Statehouse Revenue Grows By Acquisitions

In the wee hours of the morning StateHouse Holdings Inc. (CSE: STHZ) (OTCQX: STHZF) released its financial results for the third quarter ending September 30, 2022, and provided additional business updates. Statehouse reported that its revenues increased 77% to $30.8 million versus last year’s revenue of $17.5 million. Statehouse also said in its statement that it is exploring the potential sale of various non-core assets, which could bring in roughly $5-8 million of non-dilutive capital to strengthen the balance sheet and fund its growth objectives.

The growth was attributed to the acquisitions of UL Holdings Inc. (Urbn Leaf) and LPF JV Corporation (Loudpack), which were completed in March and April of 2022, respectively. In addition to the added revenue from the new acquisitions, Statehouse also opened a Harborside branded retail dispensary in the Haight Ashbury neighborhood of San Francisco and opened an  Urbn Leaf branded retail dispensary in Grossmont in April 2022.

Profitability in 2023

The net losses grew to $20 million versus last year’s net income of $2.6 million. Net losses for the first nine months have grown to $44 million. Based on the current strength of the business and what has been achieved to date, Statehouse said it expects to generate materially positive Adjusted EBITDA in 2023 and to begin generating positive cash flow in the second half of 2023.

Statehouse also noted that the quarter’s cultivation yields in the Salinas facility were up 150% over last year’s third quarter due to improved practices. However, the cost per pound declined 56% over the same time period. Year-to-date yields are up 99% over YTD 2021 with a 40% reduction in cost per pound.

“Undoubtedly, California’s cannabis industry has experienced several challenges over this past year which has created a unique opportunity for leaders to engage in meaningful discussions on how we can work together to move this industry into the future,” said CEO Ed Schmults. “We believe a strong industry is driven by a diverse ecosystem of operators striving in unison for a robust and well-developed market that will drive innovation and excellence to deliver safe, high-quality products.”

As of September 30, 2022, Statehouse said it had a cash and restricted cash balance of $9,430,182 to settle current liabilities of $134,038,231. The higher amount of current liabilities as of September 30, 2022, is primarily due to the company’s provision for an uncertain tax position, debt assumed as part of the Urbn Leaf Acquisition and Loudpack acquisitions, and the company’s excise, cultivation, and property tax liabilities.

Expense Cuts

Statehouse said that by the end of the quarter it had generated approximately $16 million of annualized cost savings. The company noted that its annual selling, general and administrative (SG&A) costs have been reduced by approximately 20% to date, with another 20% improvement expected by the end of 2022.

Mr. Schmults concluded, “Looking ahead, we believe that our industry-leading scale, together with our strong brand portfolio, has positioned us to continue to build customer loyalty, increase our market share and expand our margins. As a result, we expect to begin delivering positive EBITDA results in 2023 and become cash flow positive in the second half of the year. I am extremely confident in the team we have built and the ability of our newly solidified organization to emerge as the leader in this market and drive strong, long-term value for our shareholders.”