The California-based company’s net revenues for the period were $25.3 million, down versus the $34.6 million in the same period last year. However, gross margins improved to 49.9% in the second quarter from 46.6% in the prior year’s period. StateHouse also reported that its cultivation yields at the Salinas facility rose by 34% over sequentially and by 23% per square foot compared to the second quarter in 2022 due to improved lighting and growing techniques.
CEO Ed Schmults commented on the results, highlighting the company’s resilience despite challenging market conditions. He noted the positive adjusted EBITDA in the second quarter as a solid achievement and mentioned the recent milestone of more than 280,000 members in the TOPS customer loyalty program.
“Consistent execution and steady improvement has been at the core of our success throughout the first half of the year, and we expect to carry this momentum into the second half of the year as well,” he said in a statement Tuesday.
Schmults also discussed the company’s strategic expansion with a new managed services offering and the strengthening of its financials through a recent agreement with Pelorus Capital Group.
As part of the agreement with Pelorus, StateHouse received a capital infusion and revised its debt obligations. The repayment date of the Series A loan agreement was extended to February 10, 2027, and Pelorus provided an incremental term loan of $7.521 million, bringing the total principal amount to $15 million. Additionally, StateHouse will operate a Humboldt County grow facility and provide Pelorus with cultivation and operational expertise and other services.
The company also outlined several operational updates, including a 2.8% sequential improvement in total revenue despite ongoing competition and a reduction in retail foot traffic. The company has implemented changes to reduce annualized operating expenses by approximately $8.8 million, including a 25% reduction in headcount since January 1, 2023. StateHouse also decided not to renew the cannabis license for its Seaside dispensary and closed its operations as part of its “ongoing operational expense management.”
StateHouse said that it will be focusing on increasing the profitability of its retail operations despite competitive pressures related to sales discounting. The company achieved its goal of in-house branded products representing approximately 40% of total retail sales in the second quarter and set a new goal of 50% by the end of the fourth fiscal period. Additionally, the company is implementing new automation in its manufacturing operations to lower costs and enhance quality.
StateHouse expects to begin generating positive adjusted EBITDA and positive cash flow before the end of 2023.