GrowGeneration Reports Record Financial Results Q2 2020

Record Revenues of $43.5 Million, Adjusted EBITDA of $4.6 Million and Net Income of $2.6 Million
2020 Revenue Guidance Increased to…

Record Revenues of $43.5 Million, Adjusted EBITDA of $4.6 Million and Net Income of $2.6 Million

  • 2020 Revenue Guidance Increased to $170$175M
  • Adjusted EBITDA Guidance for 2020 is $17.0$18.0M
  • GAAP Net Income Guidance for 2020 is $7.0$8.0M
  • 2021 Revenue Guidance Set at $245$260M
  • Adjusted EBITDA Guidance for 2021 is $26.0$28.0M

DENVER, CO, Aug. 13, 2020 /PRNewswire/ – GrowGeneration Corp. (NASDAQ: GRWG), («GrowGen» or the «Company»), the largest chain of specialty hydroponic and organic garden centers, with currently 28 locations, today reported record revenues of $43.5 million and adjusted EBITDA of $4.6 million for Q2 2020. Q2 2020 was the Company’s 10th consecutive quarter of record revenues. The Company also reported record GAAP net income of approximately $2.6 million for Q2 2020 compared to net income of $1.1 Million for Q2 2019. As we continue to outpace guidance, we are increasing 2020 revenue guidance to $170M$175M and Adjusted EBITDA to $17.0M$18.0M. Revenue guidance for  2021 is $245M$260M. Adjusted EBITDA guidance for 2021 is $26M$28M.

Financial Highlights for 2nd Quarter 2020 compared to 2nd Quarter 2019

  • Revenues up 123% to $43.5 million for Q2 2020 vs $19.5 million for Q2 2019
  • Same store sales were $25.1 million for Q2 2020 vs $16.9 million for Q2 2019, a 49% increase
  • Adjusted EBITDA of $4.6 million for Q2 2020 vs $1.7 million for Q2 2019, an increase of 166%, $.12 per share, basic           
  • Gross profit margin % for Q2 2020 was 26.7% vs 29.9% for Q2 2020
  • Gross profit was $11.6 million for Q2 2020 vs $5.8 million for Q2 2019, an increase of 99%
  • Store operating costs as a percentage of sales was 9.2% for Q2 2020 vs 14% for Q2 2019, a decrease of 34%    
  • Income from store operations was $7.6 million for Q2 2020 vs $3.1 million for Q2 2019, an increase of 146%
  • Income from store operations as a percentage of revenue was 17.5% for Q2 2020 vs 15.8% for Q2 2019
  • Corp Payroll and G&A as a percentage of revenue was 7.2% for Q2 2020 vs 7% for Q2 2019
  • GAAP net income per share, basic, was $.07 for Q2 2020 vs $.04 for Q2 2019
  • GAAP net income was $2.6 million for Q2 2020 vs net income of $1.1 million for Q2 2019 2020

Working Capital and Cash

  • Working capital was $35.2 million on June 30, 2020 vs $30.6 million at December 31, 2019
  • Cash on June 30, 2020 is $14.8 million, cash on December 31, 2019 was $12.98 million, and cash as of August 12, 2020 was $59.3 million
  • Proceeds from the sale of common stock and warrants was $282,000 for Q2 2020
  • On July 2, 2020, the Company completed the offering of 8,625,000 shares of its common stock generating $48.3 million in gross proceeds before deducting the underwriting discounts and commissions and other offering expenses. Oppenheimer & Co. Inc. acted as the sole book-running manager for the Offering. Ladenburg Thalmann & Co. Inc. and Lake Street Capital Markets, LLC acted as co-managers for the Offering

Recent Events

  • May 12, 2020, we opened our Store Support Center in Denver, CO
  • On June 16, 2020, the Company purchased the assets of H2O Hydroponics LLC. located in West Lansing, MI, creating a 15,000 sq. ft., $8.0 million operation in West Lansing, MI.
  • On June 29, 2020 GrowGeneration was added to the Russell 3000Ò Index
  • On July 2,2020 Oppenheimer & Co. Inc. acted as the sole book-running manager and closed on a $48.3 million Offering. Ladenburg Thalmann & Co. Inc. and Lake Street Capital Markets, LLC were acting as co-managers for the Offering
  • The Company surpassed $100 million in year-to-date revenues on August 10, 2020
  • On August 10,2020, the Company purchased the assets of Emerald City Garden, located in Concord, CA
  • On August 12, 2020, the Company entered into a partnership with Whole Cites Foundation, committing to donate free product to develop urban farms across the US

Darren Lampert, Co-Founder and CEO, said, «The Company’s Q2 2020 record financial results reflect our continued focus on revenue growth and EBITDA expansion. Q2 2020 is the Company’s 10th consecutive quarter of record revenues. Revenues were up 123% for Q2 2020 versus Q2 2019, to $43.5 million. Adjusted EBITDA was $4.6 million for Q2 2020 compared to $1.7 million for Q2 2019, an increase of 166% or $.12 per share, basic. Our same store sales were up 49% for the period Q2 2020 versus Q2 2019. Income from store operations was $7.6 million for Q2 2020 vs $3.1 million for Q2 2019, an increase of 146%.

Our online business increased by 149%, Q2 2020 versus Q2 2019. Our commercial division generated over $9.0 million in revenues, an increase of 142% Q2 2020 versus Q2 2019. The Company added 167 new commercial customer accounts from Q1, 2020 to Q2 2020 and now services over 700 commercial accounts. We continue to see strong demand for our products that include LED lights, nutrients, additives, soils and other products that outfit and feed grower’s gardens. Our Sunleaves private-label nutrient and additives line of product is now generating over $100,000 a month in sales. Our weekly walk-in transactions are now 10,000, an increase of 50 %, quarter over quarter. On June 16, the Company successfully acquired H2O Hydroponics LLC, and consolidated it with our West Lansing operations into a new 15,000 sq. ft. super hydroponic garden center. The Company believes that the combined business will generate over $8.0 million in annual revenues in 2020.

Our mergers and acquisitions pipeline is the most active it has been since our inception. We have set a corporate goal to reach 50 stores and 15 states in 2021.

On July 2, 2020 we closed on a $48 million upsized follow-on public offering with Oppenheimer & Co. Inc. acting as the sole book-running manager for the Offering. Ladenburg Thalmann & Co. Inc. and Lake Street Capital Markets, LLC acted as co-managers for the Offering. The Company intends to use the net proceeds from the Offering primarily to expand its network of hydroponic/garden centers through organic growth and acquisitions, and for general corporate purposes.

On June 29, 2020, we were added to the Russell 3000® Index. We believe our Russell 3000 listing will increase long-term shareholder value by improving awareness, liquidity and appeal to institutional investors.

While we take this opportunity to announce our quarterly earnings, we are mindful of the COVID-19 plight which is besieging society, leaving no one unaffected. We are thankful for the dedication of health care workers and first responders, as well as the essential workers who are keeping our communities running. 

As a result of our first-rate preparedness, all of our personnel have been working since mid-March with complete effectiveness. I have been inspired by the efforts and dedication of GrowGen’s team as they have worked tirelessly to service our customers and communities.

The economic road ahead will challenge all businesses, but GrowGen’s strong Executive Team, balance sheet and amazing employees put us on excellent footing to overcome adversity.

As we continue to monitor the COVID-19 situation, GrowGen is considered an «essential» supplier to the agricultural industry, suppling the nutrients and nourishment required to feed their plants. Accordingly, we are open during this difficult time and will remain open for the foreseeable future. We have plans and procedures in place to ensure our customers and employees stay safe during this time of uncertainty. All of us at GrowGeneration remain committed to the safety and well-being of our customers and employees and send our prayers and thoughts to all in the growing community.

GrowGeneration has partnered with Whole Cities Foundation and has committed to donate free product to local communities and their urban farms that have been severely affected.»

Annual Guidance for 2020 and 2021

Full year 2020

  • Sales $170M$175M
  • Adjusted EBITDA guidance for 2020 increased to $17.0M$18.0M
  • GAAP pre-tax net income guidance set at $7M$8M.

Full Year 2021

  • Sales $245M$260M.
  • Adjusted EBITDA for 2021 is $26.0M$28.0M.

Conference Call

The company will host a conference call on Thursday, August 13, 2020 at 9:00AM Eastern Time.

Participant Dial-In Numbers:

Toll-Free: (+1) 888-664-6383

*Participants should request the GrowGeneration Earnings Call or provide confirmation code: 28032517

About GrowGeneration Corp.:

GrowGen owns and operates specialty retail hydroponic and organic gardening stores. Currently, GrowGen has 28 stores, which include 5 locations in Colorado, 6 locations in California, 2 locations in Nevada, 1 location in Washington, 4 locations in Michigan, 1 location in Rhode Island, 4 locations in Oklahoma, 1 location in Oregon, 3 locations in Maine and 1 location in Florida. GrowGen also operates an online superstore for cultivators, located at www.growgen.pro and www.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. Our mission is to own and operate GrowGeneration branded stores in all the major states in the US and Canada. Management estimates that roughly 1,000 hydroponic stores are in operation in the US. By 2025, the global hydroponics system market is estimated to reach approximately $16 billion.

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:

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,

2020


June 30,

2019

Net income

$

2,573,943


$

1,062,000

Income taxes


156,000



Interest


13,240



3,161

Depreciation and Amortization


467,677



150,842

EBITDA


3,210,860



1,216,003

Share based compensation (option compensation, warrant compensation, stock issued for services)


1,186,905



390,898

Bad debt reserve allowance


194,680



Amortization of debt discount




117,150







Adjusted EBITDA

$

4,592,445


$

1,724,051







Adjusted EBITDA per share, basic

$

.12


$

.06

Adjusted EBITDA per share, diluted

$

.12


$

.05






Six Months Ended


June 30,

2020


June 30,

2019

Net income

$

480,425


$

1,291,421

Income taxes


156,000



Interest


20,421



8,690

Depreciation and Amortization


826,820



291,132

EBITDA


1,483,666



1,591,243

Share based compensation (option compensation, warrant compensation, stock issued for services)


5,301,972



522,243

Bad debt reserve allowance


194,680



Amortization of debt discount




242,096







Adjusted EBITDA

$

6,980,318


$

2,355,582







Adjusted EBITDA per share, basic

$

.17


$

.08

Adjusted EBITDA per share, diluted

$

.17


$

.08

 

GROWGENERATION CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS



June 30,

2020


December 31

2019


(Unaudited)



ASSETS




Current assets:




Cash

$

14,823,541


$

12,979,444

Accounts receivable (net of allowance for credit losses of $465,420 and $331,372, respectively)


3,608,966



4,455,209

Inventory, net


30,429,958



22,659,357

Prepaid expenses and other current assets


5,166,060



2,549,559

Total current assets


54,028,525



42,643,569







Property and equipment, net


4,015,982



3,340,616

Operating leases right-of-use assets, net


7,630,644



7,628,591

Deferred income taxes





Intangible assets, net


820,507



233,280

Goodwill


21,085,084



17,798,932

Other assets


294,718



377,364

TOTAL ASSETS

$

87,875,460


$

72,022,352







LIABILITIES & STOCKHOLDERS’ EQUITY






Current liabilities:






Accounts payable

$

11,933,154


$

6,024,750

Other accrued liabilities


107,568



Payroll and payroll tax liabilities


1,343,696



1,072,142

Customer deposits


2,334,861



2,503,785

Sales tax payable


878,174



533,656

Income taxes payable


156,000



Current maturities of operating leases liability


1,959,124



1,836,700

Current maturities of long-term debt


91,128



110,231

Total current liabilities


18,803,705



12,081,264







Operating leases liability, net of current maturities


5,843,739



5,807,266

Long-term debt, net of current maturities


213,930



242,079

Total liabilities


24,861,374



18,130,609







Commitments and contingencies












Stockholders’ Equity:






Common stock; $.001 par value; 100,000,000 shares authorized; 38,844,819 and 36,876,305 shares issued and outstanding, respectively


38,845



36,876

Additional paid-in capital


69,382,004



60,742,055

Accumulated deficit


(6,406,763)



(6,887,188)

Total stockholders’ equity


63,014,086



53,891,743

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

87,875,460


$

72,022,352

 

GROWGENERATION CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)






 Three Months Ended

June 30,


Six Months Ended

June 30,


2020


2019


2020


2019









Sales

$

43,451,840


$

19,483,383


$

76,433,345


$

32,570,605

Cost of sales


31,866,503



13,663,173



55,901,760



23,063,764

Gross profit


11,585,337



5,820,210



20,531,585



9,506,841













Operating expenses:












Store operations


3,999,280



2,734,788



7,516,329



4,616,326

General and administrative


1,150,435



549,129



2,424,647



1,124,313

Share based compensation


1,186,905



390,898



5,301,972



522,243

Depreciation and amortization


467,677



150,842



826,820



291,132

Salaries and related expenses


1,971,391



820,842



3,769,151



1,429,106

Total operating expenses


8,775,688



4,646,499



19,838,919



7,983,120













Income from operations


2,809,649



1,173,711



692,666



1,523,721













Other income (expense):












Interest expense


(13,240)



(120,311)



(20,421)



(250,786)

Interest income


200



15,433



25,042



34,283

Other income (loss)


(66,666)



(6,833)



(60,862)



(15,797)

Total non-operating income (expense), net


(79,706)



(111,711)



(56,241)



(232,300)













Net income before taxes


2,729,943



1,062,000



636,425



1,291,421

Provision for income taxes


(156,000)





(156,000)



Net Income

$

2,573,943


$

1,062,000


$

480,425


$

1,291,421













Net income per shares, basic

$

.07


$

.04


$

.01


$

.04

Net income per shares, diluted

$

.06


$

.03


$

.01


$

.04













Weighted average shares outstanding, basic


38,616,610



30,326,304



38,224,109



29,389,636

Weighted average shares outstanding, diluted


41,016,392



31,426,757



40,241,292



30,455,282

 

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SOURCE GrowGeneration