STMH - Stem Holdings Inc. (STMH)(STEM:CA) - Moving Forward With the Farm-to-Home Strategy Reports 3Q21 Results
3Q2021 Results. Stem reported third quarter record gross sales of $12.4 million and net sales of $10.6 million, a 104% increase and 103% increase, respectively, over the prior year’s $6.1 million gross sales and $5.2 million net sales. Gross margin was 14%, compared with 34% in the prior year period, due to reclassification of expenses. We had forecast net revenue of $12.75 million.Positive EPS, But. Stem recorded net income of $2.7 million in the third quarter, or EPS of $0.01. This compares to a loss of $826,000, or a loss of $0.01 per share, in the same period last year. The positive net income was the result of a $6.4 million change in fair value of warrant liability. Excluding the warrant liability gain, we estimate Stem would have reported a net loss of $3.8 million in 3Q21, or $0.02 per share. We had forecast a net loss of $2.1 million or $0.01 a share.Momentum Building. Stem continued to build momentum during the quarter, in our view. Stem saw a 19% increase in total dispensary sales, a significant outperform to market particularly in Oregon, which grew at 7% in the same period. More recently, the Budee delivery platform was launched in Oregon on August 9th. Stem also expects to launch its first dispensary in Michigan in September 2021, which will be coupled with Budee delivery.Updated Projections. Incorporating the third quarter results and trends, we are taking a more conservative approach to our fourth quarter estimates. We are now projecting net revenue of $13 million, down from a prior $15.3 million and a net loss of $0.02 per share, versus a prior break-even. For the full year, we are now at net revenue of $39.6 million and a net loss of $0.11 per share.Maintaining Outperform. In spite of a slower than anticipated revenue ramp, we are maintaining our Outperform rating and a $2.00 12-month price target. We believe the Company's merger with Driven Deliveries has established Stem as the first cannabis cultivator and technology omnichannel retailer with e-commerce ordering and express and next-day delivery providing Stem with not only a first mover advantage but a defensible moat. Read More >>