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
DENVER–(BUSINESS WIRE)– 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.
