Net Revenue of $55.7 million, Consistent with
Expectations
Gross Profit Margin of 29.1% Represents 230
Basis Points Sequential Improvement Over Second Quarter 2023
Net Loss of $7.3 million and Non-GAAP Adjusted
EBITDA(1) Loss of $0.9 million
GrowGeneration Corp. (NASDAQ: GRWG) (“GrowGen” or the
“Company”), the largest chain of specialty hydroponic and organic
garden centers in the United States with 50 stores across 18
states, today reported financial results for the third quarter
ended September 30, 2023.
Third Quarter 2023 Highlights
- Net sales decreased 13% quarter-over-quarter to $55.7
million
- Comparable store sales decreased 14.4% to the prior
year
- Gross profit margin of 29.1%, increase of 320 basis points
to the prior year
- Net loss of $7.3 million, compared to a net loss of $7.2
million in the prior year
- Adjusted EBITDA(1) loss of $0.9 million, an
improvement of $1.8 million to 2022
- Year-to-date cash flow provided by operations of $2.8
million
- Cash, cash equivalents, and marketable securities of $66.6
million
- Maintains 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 third quarter results,
which are broadly consistent with the expectations we communicated
last quarter. Our continued focus on proprietary brands and
distribution helped drive gross profit margin of 29.1%,
representing a 230 basis point improvement over the second quarter.
We have also reduced store operating expenses by over 12% and
SG&A by nearly 14% year-over-year. As I have said before, we
are constantly evaluating our network to enhance profitability and,
as such, we consolidated 6 retail locations during the third
quarter. Further in the fourth quarter, we expect to consolidate 6
additional locations where we identified cost rationalization
opportunities through our ability to serve a similar customer base
from a smaller footprint. GrowGen ended the quarter with $66.6
million of cash and cash equivalents and generated nearly $3
million of operating cash flow year-to-date. We continue to make
progress on our digital transformation efforts and we are excited
about the potential of our new ERP system to enable further
efficiencies in our supply chain and ultimately improve our
end-to-end customer experience.”
Lampert continued, “We are bringing innovative new products to
market and have seen success in growing our proprietary brand
portfolio. We believe that our third quarter results represent
progress towards the initiatives that we have been striving to
achieve. Despite challenges within the industry, we remain focused
on what we can control to position GrowGen to be more nimble,
efficient, and better-positioned for profitable growth in 2024 and
beyond.”
Third Quarter 2023 Consolidated Results
Revenues declined $15.2 million, or 21.4%, to $55.7 million for
the quarter ended September 30, 2023, compared to $70.9 million for
the quarter ended September 30, 2022. The decrease in net revenue
was partially attributed to a decline in same-store sales of 14.4%
at 55 retail locations. Overall retail sales were $41.4 million in
the third quarter, compared to $47.9 million for the same period
last year.
E-commerce revenue was $2.8 million in the third quarter,
compared to $3.1 million for the same period last year.
Revenue from non-retail operations, including distributed brands
and MMI, was $11.5 million in the third quarter of 2023, compared
to $19.8 million in the same quarter last year. The year ago period
in 2022 included a few large one-time transactions to account for
the decrease.
Gross profit was $16.2 million for the third quarter of 2023,
compared to $18.3 million for the third quarter of 2022. Gross
profit margin was 29.1%, compared to 25.9% in the same quarter last
year. The increase in gross margin in the third quarter of 2023 was
due to increased private label sales growth, pricing expansion, and
margin accretion from development of our distribution network and
corresponding bulk-buy negotiations.
Store and other operating expenses in the third quarter of 2023
were $11.9 million, compared to $13.6 million in the prior year, a
decrease of 12%.
Selling, general, and administrative expenses in the third
quarter of 2023 were $7.6 million, compared to $8.8 million in the
prior year, a decrease of 13.8%.
GAAP pre-tax net loss was $7.3 million for the third quarter of
2023, or a loss of $0.12 per diluted share, compared to $7.9
million in the third quarter of 2022, or a loss of $0.12 per
diluted share.
Non-GAAP loss before interest, taxes, depreciation,
amortization, share-based compensation, and other non-recurring
charges (Adjusted EBITDA)(1) was $0.9 million in the third quarter
of 2023, compared to a loss of $2.7 million in the same period last
year.
Cash and short-term marketable securities as of September 30,
2023 were $66.6 million. Inventory as of September 30, 2023 was
$76.0 million, and prepaid inventory and other current assets were
$12.4 million.
Total current liabilities, including accounts payable, accrued
payroll, and other liabilities, increased from $35.8 million at
December 31, 2022 to $40.5 million at September 30, 2023.
Geographical Footprint
The Company’s operations span approximately 826,000 square feet
of retail and warehouse space at 50 existing locations across 18
states.
Fiscal Year 2023 Financial Outlook(2)
Revenue guidance for full-year 2023 is unchanged to be between
$220 million to $225 million.
Adjusted EBITDA(1) guidance for full-year 2023 is unchanged to
be between a loss of $4 million to a loss of $6 million.
Footnotes
(1) Adjusted EBITDA represents earnings before interest, 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, November 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 71685189. 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:
GrowGeneration is a leading marketer and distributor of
nutrients, growing media, lighting, benching and racking,
environmental control systems, and other products for both indoor
and outdoor hydroponic and organic gardening, including proprietary
brands such as Charcoir, Drip Hydro, Power Si, MMI benching and
racking, Ion lights, Durabreeze fans, and more. Incorporated in
Colorado in 2014, GrowGeneration is the largest chain of specialty
retail hydroponic and organic garden centers in the United States.
The Company also operates an online superstore for cultivators at
growgeneration.com, as well as a wholesale business for resellers,
HRG Distribution, and a benching, racking, and storage solutions
business, Mobile Media.
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)
September 30,
2023
December 31,
2022
ASSETS
Current assets:
Cash and cash equivalents
$
31,414
$
40,054
Marketable securities
35,203
31,852
Accounts receivable, net of allowance for
doubtful accounts of $1.1 million and $0.7 million at September 30,
2023 and December 31, 2022
8,351
8,336
Notes receivable, current, net of
allowance for doubtful accounts of $1.7 million and $1.3 million at
September 30, 2023 and December 31, 2022
—
1,214
Inventory
75,987
77,091
Prepaid income taxes
477
5,679
Prepaids and other current assets
12,383
6,455
Total current assets
163,815
170,681
Property and equipment, net
28,946
28,669
Operating leases right-of-use assets
42,316
46,433
Intangible assets, net
24,466
30,878
Goodwill
16,808
15,978
Other assets
880
803
TOTAL ASSETS
$
277,231
$
293,442
LIABILITIES &
STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
20,219
$
15,728
Accrued liabilities
3,413
1,535
Payroll and payroll tax liabilities
2,027
4,671
Customer deposits
4,926
4,338
Sales tax payable
1,503
1,341
Current maturities of lease liability
8,374
8,131
Current portion of long-term debt
—
50
Total current liabilities
40,462
35,794
Commitments and contingencies
Operating lease liability, net of current
maturities
36,387
40,659
Other long-term liabilities
317
593
Total liabilities
77,166
77,046
Stockholders’ equity:
Common stock; $0.001 par value;
100,000,000 shares authorized, 61,309,456 and 61,010,155 shares
issued and outstanding as of September 30, 2023 and December 31,
2022
61
61
Additional paid-in capital
372,789
369,938
Retained earnings
(172,785
)
(153,603
)
Total stockholders’ equity
200,065
216,396
TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY
$
277,231
$
293,442
GROWGENERATION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (in thousands, except per share
amounts)
For the Three Months Ended
September 30,
For the Nine Months Ended
September 30,
2023
2022
2023
2022
Net sales
$
55,678
$
70,850
$
176,430
$
223,710
Cost of sales (exclusive of depreciation
and amortization shown below)
39,490
52,516
126,816
163,009
Gross profit
16,188
18,334
49,614
60,701
Operating expenses:
Store operations and other operational
expenses
11,930
13,585
37,165
41,884
Selling, general, and administrative
7,582
8,796
21,923
28,164
Bad debt expense
257
172
681
1,774
Depreciation and amortization
4,721
3,875
12,477
13,164
Impairment loss
—
—
—
127,831
Total operating expenses
24,490
26,428
72,246
212,817
Income from operations
(8,302
)
(8,094
)
(22,632
)
(152,116
)
Other income (expense):
Other expense
954
34
3,549
547
Interest income
—
143
—
190
Interest expense
(1
)
(3
)
(6
)
(16
)
Total non-operating income (expense),
net
953
174
3,543
721
Net income (loss) before taxes
(7,349
)
(7,920
)
(19,089
)
(151,395
)
Provision (loss) for income taxes
—
718
(93
)
2,637
Net income (loss)
$
(7,349
)
$
(7,202
)
$
(19,182
)
$
(148,758
)
Net income (loss) per share, basic
$
(0.12
)
$
(0.12
)
$
(0.31
)
$
(2.45
)
Net income (loss) per share, diluted
$
(0.12
)
$
(0.12
)
$
(0.31
)
$
(2.45
)
Weighted average shares outstanding,
basic
61,272
60,855
61,127
60,771
Weighted average shares outstanding,
diluted
61,272
60,855
61,127
60,771
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
September 30,
2023
2022
(000
)
(000
)
Net income
$
(7,349
)
$
(7,202
)
Income taxes
—
(718
)
Interest income
—
(143
)
Interest expense
1
3
Depreciation and amortization
4,721
3,875
EBITDA
$
(2,627
)
$
(4,185
)
Share based compensation (option
compensation, warrant compensation, stock issued for services)
938
1,291
Impairment, restructuring, and other
charges
717
—
Fixed asset disposal
64
165
Adjusted EBITDA
$
(908
)
$
(2,729
)
Adjusted EBITDA per share, basic
$
(0.01
)
$
(0.04
)
Adjusted EBITDA per share, diluted
$
(0.01
)
$
(0.04
)
For the Nine Months Ended
September 30,
2023
2022
(000
)
(000
)
Net income
$
(19,182
)
$
(148,758
)
Income taxes
93
(2,637
)
Interest income
—
(190
)
Interest expense
6
16
Depreciation and amortization
12,477
13,164
EBITDA
$
(6,606
)
$
(138,405
)
Impairment, restructuring, and other
charges
2,215
127,831
Share based compensation (option
compensation, warrant compensation, stock issued for services)
2,452
3,980
Restructuring charges
2,215
—
Fixed asset disposal
85
81
Adjusted EBITDA
$
(1,854
)
$
(6,513
)
Adjusted EBITDA per share, basic
$
(0.03
)
$
(0.11
)
Adjusted EBITDA per share, diluted
$
(0.03
)
$
(0.11
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231108027455/en/
ICR, Inc. GrowGenIR@icrinc.com
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