urban-gro(US:UGRO)2024-05-01 00:27Financial Data and Key Metrics Changes - The company reported revenue of $15.5 million for Q1 2024, representing a sequential improvement of 4% from $15.0 million in Q4 2023, but a 7% decrease from $16.8 million in Q1 2023 [45] - The net loss was $2.1 million, or a negative $0.18 per diluted share, compared to a net loss of $5.1 million, or a negative $0.48 per diluted share in the prior year period [46] - Adjusted EBITDA improved by $2.7 million sequentially to a loss of $0.3 million in Q1 2024, marking a $3.1 million improvement compared to the prior year period [46] Business Line Data and Key Metrics Changes - Equipment Systems revenue decreased by $0.4 million, and services revenue decreased by $0.3 million, reflecting the downturn in the cannabis industry [27] - Gross profit was $3.1 million, or 20% of revenue, in Q1 2024, compared to 11% in Q4 2023 and 17% in the prior year period, driven by improved margins in services and construction design-build revenues [27] Market Data and Key Metrics Changes - Approximately 72% of revenues in Q1 2024 came from commercial sectors, while 28% came from Controlled Environment Agriculture (CEA) [24] - The company’s backlog as of March 31, 2024, was approximately $99 million, reflecting a sequential decrease of 10% [28] Company Strategy and Development Direction - The company is focused on diversifying revenue streams and reducing operating expenses, which has led to positive cash flow from operations and the strongest quarterly adjusted EBITDA results in two years [8][9] - The successful rescheduling of cannabis is seen as a significant catalyst for the industry, potentially leading to increased working capital for operators to reinvest in their businesses [22] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the future, indicating that they believe they have turned a corner and are well-positioned to build momentum through the end of the year [33][44] - The company is maintaining its revenue guidance of more than $84 million for 2024, which does not account for recent regulatory developments [42] Other Important Information - Operating expenses were $5.2 million in Q1 2024, a decrease of $1.2 million sequentially and $2.7 million year-over-year, attributed to expense optimization initiatives [13] - The company ended the quarter with $0.7 million in cash and a $2.0 million balance on its line of credit, indicating a stable cash position [28] Q&A Session Summary Question: Are operators engaging more in services due to the potential vote in Florida? - Management noted that there is cautious optimism and increased engagement from operators in Florida, with preparations underway for potential facility build-outs [30][31] Question: Can you provide more cadence on the remaining of 2024? - Management remains cautiously optimistic and believes they have turned a corner, with a strong backlog and reduced break-even levels [33] Question: What is the typical timing for projects in the cannabis industry? - Project timelines can range from nine months to two years, depending on size and location, with proactive involvement potentially shortening these timelines [39] Question: What percentage of the $99 million backlog is cannabis-related? - 76% of the backlog is related to Controlled Environment Agriculture (CEA), while 24% is from commercial sectors [68] Question: How does the rescheduling of cannabis impact future business? - The removal of the 280E tax burden is expected to significantly benefit cannabis operators, leading to increased reinvestment in their businesses [71][72]