Stem Holdings, Inc.

Fiscal third quarter 2021 gross revenue was $12.4 million, up $6.3 million, or 104%, from $6.1 million in the same quarter of 2020. Reported gross margin was 14%, and management said it would have been 41.8% for the quarter without the reclassification of expenses from SG&A to COGS related to the recent Driven cannabis delivery business acquisition. Management said the quarter included 57,603 transactions, 78,455 deliveries in California and nearly 1,000 in Oregon, plus 3,850 new customers and a $66 average order rate. Looking ahead, management said it still believes it will achieve $75 million of gross revenue in calendar 2021, but that the timing is likely to be slightly delayed as technology integration, Oregon launch timing, and other growth initiatives roll through.

CEO Adam Berk framed the quarter as validation of the company’s vertically integrated, farm-to-home strategy and said the business is building toward becoming a large publicly traded cannabis e-commerce and delivery platform. His tone was optimistic and expansive, emphasizing five paths to profitability, including delivery expansion, partnerships, branded products, and M&A. He repeatedly pointed to Oregon, Michigan, Georgia, and potential East Coast opportunities as future growth drivers, while stressing that technology integration and platform quality were essential to retention and long-term scale.

No separate CFO prepared remarks were provided on the call, so financial commentary came from the CEO. He explained that the 14% reported gross margin was distorted by a reclassification of delivery-related labor from SG&A to COGS, and said the company should see margin improvement from productivity, better purchasing, and product assortment. He also said the company does not need capital right now, but will remain opportunistic if growth or M&A opportunities arise.

Analyst Joe Gomes asked why net revenue was relatively flat sequentially despite strong year-over-year growth; management attributed that to normal summer seasonality, intensified by travel out of West Coast markets, and said new customer acquisition helped offset the decline. He also pressed on gross margin, and management said the reported 14% should improve as delivery labor classification normalizes and as sourcing and productivity gains flow through. Later, Joe asked about the beverage opportunity and capital needs; management said the company is pursuing a syrup-based product first, expects it to launch in Oregon by year-end, and said no near-term capital raise is needed.