urban-gro(UGRO) - 2023 Q4 - Annual Results

Financial Performance and Outlook This section details urban-gro's 2023 financial performance, including revenue growth, increased losses, and 2024 guidance 2023 Financial Highlights & 2024 Guidance Urban-gro reported increased 2023 revenue but wider losses, while forecasting 2024 revenue growth and a return to positive Adjusted EBITDA Full Year 2023 Results vs. 2022 | Metric | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Revenue | $71.5 million | $67.0 million | | Net Loss | $(18.7) million | $(15.3) million | | Adjusted EBITDA | $(9.7) million | $(3.9) million | 2024 Guidance and Q1 2024 Preliminary Guidance | Period | Metric | Guidance/Preliminary Result | | :--- | :--- | :--- | | Full Year 2024 | Revenue | > $84.0 million (>17.4% growth) | | | Adjusted EBITDA | Positive | | Q1 2024 | Revenue | ≥ $15.0 million | | | Adjusted EBITDA | ≥ $(0.5) million | Management Commentary Management emphasizes 2023 diversification, $110 million backlog, cost reductions, and optimism for cannabis regulatory catalysts - In 2023, revenue sources reversed from 2022, with 70% from commercial sectors and 30% from Controlled Environment Agriculture (CEA), demonstrating the success of the company's diversification strategy[2] - The company implemented annualized cost reductions of over $8 million to better align its cost structure, which is expected to help generate sustained positive Adjusted EBITDA in 2024[2] - The company sees potential industry catalysts from the rescheduling of cannabis, the SAFER Banking Act, and new state approvals for adult-use cannabis, which could drive demand for Design-Build projects[2][5] Fourth Quarter 2023 Financial Results Q4 2023 revenue declined to $15.0 million, gross profit fell, and both net and Adjusted EBITDA losses increased Q4 2023 vs. Q4 2022 Financial Performance | Metric | Q4 2023 | Q4 2022 | | :--- | :--- | :--- | | Revenue | $15.0 million | $17.3 million | | Gross Profit | $1.7 million | $3.2 million | | Gross Margin | 11% | 19% | | Net Loss | $(4.7) million | $(4.2) million | | Adjusted EBITDA | $(3.0) million | $(1.7) million | - The decrease in Q4 revenue was driven by a $1.3 million decline in construction Design-Build revenue and a $0.8 million decline in professional services revenue[5] - Operating expenses increased by $0.2 million to $6.4 million, primarily due to higher legal expenses[7] Full Year 2023 Financial Results Full year 2023 revenue grew to $71.5 million, but gross profit declined, and net and Adjusted EBITDA losses expanded Full Year 2023 vs. 2022 Financial Performance | Metric | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Revenue | $71.5 million | $67.0 million | | Gross Profit | $10.3 million | $14.2 million | | Gross Margin | 14.4% | 21.0% | | Net Loss | $(18.7) million | $(15.3) million | | Adjusted EBITDA | $(9.7) million | $(3.9) million | - The revenue increase was driven by a $26.4 million rise in construction revenue, offset by a $20.7 million drop in equipment systems revenue due to reduced demand in the CEA market[10] - Operating expenses remained flat at approximately $27.0 million, as a $3.8 million increase in G&A expenses was offset by a $3.3 million reduction in a one-time business development expense from the prior year[12] Backlog Analysis Total backlog increased to $110 million as of December 31, 2023, primarily driven by construction Design-Build contracts Backlog Change from Dec 31, 2022 to Dec 31, 2023 (in millions) | Category | Beginning Backlog (2022) | Revenue Recognized | Backlog Additions | Ending Backlog (2023) | | :--- | :--- | :--- | :--- | :--- | | Equipment Systems | $5 | $(13) | $9 | $1 | | Services | $6 | $(12) | $13 | $7 | | Construction Design-Build | $82 | $(46) | $66 | $102 | | Total Backlog | $93 | $(71) | $88 | $110 | - Total backlog as of December 31, 2023, was approximately $110 million, a sequential increase of $26 million from Q3 2023 and an increase from $93 million at the end of 2022[1][16][17] 2024 Financial Guidance The company forecasts 2024 revenue exceeding $84 million and positive Adjusted EBITDA, with strong Q1 professional services 2024 Financial Guidance | Period | Metric | Guidance | | :--- | :--- | :--- | | Full Year 2024 | Revenue | > $84 million | | | Adjusted EBITDA | Positive | | First Quarter 2024 | Revenue | > $15 million | | | Adjusted EBITDA | > $(0.5) million | - Robust professional services revenues are expected in Q1 2024, which is considered a strong leading indicator of future construction and equipment demand[19] - Gross margins are expected to improve year-over-year in 2024 as a result of expense reductions implemented in 2023[19] Consolidated Financial Statements This section presents the company's consolidated balance sheets and statements of operations, detailing financial position and performance Consolidated Balance Sheets As of December 31, 2023, total assets increased slightly, cash decreased, and liabilities rose while equity declined Key Balance Sheet Items (As of December 31) | Account | 2023 | 2022 | | :--- | :--- | :--- | | Cash | $1.1 million | $12.0 million | | Total Current Assets | $41.0 million | $34.6 million | | Total Assets | $64.4 million | $62.1 million | | Accounts Payable | $25.4 million | $10.0 million | | Total Current Liabilities | $42.1 million | $24.3 million | | Total Liabilities | $44.3 million | $27.3 million | | Total Shareholders' Equity | $20.1 million | $34.7 million | Consolidated Statements of Operations and Comprehensive Loss Total revenues increased to $71.5 million in 2023, but gross profit declined, and net loss widened to $18.7 million Revenue by Segment (For the Years Ended December 31) | Revenue Segment | 2023 | 2022 | | :--- | :--- | :--- | | Equipment systems | $12,675,645 | $33,333,574 | | Services | $11,923,920 | $12,862,308 | | Construction design-build | $46,254,967 | $19,822,901 | | Total revenues | $71,542,773 | $67,029,934 | Profitability Summary (For the Years Ended December 31) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Gross Profit | $10,291,562 | $14,205,719 | | Loss from Operations | $(16,677,437) | $(12,636,985) | | Net Loss | $(18,681,061) | $(15,277,909) | | Loss per share | $(1.66) | $(1.44) | Non-GAAP Financial Measures This section provides reconciliations of GAAP net loss to non-GAAP Adjusted EBITDA and adjusted net loss Reconciliation of Net Loss to Adjusted EBITDA Adjusted EBITDA loss widened to $9.7 million in 2023, with key adjustments including stock-based compensation - Adjusted EBITDA is defined as net income (loss) excluding items like interest, taxes, depreciation, amortization, stock-based compensation, and other non-recurring expenses that management believes do not reflect core operating performance[21] Adjusted EBITDA Reconciliation Summary (For the Years Ended December 31) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Net Loss | $(18,681,061) | $(15,277,909) | | EBITDA | $(16,976,557) | $(14,375,116) | | Adjusted EBITDA | $(9,712,173) | $(3,887,049) | Reconciliation of GAAP Net Loss to Non-GAAP Adjusted Net Loss and EPS Non-GAAP adjusted net loss for 2023 was $13.6 million, or $(1.21) per share, after adjusting for non-recurring items GAAP vs. Non-GAAP Net Loss and EPS (For the Year Ended December 31, 2023) | Metric | GAAP | Non-GAAP (Adjusted) | | :--- | :--- | :--- | | Net Loss | $(18,681,061) | $(13,615,723) | | Loss per Share | $(1.66) | $(1.21) | GAAP vs. Non-GAAP Net Loss and EPS (For the Year Ended December 31, 2022) | Metric | GAAP | Non-GAAP (Adjusted) | | :--- | :--- | :--- | | Net Loss | $(15,277,909) | $(4,880,852) | | Loss per Share | $(1.44) | $(0.46) |