StateHouse Holdings Inc. (OTCQX:STHZF) (CSE:STHZ) Q2 2022 total net revenues were $34.6 million, a 125% increase over the $15.4 million realized in Q2 2021. The increase reflected the acquisitions of UL Holdings Inc. ("Urbn Leaf") and LPF JV Corporation ("Loudpack"), which were completed in March and April of 2022, respectively.
Q2 2022 Financial Highlights
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Gross profit was $16.1 million compared to $8.7 million in Q2 2021.
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Consolidated gross margins during Q2 2022 were 42.6% of revenues, compared to 45.6% of revenues in Q2 2021.
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Net loss was $13.5 million compared to net income of $1.67 million in Q2 2021.
Q2 2022 Other Highlights
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On May 11, 2022, the company announced new retail store openings in San Francisco and Grossmont, California;
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On May 19, 2022, the company acquired a further 50% interest in its retail store in Seaside, California, bringing its interest in the store to 100%; and,
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On May 31, 2022, the company announced initial integration measures that are expected to generate approximately $10.3 million of annualized cost savings.
Subsequent Events
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On July 25, 2022, the company officially changed its name from Harborside Inc. to StateHouse Holdings Inc. The company's subordinate voting shares were also reclassified as common shares on this date;
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On July 28, 2022, the company revealed that it reached a partial payment installment agreement with the Internal Revenue Service 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 the IRS over additional tax repayments; and,
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On August 15, 2022, StateHouse completed the transition to a common technology platform for its California retail stores, e-commerce and home delivery.
Operations Update
In cultivation, the company has converted to a perpetual harvest program, with crop yields at the Salinas facility up 78% from last year through the first half of 2022. At the Greenfield Campus, the adoption of best practices has led to enhanced efficiencies and improved gross profits. At retail, despite competitive pressures related to sales discounting, gross margins have held steady as the company moves further towards its goal of in-house branded products representing 40% of total retail sales.
Management is also exploring the potential sale of various non-core assets, which is expected to generate approximately $5-8 million of non-dilutive capital, to strengthen its balance sheet and fund its growth objectives.
"The second quarter was a landmark period for StateHouse, as we completed the acquisition of Loudpack to create a leading, fully integrated California cannabis company," stated Ed Schmults, CEO. "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 cost savings. One-time costs related to closing the Loudpack acquisition impacted profitability in Q2 2022, but with the integration activities underway, we exited the quarter in a much stronger competitive position. While California cannabis market conditions are currently challenging, particularly in wholesale, we are continuing to aggressively reduce costs and optimize operations, developing new consumer packaged cannabis products and expecting to generate material positive EBITDA in 2023".
Management Departure
Ahmer Iqbal, COO, is leaving the company effective September 30, 2022 to pursue other opportunities. Iqbal's duties will be assumed by other members of the management team upon his departure.
Photo by Giorgio Trovato on Unsplash
