GrowGeneration Reports Fourth Quarter and Full Year 2023 Financial Results; Provides First Quarter and Full Year 2024 Guidance
- Full Year Net Revenue of $225.9 million, Beating Guidance
- Full Year Net Loss of $46.5 million and Non-GAAP Adjusted EBITDA¹ Loss of $5.6 million, In Line with Guidance
- 2024 Outlook Calls for Revenue from $205 million to $215 million and Non-GAAP Adjusted EBITDA¹ from a Loss of $2 million to a Profit of $3 million
- Company to Review Strategic Opportunities for MMI
DENVER–(BUSINESS WIRE)– GrowGeneration Corp. (NASDAQ: GRWG), (“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 fourth quarter and full year ended December 31, 2023.
Fourth Quarter 2023 Highlights Compared to Prior Year
- Net revenues decreased approximately 9% to $49.5 million, and same-store sales decreased 3.6%
- Gross profit increased to $11.6 million, or 23.5% of net revenues, from $9.6 million, or 17.6% of net revenues
- Net loss of $27.3 million, or $(0.44) per diluted share, compared to a net loss of $15.0 million, or $(0.25) per diluted share, primarily due to non-cash impairment
- Adjusted EBITDA¹ loss of $3.7 million, compared to a loss of $10.2 million
Full Year 2023 Highlights Compared to Prior Year
- Net revenues decreased approximately 18.8% to $225.9 million, beating the Company’s previous guidance
- Gross profit decreased to $61.3 million, or 27.1% of net revenues, from $70.3 million, or 25.3% of net revenues
- Net loss of $46.5 million, or $(0.76) per diluted share, compared to a net loss of $163.7 million, or $(2.69) per diluted share
- Adjusted EBITDA¹ loss of $5.6 million, compared to earnings of $16.7 million
- Reduced operating expense and selling, general, and administrative expense base by roughly $13.6 million through operating efficiencies and strategic cost rationalization
- Cash, cash equivalents, and marketable securities of $65.0 million as of December 31, 2023, along with no debt
- Generated $1.4 million of operating cash, primarily driven by reduction of inventory
Darren Lampert, GrowGen’s Co-Founder and Chief Executive Officer, stated, “I am pleased that our hard work and dedication to executing our strategic initiatives in 2023 allowed us to surpass our full year revenue guidance and be in line with our full year Adjusted EBITDA guidance. Our profit margins increased nearly 200 basis points as well, driven by more proprietary product sales and consumable product sales as a percent of total sales. Lastly, we ended 2023 with $65.0 million in cash, cash equivalents, and marketable securities and with no debt, positioning us well to continue to execute on our strategic initiatives in 2024.”
Mr. Lampert continued, “2023 was a year of strategic execution and resilience for GrowGen, and we continue into 2024 laser-focused on positioning the business for long-term, profitable growth. One key pillar for growth is continuing to enhance our brand portfolio, including launching new products and increasing sales in our higher margin proprietary brands. We are also expanding into the home gardening market with The Harvest Company, which we launched earlier this year. We believe GrowGen’s expertise in advanced cultivation technologies and sustainable practices developed within the cannabis industry will allow us to succeed in this new market, where consumers are seeking home gardening products to grow healthy, organic, and sustainable microgreens, fruits, and vegetables. Lastly, we remain focused on creating and sustaining operational efficiencies to position ourselves to capitalize on market opportunities as they arise, and I believe they will arise sooner than later as the legislative landscape around cannabis continues to become more favorable.”
Reporting Segments Update
During the fourth quarter of 2023, the Company realigned its operating and reportable segments to correspond with changes to its operating model, management structure, and internal reporting, and to better align with how the Chief Executive Officer makes operating decisions, allocates resources, and assesses performance. Accordingly, the Company identified two operating segments, each its own reportable segment, based on its major lines of business: the Cultivation and Gardening segment; and the Storage Solutions segment.
Fourth Quarter 2023 Consolidated Results
Net revenues decreased $5.0 million, or 9%, to $49.5 million for the fourth quarter ended December 31, 2023, compared to $54.5 million for the fourth quarter ended December 31, 2022. The decline was driven primarily by a 3.6% decrease in same-store sales. Net revenues for same-store sale locations open for the same period in 2022 and 2023 were $35.6 million in the fourth quarter 2023, compared to $37.0 million in the fourth quarter 2022.
Gross profit was $11.6 million for the fourth quarter 2023, an increase of $2.1 million, compared to gross profit of $9.6 million for the fourth quarter 2022. Gross profit margin was 23.5% for the fourth quarter 2023, compared to 17.6% for the fourth quarter 2022, an increase of 600 basis points, primarily due to improvements in product mix and corresponding margin performance.
GAAP net loss was $27.3 million in the fourth quarter 2023, a decrease of $12.3 million, compared to a net loss of $15.0 million in the fourth quarter 2022. Net loss was $0.44 per diluted share in the fourth quarter 2023, compared to a net loss of $0.25 per diluted share in the fourth quarter 2022. The decrease in GAAP net loss was primarily due to a $15.7 million non-cash impairment recorded in the fourth quarter 2023 of goodwill and intangible assets related to prior acquisitions.
Non-GAAP Adjusted EBITDA¹ was a loss of $3.7 million in the fourth quarter 2023, compared to a loss of $10.2 million in the fourth quarter 2022. The increase to Adjusted EBITDA¹ was primarily driven by improvements in gross profit and reductions in operating and corporate expenses relating to our strategic cost rationalization.
Cash, cash equivalents, and marketable securities as of December 31, 2023 were $65.0 million.
Full Year 2023 Consolidated Results
Net revenues decreased $52.3 million, or 18.8%, to $225.9 million for the full year ended December 31, 2023, compared to $278.2 million for the full year ended December 31, 2022. The decline was driven primarily by a 19.3% decrease in same-store sales.
Gross profit was $61.3 million for the full year 2023, a decrease of $9.0 million, compared to gross profit of $70.3 million for the full year 2022. Gross profit margin was 27.1% for the full year 2023, compared to 25.3% for the full year 2022, an improvement of 180 basis points. The improvement to gross margin on a percentage basis was primarily due to stronger penetration of private label as a percent of sales.
GAAP net loss was $46.5 million for the full year 2023, a decrease of $117.3 million, compared to net loss of $163.7 million for the full year 2022. Net loss was $0.76 per diluted share for the full year 2023, compared to net loss of $2.69 per diluted share for the full year 2022. The improvement in net income was primarily attributable to 186 basis point improvement in gross margin percent, $13.6 million in annualized expense reductions, along with $112.2 million dollar reduction in impairment related charges. To offset, revenue decreased by $52.3 million.
Non-GAAP Adjusted EBITDA¹ was a loss of $5.6 million for the full year 2023, compared to a loss of $16.7 million for the full year 2022. The improvement in Adjusted EBITDA¹ was primarily driven by improvements in the operating and corporate expense structure compared to the prior year.
Geographic Footprint
The Company’s geographic footprint for its Cultivation and Gardening segment spans approximately 942,000 square feet of retail and warehouse space across 18 states. During 2023, the Company acquired or opened 5 new locations and expanded its physical retail presence into 2 new states. The Company also reduced redundancies in cost structure by closing and consolidating 14 retail locations in 2023, where we were generally able to serve the same customer base through a single location. To date in 2024, the Company further closed and consolidated 3 additional stores and may consider additional store consolidations in the future.
First Quarter and Full Year 2024 Outlook²
- Full year 2024 net revenues in the range of $205 million to $215 million
- Full year 2024 Adjusted EBITDA¹ from a $2 million loss to a $3 million profit
- First quarter 2024 net revenues in the range of $45 million to $48 million with Adjusted EBITDA¹ between a $2 million loss and breakeven
Exploring Strategic Opportunities for MMI
The Company also announced today that it is exploring strategic opportunities for its benching, racking, and storage solutions business, MMI, which was acquired by the Company in late 2021 and currently constitutes the Company’s Storage Solutions segment.
Mr. Lampert commented, “MMI has continued to exceed our expectations, with full year 2024 revenue of $31.4 million and $8.9 million in operating profit, reflecting the tremendous strength and potential of this business. We believe MMI is now in a place where it makes sense to consider strategic opportunities for the business, and we recently engaged Lake Street Capital Markets to advise us in this process. While we are happy having MMI within our portfolio, we also believe that the right strategic opportunity for MMI would better position GrowGen to build upon its achievements and capitalize on additional opportunities within its core Cultivation and Gardening business.”
Footnotes
¹Adjusted EBITDA represents earnings before interest, 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.
²Sales and Adjusted EBITDA¹ 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, March 13, 2024, at 4:30 PM Eastern Time to discuss financial results for fourth quarter and full year ended December 31, 2023. To participate in the call, please dial (888) 664-6392 (domestic) or (416) 764-8659 (international). The conference code is 80413128. The call will also be webcast and can be accessed here or in the Investor Relations section of the GrowGen website at: 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 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.
