delayed? And sort of what are your thoughts on how this progresses?
Bob Groesbeck
Well, yes. Look, it was my expectation that we would have had something here in Q1, but it’s government. And — but I’m encouraged we’ve had some very significant process or movements rather than progress. We’ve had a number of workshops. I anticipate based on the last workshop a week ago, there may be one more, then I actually see this going into final form. So, we do see light at the end of the tunnel, and we’re going to continue to push as aggressively as we can with our colleagues in the industry. But at the end of the day, it’s the CCB will make that determination. But we’re getting close, getting really close.
Doug Cooper
Okay. Dennis, you obviously had a number of sort of, I’ll call them onetime costs in 2021. Through the conversion to U.S. registrant — U.S., I guess, registrant, like out of the sort of $44.4 million of G&A expenses in the year, how many of that would you deem would be nonrecurring? We’re just trying to get a run rate for fiscal ‘22, I guess.
Dennis Logan
Yes. So, I want to go back to your first question, that’s $2.6 million for California for the quarter, kind of $5 million — probably a little over $5 million for the year or the back half of the year. And in terms of those costs, it was — I’m guessing if I — still waiting for some of the final bills to give it on the Form 10 filing et cetera, but it was approximately $3.5 million to do that conversion into U.S. GAAP due to three-year audits and go-forward filing at Form 10. So that was one big chunk of cost there. There were some other onetime costs. We had a couple of sales acquisitions in there, probably added up to another $2 million in legal fees that we had to write off during the year at $44 million. Obviously, if you look at the G&A and the G&A breakdown in the MD&A, you can get a sense of where those buckets are. We talked about salary increases being there. We are focusing quite heavily on trying to get our costs under control. Obviously, you need to have those costs under much tighter control in order to continue to make money. I mean our revenue is up 70%, our costs were up high. So that was part of the problem here. We’re actively working on that to keep it — bring it down.
Doug Cooper
Okay. So as we look forward into 2022, obviously, 2023 is going to be the — you’re going to get the impact of Florida in 2023, potentially Illinois and, I guess, potentially the consumption lounge in 2023. As we sit here in 2022, if Las Vegas picks up in the tourist season and you guys gained some share there, you’ll get there. But California obviously is a big — the major growth avenue, I guess, in 2022. Next Green Wave a good start there and building infrastructure. What is the plan? I mean California seems to me, it’s always been a bit of anomaly, it seems like it’s such a huge market, but nobody seems to be making any money. And at some point, there’s going to be a return to rationality. And there’s nobody — no clear winners there in such a big market. Like, what are you — how are you — I guess, what are your thoughts in California about what you want to be in the next few years there?
Bob Groesbeck
Well, yes, Doug, California is a challenge right now. I mean, there are a lot of headwinds. No question about that, particularly on the cultivation side. What it’s going to take in the near term is the state of California to get serious about regulating the industry and about taking meaningful action to curb the black market. I mean it’s just — it’s out of control. And the tax rates down there are just unacceptable as well. So, those are all hurting our ability to be competitive.
That said, I still think the location for the SuperStore makes sense, as we start transitioning our products through the Next Green Wave facility into the store, we think that’s going to help. I’m down there just about at least 1 week a month now, seeing a lot of improvement on the freeway construction and just an overall sense of positive behavior from the consumers. People are starting to put the masks away, starting to come out. I haven’t seen the tourist pick up yet, but talking with other operators and other industries, everybody remains optimistic that things are going to swing to the upside here pretty quick. So, there’s a lot of positives, it’s just taking much longer than we thought and — but we’re going to continue to push forward, and we think we’ll make significant improvement with the Next Green Wave acquisition.
Doug Cooper
Yes. And just — I guess, I’m just curious, you had the one store, obviously, and the Next Green Wave is a very profitable company and the cultivation side and brings that vertical integration aspect to it. But do you want to open maybe more greenfield stores like in Florida, obviously, you’re obligated to open at least 6, but — from a license. But do you want to open more stores in California, maybe where would those be if you’re going to continue to increase your infrastructure in the state?
Bob Groesbeck
Yes. I mean, look, the challenges of California have obviously also created some opportunities. There are a lot of distressed assets down there that are becoming more and more distressed every month. So, we’re continuing to field inquiries and we’re looking at deals. Nothing has really hit our plate yet that gets us terribly excited. But we think that there will be additional opportunities. And to your other question, we think most of those will be a mix in the larger metro areas. And then, we’ve seen some stores that have done quite well in the smaller midsized communities. It’s just a function of the right deal. We’ve got our plate full just trying to get Florida moving and getting Next Green Wave integrated. But that doesn’t mean we won’t take a hard look at the right deal.
Doug Cooper
And then, maybe just my last one here, get back to Nevada. You talked about 10% state-wide. I’m assuming in Clark County, you’re continue to be more than that. Can you talk a little bit about the competitive landscape there? Obviously, MedMen is having — continue to have difficulty. Just maybe the competitive aspect for the tourist dollar. And then maybe just some comment on the Medizin, how they’re doing for the local market?
Bob Groesbeck
Well, Doug, if you’ve looked and I’m sure you have, you’ve looked at the state’s numbers for the last — I think they’ve published through December now. It’s been very changing. And we’ve seen a pretty significant drop in revenue statewide. Look, there’s much more competition here in the valley, particularly for the local customer, and that’s not going to abate anytime soon. The state is still allowing operators to open. And that’s — we’re just going to have to deal with that. But as Dennis said earlier, and I think even Larry alluded to in his comments, we’ve held our own, and we’re continuing to move forward. We think that we’ll continue to be a significant or a dominant player in the space. But again, with respect to the superstore, which is our biggest revenue driver, it’s a function of how the tourist market looks. We’re encouraged by that and we’ll just deal with the competition as best we can. That’s…
Doug Cooper
Right. Is there any way you can quantify sort of the number of conferences, say, for example, that are booked in 2022 versus this time 2021? Any sort of indicators to show that Las Vegas is going to be that much fuller sort of coming up than it was in the prior two years?
Bob Groesbeck
Yes. I don’t have that data in front of me, but you can look to, for instance, a Las Vegas Convention Visitors Authority. And then, you can look into concert sort of booking, for instance, Allegiant Stadium and some of the larger venues, their bookings are up significantly over last year. And so, we’re very — like I said, we’re very encouraged with that. Because those are real drivers for us. There are certain shows and certain events that are fantastic for us. Historically, EDC, for instance, whereas others, World of Concrete, for instance, that drives no traffic to us. So with concerts, though, we get a very nice mix. It seems like for every large-scale concert, we get a nice bump. So, that we’re very excited to see that. We’re very excited to see Allegiant Stadium being utilized in that respect. So, it’s much more than just a football of any.
Operator
[Operator Instructions] The next question is coming from Greg Gibas with Northland Securities.
Greg Gibas
You mentioned some staffing issues in the quarter. Have they since improved? And if so, maybe what steps do you take there to remediate those issues?
Dennis Logan
I’ll take part of it, Bob, and then you can do the front. We’re seeing significant pressure in the back office area and the accounting staff and sort of the administrative staff. The data market is really heating up for talent. So, we’re having a bit of a challenge keeping people from that perspective. We did get hit pretty hard with COVID. I think at one point or another throughout the quarter and the back half of ‘21, probably 50% of our employees overall have had COVID, were out — with COVID. So, we have some challenges there. But Bob, do want you talk to your specifics on the store itself and the storefront there?
Bob Groesbeck
Yes. No, Greg, Dennis is exactly right. The other thing we had, though, kind of more falling into Q4. We really staffed up for Santa Ana. So we were pretty heavy on staff there initially. We pared that back considerably to make them more reflected traffic volume that we’re seeing. So, challenges there as well, a little different in Vegas. But we think we’re starting to get our hands around that. And — but there is a lot of pressure right now, particularly with respect to, as I said earlier, increases in gas, where a lot of our employees are coming in now, obviously bringing those issues to our attention, and we’re trying to manage that as best we can. But it’s not unique to our company. It’s unique to all employers.
Greg Gibas
Right. Got it. That’s helpful. And I guess along those lines in California, can you just remind us when some of those headwinds like the freeway construction are expected to no longer affect the business?
Bob Groesbeck
Well, when I was down with our managers last time, the number I heard is about 8 to 12 months out for full completion, 405 [ph] there. But based on what I saw and what I’ve seen the last few times I’ve been down there, they made significant progress in the Santa Ana corridor where we are. So you can now actually get off the Fairview [ph] ramp quite easily in the harbor ramp. So that’s very encouraging. And the whole focus, of course, now is to be able to get Warner over the freeway into beach cities like Seal Beach. So that’s going to be many more months. But again, things are improving from my perspective considerably.
Greg Gibas
Okay. Got it. And I guess in relation to the sales impact from COVID, probably hard to quantify, but if we were to maybe — if you think about it being a slower season anyway near the end of the year, how much do you maybe see from that in December? And I guess, in relation to Q1, I’m guessing a lot of it was January. And just wondering if you could try to maybe quantify or discuss how sales were impacted from COVID, to the best of your knowledge? And maybe how February has kind of trended since?
Bob Groesbeck
So Dennis, I’ll pass that to you.
Dennis Logan
So Greg, it’s a little harder. The COVID impact has been ebbing and flowing throughout the year. We’ve typically seen more seasonality in Q4. Obviously, October strong, November kind of 10% down on October and December 10% down on November. We’ve typically seen that now over the last three years. January picks back up and improves — this January and February were not as big of improvements as they were this time last year. March, we’re starting to see significant increases in Medizin, the tours come back. So, I look at — not more COVID. But as Bob mentioned, too, it’s also squeezing wallet due to the high price of gas or the high price and inflation are causing some of that and the lack of stimulus checks for some of our customers compared to last year. So, it’s kind of hard to pinpoint exactly what is pure COVID versus others, but it’s all having an impact. But we are seeing the uptick in March kind of back to more normal levels of visitors and spend in average ticket.
Greg Gibas
Okay, great. And I guess last one for me relating to the gross margins, nice improvement, I guess, in the quarter despite the lower top line sequentially. I just wanted to ask maybe what you would attribute that to. And how you’re thinking about gross margins in 2022?
Dennis Logan
Yes. So, the increase in gross margins was basically a larger share of the in-store sales of the SuperStore will come from our own brands overall as we push through our own capabilities and our own products into that marketplace. We also did see softening in the wholesale side of the equation from a B and C grade flower. So, we were able to pick up less expensive flower to process through our production facilities. So, we picked up some margin there as well. And we continue to completely sell out of our premium indoor flower and have not seen any price reduction in that premium segment of our flower market compared to the rest of the flower market. So picking up some margin there as our costs come down, our yields improve at the Bell Drive facility that we’re currently continuing to expand.
Operator
There are no further questions in queue. This concludes the Q&A portion of the conference call. Thank you, ladies and gentlemen. This does conclude today’s conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.
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