Net Revenue of $57 million Represents
Sequential Improvement from Prior Quarter
Gross Margin Improved Substantially to
28.7%
Net Loss of $6.1 million and Non-GAAP Adjusted
EBITDA(1) Loss of $1.8 million, Above Guidance
GrowGeneration Corp. (NASDAQ: GRWG) (“GrowGen” or the
“Company”), the largest chain of specialty hydroponic and organic
garden centers with 61 locations across 17 states, today reported
financial results for the first quarter ended March 31, 2023.
First Quarter 2023 Highlights
- Net sales increased quarter-over-quarter to $56.8
million
- Comparable store sales decreased 36.6% to the prior
year
- Gross profit margin of 28.7%, increase of 1.58% to the prior
year
- Net loss of $6.1 million and Adjusted EBITDA(1) loss
of $1.8 million
- Cash, cash equivalents and marketable securities of $71.9
million
- Maintaining full-year 2023 guidance for revenue to be $250
million to $270 million and Adjusted EBITDA(1) to be a loss
of $4 million to a $1 million profit
Darren Lampert, GrowGeneration’s Co-Founder and Chief Executive
Officer, stated, “I am pleased that GrowGen is off to a strong
start in 2023 and we are seeing incremental signs of stabilization
in our business. We generated net revenue of $56.8 million in the
first quarter, which was at the high-end of our guidance range.
Encouragingly, gross margins of 28.7% were above our expectations
for the first quarter.”
Lampert continued, “While we maintain a degree of cautious
optimism, we expect to invest for growth in a disciplined manner
this year. Our entire organization is focused on building and
growing our private brands, executing upon accretive and
complementary acquisitions, and putting profitable growth at the
forefront. We believe that the vast majority of our cost cutting
initiatives are behind us, the benefits of which will continue to
flow through our margins in 2023.
We are reiterating our full-year 2023 financial guidance and we
expect sequential improvements in net revenue and adjusted EBITDA
to continue into our second quarter results. Today, our business is
more nimble and efficient, and better-positioned for profitable
growth in 2023 and beyond.
First Quarter 2023 Consolidated Results
Revenues declined $24.9 million, or 30.5%, to $56.8 million, for
the quarter ended March 31, 2023, compared to $81.8 million for the
quarter ended March 31, 2022. The decrease in net revenue was
primarily attributed to a decline in same-store sales of 36.6% at
55 retail locations and the Company’s e-commerce operations
compared to the same period last year, offset partially by an
increase in revenue from our distribution and other segment.
Overall retail sales were $39.4 million in the first quarter,
compared to $64.3 million for the same period last year.
E-commerce revenue was $3.3 million in the first quarter,
compared to $5.3 million for the same period last year.
Revenue from non-retail operations, including distributed brands
and MMI, was $14.2 million in the first quarter of 2023, compared
to $12.2 million in the same quarter last year.
Gross profit was $16.3 million for the first quarter of 2023,
compared to $22.1 million for the first quarter of 2022. Gross
profit margin was 28.7%, compared to 27.1% in the same quarter last
year.
Store and other operating expenses in the first quarter of 2023
were $13.0 million, compared to $14.5 million in the prior
year.
Selling, general, and administrative expenses in the first
quarter of 2023 were $6.8 million, compared to $9.6 million in the
prior year.
GAAP pre-tax net loss was $6.1 million for the first quarter of
2023, or a loss of $0.10 per diluted share, compared to $6.8
million in the first quarter of 2022, or loss of $0.09 per diluted
share.
Non-GAAP earnings before interest, taxes, depreciation,
amortization, and share-based compensation (Adjusted EBITDA)(1) was
a loss of $1.8 million in the first quarter of 2023, compared to a
loss of $0.8 million in the same period last year.
Cash and short-term marketable securities as of March 31, 2023
were $71.9 million. Inventory as of March 31, 2023 was $75.6
million, and prepaid inventory and other current assets were $8.2
million.
Total current liabilities, including accounts payable and
accrued payroll and other liabilities, decreased from $35.8 million
at December 31, 2022 to $33.2 million at March 31, 2023.
Geographical Footprint
The Company’s operations span approximately 952,000 square feet
of retail and warehouse space at 63 existing locations across 18
states.
Fiscal Year 2023 Financial Outlook(2)
Revenue guidance for 2023 is maintained to be between $250
million to $270 million.
Adjusted EBITDA(1) guidance is maintained to be between a loss
of $4 million to a $1 million profit.
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, May 9, 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 48923290. 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 61 stores across
17 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)
March 31,
2023
December 31,
2022
ASSETS
Current assets:
Cash and cash equivalents
$
62,738
$
40,054
Marketable securities
9,126
31,852
Accounts receivable, net of allowance for
doubtful accounts of $0.7 million and $0.7 million at March 31,
2023 and December 31, 2022
7,569
8,336
Notes receivable, current, net of
allowance for doubtful accounts of $1.7 million and $1.3 million at
March 31, 2023 and December 31, 2022
—
1,214
Inventory
75,581
77,091
Prepaid income taxes
625
5,679
Prepaids and other current assets
8,250
6,455
Total current assets
163,889
170,681
Property and equipment, net
30,274
28,669
Operating leases right-of-use assets
43,581
46,433
Intangible assets, net
28,479
30,878
Goodwill
15,978
15,978
Other assets
442
803
TOTAL ASSETS
$
282,643
$
293,442
LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
15,414
$
15,728
Accrued liabilities
1,985
1,535
Payroll and payroll tax liabilities
2,363
4,671
Customer deposits
3,916
4,338
Sales tax payable
1,467
1,341
Current maturities of lease liability
8,004
8,131
Current portion of long-term debt
34
50
Total current liabilities
33,183
35,794
Commitments and contingencies
Operating lease liability, net of current
maturities
38,130
40,659
Other long-term liabilities
627
593
Total liabilities
71,940
77,046
Stockholders’ equity:
Common stock; $0.001 par value; 10,000,000
shares authorized, 61,035,521 and 61,010,155 shares issued and
outstanding as of March 31, 2023 and December 31, 2022
61
61
Additional paid-in capital
370,379
369,938
Retained earnings
(159,737)
(153,603)
Total stockholders’ equity
210,703
216,396
TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY
$
282,643
$
293,442
GROWGENERATION CORP.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(in thousands, except per
share amounts)
(Unaudited)
For the Three Months Ended
March 31,
2023
2022
Net sales
$
56,827
$
81,767
Cost of sales (exclusive of depreciation
and amortization shown below)
40,538
59,627
Gross profit
16,289
22,140
Operating expenses:
Store operations and other operational
expenses
12,966
14,532
Selling, general, and administrative
6,838
9,609
Bad debt expense
317
714
Depreciation and amortization
3,932
4,506
Total operating expenses
24,053
29,361
Income from operations
(7,764)
(7,221)
Other income (expense):
Other expense
1,204
409
Interest income
428
2
Interest expense
(2)
(3)
Total non-operating income (expense),
net
1,630
408
Net income (loss) before taxes
(6,134)
(6,813)
Provision (loss) for income taxes
—
1,636
Net income (loss)
$
(6,134)
(5,177)
Net income (loss) per share, basic
$
(0.10)
$
(0.09)
Net income (loss) per share, diluted
$
(0.10)
$
(0.09)
Weighted average shares outstanding,
basic
61,028
60,126
Weighted average shares outstanding,
diluted
61,028
60,126
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
March 31,
2023
2022
(000
)
(000
)
Net income
$
(6,134
)
$
(5,177
)
Income taxes
(1,636
)
Interest income
(428
)
(2
)
Interest expense
2
3
Depreciation and amortization
3,932
4,506
EBITDA
$
(2,628
)
$
(2,306
)
Impairment loss
Share based compensation (option
compensation, warrant compensation, stock issued for services)
567
1,583
Restructuring charges
278
Fixed asset disposal
(19
)
(72
)
Adjusted EBITDA
$
(1,802
)
$
(795
)
Adjusted EBITDA per share, basic
$
(0.03
)
$
(0.01
)
Adjusted EBITDA per share, diluted
$
(0.03
)
$
(0.01
)
View source
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