GrowGeneration Corp. (NASDAQ: GRWG) (“GrowGen” or the
“Company”), the largest chain of specialty hydroponic and organic
garden centers with 63 locations across 13 states, today reported
financial results for the first quarter ended March 31, 2022.
First Quarter 2022 Highlights Compared to Prior-Year
Period
- Net sales declined 9.2% to $81.8 million driven by softer
industry demand
- Comparable store sales for the quarter decreased
35.5%
- Net loss of $5.2 million compared to net income of $6.1
million last year
- Loss per share of $0.09 in the quarter
- Adjusted EBITDA loss of $0.7 million
Darren Lampert, GrowGeneration’s Co-Founder and Chief Executive
Officer stated, “The GrowGen team faced significant industry
disruptions head on, and we exceeded our internal expectations in
the first quarter despite a very difficult macro environment. The
first half of last year was exceptionally strong with same-store
sales up approximately 60% compared to the same period in 2020. In
the first quarter of 2022, on a two-year basis, our same-store
sales increased 7.3% compared to the first quarter of 2020.”
Lampert continued, “We expect the revenue and gross profit
headwinds in the first quarter will become more pronounced in the
second quarter, with the remainder of 2022 facing more pressure
than we initially planned. While the industry is experiencing a
prolonged period of softer demand, we remain confident in the
longer-term opportunity that exists within hydroponics. GrowGen
remains on solid financial footing, and we firmly believe we are
well positioned to emerge stronger when the market eventually
turns. In the meantime, we are taking an active approach to
managing the business in a way that preserves cash through working
capital optimization and we are more aggressively right-sizing our
cost structure. We remain committed to our five key strategic
initiatives this year, which we think will position us to win in
2023 and beyond.”
First Quarter 2022 Consolidated Results
Revenues declined $8.3 million, or 9.2%, to $81.8 million, for
the quarter ended March 31, 2022, compared to $90.0 million for the
first quarter ended March 31, 2021. The decrease in net revenue was
attributed to a decline in same-store sales of 35.5% at 48 retail
locations and the Company’s e-commerce operations open in the first
quarter of 2022 compared to the same period last year, offset
partially by the addition of 15 new stores and the contribution
from acquisitions.
E-commerce revenue, including growgeneration.com and Agron, was
$5.3 million in the first quarter, compared to $6.0 million for the
same period last year. Revenue from non-retail operations,
including distributed brands and MMI, was $12.2 million in the
first quarter of 2022, compared to $2.8 million in the same quarter
last year.
Gross profit was $22.1 million for the first quarter of 2022,
compared to $25.4 million for the first quarter of 2021. Gross
profit margin decreased approximately 110 basis points to 27.1%,
compared to 28.2% in the same quarter last year. The decrease in
gross profit was due primarily to lower net sales, fewer rebates,
and increased obsolescence and shrinkage costs in the first quarter
of 2022 compared to the same period last year.
Operating expenses in the first quarter of 2022 were $29.4
million, compared to $17.6 million in the prior year. Selling,
general, and administrative expenses in the first quarter of 2022
were $10.3 million, compared to $7.4 million in the prior year. The
increase was primarily attributable to the addition of non-retail
operations through acquisition. Store operations expenses were
$14.5 million, compared to $8.2 million in the prior year
associated with the increase in store locations over the same
period in the prior year.
GAAP pre-tax net loss was $6.8 million for the first quarter of
2022, or a loss of $0.09 per diluted share, compared to pre-tax net
income of $7.7 million in the first quarter of 2021, or earnings of
$0.10 per diluted share. The decrease in net income was due to
lower gross profit combined with higher operating expenses
associated with additional store locations and operations.
Non-GAAP earnings before interest, taxes, depreciation,
amortization, and share-based compensation (Adjusted EBITDA) was a
loss of $0.7 million in the first quarter of 2022, compared to
$11.1 million in the same period last year.
Cash and short-term marketable securities as of March 31, 2022,
were $66.3 million. Inventory as of March 31, 2022, was $105.9
million and prepaid inventory and other current assets were $7.0
million.
Total current liabilities, including accounts payable and
accrued payroll and other liabilities decreased from $47.1 million
at December 31, 2021 to $36.6 million at March 31, 2022.
M&A Activity
In February 2022, the Company acquired the assets of
Horticultural Rep Group, Inc. (“HRG”), a specialty marketing and
sales organization of horticultural products based in Ogden, Utah.
The total consideration for the purchase of HRG was $13.4
million.
Expansion Efforts
The Company’s supply chain spans approximately 1,022,000 square
feet of retail and warehouse space, across existing locations and
signed leases in new locations, spanning 13 states. In January
2022, the Company opened its sixth Oklahoma location in Ardmore.
The Company relocated two retail stores into multi-channel
operations that will serve as fulfillment centers, including a
25,000 square feet location in Phoenix, Arizona and a 58,000 square
feet location in Medley, Florida.
Fiscal Year 2022 Financial Outlook
- Revenue guidance for 2022 updated to be between $340 to $400
million, down from a range of $415 million to $445 million
previously
- Adjusted EBITDA guidance expected to be between zero and $10
million, down from previous expectations of $30 million to $35
million
- Expect to add 10-15 new stores this year, down from previous
target of 15-20 new stores, given strategic decision not to build
new stores in states where there is already physical retail
presence
Conference Call
The Company will host a conference call today, May 10, 2022, at
5:00PM Eastern Time. To participate in the call, please dial (800)
289-0438 (domestic) or (647) 484-0478 (international). The
conference code is 219309. This call is being webcast and can be
accessed on the Investor Relations section of GrowGen's website at:
https://ir.growgeneration.com/news-events/ir-calendar.
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. An Encore replay of the call will
be available for seven days after the call. To access the
replay, please dial (888) 203-1112 (domestic) or (647) 436-0148
(international). The conference code is 219309.
About GrowGeneration Corp:
GrowGen owns and operates specialty retail hydroponic and
organic gardening centers. Currently, GrowGen has 63 stores, which
include 21 locations in California, 8 locations in Colorado, 7
locations in Michigan, 5 locations in Maine, 6 locations in
Oklahoma, 2 locations in Nevada, 2 locations in Washington, 4
locations in Oregon, 1 location in Arizona, 1 location in Rhode
Island, 1 location in Florida, and 1 location in Massachusetts.
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.
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,” “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
STATEMENTS OF OPERATIONS
(in thousands, except per
share amounts)
(Unaudited)
For the Three Months Ended
March 31,
2022
2021
Net sales
$
81,767
$
90,022
Cost of sales
59,627
64,645
Gross profit
22,140
25,377
Operating expenses:
Store operations and other operational
expenses
14,532
8,182
Selling, general, and administrative
10,323
7,405
Depreciation and amortization
4,506
2,054
Total operating expenses
29,361
17,641
Income from operations
(7,221
)
7,736
Other income (expense):
Other expense
409
(38
)
Interest income
2
4
Interest expense
(3
)
(2
)
Total non-operating income (expense),
net
408
(36
)
Net income (loss) before taxes
(6,813
)
7,700
Provision (loss) for income taxes
1,636
(1,553
)
Net income (loss)
$
(5,177
)
$
6,147
Net income (loss) per share, basic
$
(0.09
)
$
0.11
Net income (loss) per share, diluted
$
(0.09
)
$
0.10
Weighted average shares outstanding,
basic
60,126
58,394
Weighted average shares outstanding,
diluted
60,126
60,317
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):
Three Months Ended March
31,
2022
2021
(000)
(000)
Net income
$
(5,177
)
$
6,147
Income taxes
(1,636
)
1,553
Interest expense
3
2
Depreciation and Amortization
4,506
2,054
EBITDA
(2,304
)
9,756
Share based compensation (option
compensation, warrant compensation, stock issued for services)
1,583
1,327
Adjusted EBITDA
$
(721
)
$
11,083
Adjusted EBITDA per share, basic
$
(0.01
)
$
0.19
Adjusted EBITDA per share, diluted
$
(0.01
)
$
0.18
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220510006286/en/
Company Inquiries
GrowGeneration Corp. John Evans (415) 309-0230
john.evans@growgeneration.com
Investor Contact
ICR, Inc. Clay Crumbliss, CFA Managing Director
clay.crumbliss@icrinc.com
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