Stem’s Acquisition of Driven is Expected to Close in CY20/Q4
Stem to be Renamed “Driven By Stem”
Unaudited financial results for the quarter ended
- Combined record gross revenues of
$14.9 million , reflecting +394% Y/Y growth for Driven and +162% Y/Y for Stem. - Gross product margin improved to
$4.26 million for Driven and to$1.3 million for Stem, or an aggregate of$5.56 million ; +37.3%. - Stem’s dispensary revenues climbed 63% to
$4.1 million , with 62,391 transactions for a total of 174,368 units sold at an average price of$62.66 . On a combined basis with Driven, 149,591 transactions were completed during the quarter. - 13.5% of Driven’s delivered orders were to new customers who had previously never ordered from Driven, representing a record new customer acquisition rate.
- E-Commerce Platform venture shopfoothill.com, announced on
June 11th to service theNorthern California market by integrating Stem’s Foothills Wellness dispensary into Driven’s operations, indicating a successful test-market and will serve as a post-acquisition business model. Stem’s recreational license for Foothills awaits final regulatory approval, now expected in CY20/Q4 which is expected to further enhance our results. - Rebelle, Stem’s first dispensary in
Massachusetts in partnership withCommunity Growth Partners inGreat Barrington, MA , opened to acclaim overLabor Day weekend.
Business Update:
Stem management continues to drive innovation and expansion of its geographic footprint with strategic execution in all markets. Stem’s four-point plan continues to guide its expansion: financial discipline,
M STEM HOLDINGS AND DRIVEN DELIVERIES PROVIDE BUSINESS UPDATE.102920.pdf STEM HOLDINGS AND DRIVEN DELIVERIES PROVIDE BUSINESS UPDATE.102920.pdf STEM HOLDINGS AND DRIVEN DELIVERIES PROVIDE BUSINESS UPDATE.102920.pdfproductivity, customer centricity, and disruptive, margin-accretive innovation for Stem’s brands.
Financial Discipline: Stem’s focus on key performance indicators reveal an improvement to its cash conversion cycle, a 70% reduction in outstanding receivables Y/Y even as Stem drove strong sales growth and continued positive EBITDA from operations of 1.3%.
Productivity: Stem continued to reduce operating SG&A, while strengthening its team for efficiency and yield improvement in its cultivation and processing activities. Stem’s value engineering enabled it to improve product quality and gross margin with higher service levels than previously achieved. This is critical to Stem’s planned integration of Driven in CY20/Q4.
Stem is also increasing its canopy at two facilities in
Customer Centricity: As the novel coronavirus (COVID-19) outbreak continued throughout the summer, Stem re-doubled its efforts to service its wholesale and retail customers while ensuring their safety. Stem improved customer service and shortened delivery lead time with improved fulfillment procedures and forecasting accuracy.
Innovation: Stem launched margin-accretive, strategic new products as planned, including its new line-up of tinctures from trial size to grow usage within this important product segment, and new formulas including the first-ever co-brand between Stem’s Yerba Buena™ and TJ’s Gardens™ for a new RSO which was launched and announced two weeks ago. Stem’s Cannavore™ edibles brand launched in
Driven will adopt Stem’s four-point plan once the Acquisition is completed. In anticipation of this, Driven has similarly adopted best practices to drive topline revenue growth with a disciplined approach to expenses that are expected to be evident in Stem and Driven’s first quarter of combined operations.
Driven increased its investment in marketing in the quarter, adding 11,815 new customers in Q3. Repeat customer orders were nearly 7x that level and Driven prepared for this growth with a renewed focus on customer service, and by ramping-up distribution capabilities.
The Acquisition is expected to close in CY20/Q4.
About
About
Cautionary Note Regarding Forward-Looking Information
This press release contains statements that constitute “forward-looking information” within the meaning of applicable securities laws, including statements regarding the plans, intentions, beliefs and current expectations of the management of Stem and
Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking information prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Although Stem and Driven have attempted to identify important risks, uncertainties and factors which could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated or intended. Neither Stem nor Driven assume any obligation to update this forward-looking information except as otherwise required by applicable law.
No securities regulatory authority has in any way passed upon the merits of the proposed transactions described in this news release or has approved or disapproved of the contents of this news release.
Non-GAAP Measures
Certain supplementary measures in this news release do not have any standardized meaning as prescribed under generally accepted accounting principles ("GAAP") for publicly accountable entities in
The intent of non-GAAP measures is to provide additional useful information with respect to Stem’s operational and financial performance to investors and analysts though the measures do not have any standardized meaning under GAAP. The measures should not, therefore, be considered in isolation or used in substitute for measures of performance prepared in accordance with GAAP. Other issuers may calculate these non-GAAP measures differently.
In particular, the term "EBITDA from operations” is used in this news release to describe certain financial information of Stem. Earnings before interest, taxes, depreciation and amortization (EBITDA) is not a recognized performance measure under GAAP. EBITDA does not have a standardized meaning prescribed by GAAP and may not be comparable to similar measures presented by other issuers.
The term EBITDA consists of net (loss) income and excludes interest ("financing costs"), taxes, depreciation and amortization. EBITDA also excludes share-based compensation, impairment of assets, acquisition costs, legal settlement costs, restructuring charges, and adjustments for fair value of biological assets, warrant liabilities, and stock appreciation rights. EBITDA is included as a supplemental disclosure because management of Stem believes that such measurement provides a better assessment of Stem’s operations on a continuing basis by eliminating certain non-cash charges and charges or gains that are nonrecurring. The most directly comparable measure to EBITDA calculated in accordance with GAAP is [net (loss) income].
For further information, please contact:
Media Contact:
Mauria@stemholdings.com
971.319.0303
Investor Contact:
+1 212-896-1254 or +1 212-896-1203
DRVD@kcsa.com
Source:
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