StateHouse Looks for New Revenue Streams, Efficiencies as California Struggles

The company highlighted strong growth in its loyalty program.

California-based StateHouse Holdings Inc. (CSE: STHZ) (OTCQB: STHZF) recorded a $17 million loss in the third quarter this year, up dramatically from the $1.9 million net loss in the second quarter, but down year-over-year from the $20.1 million the company lost in the same period a year ago.

Revenue for the quarter, which ended Sept. 30, was also down year-over-year, to $25.4 million from $30.8 million, but essentially stable from the second quarter, when StateHouse pulled in $25.3 million.

Quarterly revenue included $13.2 million from retail, $11.7 million from manufacturing, and $600,000 from wholesaling, StateHouse reported. All three revenue streams were down year-over-year.

The company asserted that the slight sequential quarterly growth was “despite the ongoing competition, price compression, a reduction in retail foot traffic and the closure of the company’s Seaside store.”

Meanwhile, StateHouse leadership has focused on brand development, cultivating customer loyalty through rewards programs, and cutting operational costs, the company reported.

During the quarter, StateHouse cut costs to the tune of $2.3 million from the second quarter, through “process improvements, outsourcing of distribution, upgraded and consolidated technology, and the elimination of redundant operations and service providers.”

The company is actively exploring the sale of $7 million to $10 million in noncore assets to bolster its balance sheet. Other key initiatives included:

  • Investing more in its cultivation facility to improve cannabis crop yields and potency
  • Implementing new automated trimming and pre-roll production
  • Revamping climate control systems in its greenhouses.

In the third quarter, new processes resulted in a cultivation yield increase of 28%, StateHouse reported.

CEO Ed Schmults also said StateHouse is focused on expanding its customer base.

“Our STASH loyalty program is an important differentiator, and we were thrilled to celebrate over 292,363 enrolled members as of Nov. 26,” Schmults said in a statement, noting that roughly two-thirds of retail sales come from STASH program members, and that membership is up almost 10% from the second quarter.

Shmults also said he’s excited for StateHouse to take over management at several Humboldt County facilities in collaboration with Pelorus Capital Group, a deal struck in August that was a quarterly highlight for the company. Under the deal, StateHouse will manage a 150,000-square-foot greenhouse, an acre of outdoor canopy, and two nursery licenses that include a tissue culture lab.

Also during the third quarter, StateHouse revised some of its debt obligations to Pelorus, with a new repayment date of Feb. 10, 2027, for a $15 million loan.

At the end of September, StateHouse had $158.3 million in total assets, including $2 million in cash, against $297.5 million in total liabilities.

John Schroyer

John Schroyer has been a reporter since 2006, initially with a focus on politics, and covered the 2012 Colorado campaign to legalize marijuana. He has written about the cannabis industry specifically since 2014, after being on hand for the first-ever legal cannabis sales on New Year’s Day that year in Denver. John has covered subsequent marijuana market launches in California and Illinois, has written about every aspect of the marijuana trade, and was part of the team that built the cannabis industry’s first-ever trade show, MJBizCon. He joined Green Market Report in 2022.

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