Debra BorchardtAfter the market closed on Thursday, Stem Holdings, Inc. (OTCQX: STMH) (CSE: STEM) reported its financial results for the 2021 fiscal year ending in September with revenue totaling $41.8 million. This was an increase of 155% versus the 2020 fiscal year revenue of $16.4 million. Stem said that the revenue net of Driven Delivery’s portion totaled $24.4 million, which is an increase of 49% from the prior year. The company also reported a net loss for the fiscal year 2021 of $64.6 million and said this was predominately attributable to a $52.5 million impairment charge related to Driven Deliveries.
Stem went on to note that net revenue after discounts and returns totaled $35.8 million, an increase of 156% as compared to $14.0 million for the same period the year prior. The company’s net revenue after discounts and returns net of Driven portion totaled $20.9 million, an increase of 49% for the same period the year prior. During fiscal year-end 2021, the Company reported impairment expenses totaling $52.5 million, predominately related to the intangible assets and a related party receivable of Driven Deliveries, Inc., which the Company recently divested of. The adjusted EBITDA loss for the fiscal year 2021 totaled $5.8 million as compared to $5.4 million in the prior year period.
“In December 2021, we announced the divestiture of Driven Deliveries, its assets and liabilities,” said Interim CEO Steve Hubbard. “This divesture allows us to ‘Get back to our roots’. Currently, our initiative is focused on our operations in Oregon and California. Oregon, where we are vertically integrated with five retail locations, we see a considerable growth opportunity as two of our stores are under-performing and the other three locations can incrementally increase sales. In our multiple cultivation facilities, we have significant upside to improve yields, while at the same time, bring the quality of our flower back to the level of top shelf that our customers expect. As we increase productivity and harvest new high-quality, high demand, strains, we expect to increase distribution through both our retail and wholesale channels. TJ’s Gardens and Yerba Buena will continue to be our leading consumer product flower brands, while Cannavore, Doseology and Artifact Extracts are our primary edibles and extracts brands.”
In December Stem spun off Driven Deliveries to its founders in return for 12.5 million shares of Stem. At the time, the company has also announced the appointment of Steve Hubbard, co-founder and current CFO, as interim CEO, replacing Adam Berk who had resigned. Stem said the divestiture would immediately improve its balance sheet and cost structure. Driven Deliveries currently accounted for 32.3% of the total liabilities reported on the consolidated balance sheet as of 12/15/2021. Divesting this asset would return 12.5 million shares of Stem to treasury, reduce total liabilities by $7.1 million and increase working capital by $4.1 million. Monthly expenses related to Driven Deliveries would reduce total expenses by $9.6 million annually, positioning Stem to achieve a positive Adjusted EBITDA in 2022.
Stem has ownership interests in 29 state-issued cannabis licenses including nine licenses for cannabis cultivation, three licenses for cannabis processing, two licenses for cannabis wholesale distribution, three licenses for hemp production and five adult-use medical retailers (non-storefront) which were subsequently divested and seven cannabis dispensary licenses.
