GrowGeneration(GRWG) - 2025 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) For the three months ended March 31, 2025, GrowGeneration reported a net loss of $9.4 million on net sales of $35.7 million, compared to a net loss of $8.8 million on net sales of $47.9 million in the prior year period, with total assets decreasing to $164.2 million from $174.4 million at year-end 2024, while cash and cash equivalents increased to $32.7 million Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets | Account | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Current Assets | | | | Cash and cash equivalents | $32,742 | $27,471 | | Inventory | $42,129 | $40,295 | | Total current assets | $109,161 | $113,208 | | Total Assets | $164,232 | $174,352 | | Current Liabilities | | | | Accounts payable | $9,959 | $8,146 | | Total current liabilities | $24,912 | $24,274 | | Total Liabilities | $53,073 | $54,259 | | Total Stockholders' Equity | $111,159 | $120,093 | Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations | Metric | Three Months Ended Mar 31, 2025 (in thousands) | Three Months Ended Mar 31, 2024 (in thousands) | | :--- | :--- | :--- | | Net sales | $35,703 | $47,888 | | Gross profit | $9,707 | $12,364 | | Loss from operations | $(9,874) | $(9,432) | | Net loss | $(9,377) | $(8,837) | | Net loss per share, basic & diluted | $(0.16) | $(0.14) | Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Three Months Ended Mar 31, 2025 (in thousands) | Three Months Ended Mar 31, 2024 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | $(3,829) | $(3,646) | | Net cash provided by investing activities | $9,160 | $4,967 | | Net cash used in financing activities | $(60) | $(28) | | Net increase in cash and cash equivalents | $5,271 | $1,293 | Notes to Condensed Consolidated Financial Statements The notes detail the company's business structure, accounting policies, and financial statement components, including segment performance where Cultivation and Gardening revenue declined while Storage Solutions remained flat, and the completion of a significant restructuring plan incurring $1.1 million in charges during the quarter, with total charges reaching $3.5 million and expected annualized savings of $12.0 million - The company operates two major lines of business: the Cultivation and Gardening segment and the Storage Solutions segment, with 31 retail locations in 12 states as of March 31, 2025[22][23] Segment Revenue | Segment Revenue (in thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Cultivation and Gardening | $30,911 | $43,108 | | Storage Solutions | $4,792 | $4,780 | | Total Net Sales | $35,703 | $47,888 | Segment Operating Income (Loss) | Segment Operating Income (Loss) (in thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Cultivation & Gardening | $535 | $1,064 | | Storage Solutions | $380 | $666 | | Corporate | $(10,789) | $(11,162) | | Total Loss from Operations | $(9,874) | $(9,432) | - The company incurred $1.1 million in restructuring charges in Q1 2025, bringing the total aggregate cost to $3.5 million since the plan was announced in July 2024, with the restructuring now substantially complete[78][79] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 25.4% year-over-year decline in net sales to the closure of 19 retail locations in 2024 as part of a strategic restructuring, which is now substantially complete with expected annualized cost savings of approximately $12.0 million, while gross profit margin improved to 27.2% from 25.8% due to a higher mix of proprietary brand sales, and the company reported an Adjusted EBITDA loss of $4.0 million for the quarter, maintaining a solid liquidity position with $52.6 million in cash and marketable securities - Net sales decreased by 25.4% year-over-year, primarily due to the Cultivation and Gardening segment, which was impacted by the closure of 19 retail locations during 2024[102][103] - Gross profit margin increased by 140 basis points to 27.2%, largely driven by strategic initiatives to increase the sales mix of higher-margin proprietary brands[108] - The strategic restructuring plan, initiated in July 2024, is now substantially complete, incurred a total cost of $3.5 million, and is expected to generate annualized cost savings of approximately $12.0 million[89][90] Reconciliation to Net Loss | Reconciliation to Net Loss (in thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net loss | $(9,377) | $(8,837) | | EBITDA | $(6,289) | $(5,643) | | Adjusted EBITDA | $(4,030) | $(2,871) | - As of March 31, 2025, the company had $52.6 million in cash, cash equivalents, and marketable securities, and management believes it is adequately funded for the next twelve months[117][118] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company directs investors to its Annual Report on Form 10-K for the year ended December 31, 2024, for a summary of its quantitative and qualitative disclosures about market risk - For information regarding market risk, the company refers to Item 7A of its Annual Report on Form 10-K for the fiscal year ended December 31, 2024[125] Item 4. Controls and Procedures Management concluded that as of March 31, 2025, the company's disclosure controls and procedures were not effective due to a material weakness in internal control over financial reporting related to the Storage Solutions segment's separate ERP system, for which a remediation plan is underway, including transitioning this segment to the company's primary NetSuite ERP system - Management concluded that disclosure controls and procedures were not effective as of March 31, 2025[127] - The ineffectiveness is due to a material weakness in internal control over financial reporting within the Storage Solutions segment's separate ERP system (Navision), which had segregation of duties conflicts[130][133] - A remediation plan is in progress to address the material weakness, with a key initiative being the transition of the Storage Solutions (MMI) business from the Navision system to the company-wide NetSuite ERP system[135] PART II OTHER INFORMATION Item 1. Legal Proceedings The company reported no material legal proceedings for the period - The company reports no legal proceedings[137] Item 1A. Risk Factors For a summary of risk factors, the company refers to its Annual Report on Form 10-K for the year ended December 31, 2024 - The company refers to its Form 10-K for the year ended December 31, 2024, for a summary of risk factors[138] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - The company reports none[139] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO, and Interactive Data Files (XBRL) - The report includes standard exhibits such as CEO and CFO certifications (Rule 13a-14(a) and Section 1350) and XBRL Interactive Data Files[145]