GrowGeneration Stock Slips As Losses Increase In First Quarter Earnings

Denver-based hydroponic retailer GrowGeneration (GRWG) reported that its revenue for the first quarter of 2018 increased 70% to $4.4 million versus $2.6 million for the 1st quarter of 2017. Gross profits rose 75% to approximately $1.2 million compared to approximately $.68 million for the same time period. Still, the company delivered a net loss of $953,430 versus last year’s net loss of $283,309. The stock fell over 7% to $4.70 on the earnings announcement.

The company said that the increase in the net loss from 2017 to 2018 of $670,121 was primarily due to increases in non-cash expenses, share-based compensation, and amortization of debt discount which accounted for $456,455 of the increase. Non-cash share-based compensation increased $139,200 and non-cash amortization of debt discount increased $317,255. Other increases in corporate overhead as discussed above accounted for the remaining $213,666 increase.

Darren Lampert, Co-Founder, and CEO said, “This was another great quarter of sales for GrowGeneration, clearly demonstrating the demand for our products and the scalability of our business as we continue our expansion plans.” Lampert went on to say, “Our company continues to attract capital, raising $10.2 million in debt and equity financing for the quarter ended March 31, 2018, strengthening our balance sheet to $8.8 million in cash and $14.3 million in working capital. Today, we have a strong balance sheet of almost $18 million in cash and strong strategic partners in Gotham Green Partners, Merida Capital Partners, and Navy Capital. Our acquisition pipeline is robust, totaling over $25 million. For 2018, the company has set revenue guidance at $37 million.”

Same Store Sales

GrowGeneration had the same 9 stores opened for the entire first quarter for 2018 and 2017. These same stores saw the sales increase 3.4% to $2.6 million in sales for the 2018 first quarter versus $2.5 million for 2017. The revenues in the first quarter tend to typically be lower due to shorter growing seasons.

Cash

The company also reported that it has working capital increased roughly $8.7 million to approximately $14.3 million versus approximately $5.6 million as of December 31, 2017. The company attributed the increase in working capital to the receipt of proceeds from a convertible debt offering of $9 million and proceeds from the exercise of warrants and options of $1.2 million. At March 31, 2018, we had cash and cash equivalents of approximately $8.8 million.

One comment

  • John F.

    October 1, 2018 at 1:58 pm

    This interesting article makes me a little annoyed at Grow Gen. They have 19 stores–19 times more than when they had one. Yet they are still losing money. Where is the “evidence of scaling” as the CEO says? Scaling (bringing down costs per revenue dollar, so that they deliver profit) is a management choice, not an imperative. They decide when they are going to start growing and spending less and delivering money to the bottom line. They should tell us what is their goal for # of stories, before they start delivering profit? They give no indication. They could have 50 stores and still deliver no profit, if they say they are shooting for 100. They should 1) give us more clear evidence of scaling (if any exists) AND 2) tell us exactly when (# of stores, year, etc) profit will become the primary management goal.

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