Stem Holdings, Inc., d/b/a Driven By Stem (“Stem” or the “Company”), a leading omnichannel, vertically-integrated cannabis branded products and technology company with state-of-the-art cultivation, processing, extraction, retail, distribution, and delivery-as-a-service (DaaS) operations throughout the United States, today reported its financial results for the first calendar quarter ended March 31, 2021.
Highlights for the quarter ended March 31, 2021:
- Gross revenue increased to a record $12.4 million from $2.7 million for the three months ended March 31, 2020.
- Gross profit increase of 269% to $2.7 million as compared to $0.73 million for the comparable period in the previous year.
- Retail gross revenue comps +49.5% vs. 2020, with 2,614 transactions in one day on 4-20, the annual celebration day for cannabis.
- Budee™ DaaS revenues increased vs. three months ended March 31, 2020 in California and is poised to launch in Oregon in May, followed by Michigan in September.
- Cultivation yields increased 7.8% vs. three months ended March 31, 2020, and our retail footprint for our brands increased by 32%.
- Adjusted EBITDA of $1.7 million an increase from ($5.8 million) for the three months ended March 31, 2020 reflects ongoing operational improvements.
- Subsequent to the quarter end, the Company closed on a C$10.3 million public offering, previously announced December 14, 2020, led by Canaccord Genuity.
Operational Updates
- Budee™ delivery is poised to launch in Oregon in May 2021.
- New retail dispensary to open in September 2021 in Michigan.
- With retail opening in Michigan, Budee DaaS will launch for expanded state-wide market footprint by Labor Day, its third delivery state.
- Launch of Yerba Buena™ brand cannabis flower in California, the first expansion market for the brand.
Management Commentary
“Our record sales and the beginning of the successful integration of Driven Deliveries Inc. (“Driven”) has positioned us for greater growth as we expand the footprint of our retail, delivery, and branded product operations in high-growth markets,” stated Adam Berk, CEO of the Company. “Full integration and streamlined execution and expansion of Driven’s technology will continue over the next six months, to be completed by the end of 2021. We are leveraging our combined strength by simultaneously increasing market share of our own retail operations, as well as our branded products,” he continued. “Our plans for expansion in Michiganboth at retail and with Budee delivery by Labor Day, as well as our ongoing efforts in New York, bode well for accretive growth throughout 2021. We are excited about our progress and driving synergies for continued growth in 2022.”
Mr. Berk continued, “We have continued to strengthen our balance sheet and to add strong management talent to our team to ensure that we can manage our ‘Farm-to-Home™’ strategy in all current and expanded markets. We also continue to improve gross margin and cash conversion as we continue to support our initiatives building shareholder value.”
Financing
On April 23, 2021, the Company closed a C$10.3 million public offering announced in December 2020 (the Offering”), of units of the Company (the “Units”) at a price of $.55 per Unit. Each Unit was comprised of one share of common stock of the Company and one share purchase warrant of the Company (a “Warrant”). Each Warrant is exercisable at an exercise price of C$0.68 until April 23, 2023. The Offering was led by Canaccord Genuity Corp. The offering included a short-form prospectus and an effective S-1.
Expansion of Consumer Packaged Goods Business
- The Company’s Yerba Buena™ brand was launched in California, the first of our expansion markets for this top-shelf Oregon brand. It rapidly became the second-highest selling brand on our Budee platform covering 92% of consumers in the state, as well as at our Foothill Health and Wellness dispensary in Shingle Spring, CA.
- The Cannavore brand of edibles expanded from its original line of Salted Caramel Chews to new flavors for the holidays including the launching of Irish Cream on St. Patrick’s Day, and experienced gains in our distribution channels for those dispensaries carrying TJ’s Gardens and Yerba Buena flower. The brand will be launching a new line of calorie-free, zero-refined sugar THC-infused gummies later in June which are unique to the market, meeting demand for alternative candies to high-calorie, sugary products. They are gluten-free, vegan, and suitable for diabetics with a low glycemic index and are all natural.
Retail Business Development
- Comparable dispensary sales growth for the quarter was 49.5% vs. 2020, reaching a record of 2,614 transactions on 4-20, the annual celebration day for cannabis.
- The Company increased its retail footprint for its brands in other dispensaries by 32% as it drives market share in Oregon and Nevada. Additional distribution white space remains to further accelerate growth.
- Our Budee delivery business grew in the quarter vs. the three months ended March 31, 2020. This success includes adding over a dozen best-in-class brands in California during the quarter to enthuse consumers and increase on-line activation. This includes Premium Vape from Red, White and Bloom brands (CSE: RWB) (OTC: RWBYF); Caliva Flower, Deli Prerolls, Fund Uncle Prerolls, Yummi Karma, and Rehab by Yummi, and Chill Chocolates from The Parent Co. (NEO: GRAM.U) (OTCQX: GRAMF); Chong’s Cannabis; Dosist Pens, Tablets and Edibles; Kushy Punch Gummies; Loudpack Farms, and as mentioned, the Company’s Yerba Buena™ flower.
The Company continues its plans for accretive new product innovation with a queue of innovative products scheduled for launch throughout 2021.
