Cannabis company Harborside outlines cost savings from recent acquisitions

Cannabis company Harborside outlined its cost savings from integrating three companies it acquired in the past 12 months.

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The California-based company acquired Sublimation, also known as Sublime, on July 2, 2021; UL Holdings on March 1, 2022, which operates Urbn Leaf; and LPF JV Corp. on April 4, 2022, which operates Loudpack. The integration process for all three is ongoing, the first phase should be completed by the end of June. The synergies will generate annual cost savings of approximately $10.3 million.

“We are making excellent progress bringing these four companies together,” said Ed Schmults, CEO of Harborside. “The annual cost savings of $10.3 million achieved to date will significantly strengthen our financial performance and we are pleased to be able to realize the synergies so quickly. As we prepare to change the company’s name to StateHouse Holdings Inc. in the coming weeks, we expect to begin the second phase of the integration, which will focus on further cost reductions and gross margin improvement .”

In January, Harborside relocated Urbn Leaf’s manufacturing and distribution operations to Loudpack’s state-of-the-art facility in Greenfield, California. As a result, the Company ceased operations at Urbn Leaf’s manufacturing and distribution facilities and generated estimated annual cost savings of approximately $800,000.

Also in April, Harborside consolidated the management of its Greenfield cultivation operations with the management of its cultivation operations at its Salinas, California facility. This eliminated redundancies and resulted in annual cost savings of approximately $600,000. An additional $260,000 will be saved by integrating Salinas’ nutrient formula into the greenfield facility.

This week, the company expects to complete the closure of Sublime’s Oakland manufacturing facility and plans to sell it by the end of June. Including the sale, total cost savings are expected to total approximately $2.4 million per year, with additional annual savings from rent reduction and license waiver.

In addition, Harborside has reduced all of its senior management, resulting in an approximately $1.2 million reduction in annual payroll costs. Harborside expects to achieve an additional $5 million in annual cost savings through operational efficiencies and process improvements by the end of June. The one-time costs associated with these changes are expected to be approximately $500,000.

The company is already seeing benefits from the deals, as April crop yields were 2.5 times higher than April last year, and May 2022 yields are at a similar level. In addition, gross margin from the retail business is expected to increase to over 60 percent by the end of the year.

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