GrowGeneration(US:GRWG)2022-11-08 03:08Financial Data and Key Metrics Changes - The company reported third-quarter revenue of $71 million, a decline of approximately 38.9% compared to $116 million in the same quarter of 2021 [23] - Same-store sales decreased by 58% year-over-year, from $95.4 million to $39.9 million [23] - Adjusted EBITDA for the third quarter was a loss of $2.6 million, compared to income of $10.8 million in the prior year [30] - The net loss for the third quarter was $7.2 million, or negative $0.12 per share, compared to net income of $4 million, or $0.07 per share, in the same quarter last year [29] Business Line Data and Key Metrics Changes - E-commerce revenue fell from $10.5 million to $3 million due to decreased capital expenditure demand from commercial markets [24] - The distribution business saw a $15.1 million increase, positively impacting year-over-year revenue changes [24] - Retail gross margin decreased by 782 basis points compared to the previous year, primarily due to inventory reduction efforts [25] Market Data and Key Metrics Changes - The broader cannabis and hydroponic industry is experiencing a prolonged downturn, affecting all participants from growers to retailers [8] - The company noted a continued oversupply of cannabis in the marketplace, leading to slow hydroponic demand across the U.S. [8] Company Strategy and Development Direction - The company is focusing on cost control, store consolidation, inventory reduction, and cash generation as part of its strategic initiatives [11] - Plans to explore opportunities in the indoor vertical farming market with proprietary fertilizers and solutions are underway [15] - The private label strategy is a key growth initiative, with private label sales accounting for $7.1 million, or 14% of overall retail and e-commerce sales, growing 8% year-over-year [18] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about early signs of stabilization in the market, particularly in the Mid-Atlantic region [44] - The company anticipates a challenging fourth quarter but expects to maintain a strong liquidity position with $71 million in cash and no debt [10] - Full-year revenue guidance was updated to between $270 million and $280 million, with adjusted EBITDA expected to be a loss of $10 million to $13 million [34] Other Important Information - The company has reduced payroll expenses by $11.7 million year-to-date, equating to a 41% headcount reduction [13] - Inventory was reduced by $10 million quarter-over-quarter, contributing to a total reduction of over $24.1 million year-to-date [12] - The company is committed to supporting social equity in the cannabis industry through partnerships with organizations like Harvest 360 [40] Q&A Session Summary Question: Are there signals of stabilization in sales despite the pressures? - Management noted that while same-store sales are down 58%, there are signs of increased quoting and business backlog in the Mid-Atlantic region, indicating potential stabilization [44] Question: Is there a pickup in licensing activity in newly legalized states? - Management confirmed a pickup in licensing activity in Eastern states, including New Jersey and Mississippi, where new stores are opening [47] Question: How are inventory levels currently? - Management stated that significant progress has been made in reducing inventory, entering 2023 with a cleaner inventory and a strong balance sheet [52] Question: What impact are private labels having in the current environment? - Management indicated that both cost savings and promotional activity are driving the adoption of private label products, which are performing well in the market [55] Question: How is the competitive landscape shaping up for potential M&A? - Management highlighted that the current market distress is leading to consolidation, with opportunities to acquire stores at favorable prices due to the financial struggles of smaller competitors [58] Question: What are the plans for store openings and operational efficiency? - Management confirmed a shift towards smaller stores and increased reliance on distribution capabilities, with fewer new store openings planned for 2023 [71]