Full Year Net Revenue of $278.2 million, at the High End of Guidance
Full Year Net Loss of $163.7 million and Non-GAAP Adjusted EBITDA Loss of $16.7 million
For Full Year 2023, Expected Revenue in the Range of $250 Million to $270 Million with Adjusted EBITDA from a Loss of $4.0 Million to Profit of $1.0 Million
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, today announced financial results for fourth quarter and full year ended December 31, 2022.
Fourth Quarter 2022 Highlights Compared to Prior Year
- Net revenues decreased approximately 40% to $54.5 million and same-store sales decreased 51.9%
- Gross profit decreased to $9.6 million, or 17.6% of net revenues, from $23.1 million, or 25.5% of net revenues, primarily due to aggressive inventory clearance and an increase in inventory reserves
- Net loss was $15.0 million, or $(0.25) per diluted share, compared to net loss of $4.1 million, or $(0.07) per diluted share
- Adjusted EBITDA(1) was a loss of $10.2 million, compared to a loss of $1.7 million, due in part to approximately $1.0 million in expense associated with closure of Las Vegas, Compton, and Cotati locations and nearly $4.0 million associated with inventory cleanup measures
- Cash and short-term securities were $71.9 million as of December 31, 2022
Full Year 2022 Highlights Compared to Prior Year
- Net revenue decreased approximately 34.2% to $278.2 million, towards the high end of the Company’s previous guidance range
- Gross profit decreased to $70.3 million, or 25.3% of net revenues, from $118.2 million, or 28.0% of net revenues, with the decrease primarily due to a decline of $178.0 million in same-store sales, representing a 51.6% decrease, which is primarily attributable to the downturn in the business cycle for cannabis cultivators, resulting in less supply and equipment demand
- Net loss was $163.7 million, or a loss of $(2.69) per diluted share, compared to net income of $12.8 million, or $0.21 per diluted share
- Adjusted EBITDA(1) was a loss of $16.7 million, or $(0.27) per diluted share, compared to earnings of $34.2 million, or $0.57 per diluted share
- Reduced operating expense and selling, general, and administrative expense base by roughly $20.7 million, primarily through workforce reduction, store closures, and tighter day-to-day expense controls
- Invested approximately $9.0 million for payments associated with technology, supply chain, and distribution investments
- On a full-year basis the Company generated $11.9 million of operating cash, primarily driven by the reduction of inventory
Darren Lampert, GrowGen’s Co-Founder and Chief Executive Officer, stated, “Despite significant market challenges in 2022, we are proud that our team has remained steadfast in executing our strategy. Given the pressures on the broader cannabis and hydroponic industries, we recognized early last year the need to shift our focus towards right-sizing our cost structure, reducing inventory, consolidating our store footprint, and generating cash to strengthen our balance sheet. We made significant progress against these initiatives in 2022, and we firmly believe these decisions are putting GrowGen in a better place to be stronger and nimbler than ever before. Notably, we reduced inventory by $28.5 million, eliminated redundancies in our store footprint, reduced payroll by 30%, and ended the year with $71.9 million of cash and short-term securities on our balance sheet with no debt.”
Mr. Lampert continued, “In 2023, we expect to see the benefit of costs savings flow-through from store consolidations, reduced payroll expenses, declining ocean freight rates, reduced headwinds from inventory discounting on our margins, and the favorable mix impact from a greater proportion of private label and proprietary brand sales. While we expect a degree of continued uncertainty in 2023, we remain focused on the areas of the business we can control. For the first time in seven quarters, we believe GrowGen will see sequential revenue growth in the first quarter of 2023 versus the fourth quarter of 2022, with sequential growth quarter over quarter expected throughout the remainder of the year. Further, we believe that margins will normalize in the first quarter and for the balance of the year.”
Fourth Quarter 2022 Consolidated Results
Net revenues decreased $36.1 million, or 40%, to $54.5 million for the fourth quarter ended December 31, 2022, compared to $90.6 million for the fourth quarter ended December 31, 2021. The decline was driven primarily by a 51.9% decrease in same-store sales. Net revenues for same-store sale locations open for the same period in 2021 and 2022 were $34.3 million in the fourth quarter 2022, compared to $71.4 million in the fourth quarter 2021.
Gross profit was $9.6 million for the fourth quarter 2022, a decrease of $13.5 million, compared to gross profit of $23.1 million for the fourth quarter 2021. Gross profit margin was 17.6% for the fourth quarter 2022, compared to 25.5% for the fourth quarter 2021, a decrease of -790 basis points, primarily due to clearance events and recognition of obsolete inventory.
GAAP net loss was $15.0 million in the fourth quarter 2022, a decrease of $10.9 million, compared to a net loss of $4.1 million in the fourth quarter 2021. Net loss was $(0.25) per diluted share in the fourth quarter 2022, compared to a net loss of $(0.07) per diluted share in the fourth quarter 2021.
Non-GAAP Adjusted EBITDA(1) was a loss of $10.2 million in the fourth quarter 2022, compared to a loss of $1.7 million in the fourth quarter 2021. The reduction in Adjusted EBITDA(1) was primarily driven by lower sales and unfavorable gross margin impacts, as well as store closure expense and inventory cleanup measures.
Cash and short-term securities as of December 31, 2022 were $71.9 million.
Full Year 2022 Consolidated Results
Net revenues decreased $144.3 million, or 34.2%, to $278.2 million for the full year ended December 31, 2022, compared to $422.5 million for the full year ended December 31, 2021. The decline was driven primarily by a 51.6% decrease in same-store sales.
Gross profit was $70.3 million for the full year 2022, a decrease of $48.0 million, compared to gross profit of $118.2 million for the full year 2021. Gross profit margin was 25.3% for the full year 2022, compared to 28.0% for the full year 2021, a decrease of -273 basis points, primarily due to a decrease of approximately $178.0 million in same-store sales, representing a 51.6% decrease year-over-year, which is primarily attributable to the downturn in the business cycle for cannabis cultivators, resulting in less demand for the Company’s products.
GAAP net loss was $163.7 million for the full year 2022, a decrease of $176.5 million, compared to net income of $12.8 million for the full year 2021. Net loss was $(2.69) per diluted share for the full year 2022, compared to net income of $0.21 per diluted share for the full year 2021. The reduction in net income was primarily attributable to the decrease in net revenues and an impairment loss of $127.8 million recorded during 2022, which was primarily due to the decline in the Company’s market capitalization below net book value of assets in addition to the Company’s declining performance.
Non-GAAP Adjusted EBITDA(1) was a loss of $16.7 million for the full year 2022, compared to earnings of $34.2 million for the full year 2021. The reduction in Adjusted EBITDA1 was primarily driven by lower sales volume and a reduction in total gross profit.
M&A Activity
The Company consummated the following acquisitions in the fourth quarter of 2022:
- On November 3, 2022, the Company purchased certain assets of St. Louis Hydroponic Company, a hydroponic retail store in St. Louis, Missouri.
Geographic Footprint
The Company’s supply chain spans approximately 946,000 square feet of retail and warehouse space across 16 states. In the full year 2022, the Company closed 8 stores and opened 5 new stores that included 4 new states where the Company did not previously have retail operations.
Full Year 2023 Outlook(2)
- Full year 2023 net revenues in the range of $250 million to $270 million
- Full year 2023 Adjusted EBITDA(1) from a $4 million loss to $1 million profit
- First quarter 2023 net revenues in the range of $55 million to $57 million with Adjusted EBITDA(1) loss between $2 million and $4 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(1) guidance metrics are inclusive of acquisitions and store openings completed in 2022 and 2021, but do not include any unannounced acquisitions. |
Conference Call
The Company will host a conference call today, March 15, 2022, at 4:30 PM Eastern Time to discuss financial results for fourth quarter and full year ended December 31, 2022. To participate in the call, please dial (888) 664-6392 (domestic) or (416) 764-8659 (international). The conference code is 01734369. The call will also be webcast and can be accessed here or in the Investor Relations section of the GrowGen website at: 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.
