GrowGeneration Reports First Quarter 2023 Financial Results
- 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
DENVER, May 09, 2023–(BUSINESS WIRE)–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.”
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.
Darren Lampert, GrowGeneration’s Co-Founder and Chief Executive Officer
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.
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):
