Net Revenue of $47.9 million, At the Top End of
Guidance
Gross Profit Margin of 25.8% Represents a 230
Basis Point Sequential Improvement Over Fourth Quarter 2023
Net Loss of $8.8 million and Non-GAAP Adjusted
EBITDA(1) Loss of $2.9 million, In Line with Guidance
GrowGeneration Corp. (NASDAQ: GRWG) (“GrowGen” or the
“Company”), one of the largest retailers and distributors of
specialty hydroponic and organic gardening products in the United
States, today announced financial results for the first quarter
ended March 31, 2024.
First Quarter 2024 Highlights
- Net sales decreased 3% quarter-over-quarter to $47.9
million
- Comparable store sales including e-commerce decreased 1.0% to
the prior year, but was positive for retail stores
- Gross profit margin of 25.8%, a decrease of 280 basis points
from the prior year
- Net loss of $8.8 million, compared to a net loss of $6.1
million in the prior year
- Adjusted EBITDA(1) loss of $2.9 million, a decline of $1.1
million to first quarter 2023
- Cash, cash equivalents, and marketable securities of $61.3
million and no debt
- Reiterating full-year 2024 guidance for revenue to be $205
million to $215 million and Adjusted EBITDA(1) to be a loss of $2
million to a profit of $3 million
Darren Lampert, GrowGeneration’s Co-Founder and Chief Executive
Officer, stated, “I am pleased to announce our first quarter net
revenue was at the top end of our expectations. We continued to see
improvement across the business throughout the first quarter,
attesting to the execution of our strategic initiatives over the
prior two years. During the first quarter, our same-store sales,
excluding e-commerce, was positive on a year over year basis for
the first time in nine quarters. Given the stabilization of trends,
we are reiterating our previously communicated full-year 2024
guidance.”
Lampert continued, “As we look ahead into the balance of 2024,
our strategic initiatives remain focused on expanding our
proprietary brand portfolio, maintaining disciplined cost control,
and driving increased profitability through margin expansion.
During the first quarter, proprietary brand sales represented about
23% of our reported Cultivation and Gardening net sales, the
highest in our Company’s history, and meaningfully above the
approximately 18% of Cultivation and Gardening net sales that we
reported for fiscal year 2023. GrowGen remains in a healthy
financial position, ending the quarter with $61.3 million of cash,
cash equivalents, and marketable securities and zero debt on our
balance sheet. Based on this quarter’s results, we continue to hold
conviction in the underlying strength of the business, which was
evidenced by the recent announcement of our share repurchase
program. As we look to the rest of 2024, we remain optimistic
around forward looking opportunities for profitable growth.”
First Quarter 2024 Consolidated Results
Net sales declined $8.9 million, or 15.7%, to $47.9 million for
the quarter ended March 31, 2024 compared to $56.8 million for the
quarter ended March 31, 2023. The decrease in net sales was
primarily related to our Cultivation and Gardening segment, which
had net sales of $43.1 million for the three months ended March 31,
2024 compared to $49.1 million for the three months ended March 31,
2023. This decrease in net sales was primarily due to the fiscal
2023 consolidations of 13 retail locations after March 31, 2023, as
well as the four additional retail store consolidations during the
three months ended March 31, 2024. Same-store sales decreased
approximately $0.4 million, or 1%, primarily due to decreased
e-commerce sales volume, which was partially offset by same-store
sales growth in our brick-and-mortar retail locations. Proprietary
brand sales as a percentage of Cultivation and Gardening net sales
for the three months ended March 31, 2024 was approximately 23% as
compared to approximately 18% for the three months ended March 31,
2023, driven primarily by our strategic initiatives to increase
sales volume with our expanded portfolio of proprietary brands and
products and various proprietary product launches. The percentage
of Cultivation and Gardening net sales related to consumable
products for the three months ended March 31, 2024 was
approximately 70%, which was an increase from approximately 66% for
the three months ended March 31, 2023. The increase in consumable
sales as a percentage of net sales was driven primarily by
increased brand adoption of proprietary growing media and nutrient
products.
Additionally, net sales of commercial fixtures within our
Storage Solutions segment decreased to $4.8 million for the three
months ended March 31, 2024 compared to $7.7 million for the three
months ended March 31, 2023.
Gross profit was $12.4 million for the three months ended March
31, 2024 compared to $16.3 million for the three months ended March
31, 2023, a decrease of $3.9 million or 24.1%. The decrease in
gross profit is primarily related to the Cultivation and Gardening
segment, which decreased $2.9 million, or 22.0%, for the three
months ended March 31, 2024 as compared to the three months ended
March 31, 2023, largely as a result of the decrease in sales volume
due to store consolidations as previously discussed. Additionally,
gross profit from our Storage Solutions segment decreased $1.0
million, or 33.4%, in the three months ended March 31, 2024
compared to the three months ended March 31, 2023.
Gross profit margin was 25.8% for the three months ended March
31, 2024, a decrease of 290 basis points from a gross profit margin
of 28.7% for the three months ended March 31, 2023. The decrease
was primarily attributable to a 290 basis point gross profit margin
decline for the Cultivation and Gardening segment, which was
primarily driven by industry pricing compression on distributed
products and non-recurring costs associated with store
consolidations. The decrease in the total gross profit margin was
partially offset by a 300 basis point gross profit margin
improvement for the Storage Solutions segment.
Store and other operating expenses in the first quarter of 2024
were $10.6 million, compared to $12.6 million in the first quarter
of 2023, a decrease of 15.8%.
Selling, general, and administrative expenses in the first
quarter of 2024 were $7.9 million, compared to $6.8 million in the
first quarter of 2023, an increase of 15.6%.
GAAP pre-tax net loss was $8.8 million for the first quarter of
2024, or a loss of $0.14 per diluted share, compared to $6.1
million in the first quarter of 2023, or a loss of $0.10 per
diluted share.
Adjusted EBITDA(1) was a loss of $2.9 million in the first
quarter of 2024, compared to a loss of $1.8 million in the same
period last year.
Cash, cash equivalents, and marketable securities as of March
31, 2024 were $61.3 million. Inventory as of March 31, 2024 was
$66.0 million, and prepaid and other current assets were $6.1
million.
Total current liabilities, including accounts payable, accrued
payroll, and other liabilities, decreased from $30.9 million at
December 31, 2023 to $29.3 million at March 31, 2024.
Geographical Footprint
The Company’s geographic footprint for its Cultivation and
Gardening segment spans approximately 826,000 square feet of retail
and warehouse space at 46 locations across 18 states. To date in
2024, the Company consolidated 4 retail stores where it is
generally able to serve the same customer base through a single
location, thereby reducing redundancies in cost structure. The
Company may consider additional store consolidations in the
future.
Fiscal Year 2024 Financial Outlook(2)
The Company is reiterating its previously communicated full-year
guidance and outlook of:
- Full-year 2024 net sales in the range of $205 million to $215
million.
- Full-year 2024 Adjusted EBITDA(1) from a $2 million loss to a
$3 million profit.
Footnotes
(1) Adjusted EBITDA represents earnings before interest, 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 2024 and 2023, but do
not include any unannounced acquisitions.
Conference Call
The Company will host a conference call today, May 8, 2024, at
4:30PM Eastern Time. To participate in the call, please dial (888)
836-8184 (domestic) or (289) 819-1350 (international). The
conference code is 39229. 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 is a leading developer, marketer, retailer, and
distributor of products for both indoor and outdoor hydroponic and
organic gardening, as well as customized storage solutions. GrowGen
carries and sells thousands of products, such as nutrients,
additives, growing media, lighting, environmental control systems,
and benching and racking, including proprietary brands such as
Charcoir, Drip Hydro, Power Si, Ion lights, The Harvest Company,
and more. Incorporated in Colorado in 2014, GrowGen 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 or MMI.
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. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(in thousands, except
shares)
March 31,
December 31,
2024
2023
ASSETS
Current assets:
Cash and cash equivalents
$
31,050
$
29,757
Marketable securities
30,280
35,212
Accounts receivable, net of allowance for
credit losses of $1.4 million and $1.4 million at March 31, 2024
and December 31, 2023
7,832
8,895
Notes receivable, current, net of
allowance for credit losses of $0.2 million and $1.7 million at
March 31, 2024 and December 31, 2023
215
193
Inventory
66,028
64,905
Prepaid income taxes
213
516
Prepaid and other current assets
6,102
7,973
Total current assets
141,720
147,451
Property and equipment, net
25,336
27,052
Operating leases right-of-use assets,
net
40,408
39,933
Notes receivable, long-term
54
106
Intangible assets, net
14,503
16,180
Goodwill
7,525
7,525
Other assets
847
843
TOTAL ASSETS
$
230,393
$
239,090
LIABILITIES &
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$
12,392
$
11,666
Accrued liabilities
2,126
2,530
Payroll and payroll tax liabilities
2,097
2,169
Customer deposits
3,880
5,359
Sales tax payable
1,249
1,185
Current maturities of operating lease
liabilities
7,593
8,021
Total current liabilities
29,337
30,930
Operating lease liabilities, net of
current maturities
35,431
34,448
Other long-term liabilities
317
317
Total liabilities
65,085
65,695
Commitments and contingencies
Stockholders' equity:
Common stock; $0.001 par value;
100,000,000 shares authorized, 61,507,259 and 61,483,762 shares
issued and outstanding as of March 31, 2024 and December 31,
2023
62
61
Additional paid-in capital
374,182
373,433
Retained earnings (deficit)
(208,936
)
(200,099
)
Total stockholders' equity
165,308
173,395
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY
$
230,393
$
239,090
GROWGENERATION CORP. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per
share amounts)
Three Months Ended March
31,
2024
2023
Net sales
$
47,888
$
56,827
Cost of sales (exclusive of depreciation
and amortization shown below)
35,524
40,538
Gross profit
12,364
16,289
Operating expenses:
Store operations and other operational
expenses
10,634
12,622
Selling, general, and administrative
7,908
6,838
Estimated credit losses (recoveries)
(488
)
317
Depreciation and amortization
3,742
3,932
Total operating expenses
21,796
23,709
Income (loss) from operations
(9,432
)
(7,420
)
Other income (expense):
Other income (expense)
47
860
Interest income
602
428
Interest expense
(56
)
(2
)
Total other income (expense)
593
1,286
Net income (loss) before taxes
(8,839
)
(6,134
)
Benefit (provision) for income taxes
2
—
Net income (loss)
$
(8,837
)
$
(6,134
)
Net income (loss) per share, basic
$
(0.14
)
$
(0.10
)
Net income (loss) per share, diluted
$
(0.14
)
$
(0.10
)
Weighted average shares outstanding,
basic
61,499
61,028
Weighted average shares outstanding,
diluted
61,499
61,028
Use of Non-GAAP Financial Information
EBITDA and Adjusted EBITDA are non-GAAP financial measures
commonly used in our industry and should not be construed in
isolation as substitutions to net income (loss) as indicators of
operating performance or as alternatives to cash flow provided by
operating activities as a measure of liquidity (each as determined
in accordance with GAAP). GrowGeneration defines EBITDA as net
income (loss) before interest income, interest expense, income tax
expense, depreciation and amortization, and Adjusted EBITDA as
further adjusted to exclude certain items such as stock-based
compensation, impairment losses, restructuring and corporate
rationalization costs, and other non-core or non-recurring expenses
and to include income from our marketable securities as these
investments are part of our operational business strategy and
increase the cash available to us. We believe these non-GAAP
measures, when used in conjunction with net income (loss), provide
meaningful supplemental information to both management and
investors, facilitating the evaluation of performance across
reporting periods. Management 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. We believe that these non-GAAP
financial measures may be useful to investors in their assessment
of our operating performance and valuation. In addition, these
non-GAAP financial measures address questions routinely received
from analysts and investors and, in order to ensure that all
investors have access to the same data, we have determined that it
is appropriate to make this data available to all investors.
Set forth below is a reconciliation of EBITDA and Adjusted
EBITDA to net income (loss) (in thousands):
Three Months Ended March
31,
2024
2023
Net income (loss)
$
(8,837
)
$
(6,134
)
Benefit (provision) for income taxes
(2
)
—
Interest income
(602
)
(428
)
Interest expense
56
2
Depreciation and amortization
3,742
3,932
EBITDA
$
(5,643
)
$
(2,628
)
Share-based compensation
778
567
Investment income
580
—
Restructuring and other charges (1)
1,414
259
Adjusted EBITDA
$
(2,871
)
$
(1,802
)
(1) Consists primarily of expenditures
related to the activity of store and distribution consolidation and
one-time severances
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240508340236/en/
ICR, Inc. GrowGenIR@icrinc.com
Growgeneration (NASDAQ:GRWG)
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