GrowGeneration Corp. (NASDAQ: GRWG) (“GrowGen” or the
“Company”), the largest chain of specialty hydroponic and organic
garden centers with 62 locations across 14 states, today reported
financial results for the second quarter ended June 30, 2022.
Second Quarter 2022 Highlights Compared to Prior-Year
Period
- Net sales declined 44% to $71.1 million driven by softer
industry demand
- Comparable store sales for the quarter decreased
56.9%
- Net loss of $136.4 million inclusive of $127.8 million
impairment expense for goodwill and other intangibles compared to
net income of $6.7 million last year
- Loss per share of $2.24 in the quarter
- Adjusted EBITDA loss of $2.9 million
- Revenue guidance for 2022 updated to be between $250 to $275
million, down from a range of $340 million to $400 million
previously
- Adjusted EBITDA guidance expected to be a loss of $12 to $15
million, down from previous expectations of $0 million to $10
million profit
Darren Lampert, GrowGeneration’s Co-Founder and Chief Executive
Officer stated, “The GrowGen team faced significant industry
headwinds in the second quarter resulting in disappointing results
for the quarter. The first half of last year was exceptionally
strong with second quarter same-store sales up approximately 60%
compared to the same period in 2020. In the second quarter of 2022
sales declined 43.5% and we had a $127.8 million impairment of
goodwill and intangibles. However, we generated $3.8 million of
positive cash flow from operations as we managed inventory levels
during the quarter ended June 30, 2022. In addition, we are on
track to reduce our annualized cost base by $13 million compared to
year-end 2021 levels.”
Lampert continued, “We expect the revenue and gross profit
headwinds in the first half will continue in the second half, with
the remainder of 2022 revenue declining compared to the first half
as we are 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 and indoor controlled environment agriculture. GrowGen
remains on solid financial footing with a strong balance sheet and
operational capabilities. 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.”
Second Quarter 2022 Consolidated Results
Revenues declined $54.8 million, or 43.5%, to $71.1 million, for
the quarter ended June 30, 2022, compared to $125.9 million for the
quarter ended June 30, 2021. The decrease in net revenue was
attributed to a decline in same-store sales of 56.9% at 58 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 5 new stores and the contribution from
acquisitions. Overall retail sales was $55.4 million in the second
quarter, compared to $108.9 million for the same period last
year.
E-commerce revenue was $3.7 million in the second quarter,
compared to $12.0 million for the same period last year. The
decline stems from closure of the company’s commercial focused
Agron.io platform.
Revenue from non-retail operations, including distributed brands
and MMI, was $12.0 million in the second quarter of 2022, compared
to $5.0 million in the same quarter last year.
Gross profit was $20.2 million for the second quarter of 2022,
compared to $35.7 million for the second quarter of 2021. Gross
profit margin was 28.5%, flat to the same quarter last year.
Store and other operating expenses in the second quarter of 2022
were $13.8 million, compared to $12.6 million in the prior year.
The increase was primarily associated with the increase in store
locations over the same period in the prior year offset partially
by cost reductions.
Selling, general, and administrative expenses in the second
quarter of 2022 were $10.6 million, flat to prior year. The
increase was primarily attributable to the addition of non-retail
operations through acquisition partially offset by cost
reductions.
GAAP pre-tax net loss was $136.7 million for the second quarter
of 2022, or a loss of $2.24 per diluted share, compared to pre-tax
net income of $9.6 million in the second quarter of 2021, or
earnings of $0.11 per diluted share. The decrease in net income was
primarily due to a $127.8 million non-cash impairment expense for
goodwill and intangible assets acquired in historical business
combinations. Impairment and income tax expense represents a
preliminary amount and remain subject to change following the
completion of normal quarter-end accounting procedures.
Non-GAAP earnings before interest, taxes, depreciation,
amortization, and share-based compensation (Adjusted EBITDA) was a
loss of $2.9 million in the second quarter of 2022, compared to a
profit of $14.5 million in the same period last year.
Cash and short-term marketable securities as of June 30, 2022,
were $65.6 million. Inventory as of June 30, 2022, was $99.1
million and prepaid inventory and other current assets were $9.2
million.
Total current liabilities, including accounts payable and
accrued payroll and other liabilities, decreased from $47.1 million
at December 31, 2021 to $39.5 million at June 30, 2022.
Expansion Efforts
The Company’s supply chain spans approximately 958,000 square
feet of retail and warehouse space, across existing locations and
signed leases in new locations, spanning 14 states. In July 2022,
the Company opened its first location in Mississippi. The Company
has closed two under-performing locations in July and expects to
close 3 to 5 additional locations before year-end 2022. The company
expects to add 3 to 4 additional new stores before the end of 2022,
primarily in states where the company does not currently
operate.
Fiscal Year 2022 Financial Outlook
- Revenue guidance for 2022 updated to be between $250 to $275
million, down from a range of $340 million to $400 million
previously
- Adjusted EBITDA loss guidance expected to be $12 million to $15
million, down from previous expectations of $0 million to $10
million profit
Conference Call
The Company will host a conference call today, August 4, 2022,
at 5:00PM Eastern Time. To participate in the call, please dial
(888) 882-4478 (domestic) or (647) 484-0475 (international). The
conference code is 8913925. 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.
About GrowGeneration Corp:
GrowGen owns and operates specialty retail hydroponic and
organic gardening centers. Currently, GrowGen has 62 stores, which
include 23 locations in California, 7 locations in Colorado, 7
locations in Michigan, 5 locations in Maine, 6 locations in
Oklahoma, 3 locations in Washington, 4 locations in Oregon, 1
location in Arizona, 1 location in Rhode Island, 1 location in
Florida, 1 location in Nevada, 1 location in Mississippi, 1
location in New Mexico, 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,” “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.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(in thousands, except shares
and per share amounts)
June 30, 2022
December 31,
2021
ASSETS
Current assets:
Cash and cash equivalents
$
55,594
$
41,372
Marketable securities
10,000
39,793
Accounts receivable, net of allowance for
doubtful accounts of $0.9 million and $0.6 million at June 30, 2022
and December 31, 2021
8,313
5,741
Notes receivable, current, net of
allowance for doubtful accounts of $1.3 million and $0.5 million at
June 30, 2022 and December 31, 2021
1,372
2,440
Inventory
99,086
105,571
Prepaid income taxes
5,872
5,856
Prepaids and other current assets
9,209
16,116
Total current assets
189,446
216,889
Property and equipment, net
29,338
24,116
Operating leases right-of-use assets
47,367
43,730
Intangible assets, net
34,798
48,402
Goodwill
15,843
125,401
Other assets
875
800
TOTAL ASSETS
$
317,667
$
459,338
LIABILITIES &
STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
17,373
$
17,033
Accrued liabilities
1,268
2,044
Payroll and payroll tax liabilities
4,374
7,440
Customer deposits
6,294
11,686
Sales tax payable
1,739
1,923
Current maturities of lease liability
8,312
6,858
Current portion of long-term debt
96
92
Total current liabilities
39,456
47,076
Commitments and contingencies
Deferred tax liability
440
2,359
Operating lease liability, net of current
maturities
41,028
38,546
Long-term debt, net of current portion
17
66
Total liabilities
80,941
88,047
Stockholders’ equity:
Common stock; $0.001 par value;
100,000,000 shares authorized, 60,782,525 and 59,928,564 shares
issued and outstanding as of June 30, 2022 and December 31,
2021
61
60
Additional paid-in capital
368,077
361,087
Retained earnings
(131,412
)
10,144
Total stockholders’ equity
236,726
371,291
TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY
$
317,667
$
459,338
GROWGENERATION CORP.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(in thousands, except per
share amounts)
(Unaudited)
Three Months Ended June
30,
For the Six Months Ended June
30,
2022
2021
2022
2021
Net sales
$
71,093
$
125,885
$
152,860
$
215,907
Cost of sales
$
50,866
$
90,172
110,493
154,817
Gross profit
20,227
35,713
42,367
61,090
Operating expenses:
Store operations and other operational
expenses
13,767
12,624
28,299
20,806
Selling, general, and administrative
10,647
10,563
20,970
17,968
Depreciation and amortization
4,783
2,917
9,289
4,971
Impairment loss
127,831
—
127,831
—
Total operating expenses
157,028
26,104
186,389
43,745
Income from operations
(136,801
)
9,609
(144,022
)
17,345
Other income (expense):
Other expense
104
(8
)
513
(46
)
Interest income
45
36
47
40
Interest expense
(10
)
(4
)
(13
)
(6
)
Total non-operating income (expense),
net
139
24
547
(12
)
Net income (loss) before taxes
(136,662
)
9,633
(143,475
)
17,333
Provision (loss) for income taxes
283
(2,920
)
1,919
(4,473
)
Net income (loss)
$
(136,379
)
$
6,713
$
(141,556
)
$
12,860
Net income (loss) per share, basic
$
(2.24
)
$
0.11
$
(2.33
)
$
0.22
Net income (loss) per share, diluted
$
(2.24
)
$
0.11
$
(2.33
)
$
0.22
Weighted average shares outstanding,
basic
60,756
59,061
60,742
58,588
Weighted average shares outstanding,
diluted
60,756
60,223
60,742
59,794
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 June
30,
2022
2021
(000)
(000)
Net income
$
(136,379
)
$
6,713
Income taxes
(283
)
2,920
Interest
10
4
Depreciation and amortization
4,783
2,917
EBITDA
$
(131,869
)
12,554
Impairment loss
127,831
—
Share based compensation (option
compensation, warrant compensation, stock issued for services)
1,106
1,914
Adjusted EBITDA
$
(2,932
)
$
14,468
Adjusted EBITDA per share, basic
$
(0.05
)
$
0.24
Adjusted EBITDA per share, diluted
$
(0.05
)
$
0.24
For the Six Months Ended June
30,
2022
2021
(000)
(000)
Net income
$
(141,556
)
$
12,860
Income taxes
(1,919
)
4,473
Interest expense
13
6
Depreciation and amortization
9,289
4,971
EBITDA
(134,173
)
22,310
Impairment loss
127,831
—
Share based compensation (option
compensation, warrant compensation, stock issued for services)
2,689
3,241
Adjusted EBITDA
$
(3,653
)
$
25,551
Adjusted EBITDA per share, basic
$
(0.06
)
$
0.44
Adjusted EBITDA per share, diluted
$
(0.06
)
$
0.43
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220804005987/en/
Clay Crumbliss, CFA Managing Director ICR, Inc.
GrowGenIR@icrinc.com
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