GrowGen. Stock Trading Lower On 34% FY22 Net Revenue Drop Impacted By 'The Pressures On The Broader Cannabis And Hydroponic Industries'

GrowGeneration Corp. GRWG net revenue decreased $144.3 million, or 34.2%, to $278.2 million for the full year ended December 31, 2022, compared to $422.5 million for the full year ended December 31, 2021. The decline was driven primarily by a 51.6% decrease in same-store sales.

Q4 2022 Financial Highlights

• Net revenue was $54.5 million, a decrease of 40% compared to 90.6 million in Q4 2021.

• Gross profit decreased to $9.6 million, or 17.6% of net revenues, from $23.1 million, or 25.5% of net revenues in Q4 2021.

• Net loss was $15.0 million, or $(0.25) per diluted share, compared to net loss of $4.1 million, or $(0.07) per diluted share in Q4 2021.

• Adjusted EBITDA was a loss of $10.2 million, compared to a loss of $1.7 million in Q4 2021.

• Cash and short-term securities were $71.9 million as of December 31, 2022

Full Year 2022 Highlights Compared to Prior Year

• Gross profit was $70.3 million for the full year 2022, a decrease of $48.0 million, compared to gross profit of $118.2 million for the full year 2021.

• Gross profit margin was 25.3% for the full year 2022, compared to 28.0% for the full year 2021, a decrease of -273 basis points.

• Net loss was $163.7 million for the full year 2022, a decrease of $176.5 million, compared to net income of $12.8 million for the full year 2021. Net loss was $(2.69) per diluted share for the full year 2022, compared to net income of $0.21 per diluted share for the full year 2021.

• Adjusted EBITDA was a loss of $16.7 million, or $(0.27) per diluted share, compared to earnings of $34.2 million, or $0.57 per diluted share for the full year 2021.

Darren Lampert, GrowGen’s co-founder and CEO, stated, “Despite significant market challenges in 2022, we are proud that our team has remained steadfast in executing our strategy. Given the pressures on the broader cannabis and hydroponic industries, we recognized early last year the need to shift our focus towards right-sizing our cost structure, reducing inventory, consolidating our store footprint, and generating cash to strengthen our balance sheet. We made significant progress against these initiatives in 2022, and we firmly believe these decisions are putting GrowGen in a better place to be stronger and nimbler than ever before. Notably, we reduced inventory by $28.5 million, eliminated redundancies in our store footprint, reduced payroll by 30%, and ended the year with $71.9 million of cash and short-term securities on our balance sheet with no debt.”

Full Year 2023 Outlook

• Full year 2023 net revenues in the range of $250 million to $270 million

• Full year 2023 adjusted EBITDA from a $4 million loss to $1 million profit

• First quarter 2023 net revenues in the range of $55 million to $57 million with adjusted EBITDA loss between $2 million and $4 million

Price Action

GrowGeneration shares were trading 9.57% lower at $3.59 during Thursday’s pre-market session.

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