Stem Hldgs Inc

Q4 2021 Earnings Conference Call


spk_0: phone keypad please note discovered is being recorded i went out from the converts over to your host vaulter can tell managing director of casey as a church should teach communications you may begin thank you operator good afternoon everyone and joined today by mr steve hubbard chief financial officer an interim ceo of some holdings following are prepared remarks will host a brief question and answer session the company's form ten k for the period ended september thirtieth two thousand and twenty one was filed with us
spk_1: years exchange commission today january thirteenth two thousand and twenty two days call refer to various non gap financial measures that a discussion will include actual historical information as well as forward looking statements that are based on assumptions which are subject to risks and uncertainties the could get cause actual results to differ materially from those in these forward looking statements management can get no assurance that any forward looking statements will prove to be correct forward looking statements disgusting this call are relevant as of the data this call and the company and it takes navigation the update or revise any of these statements except as required by applicable law manager refers you to the cautionary statements and risk factors included in the companies and dna and which any forward looking statements made are qualified in their entirety all information is in us dollars unless otherwise specified an hour to turn the call overseas if we go ahead i give older good afternoon everyone thank you for joining us today for our twenty twenty one school year and conference call as newly appointed interim ceo and cfl and member of the boy directors your stem since it's inception in two thousand and sixteen i'm pleased to be speaking with everyone's afternoon and look forward to communicating with you all going forward the day i will briefly review our financial results for the year ended september thirty twenty twenty one but more importantly provide more detail as it relates to our strategy going forward revenue for the fiscal year twenty twenty one total forty one point eight million dollars this includes seventeen point five million dollars from driven deliveries that has been subsequently divested revenues from continuing operations not including driven was twenty four point four million an increase of four eighty eight point eight percent as compared sixteen point four million for the prior fiscal year net revenue from continued operations after discounts and returns to twenty point nine million dollars which was an increase of forty nine point three percent as compared to fourteen million dollars for the price is clear at the end of fiscal year twenty twenty one company reported on cash impairment expenses associated with the written deliveries that as church the top fifty two point five million dollars predominantly related to the intangible assets and related party receivables have driven deliveries adjusted ebitda lost to the fiscal year year and twenty twenty one total five point eight million dollars as compared to five point five million dollars in the prior paris the net loss to the fiscal year twenty twenty one thousand sixty four point six million dollars which was predominantly attributable to the fifty two point five million dollars on cash impairment charge related to driven deliveries
spk_2: in december last year we announced our divestiture driven dollars
spk_1: it's subsidiaries it's assets and liabilities after careful consideration that board we made a strategic decision to divest themselves at which will return levin point five million shares to the treasury and immediately improve our balance sheet and ca structure or total liabilities will be reduced by seven point one million dollars working capital will increase by four point one million dollars and total expenses will be reduced by nine point six billion dollars annually media least and as much healthier in a much healthier financial position allowing us to focus our resources on high growth i margin vertically integrated cultivation process and retail operations predominantly in oregon and california our number one priority is operations and to achieve operational profitability and calendar year twenty twenty two to do so we must get back to where roots and regain our best in class reputation
spk_2: we were founded with vision for world class cultivation and we followed by the family brands and retail locations we now have a core cultivation capability and a retail footprint to allow for significant growth will that will enhance enterprise ensure older die
spk_1: in oregon we have for cultivation locations where the second street premier indoor facility just outside of eugene with twenty eight thousand square feet and twenty to grow rooms hillsborough a state of the are indoor grow room with ten thousand square feet malign or farms city on about fourteen acres with twelve commercial grade greenhouses and applegate farms and forty acres in foothills of the siskiyou mountains of southern oregon currently was too large licensed greenhouses we are keenly focused on improving yields and truncation will also increase in global today we are producing at less than fifty percent or capability as we increase yield and hard new high quality products we expect significantly increase self through promote our retail stores and to our wholesale distribution today we are five you tell kitchens under the teachers brown we stores in portland salem three in eugene teachers garden and eugene aired teachers gardens and your but waiter will continue to be are leading consumer products brains uruguayan is and organically grown canvas random thoughts was righty of thc and cbd cultivars are teachers gardens brands known in oregon for to make flower tops bars and turpin profiles and poised for renaissance as or new cultivation leadership recaptures it's position as leader in this premium segment the market
spk_2: we also have strong brands of products in edibles and extractions that can grow dramatically as we introduce new and exciting products from extracts about premium marijuana plants
spk_1: my primary focus will be in oregon we are pleased to announce foothill no health and wellness store in sacramento california previously the medical sales only store just received approval for recreational don't you sales required medical license to this location and twenty twenty and that has been one of our best performing locations and twenty twenty one this location that approximately five point five million in medical records with our don't use license we believe we can significantly increase revenue dislocation as we conclude are prepared remarks as i mentioned earlier number one focus is operations and the past the profitability
spk_0: two are non core assets outside world in california we will have the opportunity opportunistic and the best interests of our shareholders thank you for joining us today i would now like to turn call over to the operators are questions thank you at this time we will be conducting a question and answer session if you'd like to ask a question please press star one hundred telephone keep keypad a confirmation total indicate your line as the question que you may press start to if you'd like to remove your question from the que per participant using speaker commit a baby necessary to pick up your hands up before pressing a stark each one moment please while we both are questions
spk_3: our first question if from joe gomez what noble capital please proceed with your question
spk_4: good afternoon and thanks for taking my question
spk_5: i job
spk_6: as whacked out the could you talk a little bit on and what remains on the non core businesses in what your initial thoughts on some of them are and terms of the don't keeping looking to accept
spk_2: any any insight there would be greatly appreciated well yeah
spk_1: we got confidentiality agreements and and other things like that i don't know that i can talk about them in the semi public format
spk_2: in the case of but i can speak generically
spk_1: in the case of assets we were we are less than one hundred percent owner
spk_2: i'm interested in either becoming one hundred percent owner or divesting of the asset
spk_7: we i believe we need to manage our our assets so being a minority holder even even him
spk_8: even a majority holder but less than hundred percent reduces our ability to control the us that my view so
spk_3: that's a partial answer the question are either divested or or on at all
spk_4: okay now
spk_3: this day try to get a better handle on exactly what are some of these assets out earlier than the years you have and twenty twenty one day
spk_9: having agreement to open in michigan is that still on the table or is that one of these assets or that as that expired in on the had an agreement to and i move forward in colorado same thing as that they'll move forward ours that
spk_10: you know expired i know we'd have the massachusetts ownership i think one in maryland also ah
spk_2: but both of those i was soon would be under the the one hundred percent are are divest typo or is it there were two deals that i'm aware of in colorado one is is dead the other is still on the table
spk_1: i'm primarily because it relates to an exceptional
spk_2: grower that we we might want to have as part of our team so
spk_1: but there's there's no
spk_2: yeah there's no there's no definitive agreement there
spk_11: massachusetts is is one
spk_2: the falls in categories what i spoke about first
spk_5: i'm not sure what was the other state you mentioned
spk_2: marilyn
spk_1: i'm i'm honestly not familiar with the maryland deal so of i can't comment on that
spk_2: okay that and michigan and likewise with michigan and yeah i've been here about two weeks
spk_3: i've been kind of focusing on the big the giant issues is there are several that i will look at every one of you can call me directly we can refresh on any of those under
spk_4: to see where we're going
spk_9: okay of and i haven't had the opportunity yet to
spk_3: courtney look at it old fourth quarter numbers by are you guys and i would just getting through the pancake just before the call what can you tell us about the fourth quarter in terms of
spk_1: you know myself through the
spk_2: to the existing retail locations are you know where you work where you
spk_1: satisfied with them were you looking for more i'm at work where are we standing those i apologized to be taught us or it i joined a call eight know that that i know i didn't talk and quarterback order at all
spk_2: no absolutely not satisfied with the fourth quarter we'd had softness
spk_1: across the board in retail
spk_2: the end it seems to be consistent in the industry but we're going to try to fix that we have two locations
spk_1: in particular that are underperforming i don't think that's related to softness as much as
spk_2: lack of attention gotta get those two under control in the grow operations
spk_1: i am to be more pleased with the direction the grow operations are going right now they were
spk_2: in rather difficult shape i'd say six months ago
spk_5: we've got a new grow manager is doing a phenomenal job and pregnancy some great stuff out out about grow operations
spk_12: okay
spk_0: takes a while wrote you know takes a good three months on a good day to make a change in actually see it in revenue so
spk_5: it'll take a little bit of lot know that time but i can tell you that from personal observation and right now
spk_3: things are think some of the right direction
spk_1: of has great them just i guess in canada
spk_2: big picture items year you know your name the and term ceo
spk_1: where does that stand out management of the board still out looking or a full time or permanent ceo with that something that as of interest to you just can't out can tell us where that search is going we haven't initiated a formal search yet
spk_3: we need to have a board meeting and discuss strategically the right thing to do
spk_0: i have no intention of being the ceo let's just pick a time two years from now
spk_3: so maybe even a year from else so we are going to make changes that result me not being the ceo but
spk_5: we haven't we haven't started to search
spk_13: okay
spk_5: an american of your one one follow up i have it an accident that the announcement came out about doing that
spk_2: the sale of have driven deliveries as maybe just cutting expand a little bit more what you can what you can say
spk_1: as the you know how did you guys come to that conclusion you know how to come to in other kind of the agreement in terms of compensation and the giving up of of returning of shares and and the except the
spk_2: movement of debt from you guys over over to the driven i know maybe could talk whatever you can a little bit more about that whole situation well we took on driven about to end please don't hold me to the dates concern is not a particular deal i was intimately involved in but let's say a year ago
spk_1: we tried our best to manage to have a very bad situation there are you losing lots of money came to the conclusion we we were unable to change the the culture and direction of that company and after lots of deliberation that the board level operationally whatever concluded that the best thing for our shareholders as sad as a whole situation turned out to be but the best thing was to divest ah
spk_14: i'm
spk_2: and we did it in a way where we got back to some shares not much to liked because they were already pretty much dispersed i'm so we got back from shares we got rid of the liabilities we got rid of the
spk_1: an actual legal liability is related to it
spk_2: it was just and i'm fortunate deal and the other thing that happened during that time is that as we got deeper and deeper into the understanding of the deliveries market in california
spk_1: ah it be he became i think clear to us from an operational point of view that it may not ever turn out to be profitable business
spk_2: delivery a big deal or is important
spk_4: and
spk_5: but in california
spk_9: the landscape changed a bit and shifted to a point where
spk_1: we took a long hard look at said that we don't else will never make it profitable given that and given the management of have driven wanted to have it back to the right let's let's make a deal and divest it
spk_2: you heard during my comments of various improvements that are being made to or balance sheet or casual and whatever but
spk_4: i firmly believe that was the very best possible decision we could make
spk_5: okay if what what percent of fiscal twenty one revenues
spk_3: did sale through the delivery system
spk_15: account for overall sales
spk_0: you know in twenty twenty one we had a forty one point eight million dollars in sales letting that was including driven your haven't accounted for seventeen point five million of that
spk_2: and so without that we had twenty four point four million in sales which was up from sixteen point four million sales way we increase sales on around by almost fifty percent
spk_1: passion but a good year in that regard
spk_0: right

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