Agrify to Recalibrate for Positive Cash Flow This Year

Agrify believes the moves will save the company upwards of $7 million over the year.

Agrify Corp. (Nasdaq: AGFY) is slimming down in hopes to catch up on cash flow this year.

In a statement Monday, the grow giant said it is trying to “align its resources and growth plan with the current operating environment.” The company said that the measures will help the balance sheet go cash positive by year’s end.

The news comes after a disappointing earnings report, as the company remains ensnarled in a messy lawsuit over a construction loan dispute.

“Like many organizations in our industry and within the broader business landscape, we continue to encounter various headwinds that have necessitated significant adjustments to our short-term operating plan,” said CEO and chairman Raymond Chang. “Consequently, we have taken steps to create more stability during these uncertain times by better aligning our resources with the most attractive growth opportunities currently at our disposal, optimizing our sales strategy, and ensuring we have the right team in place to execute on our goals.”

Frank Colombo, director of data analytics at Viridian Capital Advisors, wrote in early January that, before 2022, many thought that “pick-and-shovel” companies that supply MSOs were safer places to park their cannabis investments.

However, he stated, an equal-weighted basket of the agriculture technology stocks in the graph declined by 80% in 2022, compared to a 73% decline in the MSOS ETF.

In particular, Agrify has experienced sharp decline of 99.6%.

“Even the group’s best performer, Scotts Miracle-Gro (NYSE: SMG), was down 69.8%, barely beating the MSOS ETF,” Colombo wrote.

Agrify said it has identified “several cost improvement measures” that it believes will significantly reduce its cash burn, help to improve margins, and increase the likelihood that it will be cash flow positive by the end of the year, such as lowering its manufacturing and production costs with beefier supplier agreements, volume discounts via higher purchasing power, and weaning off contract manufacturers.

Agrify believes that its efforts will save the company upwards of $7 million over the year.

The company also said that it expects to have “several more customer cultivation facilities coming online in 2023.”

Still, the company stated that it would hold off on construction financing “until the market stabilizes, as those engagements are capital intensive upfront with a deferred payback period.”

In the meantime, the company wants to shift its resources to pursue “more appealing growth initiatives,” such as the rapid deployment packs and the academic and pharmaceutical research verticals.

“While some of the dynamics in the current macro environment have undoubtedly impeded progress for all, we believe the cannabis industry continues to offer substantial long-term upside, with robust global growth expected in the coming years,” Chang said.

Adam Jackson

Adam Jackson covers the cannabis industry for The Green Market Report. He previously covered the Missouri statehouse for The Columbia Missourian and has written for The Missouri Independent. He most recently covered retail, restaurants, and other consumer companies for Bloomberg Business News. You can find him on Twitter @adam_sjackson and email him at adam.jackson@crain.com.


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