GrowGeneration(GRWG) - 2023 Q1 - Quarterly Report

Financial Performance - Net sales for Q1 2023 were approximately $56.8 million, a decrease of 31% from $81.8 million in Q1 2022, primarily due to a 36.6% decline in same-store sales [112]. - Gross profit for Q1 2023 was approximately $16.3 million, down 26% from $22.1 million in Q1 2022, with a gross profit margin of 28.7% compared to 27.1% in the prior year [114]. - Operating expenses decreased by approximately $5.3 million or 18%, totaling $24.1 million in Q1 2023, attributed to payroll reductions and cost controls [115]. - Net loss for Q1 2023 was approximately $6.1 million, compared to a net income of approximately $5.2 million in Q1 2022, marking a decrease of about $11.3 million [121]. - Adjusted EBITDA for Q1 2023 was approximately $(1.8) million, compared to $(0.8) million in Q1 2022, indicating a worsening operational performance [126]. Cash Flow and Working Capital - Cash provided by operating activities for Q1 2023 was approximately $3.5 million, an increase from $2.2 million used in Q1 2022 [122]. - As of March 31, 2023, the company had working capital of approximately $130.7 million, a decrease of about $4.2 million from $134.9 million as of December 31, 2022 [127]. - Cash and cash equivalents stood at approximately $62.7 million as of March 31, 2023 [127]. - The decrease in working capital was primarily due to reductions in Accounts Receivable, Inventory, and Income taxes receivable, partially offset by an increase in current liabilities [127]. - The company continues to explore cash flow from operations to fund some of its store acquisitions and new store openings [127]. Growth Strategy - The company acquired 1 new retail location in Michigan during Q1 2023 as part of its growth strategy to expand its physical presence [110]. - The company plans to continue expanding its commercial sales and distribution capabilities to enhance market share and profitability [111]. - The company's core strategy focuses on expanding geographic reach across the United States and building its store and brand portfolio through organic growth and acquisitions [127]. Financing and Capital Structure - The company anticipates needing additional financing through equity offerings and/or debt financings in the future to support store acquisitions and openings [128]. - The company has financed its operations to date through the issuance and sale of common stock, convertible notes, and warrants [128]. - There are no off-balance sheet arrangements that are likely to materially affect the company's financial condition or results of operations [130]. - The company has no extraordinary demands, commitments, or uncertainties that would reduce its current working capital [127]. E-commerce Performance - E-commerce sales decreased to $3.3 million in Q1 2023 from $5.3 million in Q1 2022, reflecting a decline in online sales performance [112]. Other Income - Total other income for Q1 2023 was approximately $1.6 million, compared to an expense of $0.4 million in Q1 2022, primarily due to increased interest income [118]. Accounting Policies - For a summary of critical accounting policies, judgements, and estimates, refer to Item 7 of the Form 10-K for the year ended December 31, 2022 [129].