Net Revenue of $63.9 million Represents a 12%
Sequential Improvement from Prior Quarter
Net Loss of $5.7 million and Non-GAAP Adjusted
EBITDA(1) Profit of $0.9 million, Driven by Sequentially Stronger
Sales
GrowGeneration Corp. (NASDAQ: GRWG) (“GrowGen” or the
“Company”), the largest chain of specialty hydroponic and organic
garden centers in the United States with 62 stores across 18
states, today reported financial results for the second quarter
ended June 30, 2023.
Second Quarter 2023 Highlights
- Net sales increased 12% quarter-over-quarter to $63.9
million
- Comparable store sales decreased 15.1% to the prior
year
- Gross profit margin of 26.8%, decrease of 1.7% to the prior
year
- Net loss of $5.7 million and Adjusted EBITDA(1) gain
of $0.9 million
- Year-to-date cash flow provided by operations of $7.4
million
- Cash, cash equivalents, and marketable securities of $70.6
million
- Changing full-year 2023 guidance for revenue to be $220
million to $225 million and Adjusted EBITDA(1) to be a loss
of $4 million to $6 million
Darren Lampert, GrowGeneration’s Co-Founder and Chief Executive
Officer, stated, “I am pleased with our performance and results in
the quarter. GrowGen is proud to share that we generated net
revenue of $63.9 million, which is a 12% improvement to the first
quarter. Further, the company is reporting positive Adjusted
EBITDA(1) of $0.9 million, consistent with the expectations that we
previously communicated. The improvements in revenue and Adjusted
EBITDA are a testament to our team’s work over the previous few
quarters in right-sizing the business and focusing on profitable
growth. Additionally, I am excited to announce that we have
officially rolled-out our new ERP system during the third quarter.
This represents a tremendous milestone for GrowGen, benefiting our
forward looking cost structure and improving customer experience as
we continue to optimize the system over the coming several
quarters. We completed three M&A transactions at desirable
valuations in the second quarter and will continue to execute upon
the right opportunities to sustainably grow our business.”
Lampert continued, “While I am encouraged by our results in the
first-half of the year, it is no secret that the cannabis market
landscape remains challenged, and these challenges are flowing
through to ancillary businesses like GrowGen. The industry
continues to face headwinds as it relates to capital availability
and investment, as well as legislative efforts. Given the softer
than anticipated industry outlook for the back-half of the year, we
are changing our guidance to better align with that reality.
GrowGen remains in a strong financial position to continue
investing for growth while putting profitability at the forefront,
all while positioning ourselves as a stronger, nimbler, and more
efficient organization.”
Second Quarter 2023 Consolidated Results
Revenues declined $7.2 million, or 10.1%, to $63.9 million for
the quarter ended June 30, 2023, compared to $71.1 million for the
quarter ended June 30, 2022. The decrease in net revenue was
primarily attributed to a decline in same-store sales of 15.1% at
56 retail locations, offset partially by an increase in revenue
from our distribution and other segment. Overall retail sales were
$46.9 million in the second quarter, compared to $55.4 million for
the same period last year.
E-commerce revenue was $3.7 million in the second quarter,
compared to $3.7 million for the same period last year.
Revenue from non-retail operations, including distributed brands
and MMI, was $13.3 million in the second quarter of 2023, compared
to $12.0 million in the same quarter last year.
Gross profit was $17.1 million for the second quarter of 2023,
compared to $20.2 million for the second quarter of 2022. Gross
profit margin was 26.8%, compared to 28.5% in the same quarter last
year. The decrease in gross margin in the second quarter of 2023
was largely attributed to a an increase of shrink and obsolescence
expense primarily driven from the restructuring of our distribution
facilities, as well as a negative impact resulting from margin
pressure on certain products due to vendor price reductions.
Store and other operating expenses in the second quarter of 2023
were $12.3 million, compared to $13.8 million in the prior year, a
decrease of 11%.
Selling, general, and administrative expenses in the second
quarter of 2023 were $7.5 million, compared to $9.8 million in the
prior year, a decrease of 23%.
GAAP pre-tax net loss was $5.6 million for the second quarter of
2023, or a loss of $0.09 per diluted share, compared to $136.7
million in the second quarter of 2022, or a loss of $2.24 per
diluted share.
Non-GAAP earnings before interest, taxes, depreciation,
amortization, and share-based compensation (Adjusted EBITDA)(1) was
$0.9 million in the second quarter of 2023, compared to a loss of
$3.0 million in the same period last year.
Cash and short-term marketable securities as of June 30, 2023
were $70.6 million. Inventory as of June 30, 2023 was $76.7
million, and prepaid inventory and other current assets were $7.9
million.
Total current liabilities, including accounts payable, accrued
payroll, and other liabilities, increased from $35.8 million at
December 31, 2022 to $36.7 million at June 30, 2023.
Geographical Footprint
The Company’s operations span approximately 953,000 square feet
of retail and warehouse space at 64 existing locations across 19
states.
Fiscal Year 2023 Financial Outlook(2)
Revenue guidance for 2023 is changed to be between $220 million
to $225 million.
Adjusted EBITDA(1) guidance is changed to be between a loss of
$4 million to $6 million.
Footnotes
(1) Adjusted EBITDA represents earnings before income, taxes,
depreciation, and amortization as adjusted for certain items as set
forth in the reconciliation table of U.S. GAAP to non-GAAP
information and is a measure calculated and presented on the basis
of methodologies other than in accordance with GAAP. Please refer
to the Use of Non-GAAP Financial Information herein for further
discussion and reconciliation of this measure to GAAP measures.
(2) Sales and Adjusted EBITDA guidance metrics are inclusive of
acquisitions and store openings completed in 2023 and 2022, but do
not include any unannounced acquisitions.
Conference Call
The Company will host a conference call today, August 8, 2023,
at 4:30PM Eastern Time. To participate in the call, please dial
(888) 664-6392 (domestic) or (416) 764-8659 (international). The
conference code is 95565917. This call is being webcast and can be
accessed on the Investor Relations section of GrowGen's website at:
https://ir.growgeneration.com.
A replay of the webcast will be available approximately two
hours after the conclusion of the call and remain available for
approximately 90 calendar days.
About GrowGeneration Corp:
GrowGen owns and operates specialty retail hydroponic and
organic gardening centers. Currently, GrowGen has 62 stores across
18 states. GrowGen also operates an online superstore for
cultivators at growgeneration.com. GrowGen carries and sells
thousands of products, including organic nutrients and soils,
advanced lighting technology and state of the art hydroponic
equipment to be used indoors and outdoors by commercial and home
growers.
Forward Looking Statements:
This press release may include predictions, estimates or other
information that might be considered forward-looking within the
meaning of applicable securities laws. While these forward-looking
statements represent current judgments, they are subject to risks
and uncertainties that could cause actual results to differ
materially. You are cautioned not to place undue reliance on these
forward-looking statements, which reflect opinions only as of the
date of this release. Please keep in mind that the company does not
have an obligation to revise or publicly release the results of any
revision to these forward-looking statements in light of new
information or future events. When used herein, words such as “look
forward,” “expect,” “believe,” “continue,” “building,” or
variations of such words and similar expressions are intended to
identify forward-looking statements. Factors that could cause
actual results to differ materially from those contemplated in any
forward-looking statements made by us herein are often discussed in
filings made with the United States Securities and Exchange
Commission, available at: www.sec.gov, and on the company’s
website, at: www.growgeneration.com.
GROWGENERATION CORP. CONDENSED
CONSOLIDATED BALANCE SHEETS (Unaudited) (in
thousands, except shares and per share amounts)
June 30, 2023
December 31,
2022
ASSETS
Current assets:
Cash and cash equivalents
$
29,587
$
40,054
Marketable securities
40,986
31,852
Accounts receivable, net of allowance for
doubtful accounts of $0.8 million and $0.7 million at June 30, 2023
and December 31, 2022
7,318
8,336
Notes receivable, current, net of
allowance for doubtful accounts of $1.7 million and $1.3 million at
June 30, 2023 and December 31, 2022
—
1,214
Inventory
76,689
77,091
Prepaid income taxes
477
5,679
Prepaids and other current assets
7,864
6,455
Total current assets
162,921
170,681
Property and equipment, net
30,682
28,669
Operating leases right-of-use assets
42,692
46,433
Intangible assets, net
26,707
30,878
Goodwill
16,808
15,978
Other assets
881
803
TOTAL ASSETS
$
280,691
$
293,442
LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
17,905
$
15,728
Accrued liabilities
2,575
1,535
Payroll and payroll tax liabilities
2,828
4,671
Customer deposits
3,746
4,338
Sales tax payable
1,473
1,341
Current maturities of lease liability
8,152
8,131
Current portion of long-term debt
17
50
Total current liabilities
36,696
35,794
Commitments and contingencies
Operating lease liability, net of current
maturities
37,191
40,659
Other long-term liabilities
316
593
Total liabilities
74,203
77,046
Stockholders’ equity:
Common stock; $0.001 par value;
100,000,000 shares authorized, 61,229,051 and 61,010,155 shares
issued and outstanding as of June 30, 2023 and December 31,
2022
61
61
Additional paid-in capital
371,863
369,938
Retained earnings
(165,436)
(153,603)
Total stockholders’ equity
206,488
216,396
TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY
$
280,691
$
293,442
GROWGENERATION CORP. CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in
thousands, except per share amounts)
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2023
2022
2023
2022
Net sales
$
63,925
$
71,093
$
120,752
$
152,860
Cost of sales (exclusive of depreciation
and amortization shown below)
46,788
50,866
87,326
110,493
Gross profit
17,137
20,227
33,426
42,367
Operating expenses:
Store operations and other operational
expenses
12,269
13,767
25,235
28,299
Selling, general, and administrative
7,503
9,759
14,341
19,368
Bad debt expense
107
888
424
1,602
Depreciation and amortization
3,824
4,783
7,756
9,289
Impairment loss
—
127,831
—
127,831
Total operating expenses
23,703
157,028
47,756
186,389
Income from operations
(6,566)
(136,801)
(14,330)
(144,022)
Other income (expense):
Other expense
1,391
104
2,595
513
Interest income
—
45
—
47
Interest expense
(431)
(10)
(5)
(13)
Total non-operating income (expense),
net
960
139
2,590
547
Net income (loss) before taxes
(5,606)
(136,662)
(11,740)
(143,475)
Provision (loss) for income taxes
(93)
283
(93)
1,919
Net income (loss)
$
(5,699)
$
(136,379)
$
(11,833)
$
(141,556)
Net income (loss) per share, basic
$
(0.09)
$
(2.24)
$
(0.19)
$
(2.33)
Net income (loss) per share, diluted
$
(0.09)
$
(2.24)
$
(0.19)
$
(2.33)
Weighted average shares outstanding,
basic
61,077
60,756
61,053
60,742
Weighted average shares outstanding,
diluted
61,077
60,756
61,053
60,742
Use of Non-GAAP Financial Information
The Company believes that the presentation of results excluding
certain items in “Adjusted EBITDA,” such as non-cash equity
compensation charges, provides meaningful supplemental information
to both management and investors, facilitating the evaluation of
performance across reporting periods. The Company uses these
non-GAAP measures for internal planning and reporting purposes.
These non-GAAP measures are not in accordance with, or an
alternative for, generally accepted accounting principles and may
be different from non-GAAP measures used by other companies. The
presentation of this additional information is not meant to be
considered in isolation or as a substitute for net income or net
income per share prepared in accordance with generally accepted
accounting principles.
Set forth below is a reconciliation of Adjusted EBITDA to net
income (loss):
For the Three Months Ended
June 30,
2023
2022
(000)
(000)
Net income
$
(5,699)
$
(136,379)
Income taxes
93
(283)
Interest income
—
(45)
Interest expense
431
10
Depreciation and amortization
3,824
4,783
EBITDA
$
(1,351)
$
(131,914)
Impairment loss
—
127,831
Share based compensation (option
compensation, warrant compensation, stock issued for services)
947
1,106
Restructuring charges
1,220
—
Fixed asset disposal
40
(12)
Adjusted EBITDA
$
856
$
(2,989)
Adjusted EBITDA per share, basic
$
0.01
$
(0.05)
Adjusted EBITDA per share, diluted
$
0.01
$
(0.05)
For the Six Months Ended June
30,
2023
2022
(000
)
(000
)
Net income
$
(11,833
)
$
(141,556
)
Income taxes
93
(1,919
)
Interest income
—
(47
)
Interest expense
5
13
Depreciation and amortization
7,756
9,289
EBITDA
$
(3,979
)
$
(134,220
)
Impairment loss
—
127,831
Share based compensation (option
compensation, warrant compensation, stock issued for services)
1,514
2,689
Restructuring charges
1,498
—
Fixed asset disposal
21
(84
)
Adjusted EBITDA
$
(946
)
$
(3,784
)
Adjusted EBITDA per share, basic
$
(0.02
)
$
(0.06
)
Adjusted EBITDA per share, diluted
$
(0.02
)
$
(0.06
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230808545176/en/
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