Cannabis company Harborside outlined its cost savings from the integration of three companies that it has purchased in the past 12 months.
The California-based company acquired Sublimation, also known as Sublime, on July 2, 2021; UL Holdings on March 1, 2022, which runs Urbn Leaf; and LPF JV Corp. on April 4, 2022, which runs Loudpack. The integration process for all three is underway, and the first phase should be finished by the end of June. The synergies will generate approximately $10.3 million of annualized cost savings.
“We are making outstanding progress to date in putting these four companies together,” Ed Schmults, CEO of Harborside, said. “The annualized cost savings of $10.3 million achieved to date will substantially strengthen our financial performance, and we are pleased to be realizing the synergies so quickly. As we prepare to change the name of the Company to StateHouse Holdings Inc. in the coming weeks, we expect to begin the second phase of integration, which will be focused on continued cost reductions and gross margin enhancement.”
In January, Harborside moved Urbn Leaf’s manufacturing and distribution operations to Loudpack’s state-of-the-art facility in Greenfield, Calif. Thus, the company discontinued operations in Urbn Leaf’s manufacturing and distribution facilities, generating roughly $800,000 of estimated annualized cost savings.
Also, in April, Harborside consolidated the management of its cultivation operations at Greenfield with the management of its cultivation operations in its facility in Salinas, Calif. This eliminated redundancies and will generate annualized cost savings of approximately $600,000. Another $260,000 will be saved by incorporating Salinas’ nutrient formula at the Greenfield facility.
This week, the company expects to complete the closure of the Sublime production facility in Oakland with plans to sell it by the end of June. Including the sale, cost savings are expected to total approximately $2.4 million per year, with additional annual savings from rent reduction and license elimination.
Further, Harborside has reduced its overall senior management, resulting in a reduction of approximately $1.2 million in annual payroll costs. Harborside expects to generate a further $5 million in annual cost reductions from operational efficiencies and process improvement by the end of June. One-time costs associated with these changes are expected to total approximately $500,000.
The company is already seeing benefits from the deals as cultivation yields in April were 2.5 times higher than the previous April, and May 2022 yields are tracking at similar levels. Further, gross margins from retail store operations are expected to increase to more than 60 percent by the end of the year.