Same Store Sales increased 12.5%
year-over-year
Proprietary brand sales increased to 23.8%; Up
from 19.4% in the same period of 2023
Cash balance of $55.2 million and no debt
GrowGeneration Corp. (NASDAQ: GRWG) (“GrowGeneration,”
“GrowGen,” or the “Company”), one of the largest retailers and
distributors of specialty hydroponic and organic gardening products
in the United States, today announced financial results for the
third quarter ended September 30, 2024.
Third Quarter 2024 Summary
- Net sales decreased 10.2% year over year to $50.0 million for
the third quarter 2024, due to 25 less retail locations;
- Positive same-store sales of 12.5% in the third quarter of 2024
compared to the prior year;
- Proprietary brand sales as a percentage of Cultivation and
Gardening net sales increased to 23.8% as compared to 19.4% in the
third quarter of 2023;
- Gross profit margin of 21.6%, a 750 basis point decrease from
the 29.1% in the year ago period mainly due to restructuring
related activities;
- Operating expenses decreased $1.3 million, or 5.4%, to $22.9
million in the third quarter of 2024 compared to the same prior
year period;
- Net loss of $11.4 million the third quarter of 2024 compared to
a net loss of $7.3 million in the year ago period;
- Adjusted EBITDA(1) loss of $2.4 million for the third quarter
of 2024, a decrease of $1.5 million from the year ago period;
and
- Cash, cash equivalents, and marketable securities of $55.2
million and no debt.
Darren Lampert, GrowGen’s Co-Founder and Chief Executive
Officer, commented, “Our third quarter results were consistent with
our expectations and reflect the substantial progress we have made
executing on our strategic restructuring plan. In particular, we
exceeded our near-term targets for proprietary brand sales as a
percentage of Cultivation and Gardening net sales, which grew to
23.8%, compared to 19.4% for the third quarter last year. This is
tracking well against our goal to grow proprietary brand sales to
35% in 2025. Additionally, same-store sales grew 12.5%
year-over-year in the third quarter, reflecting the strong
performance of our core store locations as we right-size our retail
footprint. In addition, we met our store closures target, even as
we maintained our focus on improving efficiencies, reducing store
and other operating expenses by 13.9% during the quarter. Our
financial position also remains strong, with $55.2 million in cash,
cash equivalents, and marketable securities and no debt.”
“Our same-store sales growth, reduction in expenses and the
improvement in our proprietary brand sales all demonstrate, our
actions to date have proven successful in positioning GrowGen for
sustainable growth in 2025. In line with these priorities, we are
also on track to launch our e-commerce portal in the fourth quarter
of this year, which is a key part of our digital transformation and
B2B customer focus. We are well-positioned in the industry to
capitalize on growth opportunities, and our restructuring plan has
put us on a stronger footing to drive revenue growth, optimize
margins, and build a leaner, more profitable company,” added Mr.
Lampert.
Third Quarter 2024 Consolidated Results
Net sales declined $5.7 million, or 10.2%, to $50.0 million for
the third quarter 2024 compared to $55.7 million for the third
quarter 2023.
The decrease in net sales was primarily related to our
Cultivation and Gardening segment, which had net sales of $41.4
million for the third quarter 2024 compared to $48.0 million for
the same prior year period. Cultivation and Gardening’s decrease in
net sales was primarily driven by the fiscal 2023 consolidation of
6 retail locations after the third quarter 2023 in addition to 19
retail locations to date in fiscal 2024, which include the 12
redundant or underperforming retail locations consolidated in
conjunction with our strategic restructuring plan announced in July
2024. Additionally, we estimate that sales discounts offered as
part of our strategic restructuring plan at those 12 retail
locations negatively impacted net sales by approximately $0.9
million in the third quarter 2024. Cultivation and Gardening’s
same-store sales increased 12.5%, primarily attributable to
commercial sales growth, customer retention in markets where there
were retail location closures, and improvements in our e-commerce
site sales volume. Proprietary brand sales as a percentage of
Cultivation and Gardening net sales for the third quarter 2024
increased to 23.8% as compared to 19.4% for the same prior year
period largely driven by our strategic initiatives to increase
sales volume with our expanded portfolio of proprietary brands and
products and various proprietary product launches. The percentage
of Cultivation and Gardening net sales related to consumable
products remained relatively flat at 73.3% and 73.5% for the third
quarter 2024 and 2023, respectively.
Additionally, net sales of commercial fixtures within our
Storage Solutions segment increased by 12.9% to $8.6 million for
the third quarter 2024 compared to $7.6 million for the year ago
period, primarily due to increased demand from retail customers and
timing differences of various projects being pushed into the third
quarter of 2024 from the prior quarter.
Gross profit was $10.8 million for the third quarter 2024
compared to $16.2 million for the third quarter 2023, a decrease of
$5.4 million or 33.2%. The decrease in gross profit was driven
primarily by our Cultivation and Gardening segment, which decreased
$5.5 million, or 43.3%, largely as a result of the 25 store
consolidations since the end of the third quarter 2023 as well as
the effects of our strategic restructuring plan, which include the
$0.9 million in sales discounts and an additional $1.0 million of
inventory disposal costs incurred in the third quarter 2024. Gross
profit from our Storage Solutions segment increased $0.1 million,
or 2.7%, to $3.6 million for the third quarter 2024 compared to
$3.5 million for the third quarter 2023.
Gross profit margin decreased to 21.6% for the third quarter
2024, compared to 29.1% for the year ago period. The decrease in
gross profit margin was largely driven by our Gardening and
Cultivation segment, which had a gross profit margin of 17.3% for
the third quarter 2024 as compared to 26.3% for the third quarter
2023, due to the effects of the strategic restructuring plan,
including the inventory disposal costs and inventory sales
discounts, reduced inventory discounts from vendors, and continued
industry pricing compression on distributed products. Gross profit
margin also decreased for our Storage Solutions segment to 42.2% in
the third quarter 2024 from 46.4% in the same prior year period
primarily driven by higher costs of inventory.
Adjusted Gross Profit(2) and Adjusted Gross Profit Margin(2),
which exclude the effects of the strategic restructuring plan
announced in July 2024, were $12.7 million and 25.4% for the third
quarter 2024, respectively, compared to $16.2 million and 29.1% for
the third quarter 2023.
Store and other operating expenses for the third quarter 2024
were $10.0 million compared to $11.7 million in the year ago
period, a decrease of 13.9%, primarily driven by the 25 store
consolidations since the end of the third quarter 2023.
Selling, general, and administrative expenses in the third
quarter 2024 were $7.4 million compared to $7.6 million in the
third quarter 2023, a decrease of 2.3%.
GAAP net loss was $11.4 million for the third quarter 2024, or a
loss of $0.19 per diluted share, compared to $7.3 million in the
year ago period, or a loss of $0.12 per diluted share.
Adjusted EBITDA(1) was a loss of $2.4 million in the third
quarter 2024, compared to Adjusted EBITDA(1) loss of $0.9 million
in the same prior year period.
Cash, cash equivalents, and marketable securities as of
September 30, 2024 were $55.2 million. Inventory as of September
30, 2024 was $48.0 million, and prepaid and other current assets
were $7.7 million.
Total current liabilities, including accounts payable, accrued
payroll, and other liabilities as of September 30, 2024 were $24.5
million.
Geographical Footprint
Our geographic footprint for our Cultivation and Gardening
segment spans 724,000 square feet of retail and warehouse space and
includes 31 retail locations across 12 states. To date in fiscal
2024, we have consolidated 19 retail stores where we generally
expect to be able to serve the same customer base through a single
location, thereby reducing redundancies in cost structure.
Fiscal Year 2024 Financial Outlook(3)
As a result of its previously announced restructuring plan,
GrowGen expects full-year 2024 net sales in the range of $190
million to $195 million. In the prior quarter, we had removed our
full-year 2024 Adjusted EBITDA guidance as we assessed the impact
of the restructuring, and we expect to provide updated Adjusted
EBITDA guidance at a later date.
Footnotes
(1) Adjusted EBITDA represents earnings before interest, 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) Adjusted Gross Profit represents gross profit as adjusted
for certain items as set forth in the reconciliation table of U.S.
GAAP to non-GAAP information, and Adjusted Gross Profit Margin is
calculated as Adjusted Gross Profit as a percentage of net sales.
These measures are 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 these measures to GAAP
measures.
(3) Sales and Adjusted EBITDA guidance metrics are inclusive of
any acquisitions and store openings completed in 2024 and 2023, but
do not include any unannounced acquisitions.
Conference Call
The Company will host a conference call today, November 12,
2024, at 4:30PM Eastern Time. To participate in the call, please
dial 1(888) 699-1199 (domestic) or 1(416) 945 7677 (international).
The conference code is 87243. This call is being webcast and can be
accessed at https://app.webinar.net/eLnb9eDMG3N or on the Investor
Relations section of GrowGen’s website at:
https://ir.growgeneration.com. A replay of the webcast will be
available two hours after the conclusion of the call and remain
available for 90 calendar days.
About GrowGeneration Corp:
GrowGen is a leading developer, marketer, retailer, and
distributor of products for both indoor and outdoor hydroponic and
organic gardening, as well as customized storage solutions. GrowGen
carries and sells thousands of products, such as nutrients,
additives, growing media, lighting, environmental control systems,
and benching and racking, including proprietary brands such as
Charcoir, Drip Hydro, Power Si, Ion lights, The Harvest Company,
and more. Incorporated in Colorado in 2014, GrowGen is the largest
chain of specialty retail hydroponic and organic garden centers in
the United States. The Company also operates an online superstore
for cultivators at growgeneration.com, as well as a wholesale
business for resellers, HRG Distribution, and a benching, racking,
and storage solutions business, Mobile Media or MMI.
To be added to the GrowGeneration email distribution list,
please email GrowGen@kcsa.com with GRWG.
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,” “expect,” “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 BALANCE
SHEETS
(Unaudited, in thousands,
except shares)
September 30,
2024
December 31,
2023
ASSETS
Current assets:
Cash and cash equivalents
$
27,436
$
29,757
Marketable securities
27,787
35,212
Accounts receivable, net of allowance for
credit losses of $1,800 and $1,363 at September 30, 2024 and
December 31, 2023, respectively
10,324
8,895
Notes receivable, current, net of
allowance for credit losses of $— and $1,732 at September 30, 2024
and December 31, 2023, respectively
1,106
193
Inventory
48,025
64,905
Prepaid income taxes
201
516
Prepaid and other current assets
7,688
7,973
Total current assets
122,567
147,451
Property and equipment, net
21,119
27,052
Operating leases right-of-use assets,
net
36,453
39,933
Notes receivable, long-term
—
106
Intangible assets, net
11,152
16,180
Goodwill
7,525
7,525
Other assets
823
843
TOTAL ASSETS
$
199,639
$
239,090
LIABILITIES &
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$
8,183
$
11,666
Accrued liabilities
2,536
2,530
Payroll and payroll tax liabilities
2,354
2,169
Customer deposits
2,631
5,359
Sales tax payable
1,310
1,185
Current maturities of operating lease
liabilities
7,523
8,021
Total current liabilities
24,537
30,930
Operating lease liabilities, net of
current maturities
31,620
34,448
Other long-term liabilities
317
317
Total liabilities
56,474
65,695
Commitments and contingencies
Stockholders' equity:
Common stock; $0.001 par value;
100,000,000 shares authorized, 59,242,200 and 61,483,762 shares
issued and outstanding as of September 30, 2024 and December 31,
2023, respectively
59
61
Additional paid-in capital
375,407
373,433
Accumulated deficit
(232,301
)
(200,099
)
Total stockholders' equity
143,165
173,395
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY
$
199,639
$
239,090
GROWGENERATION CORP. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited, in thousands,
except per share amounts)
Three Months Ended September
30,
Nine Months Ended September
30,
2024
2023
2024
2023
Net sales
$
50,006
$
55,678
$
151,430
$
176,430
Cost of sales (exclusive of depreciation
and amortization shown below)
39,196
39,490
113,835
126,816
Gross profit
10,810
16,188
37,595
49,614
Operating expenses:
Store operations and other operational
expenses
10,032
11,658
30,876
36,288
Selling, general, and administrative
7,405
7,582
22,417
21,923
Estimated credit losses (recoveries)
272
257
(210
)
681
Depreciation and amortization
4,972
4,721
12,329
12,477
Impairment loss
220
—
220
—
Total operating expenses
22,901
24,218
65,632
71,369
Loss from operations
(12,091
)
(8,030
)
(28,037
)
(21,755
)
Other income (expense):
Other (expense) income
(50
)
(23
)
(13
)
786
Interest income
663
705
2,002
1,886
Interest expense
—
(1
)
(70
)
(6
)
Total other income
613
681
1,919
2,666
Net loss before taxes
(11,478
)
(7,349
)
(26,118
)
(19,089
)
Benefit (provision) for income taxes
43
—
(50
)
(93
)
Net loss
$
(11,435
)
$
(7,349
)
$
(26,168
)
$
(19,182
)
Net loss per share, basic
$
(0.19
)
$
(0.12
)
$
(0.43
)
$
(0.31
)
Net loss per share, diluted
$
(0.19
)
$
(0.12
)
$
(0.43
)
$
(0.31
)
Weighted average shares outstanding,
basic
59,268
61,272
60,479
61,127
Weighted average shares outstanding,
diluted
59,268
61,272
60,479
61,127
Use of Non-GAAP Financial Information
The following non-GAAP financial measures of EBITDA, Adjusted
EBITDA, Adjusted Gross Profit, and Adjusted Gross Profit Margin are
not in accordance with, or an alternative for, generally accepted
accounting principles ("GAAP") and should be considered in addition
to, and not as a substitute for, the most directly comparable GAAP
financial measures. We believe these non-GAAP financial measures,
when used in conjunction with their most directly comparable GAAP
financial measures, net income (loss), gross profit, and gross
profit margin, provide meaningful supplemental information to both
management and investors, facilitating the evaluation of
performance across reporting periods, identify trends affecting our
business, and project future performance. Management uses these
non-GAAP financial measures for internal planning and reporting
purposes, and we believe that these non-GAAP financial measures may
be useful to investors in their assessment of our operating
performance, our ability to generate cash, and valuation. In
addition, these non-GAAP financial measures address questions
routinely received from analysts and investors and, in order to
ensure that all investors have access to the same data, we have
determined that it is appropriate to make this data available to
all investors. These non-GAAP financial measures may be different
from non-GAAP financial measures used by other companies.
EBITDA and Adjusted EBITDA
EBITDA and Adjusted EBITDA are non-GAAP financial measures
commonly used in our industry and should not be construed in
isolation as substitutions to net income (loss) as indicators of
operating performance or as alternatives to cash flow provided by
operating activities as a measure of liquidity (each as determined
in accordance with GAAP). GrowGeneration defines EBITDA as net
income (loss) before interest income, interest expense, income tax
expense, depreciation and amortization, and Adjusted EBITDA as
further adjusted to exclude certain items such as stock-based
compensation, impairment losses, restructuring and corporate
rationalization costs, and other non-core or non-recurring expenses
and to include income from our marketable securities as these
investments are part of our operational business strategy and
increase the cash available to us.
Set forth below is a reconciliation of EBITDA and Adjusted
EBITDA to net loss (in thousands):
Three Months Ended September
30,
Nine Months Ended September
30,
2024
2023
2024
2023
Net loss
$
(11,435
)
$
(7,349
)
$
(26,168
)
$
(19,182
)
(Benefit) provision for income taxes
(43
)
—
50
93
Interest income
(663
)
(705
)
(2,002
)
(1,886
)
Interest expense
—
1
70
6
Depreciation and amortization
4,972
4,721
12,329
12,477
EBITDA
$
(7,169
)
$
(3,332
)
$
(15,721
)
$
(8,492
)
Share-based compensation
672
938
2,104
2,452
Investment income
623
705
1,921
1,886
Impairment loss (1)
220
—
220
—
Restructuring plan (2)
2,699
—
2,699
—
Consolidation and other charges (3)
567
781
2,375
2,300
Adjusted EBITDA
$
(2,388
)
$
(908
)
$
(6,402
)
$
(1,854
)
(1) Impairment loss related to the
restructuring plan for operating lease right-of-use assets
impairments
(2) Includes the $1.8 million incurred in
the Condensed Consolidated Statements of Operations related to the
restructuring plan as well as an estimated additional $0.9 million
loss in gross profit due to inventory discounts offered in
conjunction with the restructuring plan
(3) Consists primarily of expenditures
related to the activity of store and distribution consolidation and
one-time severances outside of the restructuring plan announced
July 2024
Adjusted Gross Profit and Adjusted Gross Profit
Margin
Adjusted Gross Profit and Adjusted Gross Profit Margin are
non-GAAP financial measures commonly used in our industry and
should not be construed in isolation as substitutions to gross
profit or gross profit margin, defined as our gross profit as a
percentage of net sales, as indicators of operating performance
(each as determined in accordance with GAAP). GrowGeneration
calculates Adjusted Gross Profit as gross profit adjusted to
exclude the effects related to the strategic restructuring plan,
and Adjusted Gross Profit Margin is calculated as Adjusted Gross
Profit as a percentage of net sales.
Set forth below is a reconciliation of Adjusted Gross Profit and
Adjusted Gross Profit Margin to gross profit and gross profit
margin (in thousands):
Three Months Ended September
30,
Nine Months Ended September
30,
2024
2023
2024
2023
Net sales
$
50,006
$
55,678
$
151,430
$
176,430
Cost of sales
39,196
39,490
113,835
126,816
Gross profit
$
10,810
$
16,188
$
37,595
$
49,614
Gross profit margin
21.6
%
29.1
%
24.8
%
28.1
%
Restructuring plan (1)
$
1,903
$
—
$
1,903
$
—
Adjusted Gross Profit
$
12,713
$
16,188
$
39,498
$
49,614
Adjusted Gross Margin
25.4
%
29.1
%
26.1
%
28.1
%
(1) Includes the $1.0 million incurred in
Cost of sales within the Condensed Consolidated Statements of
Operations related to the restructuring plan as well as an
estimated additional $0.9 million loss in gross profit due to
inventory discounts offered in conjunction with the restructuring
plan
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241112764559/en/
KCSA Strategic Communications Philip Carlson Managing Director
T: 212-896-1233 E: GrowGen@kcsa.com
Growgeneration (NASDAQ:GRWG)
Historical Stock Chart
From Dec 2024 to Jan 2025
Growgeneration (NASDAQ:GRWG)
Historical Stock Chart
From Jan 2024 to Jan 2025
