Exclusive Interview with urban-gro Chairman and CEO Bradley Nattrass
Bradley Nattrass, the Co-Founder, Chairman and CEO of urban-gro (NASDAQ: UGRO), last spoke with New Cannabis Ventures in 2021. Since then, the company has added the final piece it needed to complete its full-service design and build capabilities for controlled environment agriculture (CEA) facilities. Nattrass told New Cannabis Ventures about urban-gro’s position in the cannabis market, expanding into food-focused vertical farming and momentum in 2022.
Listen to the entire interview or read the summary below:
End-to-End Services for Indoor Controlled Environments
urban-gro offers in-house services including architecture, engineering, cultivation systems integration and construction management. urban-gro closed the acquisition of Emerald Construction Management in May, making construction management the most recent addition to its capabilities.
When urban-gro uplisted to the NASDAQ in Q1 of 2021, the urban-gro team had the vision of offering complete design and build capabilities for indoor CEA facilities, according to Nattrass. The company wanted to be the single point of responsibility for its clients. Customers can choose from the company’s services, or they can partner with urban-gro for its end-to-end turnkey build and design facility services. Having all of those services under one roof helps clients get to market faster, according to Nattrass.
The Emerald Construction Management deal is accretive for urban-gro. The company is based in Colorado. Last year, the company generated more than $26 million in revenue with positive adjusted EBITDA, according to Nattrass. The company had reached a point where it needed more capital to grow further. Approximately one-third of Emerald Construction Management’s business is non-CEA. It works in the healthcare industry and others, which brings a more diversified client set to urban-gro.
While urban-gro has achieved its goal of offering end-to-end design and build services, it will continue to consider M&A as it grows. The company has a strong balance sheet, and it could leverage M&A to access clients and contracts, bolster its service offerings or enter new markets. The team will focus on profitable targets that will be accretive and synergistic. The company has found the right formula of cash, stock and earnout, and it has a number of opportunities to consider, according to Nattrass.
New Talent at urban-gro
urban-gro continues to invest in talent. For example, Emerald Construction Management comes with 21 employees. urban-gro currently has 125 employees, 90 of which are experts in various service areas. urban-gro also added a new Chief of Staff: JT Archer. Archer previously worked for an MSO where he was responsible for overseeing the design and buildout of six cultivation facilities and a dispensary, according to Nattrass. urban-gro also added Sonia Lo to its board of directors. Over the course of her career, Lo has been the CEO of Sensei Ag and the CEO of Crop One Holdings.
urban-gro has no intention of becoming a manufacturer. Rather, it forms partnerships with manufacturers to build a network of solutions for its clients. For example, the company formed a partnership with King Solomon Nutrients to offer its clients access to crop nutrition. By forming these kinds of relationships, urban-gro can offer more value to its clients. Once a facility is built out, the company can continue working with clients through its gro-care program, a service that helps maintain optimal facility performance and crop growth.
The company also formed partnerships in Europe, which were particularly helpful when the team was unable to have its own boots on the ground during the COVID-19 pandemic.
Market Reach and Ambitions
urban-gro works with clients across Canada and the U.S. As new markets open up, more licenses will be awarded, and urban-gro will be there to offer its services. In addition to cultivation facilities, urban-gro also works on processing facilities, kitchens, extraction facilities and retail dispensaries. MSOs are among its North American clients.
The company has also expanded its reach into Europe, the Middle East and Africa. With global travel now more open, the team has been attending trade shows in places like Dubai, Israel, Spain, Germany and Amsterdam to connect with more potential clients. urban-gro has signed contracts in North Macedonia, Israel, Denmark, Portugal, the Netherlands and the UK. The company plans to open headquarters in the Netherlands and hire a managing director for the European market. In Europe, urban-gro has also expanded to more than just cannabis. It signed a contract with Urban Health Farms to design and build up to 20 urban vertical farms.
The company ended 2021 with $34.6 million in cash, no debt and a backlog of approximately $30 million. It also ended the year with its sixth consecutive quarter of positive adjusted EBITDA, according to Nattrass. The company did invest money in its stock buyback program, which has since been filled. Acquisitions and the gro-care program are also on the company’s radar for putting capital to work. The company also plans to increase its marketing spend to ensure its brand name is visible in the marketplace.
urban-gro does not have plans right now to raise more funds. If the opportunity for a larger acquisition arose, the company wouldn’t hesitate to raise more capital. It would likely explore the debt markets if equity levels were where they are today, according to Nattrass. But he hopes that the cannabis market will continue to strengthen, and the company will be able to raise equity and maintain its zero-debt position.
Momentum in 2022
The company released 2022 guidance of more than $110 million in revenue and adjusted EBITDA of more than $5 million. The company will be expanding its team to meet demand. It will also be diversifying its business with non-CEA projects.
Urban-gro is filling a niche in the cannabis industry, offering its design and build services for 30,000 to 60,000-square-foot facilities, according to Nattrass. The challenge for the company will be to continue expanding efficiently into other parts of the world. Uncertainty on a global scale and within the cannabis industry persists, but the opportunity for urban-gro to provide clients value remains.
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