Statehouse Holdings Second Quarter Revenue Doubles Sequentially After Business Combination To $34.6M – New Cannabis Ventures
StateHouse Holdings Inc. Reports Second Quarter 2022 Financial Results and Provides Additional Business Updates
Company expects positive EBITDA in 2023
SAN DIEGO and TORONTO, August 25, 2022 /PRNewswire/ – StateHouse Holdings Inc. (“StateHouse” or the “Company”) (CSE: STHZ) (OTCQX: STHZF), a California-a vertically integrated and focused cannabis company, today announced its financial results for the three and six months ended June 30, 2022 (“Q2 2022” and “YTD 2022”, respectively), and provided additional business updates. The Q2 2022 unaudited condensed interim consolidated financial statements and corresponding MD&A can be downloaded from the Company’s investor website, statehouseholdings.com, and from the Company’s SEDAR profile. Unless otherwise indicated, all dollar amounts in this press release are denominated in US dollars.
“The second quarter was a landmark time for StateHouse as we completed the acquisition of Loudpack to create a fully integrated, leading business. California cannabis company,” said Ed Schmuls, Chief executive officer. “We then launched the first phase of a major integration initiative, which was completed before the end of the quarter and resulted in significant annual savings. One-time costs related to the closing of the Loudpack acquisition impacted profitability in the second quarter of 2022, but with ongoing integration activities, we left the quarter in a much stronger competitive position.
Whereas California Cannabis market conditions are currently challenging, particularly in wholesale, we continue to aggressively reduce costs and optimize operations, developing new packaged cannabis consumer products and expect to generate significant positive EBITDA¹ in 2023
Ed SchmulsChief executive officer
- On July 25, 2022the company officially changed its name from Harborside Inc. (“Harborside”) to StateHouse Holdings Inc. to honor its pioneering history and reflect its future direction in California cannabis sector. The Company’s subordinate voting shares were also reclassified as common shares on that date;
- On July 28, 2022the company announced that it has entered into a partial payment agreement with the Internal Revenue Service (“IRS”) to resolve and reduce former federal tax liabilities related to Section 280E of the tax code, resulting in a non-cash gain single of approximately $16.1 million. The Company continues to negotiate with the IRS for additional tax refunds; and,
- On August 15, 2022StateHouse has completed the transition to a common technology platform for its California retail stores, e-commerce and home delivery.
StateHouse has implemented a leading integrated cannabis platform which, when fully optimized, will minimize exposure to the volatile bulk cannabis market and allow the company to operate as an integrated, focused CPG business with production , transformation, brands and exclusive retail stores. Along with continued cost reductions, the company expects to emerge with a scalable, controlled, profitable and more predictable cannabis business.².
At the end of the second quarter of 2022, StateHouse was well underway with initial integration steps that are expected to generate approximately $10.3 million annualized savings. ²,³ As a result of this first phase of integration, StateHouse now operates with a significantly reduced cost base. Following the initial integration measures, the Company has initiated additional cost reductions which should result in a new $8-10 million annualized savings.²,³
Improvements have also been made across the Company’s operations. In cultivation, the Company has converted to a perpetual harvest program, with harvest yields at Salinas installation up 78% over last year through the first half of 2022, while winning seven awards for quality, including three Emerald Cup awards and four California State Fair medals, including two gold medals gold and two silver. At the Greenfield Campus, adopting best practices has improved efficiency and bottom-line profits. At retail, despite competitive pressures from sales discounts, gross margins remained stable as the Company progressed towards its goal of private label products representing 40% of total retail sales. On the administrative side, the Company is introducing a new ERP system for culture, streamlining external and supplier relations and is making progress in consolidating its financial and accounting systems into a single common platform. With new management and a highly motivated team, StateHouse is revitalizing existing customer accounts and actively seeking new ones.
Due to the significant synergies and cost savings achieved to date and the Company’s financial guidance, management expects StateHouse to generate materially positive Adjusted EBITDA¹ in 2023.
Management is also considering the possibility of selling various non-core assets, which should generate approximately $5–8 million non-dilutive capital,³ to strengthen its balance sheet and finance its growth objectives.²
Departure from management
Ahmer IqbalChief Operating Officer, leaves the Company with effect September 30, 2022 to pursue other opportunities. StateHouse’s management team and Board of Directors thank Mr. Iqbal for his contribution to the company and wish him the best in his future endeavours. Mr. Iqbal’s duties will be assumed by other members of the management team upon his departure.
¹This is a non-IFRS reporting measure. For a reconciliation to the nearest IFRS measure, see “Use of Non-IFRS Measures” and “Non-IFRS Measures” in the Company’s MD&A for the period ended. June 30, 2022. See “Non-IFRS Measures, Reconciliation and Discussion”.
²This is forward-looking information based on a number of assumptions. See “Caution Regarding Forward-Looking Information” below.
³These objectives, and associated assumptions, involve known and unknown risks and uncertainties that may cause actual results to differ materially. Although StateHouse believes there is a reasonable basis for these goals, these goals may not be achieved. These targets represent forward-looking information. Actual results may vary and differ materially from objectives. See “Caution Regarding Forward-Looking Information” and “Assumptions” below.
About State House
StateHouse, a vertically integrated company with cannabis licenses spanning retail, brand, distribution, cultivation, nursery and manufacturing, is one of the oldest and most respected cannabis companies in the world. California. Founded in 2006, its predecessor company Harborside was awarded one of the first six medical cannabis licenses granted in United States. Today, the Society operates 13 dispensaries covering the North and Southern California and one in Oregondistribution facilities in San Jose and Los Angeles, California and cultivation/production facilities integrated into Salinas and Greenfield, California. StateHouse is a publicly traded company, currently trading on the Canadian Securities Exchange (“CSE”) under the symbol “STHZ” and on the OTCQX under the symbol “STHZF”. The company continues to be instrumental in making cannabis safe and accessible to a large and diverse community of California and Oregon consumers.
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