GrowGeneration Reports Record Q1 2019 Revenues and Net Income
Ryan Allway
May 12th, 2019
News
DENVER, May 7, 2019 /PRNewswire/ – GrowGeneration Corp. (OTCQX: GRWG), (“GrowGen” or the “Company”) one of the largest chains of specialty hydroponic and organic garden centers, with currently 21 locations, today reported financial results for its quarter ended March 31, 2019.
Q1 2019 Financial Highlights:
- Adjusted EBITDA of $615,509 for Q1 2019 compared to adjusted EBITDA of $(366,945) for Q1 2018.
- Net income of $229,421 for Q1 2019 compared to a net loss of $(953,430) for Q1 2018.
- Revenue of $13.1 million up $8.7 million or 199% over Q1 2018 revenues of $4.4 million.
- Same store sales were up 42% for Q1 2019 compared to Q1 2018.
- Acquired stores in Denver, CO, Palm Springs, CA and Reno, NV, and opened Tulsa, OK and Brewer, ME locations in 2019.
- Gross profit margin percentage was 28.2% for Q1 2019 compared to 27.1% for Q1 2018.
- Store operating costs, as a percentage of revenue, have declined 26% from 20.4% for Q1 2018 to 15% for Q1 2019.
- Corporate overhead declined 107%, from 21.8% of revenues for Q1 2018 to 10.5% of revenue for Q1 2019.
- The Company had $6.6 million in cash and cash equivalents at March 31, 2019.
- As of March 31, 2019, the Company had working capital of $17.4 million compared to working capital of $21.6 million at December 31, 2018.
Darren Lampert, Co-Founder and CEO said, “the Company’s first quarter financial results were transformational. We improved the financial performance of the Company in all areas. Revenue was up almost 200% year over year, and almost 50% 4th quarter 2018 over 1st quarter 2019. Adjusted EBITDA was over $600,000, with adjusted EPS at a positive $.02. Our same store sales were up over 42% year over year, with margins increasing over 1 basis point. With our significant top and bottom-line growth, we were able to reduce our operating expenses by 26% and our corporate overhead by over 100 % as a percentage of our revenue. With Q2 being our traditional strongest quarter, revenue and net income are trending significantly higher than our Q1 numbers. The newly acquired stores and our new store openings are all performing better than expected. We have a strong pipeline of new acquisition targets set to close in Q2. The Company continues the process of up-listing the Company to a larger exchange. We are increasing our guidance for 2019 revenue to $60M–65M and adjusted EBITDA to $.14–$.18 per share for 2019.”
Summary of Q1 2019 results:
|
Three |
Three |
$ |
% |
|||||||||
|
Net revenue |
$ |
13,087,222 |
$ |
4,381,018 |
$ |
8,706,204 |
199% |
|||||
|
Cost of goods sold |
9,400,591 |
3,191,402 |
(6,209,189) |
195% |
||||||||
|
Gross profit |
3,686,631 |
1,189,616 |
2,497,015 |
210% |
||||||||
|
Operating expenses |
3,337,120 |
1,849,580 |
(1,487,540) |
80% |
||||||||
|
Operating income (loss) |
349,511 |
(659,964) |
1,009,475 |
|||||||||
|
Other income (expense) |
(120,090) |
(293,466) |
173,376 |
|||||||||
|
Net income (loss) |
$ |
229,421 |
$ |
(953,430) |
$ |
1,182,851 |
||||||
|
Adjusted EBITDA |
$ |
615,509 |
$ |
(366,945) |
||||||||
Net revenue for the three months ended March 31, 2019 increased approximately $8.7 million, or 199%, to approximately $13.1 million, compared to approximately $4.4 million for the three months ended March 31, 2018. The increase in revenues in 2019 was primarily due to the addition of 14 new stores opened or acquired after January 1, 2018, and the new e-commerce site acquired in mid-September 2018. The 14 new stores and the new e-commerce web site contributed $9.9 million in revenue for the quarter ended March 31, 2019. Four new stores which we opened at various times during the quarter ended March 31, 2018 contributed sales of $1.7 million during that quarter.
Cost of goods sold for the three months ended March 31, 2019 increased approximately $6.2 million, or 195%, to approximately $9.4 million, as compared to approximately $3.2 million for the three months ended March 31, 2018. The increase in cost of goods sold was primarily due to the 199% increase in sales comparing the three months ended March 31, 2019 to the three months ended March 31, 2018. Gross profit was approximately $3.7 million for the three months ended March 31, 2019, compared to approximately $1.2 million for the three months ended March 31, 2018, an increase of approximately $2.5 million or 210%. Gross profit as a percentage of sales was 28.2% for the three months ended March 31, 2019, compared to 27.1% for the three months ended March 31, 2018.
Store operating costs as a percentage of sales were 15% for the three months ended March 31, 2019, compared to 20.4% for the three months ended March 31, 2018. Store operating costs were positively impacted by the acquisitions of new stores in 2018 and 2019 which have a lower percentage of operating costs to revenues due to their larger size and higher volume.
Corporate overhead was 10.5% of revenue for the three months ended March 31, 2019 and 21.8% for the three months ended March 31, 2018, representing a reduction as a percentage of revenue of 107%.
Corporate overhead, excluding non-cash depreciation, amortization and share based compensation, declined from 15.9% of revenues for Q1 2018 to 8.8% of revenues for Q1 2019.
The Company currently continues to focus on eight (8) markets and the new e-commerce site noted below, and growth opportunities exist in each market. We continue to focus on new store acquisitions, proprietary products and the continued development of our online and Amazon sales.
|
Sales by Market |
|||||||||||
|
Three |
Three |
||||||||||
|
March 31, |
March 31, |
Variance |
|||||||||
|
Colorado |
$ |
3,338,273 |
$ |
1,376,847 |
$ |
1,961,426 |
|||||
|
California |
3,159,444 |
1,001,724 |
2,157,720 |
||||||||
|
Rhode Island |
1,497,982 |
962,766 |
535,216 |
||||||||
|
Michigan |
1,542,851 |
– |
1,542,851 |
||||||||
|
Nevada |
867,647 |
413,904 |
453,743 |
||||||||
|
Washington |
327,297 |
164,504 |
162,793 |
||||||||
|
Oklahoma |
1,552,749 |
– |
1,552,749 |
||||||||
|
Maine |
54,065 |
– |
54,065 |
||||||||
|
E-commerce |
681,299 |
– |
681,299 |
||||||||
|
Closed/consolidated locations |
65,615 |
461,273 |
(395,658) |
||||||||
|
Total revenues |
$ |
13,087,222 |
$ |
4,381,018 |
$ |
8,706,204 |
|||||
Balance Sheet Summary
As of March 31, 2019, we had working capital of approximately $17.4 million, compared to working capital of approximately $21.6 million as of December 31, 2018, a decrease of approximately $4.2 million. The decrease in working capital from December 31, 2018 to March 31, 2019 was due primarily to 1) the use of cash for the acquisition of three new stores during the quarter ended March 31, 2019 and 2) the application of a new accounting standard related to operating leases which resulted in $1.2 million in current liabilities. At March 31, 2019, we had cash and cash equivalents of approximately $6.6 million. As of the date hereof, we believe that existing cash and cash equivalents are sufficient to fund existing operations for the next twelve months.
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, |
March 31, |
|||||
|
Net income (loss) |
$ |
229,421 |
$ |
(953,430) |
||
|
Interest |
6,961 |
8,018 |
||||
|
Depreciation and Amortization |
146,624 |
45,012 |
||||
|
EBITDA |
383,006 |
(900,400) |
||||
|
Non-cash operating lease expense |
27,279 |
– |
||||
|
Share based compensation (option compensation, warrant compensation, stock issued for services) |
80,278 |
216,200 |
||||
|
Amortization of debt discount |
124,946 |
317,255 |
||||
|
Adjusted EBITDA |
$ |
615,509 |
$ |
(366,945) |
||
About GrowGeneration Corp.:
GrowGen owns and operates specialty retail hydroponic and organic gardening stores. Currently, GrowGen has 21 stores, which include 5 locations in Colorado, 6 locations in California, 2 locations in Nevada, 1 location in Washington, 3 locations in Michigan, 1 location in Rhode Island, 2 locations in Oklahoma, and 1 location in Maine. GrowGen also operates an online superstore for cultivators, located at HeavyGardens.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. Our mission is to own and operate GrowGeneration branded stores in all the major legalized cannabis states in the U.S. and Canada. Management estimates that roughly 1,000 hydroponic stores are in operation in the U.S. By 2020 the market is estimated to reach over $23 billion with a compound annual growth.
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 our 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 our opinions only as of the date of this release. Please keep in mind that we are not obligating ourselves 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 we make with the United States Securities and Exchange Commission, available at: www.sec.gov, and on our website, at: www.growgeneration.com.
Connect:
- Website: www.GrowGeneration.com
- Facebook: GrowGenerationCorp
- Twitter: @GrowGenOK
- Instagram: @growgen
GROWGENERATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
|
March 31, |
December 31, 2018 |
|||||
|
(Unaudited) |
||||||
|
ASSETS |
||||||
|
Current assets: |
||||||
|
Cash |
$ |
6,560,853 |
14,639,981 |
|||
|
Accounts receivable, net of allowance for doubtful accounts of $133,288 at March 31, 2019 and December 31, 2018 |
1,077,706 |
862,397 |
||||
|
Inventory |
15,064,585 |
8,869,469 |
||||
|
Prepaid expenses and other current assets |
916,492 |
606,037 |
||||
|
Total current assets |
23,619,636 |
24,977,884 |
||||
|
Property and equipment, net |
2,254,345 |
1,820,821 |
||||
|
Operating leases right-of-use assets |
4,628,017 |
– |
||||
|
Intangible assets, net |
219,655 |
114,155 |
||||
|
Goodwill |
12,419,235 |
8,752,909 |
||||
|
Other assets |
564,902 |
227,205 |
||||
|
TOTAL ASSETS |
$ |
43,705,790 |
35,892,974 |
|||
|
LIABILITIES & STOCKHOLDERS’ EQUITY |
||||||
|
Current liabilities: |
||||||
|
Accounts payable |
$ |
3,028,954 |
1,819,411 |
|||
|
Other accrued liabilities |
36,352 |
40,151 |
||||
|
Payroll and payroll tax liabilities |
515,278 |
410,345 |
||||
|
Customer deposits |
697,582 |
516,038 |
||||
|
Sales tax payable |
304,709 |
191,958 |
||||
|
Current maturities of operating leases right-of-use assets |
1,210,098 |
– |
||||
|
Current maturities of long-term debt |
436,813 |
436,813 |
||||
|
Total current liabilities |
6,229,786 |
3,414,716 |
||||
|
Long-term convertible debt, net of debt discount and debt issuance costs |
2,169,058 |
2,044,113 |
||||
|
Operating leases right-of-use assets, net of current maturities |
3,445,216 |
– |
||||
|
Long-term debt, net of current maturities |
276,066 |
375,626 |
||||
|
Total liabilities |
12,120,126 |
5,834,455 |
||||
|
Commitments and contingencies |
||||||
|
Stockholders’ Equity: |
||||||
|
Common stock; $.001 par value; 100,000,000 shares authorized; 28,844,552 and 27,948,609 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively |
28,845 |
27,949 |
||||
|
Additional paid-in capital |
40,093,390 |
38,796,562 |
||||
|
Accumulated deficit |
(8,536,571) |
(8,765,992) |
||||
|
Total stockholders’ equity |
31,585,664 |
30,058,519 |
||||
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ |
43,705,790 |
35,892,974 |
|||
GROWGENERATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
|
For the Three Months |
|||||||
|
2019 |
2018 |
||||||
|
Sales |
$ |
13,087,222 |
$ |
4,381,018 |
|||
|
Cost of sales |
9,400,591 |
3,191,402 |
|||||
|
Gross profit |
3,686,631 |
1,189,616 |
|||||
|
Operating expenses: |
|||||||
|
Store operations |
1,957,790 |
892,858 |
|||||
|
General and administrative |
493,096 |
363,778 |
|||||
|
Share based compensation |
80,278 |
216,200 |
|||||
|
Depreciation and amortization |
146,624 |
45,012 |
|||||
|
Salaries and related expenses |
659,332 |
331,732 |
|||||
|
Total operating expenses |
3,337,120 |
1,849,580 |
|||||
|
Net income (loss) from operations |
349,511 |
(659,964) |
|||||
|
Other income (expense): |
|||||||
|
Other income |
– |
31,807 |
|||||
|
Other expense |
(7,286) |
– |
|||||
|
Interest income |
18,833 |
– |
|||||
|
Interest expense |
(6,691) |
(8,018) |
|||||
|
Amortization of debt discount |
(124,946) |
(317,255) |
|||||
|
Total non-operating income (expense), net |
(120,090) |
(293,466) |
|||||
|
Net income (loss) |
$ |
229,421 |
$ |
(953,430) |
|||
|
Net income (loss) per shares, basic |
$ |
.01 |
$ |
(.05) |
|||
|
Net income (loss) per shares, diluted |
.01 |
$ |
(.05) |
||||
|
Weighted average shares outstanding, basic |
28,844,552 |
18,419,519 |
|||||
|
Weighted average shares outstanding, diluted |
34,263,302 |
18,419,519 |
|||||
SOURCE GrowGeneration
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About Ryan Allway
Mr. Allway has over a decade of experience in the financial markets as both a private investor and financial journalist. He has been actively involved in the cannabis industry since its inception, covering public and private companies.
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