– Company expects to be EBITDA positive in 2023 –
"The second quarter was a landmark period for StateHouse, as we completed the acquisition of Loudpack to create a leading, fully integrated
Q2 2022 Highlights
- Total net revenues were
$34.6 million , a 125% increase over the$15.4 million realized in the three months endedJune 30, 2021 ("Q2 2021"). The increase reflected the acquisitions ofUL Holdings Inc. ("Urbn Leaf") andLPF JV Corporation ("Loudpack"), which were completed in March and April of 2022, respectively; - Gross profit before adjustments for biological assets, was
$14.7 million , a 110% increase as compared to$7.0 million in gross profit realized during Q2 2021. Consolidated gross margins during Q2 2022 were 42.6% of revenues, compared to 45.6% of revenues in Q2 2021, with the gross margin reduction primarily due to the year over year selling price declines on bulk cannabis in theCalifornia market and the addition of manufacturing revenues which typically operate on lower margins, partially offset by greater sell through of in-house manufactured products at Company owned retail stores; - On
April 4, 2022 , the Company completed the acquisition of Loudpack to form one of the largest vertically integrated cannabis enterprises inCalifornia ; - On
May 11, 2022 , the Company announced new retail store openings inSan Francisco and Grossmont,California ; - On
May 19, 2022 , the Company acquired a further 50% interest in its retail store inSeaside, California , bringing its interest in the store to 100%; and, - On
May 31, 2022 , the Company announced initial integration measures that are expected to generate approximately$10.3 million of annualized cost savings.(2) (3)
Subsequent Events
- On
July 25, 2022 , the Company officially changed its name fromHarborside Inc. ("Harborside") toStateHouse Holdings Inc. to honor its pioneering history and reflect its future direction inCalifornia's cannabis sector. The Company's subordinate voting shares were also reclassified as common shares on this date; - On
July 28, 2022 , the Company announced that it reached a Partial Payment Installment Agreement with theInternal Revenue Service ("IRS") to resolve and reduce legacy federal tax obligations related to the Internal Revenue Code Section 280E, resulting in a one-time non-cash gain of approximately$16.1 million . The Company continues to negotiate with theIRS over additional tax repayments; and, - On
August 15, 2022 , StateHouse completed the transition to a common technology platform for itsCalifornia retail stores, e-commerce and home delivery.
Operations Update
StateHouse has established a leading integrated cannabis platform that, when fully optimized, will minimize exposure to the volatile bulk cannabis market and allow the Company to operate as a focused, integrated CPG business with proprietary production, processing, brands and retail stores. In conjunction with the continuing reduction of costs, the Company expects to emerge with a scalable, controlled, profitable and more predictable cannabis business(2).
By the end of Q2 2022, StateHouse was well underway with initial integration measures that are expected to generate approximately
Improvements were also completed across the Company's operations. In cultivation, the Company has converted to a perpetual harvest program, with crop yields at the
As a result of the significant synergies and cost savings either achieved to date and financial forecasts of the Company, management expects StateHouse to generate materially positive Adjusted EBITDA(1) in 2023.
Management is also exploring the potential sale of various non-core assets, which is expected to generate approximately
Management Departure
Notes:
(1) This is a non-IFRS reporting measure. For a reconciliation of this to the nearest IFRS measure, see "Use of Non-IFRS Measures" and "Non-IFRS Measures" in the Company's management discussion and analysis for the period ended
(2) This is forward-looking information and based on a number of assumptions. See "Cautionary Note Regarding Forward-Looking Information" below.
(3) These targets, and the related assumptions, involve known and unknown risks and uncertainties that may cause actual results to differ materially. While StateHouse believes there is a reasonable basis for these targets, such targets may not be met. These targets represent forward-looking information. Actual results may vary and differ materially from the targets. See "Cautionary Note Regarding Forward-Looking Information" and "Assumptions" below.
About StateHouse
StateHouse, a vertically integrated enterprise with cannabis licenses covering retail, major brands, distribution, cultivation, nursery and manufacturing, is one of the oldest and most respected cannabis companies in
Non-IFRS Measures, Reconciliation and Discussion
This press release may contain references to "Adjusted EBITDA" and "Adjusted Gross Profit" which are non-IFRS financial measures. Management believes that these measures provide useful information as they represent the value of incremental sales.
Adjusted EBITDA is a measure of the Company's overall financial performance and is used as an alternative to earnings or net income in some circumstances. Adjusted EBITDA is essentially net income (loss) with interest, taxes, depreciation and amortization, non-cash adjustments and other unusual items added back. This measure can be used to analyze and compare profitability among companies and industries, as it eliminates the effects of financing and capital expenditures. It is often used in valuation ratios and can be compared to enterprise value and revenue. This measure does not have any standardized meaning according to IFRS and therefore may not be comparable to similar measures presented by other companies.
Adjusted Gross Profit exclude the changes in fair value less costs to sell of the Company's biological assets. Management believes this measure provides useful information as they represent the gross profit based on the Company's cost to produce inventories sold while removing fair value measurements which are tied to changing inventory components and levels, as required by IFRS.
There are no comparable IFRS financial measures presented in StateHouse's financial statements. Reconciliations of the supplemental non-IFRS measures are presented in the Company's management's discussion and analysis for the period ended
Cautionary Note Regarding Forward-Looking Information
This news release contains "forward-looking information" and "forward-looking statements" (collectively, "forward-looking statements") within the meaning of the applicable Canadian and
These forward-looking statements are based on reasonable assumptions and estimates of management of the Company at the time such statements were made. Actual future results may differ materially as forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of the Company to materially differ from any future results, performance, or achievements expressed or implied by such forward-looking statements. Such factors, among other things, include: implications of the COVID-19 pandemic on the Company's operations; fluctuations in general macroeconomic conditions; fluctuations in securities markets; expectations regarding the size of the cannabis markets where the Company operates; changing consumer habits; the ability of the Company to successfully achieve its business objectives; plans for expansion and acquisitions; political and social uncertainties; inability to obtain adequate insurance to cover risks and hazards; employee relations; the presence of laws and regulations that may impose restrictions on cultivation, production, distribution, and sale of cannabis and cannabis-related products in the markets where the Company operates; and the risk factors set out in the Company's management's discussion and analysis for the period ended
The Company, through several of its subsidiaries, is directly involved in the manufacture, possession, use, sale, and distribution of cannabis in the recreational and medicinal cannabis marketplace in
While the approach to enforcement of such laws by the federal government in
This news release does not constitute an offer to sell, or a solicitation of an offer to buy, any securities in
Assumptions
In developing the financial guidance set forth above, StateHouse made the following assumptions and relied on the following factors and considerations:
- The targets are based on StateHouse's historical results including its year-to-date consolidated results of operations.
- The targets are subject to continued cultivation improvement.
- Targeted revenue at our retail dispensaries through the end of the year is based on our YTD results.
- Both retail and wholesale revenue sustainability and growth depend on a variety of factors, including among other things, location, competition, legal and regulatory requirements. Prices are projected forward at recently realized wholesale and retail prices.
- Cost of goods sold, before taking into account the impact of value changes in biological assets (which are non- cash in nature, and, accordingly, are excluded from calculations of Adjusted EBITDA, have been projected based on estimated costs of production and capacity available from a vertically integrated supply chain. Cost of goods sold relating to inventory purchased from third parties have been projected in line with historical levels.
- Selling, general and administrative expenses in future periods are assumed to decrease as a percentage of revenues due to inherent scalability of selling, general and administrative expenses and our cost cutting initiatives outlined above. Additionally, total selling, general and administrative expenses include an allocation for corporate overhead and public company costs.
The CSE has neither approved nor disapproved the contents of this news release. Neither the CSE nor its Market Regulator (as that term is defined in the policies of the CSE) accepts responsibility for the adequacy or accuracy of this release.
View original content:https://www.prnewswire.com/news-releases/statehouse-holdings-inc-reports-second-quarter-2022-financial-results-and-provides-additional-business-updates-301612897.html
SOURCE
© Canada Newswire, source