GrowGeneration Corp. Archives - Green Market Report

Adam JacksonAugust 4, 2022

GrowGeneration Corp. (NASDAQ: GRWG) slumped in late trading on Thursday after second-quarter results missed expectations — showing that consumer demand for hydroponics in the nation remained muted as a lack of regulatory guidance and recessionary pressures in the sector persist. The company released its financial results for the second quarter ending June 30, 2022.

For the key metric of same-store sales, GrowGeneration reported a 56.9% decline in same-store sales — lower than analysts’ expectations. The company also saw a $3.7 million decline for the combined e-commerce platform versus $20 million at the same time last year. The decline stems from the closure of the company’s commercial-focused Agron.io platform.

The company missed total revenue expectations as it delivered approximately $71.1 million during the period — missing the Stifel analyst estimate for revenues of $85 million.

GrowGeneration reported revenues of $54.8 million for the second quarter of 2022 and is lowering its guidance for 2022 revenue. GrowGeneration‘s new forecasted range for revenue is $250 million–$275 million, far below a range of $340 and $400 in the previous quarter. Adjusted EBITDA guidance is estimated to be a loss of $12 million–$15 million, down from previous quarter expectations of $0 to $10 million profit.

The company also reported a second-quarter 2022 GAAP net loss of $136.7 million compared to a net income of $9.6 million in the same period last year. Diluted loss per share in the fourth quarter was $2.24 versus diluted earnings per share of $0.11 in the same period last year. Non-GAAP income before interest, taxes, depreciation, amortization and share-based compensation (Adjusted EBITDA) was a loss of $2.9 million in the second quarter of 2022, compared to earnings of $14.5 million in the same period last year.

Revenue from non-retail operations and distributed products was $12.0 million in the second quarter versus $5.0 million in the same quarter last year.

The decrease in net income was mainly due to a $127.8 million non-cash impairment expense for goodwill and intangible assets “acquired in historical business combinations.” The company said that impairment and income tax expense represents a preliminary amount and remain subject to change following the completion of normal quarter-end accounting procedures.

“The GrowGen team faced significant industry headwinds in the second quarter resulting in disappointing results for the quarter,” said CEO Darren Lampert. “We expect the revenue and gross profit headwinds in the first half will continue in the second half, with the remainder of 2022 revenue decline compared to the first half as we are facing more pressure than we initially planned. While the industry is experiencing a prolonged period of softer demand, we remain confident in the longer-term opportunity that exists within hydroponics and indoor controlled environment agriculture. GrowGen remains on a solid financial footing with a strong balance sheet and operational capabilities.

We firmly believe we are well positioned to emerge stronger when the market eventually turns. In the meantime, we are taking an active approach to manage the business in a way that preserves cash through working capital optimization and we are more aggressively right-sizing our cost structure.”

Earlier this week, Stifel analysts Andrew Carter and Christopher Growe published an earnings preview report that estimated GrowGen’s second-quarter revenue would be $85 million, which is a drop of -32% over last year and just above consensus.

In his report, Carter thought that the company’s cost savings plan could help it in the back half of 2022. He also noted that his estimates didn’t include benefits from reduced inventory levels, and he thinks rightsizing the inventory will be a tailwind for cash flow aiding the company’s efforts to achieve break-even cash flow while investing behind the organization.

The company generated $3.8 million of positive cash flow from operations “as we managed inventory levels during the second quarter,” Lampert said. He also said the company “on track” to reduce its annualized cost base by $13 million versus last year’s levels.

StaffJanuary 4, 2022

GrowGeneration Corp. (NASDAQ: GRWG) has bought Mobile Media, Inc and MMI Agriculture, an Ellenville, NY-based mobile shelving manufacturing and warehouse facility in a deal valued at $9.4 million. GrowGen said that MMI generated over $14.0 million in revenue in 2021.

MMI occupies two warehouses totaling over 70,000 sq. ft. and will continue to produce products in its manufacturing facility in New York. MMI has been a manufacturer of high-density mobile shelving systems, commonly referred to as “benching,” to a variety of industries including agriculture, retail, commercial, and government, offering a complete turnkey solution, specializing in design, custom manufacturing, shelving systems, and installation across the United States. High-density mobile systems have become a vital part of agriculture grow facilities by increasing overall canopy space both vertically and across the floor by maintaining one moveable aisle in each grow system. MMI has gained significant traction in the agriculture industry by innovating a tiered decking system incorporated within the mobile system, allowing growers to reach numerous vertical tiers while maintaining total system functionality.

“Indoor vertical farming solutions has become a strategic priority for GrowGen, and a key component of our long-term revenue generation plan. Lighting and benching are the first two key components of a grow facility. Combining the adoption of our Ion LED light and cost savings achieved through indoor vertical cultivation using MMI’s vertical benching systems is an important part of GrowGen’s value proposition. Together, GrowGen and MMI increase opportunities for growers by offering not just GrowGen’s robust selection of hydroponic solutions and products, but also a mobile system to utilize these products,” said Michael Salaman, GrowGen’s President, and Co-Founder. “This key strategic acquisition is especially important, as we expand in newly legalizing East Coast states like New York, New Jersey, Pennsylvania, and the New England states Maine, Massachusetts, Connecticut, and Vermont, where indoor vertical growing will be the method of growing. MMI offers a great system and solution that is accompanied by an industry best warranty. Every bit of canopy grow space is critical to any grow facility. Being able to design and deliver a space-saving mobile system, then execute the design by adding in irrigation, drainage, air flow, lighting, and automation solutions, gives us a stronger presence in today’s market.”

GrowGeneration carries and sells thousands of products, including organic nutrients and soils, advanced lighting technology and hydroponic equipment to be used indoors and outdoors by commercial and home growers. The acquisition comes on the same days as competitor Scotts Miracle-Gro also announced it was buying a lighting company.

“I started MMI, 35 years ago, with the goal of providing the highest-quality vertical racking systems and I’m fortunate to find a partner like GrowGen, one of the most trusted names in hydroponic and organic gardening,” said Lance Pennington, founder of MMI. “GrowGen’s leadership position in selling products into the indoor vertical farming industry combined with MMI’s indoor vertical racking systems now offers our customers a one stop solution for all their indoor cultivation products makes this the perfect partnership.”

Debra BorchardtAugust 12, 2021

Serial hydroponic acquirer GrowGeneration Corp. (NASDAQ: GRWG) reported record second-quarter 2021 revenues of $125.9 million, versus $43.5 million in the same period last year. This beat the average analyst estimate from Yahoo Finance for revenues of $111 million. GrowGen also reported second-quarter 2021 GAAP pre-tax net income of approximately $9.6 million versus pre-tax net income of $2.7 million in the same period last year. The company also raised its 2021 revenue guidance to $455 to $475 million.

Diluted earnings per share, inclusive of tax expense, were $0.11 versus last year’s $0.06. This slightly missed the estimate for earnings of $0.12. Investors weren’t pleased and sent the stock tumbling over 9% to lately sell at $39. The average price target for the stock is $59.

Non-GAAP earnings before interest, taxes, depreciation, amortization, and share-based compensation (Adjusted EBITDA) was $14.5 million, compared to $4.4 million in the same period last year, or $0.24 per share, versus $0.11 in the prior years quarter.

“The GrowGen team delivered an exceptionally strong second quarter, with revenues up 190% compared to the same period last year, with same-store sales up 60%,” said Darren Lampert, GrowGeneration’s Co-Founder and CEO. “The entire enterprise generated more revenue in the first half of 2021 than all of 2020 and adjusted EBITDA in the first half of 2021 was more than all previous periods combined. For the year, we closed 12 acquisitions, adding 20 hydroponic retail locations, bringing our total store count to 58. Our ability to attract and purchase the “best of breed” and largest hydroponic operators in the country was again evident with our signing of HGS Hydro, the country’s third-largest hydroponic chain. The strategies implemented several quarters ago are now positively impacting margins. We increased our inventory positions across all key product categories to get ahead of price increases, as well as expanded more private label purchases. Our private-label and proprietary products now account for approximately 7% of our overall sales. I am proud and encouraged with our 170 basis point increase in gross profit margin. On a per share basis, adjusted EBITDA was $0.24 for the quarter versus $0.11 last year. These increases were accomplished despite port delays, supply chain interruptions, and increases in container costs. Due to construction and building delays, we now believe the two Southern California and the Ardmore, OK , store openings will open in the fourth quarter. The company continues to focus on building out a world-class supply chain, with omnichannel functionality, that will allow the company to continue to deliver ” just in time” inventory for all types of growers and cultivators.”

Following a standard retail strategy of growth by acquisition, GrowGen continued its purchasing habits after the end of the quarter. In July alone, GrowGen said it was buying HGS Hydro, the nation’s third-largest chain of hydroponic garden centers, with six stores across Michigan and a seventh store slated to open in the fall of 2021. It also bought Aqua Serene, a Southern Oregon -based hydroponic garden center with stores in Eugene and Ashland, Oregon. Before the month ended, GrowGen bought Mendocino Greenhouse and Garden Supply, a Northern California -based hydroponic garden center, located in Mendocino, California.

Expansion Efforts

Coordinating all of this expansion is requiring the company to organize and build distribution and fulfillment centers. GrowGen’s supply chain spans approximately 875,000 square feet of retail and warehouse space, across existing locations and signed leases in new locations, spanning 13 states. In April 2021, it entered into a lease for a 40,000 sq. ft. facility in Jackson, MS , the 13th state of operation. In May 2021, it announced the building of a sixth Oklahoma location in Ardmore. The company also announced the addition of 52,000 square feet in downtown Los Angeles and 70,000 square feet in Rancho Dominguez, California , which will serve as distribution and fulfillment locations. The company is in the process of building additional locations that will serve as fulfillment centers that include 25,000 square feet in Phoenix, Arizona, and 58,000 square feet in Medley, Florida. These locations are expected to be opened by the fall of 2021.

StaffJuly 28, 2021

GrowGeneration Corp. (NASDAQ: GRWG ) is at it again and the latest acquisition is HGS Hydro, the nation’s third-largest chain of hydroponic garden centers, with six stores across Michigan and a seventh store slated to open in the fall of 2021. This transaction is expected to close before the end of the fiscal year-end 2021. Founded in 2015 by Rocky Shaeena, HGS Hydro is the largest chain of hydroponic garden centers in the state of Michigan and generated approximately $50 million in revenue in 2020.

“We are excited to add HGS Hydro to our portfolio of stores before year-end, with its impressive leadership and commercial teams. The addition of HGS Hydro will propel Michigan to GrowGen’s second-largest state behind California. Michigan is one of the fastest-growing states for medical and recreational cannabis sales.” said Darren Lampert, GrowGen’s CEO. “We look forward to building on HGS Hydro’s experience as we continue to expand our commercial footprint. This acquisition represents our continued focus on purchasing ‘best of breed’ hydroponic operations in the U.S. and strengthening our management team with seasoned veterans from our industry.”

When completed, the transaction will also bring the total number of GrowGen hydroponic garden centers in Michigan to 14 and the total number of stores to 65. The new GrowGen locations will include Shelby Township, Southfield, Sterling Heights, Hazel Park, Walled Lake, Albion, and Imlay City, Michigan. GrowGen will announce its second-quarter results on August 12.

“The combination of HGS Hydro and GrowGeneration will further solidify GrowGen’s leadership position as the nation’s largest chain of hydroponic garden centers. As one of the pioneers of our industry, we are excited to bring our years of experience, insight, and relationships to the GrowGen team to assist in the Company’s continued growth and success,” said HGS Hydro’s CEO Rocky Shaeena.

“At HGS Hydro, my biggest priority has always been serving our loyal customers and providing an abundance of inventory at all times. We have grown tremendously as a company in the past, and I believe merging with GrowGeneration will help us continue to grow with the best service and selection possible for our customers,” said Chris Kiryakoza, HGS Hydro’s COO.

StaffDecember 9, 2020

GrowGeneration Corp. (NASDAQ: GRWG) increased its offering from the recently announced $125 million to $150 million and priced 5,000,000 shares of its common stock at $30.00 per share. GrowGen has also granted the underwriters a 30-day option to purchase up to an additional 750,000 shares of common stock offered in the public market. The company said it expects to close the Offering on or about December 11, 2020.

GrowGen shares fell on the news of the offering on Tuesday and were selling off again in early trading as investors are concerned about dilution. Shares were lately selling near $32, off of the company’s 52-week high of $37.

The company said it intends to use the net proceeds from this offering primarily to expand its network of hydroponic/garden centers through organic growth and acquisitions and for general corporate purposes. Since 2014, GrowGen has acquired 34 stores and opened 16 new stores. The company said it plans to continue to pursue acquisitions going forward. “We actively evaluate and pursue acquisitions on an ongoing basis, and are focusing on Ohio, Illinois, Pennsylvania, New York, New Jersey, Massachusetts, and Missouri as new markets where we plan to open new operations,” it said in the new prospectus.

This new deal follows the announcement in June when the company priced an underwritten public offering of 7,500,000 shares of its common stock at $5.60 per share. At the time, GrowGen said it expected the gross proceeds to be roughly $42 million, before deducting the underwriting discount and other estimated offering expenses. The deal was upsized from the previously announced offering size of $35 million of common stock and is expected to close on July 2. The underwriters had a 30-day option to purchase up to an additional 1,125,000 shares of common stock offered in the public market.

According to Yahoo Finance, eight analysts are covering the stock and all have a buy rating. The average target price is $29.80. The average revenue estimate for the current quarter is $58 million, an increase of 131% over last year’s sales for the same time period.

Debra BorchardtNovember 2, 2020

GrowGeneration Corp. (NASDAQ: GRWG) continues to add to its stable of hydroponic stores with the latest acquisition being The GrowBiz. GrowGen did not disclose how much it paid for the chain, which is the country’s third-largest, but did note that it is expected to deliver $50 million in annual revenues. The deal is expected to close before fiscal year-end 2020.

The GrowBiz was founded in 2010 by Ross and Ryan Haley and has five stores across California and Oregon. It brings a team of experienced executives and more than 60 full and part-time employees. Prior to founding The GrowBiz, Ross Haley served as CEO of Hawthorne Gardening Company, a division of Scotts Miracle-Gro, and General Hydroponics, two recognized leaders in the hydroponics industry. Ross Haley will become a senior strategic advisor to the Company.

“We are excited to add The GrowBiz to our portfolio before year-end, with its impressive leadership and commercial teams,” said Darren Lampert, GrowGen’s CEO. “We look forward to building on their combined experience and expanding our commercial footprint. The GrowBiz acquisition represents our continued investment in purchasing the ‘best of breed’ hydroponic operations in the U.S. and strengthening our management team with seasoned veterans from our industry.”

The acquisition will bring the total number of GrowGen hydroponic garden centers in California to ten and Oregon to two. The new GrowGen locations include Rocklin, Cotati, Santa Cruz and San Luis Obispo, California, and Portland, Oregon.

The GrowBiz’s CEO Ross Haley said, “Hydroponics have been a staple in cannabis cultivation and as states across the country continue to legalize, hydroponics stores are an incredible resource for consumers to learn about different cultivation methods. I’ve seen first-hand over the years how our stores have helped people diversify their gardens, so they are able to cultivate and produce cannabis – it’s empowering. GrowGeneration’s continued expansion is a testament that the stigma of cannabis prohibition is diminishing, and cannabis is indeed a legitimate business. I look forward to moving to an advisory position with GrowGeneration as I continue to build out Lbs. Distribution – a licensed cannabis distribution company in California .”

This deal comes just a few weeks after the company announced it was getting into the Arizona market with the acquisition of Hydroponics Depot, Phoenix’s largest indoor and outdoor garden center. The company also did not disclose how much was paid for the company and whether the deal was stock or cash or a combination. “We’re excited to add Hydroponics Depot to our growing portfolio, with year-to-date sales in excess of $5 million and year-over-year growth at 50 percent,” said Tony Sullivan, GrowGen’s COO. “Importantly, it represents our 11th state and our first retail operation in Arizona, a key market in GrowGen’s growth plan. We see tremendous potential from both a medical and recreational standpoint.”

GrowGen currently has 31 stores, which include 5 locations in Colorado, 6 locations in California, 2 locations in Nevada, 1 location in Arizona, 1 location in Washington, 6 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.

Debra BorchardtOctober 12, 2020

The hydroponic store chain GrowGeneration Corp. (NASDAQ: GRWG) is making a big bet on the Arizona market. The company announced that it was buying Hydroponics Depot, Phoenix’s largest indoor and outdoor garden center. The company did not disclose how much was paid for the company and whether the deal was stock or cash or a combination.

The acquisition of Hydroponics Depot brings GrowGen’s portfolio of hydroponic garden centers to 29 stores across 11 states. “We’re excited to add Hydroponics Depot to our growing portfolio, with year-to-date sales in excess of $5 million and year-over-year growth at 50 percent,” said Tony Sullivan, GrowGen’s COO. “Importantly, it represents our 11th state and our first retail operation in Arizona, a key market in GrowGen’s growth plan. We see tremendous potential from both a medical and recreational standpoint.”

GrowGen pointed out that its entry into the Arizona market comes as voters consider Prop 207, which would legalize limited possession, cultivation, and use of marijuana for adults ages 21 years or older. If approved, it is estimated that Arizona’s cannabis market could grow from over a $700 million market in 2020 into a $2 billion market, including both recreational and medical marijuana. Retail sales of medical marijuana products in the state rose nearly 20% from January to May, according to the Arizona state estimates.

Hindenburg Research Fallout

The company has been relatively quiet since August’s report from well-known short-seller Hindenburg Research that questioned the company’s management team in a report. The company has chosen several cannabis companies over the years to write damning reports typically after the company has shorted shares with the goals of making existing shareholders sell. Then Hindenburg buys back the stock to cover its short at the lower price and thus making a profit.

The report doesn’t find fault with the company’s financial statements and indeed calls the company’s latest quarter “impressive” and called the business model”interesting.” It takes issue with the price of the shares being overvalued and felt that there should be a correction in the price of the company stock. However, it saved most of its criticism for the company’s executive team, which it accuses of having unsavory ties to past criminal behavior involving stock fraud.

GrowGeneration said it planned to take action against Hindenburg. Schall Legal firm had planned to investigate claims against GrowGeneration, but following a letter from GrowGeneration has had a change of heart and announced at the end of August it was no longer pursuing that investigation.

The stock fell from a year’s high of $22.88 following the report, but was beginning to recover and was lately trading at $18.86 as the stock moved higher in early trading on the news of the Arizona acquisition.

William SumnerJuly 10, 2019

It’s time for your Daily Hit of cannabis financial news for July 10, 2019.

On the Site

Canaccord Genuity Increases Its Long-Term Growth Outlook for U.S. Cannabis

Analysts with Canaccord Genuity (CG) have increased their 2019 to 2022 long-term growth outlook for the U.S. cannabis industry from 19% CAGR to 20%. According to the report, the modest increase was attributed primarily to increased expectations for Illinois’ adult-use market, as well as recent positive trends in the Nevada and Massachusetts market.

Gotham Green

Gotham Green Partners, with participation from Wicklow Capital, has agreed to an additional $30 million in an equity commitment to MedMen Enterprises Inc. (CSE:MMEN) (OTCQX:MMNFF), bringing the total financing commitment to $280 million. To date, Gotham Green Partners has funded $100 million of the total commitment.

KushCo

KushCo Holdings, Inc. (OTCQX: KSHB) announced its financial results for the third quarter ending on May 31, 2019, after the market closed on Tuesday. Net revenue was $41.5 million, representing a quarter-over-quarter increase of 17.9%.On a GAAP basis, gross profit was 17.8%. On a GAAP basis, the net loss was $10.6 million, up from $9.2 million in the same period of the previous year.

Extractors Celebrate Their 710 Holiday – Dab Day

Extractors get their own holiday every year. July 10, also known as 7/10 has been fondly named “Dab Day” within the cannabis community. Spelling “OIL” when flipped upside-down, 7/10 is the day when cannabis concentrates and extracts are celebrated, and sales data is showing that cannabis consumers are eagerly participating in the celebration.

In Other News

GrowGeneration Corp.

GrowGeneration Corp. (OTCQX: GRWG) announced today that former Home Depot CEO, Bob Nardelli, will join the company as a strategic advisor, providing advice to the company’s CEO and Board of Directors on matters related to supply chain, merchandise, branding, distribution, new product introductions, pricing and channel selection. “Bob is a globally recognized business visionary. He comes with a strong track record of executive operations to generate accelerated, profitable growth and shareholder value across many industry verticals that are of great interest to us,” said GrowGeneration CEO Darren Lampert.

Veritas Pharma

Veritas Pharma Inc. (CSE: VRT) (OTC: VRTHF) (Frankfurt: 2VP) announced that it has sold its 50% interest in 3 Carbon Extractions to Yari Nieken for $375,000. According to interim CEO Peter McFadden, the sale of its interest is part of the company’s wider restructuring efforts. “The sale of our interest in 3 Carbon was taken as part of the restructuring of the Company with aims to consolidate and focus the Company through assets that directly contribute to the advancement of our mission. Currently neither our research nor our operations aligned with our interest in 3 Carbon,” McFadden said.

Goodness Growth Earnings Benefit from Arizona Exit, Minnesota Market Changes

Kentucky Becomes 38th State to Legalize Medical Marijuana

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GrowGeneration Corp. Archives - Green Market Report

GrowGeneration Posts Quarterly Sales That Fall Short of Expectations

GrowGen Buys Shelving Company For $9.4 Million

GrowGen Beats Revenue Estimates, Raises Guidance

GrowGen Buys Michigan-based HGS Hydro

GrowGen Upsizes Offering To $150 Million, Priced At $30

GrowGeneration Adds The GrowBiz To Its Chain

GrowGeneration Jumps Into Arizona