grwg-20240630

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarter Ended: June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to

Commission File Number: 333-207889

GROWGENERATION CORP.

(Exact name of registrant as specified in its charter)


Colorado						46-5008129
(State of other jurisdiction of incorporation)						(IRS Employer ID No.)

5619 DTC Parkway, Suite 900

Greenwood Village, Colorado 80111

(Address of principal executive offices)

(800) 935-8420

(Issuer's Telephone Number)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol

Name of each exchange on which registered

Common Stock, par value $0.001 per share

GRWG

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Smaller reporting company	☐
Non-accelerated filer	☐	Emerging growth company	☐
Accelerated filer	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 5, 2024 there were 59,171,547 shares of the registrant's common stock issued and outstanding.

TABLE OF CONTENTS


		Page No.

	PART I FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Stockholders' Equity	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25

PART II OTHER INFORMATION

Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Mine Safety Disclosures	29
Item 5.	Other Information	29
Item 6.	Exhibits	30
	Signatures	31

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

GROWGENERATION CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except shares)


	June 30, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	27,578	$	29,757
Marketable securities	28,407		35,212
Accounts receivable, net of allowance for credit losses of $1,361 and $1,363 at June 30, 2024 and December 31, 2023, respectively	9,663		8,895
Notes receivable, current, net of allowance for credit losses of $232 and $1,732 at June 30, 2024 and December 31, 2023, respectively	838		193
Inventory	60,639		64,905
Prepaid income taxes	177		516
Prepaid and other current assets	7,284		7,973
Total current assets	134,586		147,451

Property and equipment, net	24,410		27,052
Operating leases right-of-use assets, net	38,984		39,933
Notes receivable, long-term	—		106
Intangible assets, net	12,827		16,180
Goodwill	7,525		7,525
Other assets	844		843
TOTAL ASSETS	$	219,176	$	239,090

LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	12,702	$	11,666
Accrued liabilities	2,429		2,530
Payroll and payroll tax liabilities	2,224		2,169
Customer deposits	3,007		5,359
Sales tax payable	1,221		1,185
Current maturities of operating lease liabilities	7,632		8,021
Total current liabilities	29,215		30,930

Operating lease liabilities, net of current maturities	33,867		34,448
Other long-term liabilities	317		317
Total liabilities	63,399		65,695
Commitments and contingencies (Note 13)
Stockholders' equity:
Common stock; $0.001 par value; 100,000,000 shares authorized, 60,888,432 and 61,483,762 shares issued as of June 30, 2024 and December 31, 2023, respectively	61		61
Treasury stock, 938,949 shares and zero shares at cost as of June 30, 2024 and December 31, 2023, respectively	(2,316)		—
Additional paid-in capital	374,737		373,433
Accumulated deficit	(216,705)		(200,099)
Total stockholders' equity	155,777		173,395
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	219,176	$	239,090

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

GROWGENERATION CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share amounts)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net sales	$	53,536	$	63,925	$	101,424	$	120,752
Cost of sales (exclusive of depreciation and amortization shown below)	39,115		46,788		74,639		87,326
Gross profit	14,421		17,137		26,785		33,426

Operating expenses:
Store operations and other operational expenses	10,210		12,008		20,844		24,630
Selling, general, and administrative	7,104		7,503		15,012		14,341
Estimated credit losses (recoveries)	6		107		(482)		424
Depreciation and amortization	3,615		3,824		7,357		7,756

Total operating expenses	20,935		23,442		42,731		47,151

Loss from operations	(6,514)		(6,305)		(15,946)		(13,725)

Other income (expense):
Other (expense) income	(10)		(51)		37		809
Interest income	737		753		1,339		1,181
Interest expense	(14)		(3)		(70)		(5)
Total other income	713		699		1,306		1,985

Net loss before taxes	(5,801)		(5,606)		(14,640)		(11,740)

Provision for income taxes	(95)		(93)		(93)		(93)

Net loss	$	(5,896)	$	(5,699)	$	(14,733)	$	(11,833)

Net loss per share, basic	$	(0.10)	$	(0.09)	$	(0.24)	$	(0.19)
Net loss per share, diluted	$	(0.10)	$	(0.09)	$	(0.24)	$	(0.19)

Weighted average shares outstanding, basic	60,681		61,077		61,090		61,053
Weighted average shares outstanding, diluted	60,681		61,077		61,090		61,053

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

GROWGENERATION CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited, in thousands)


	Common Stock			Treasury Stock			Additional Paid-In Capital		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount		Shares	Amount
Balances, December 31, 2023	61,484	$	61	—	$	—	$	373,433	$	(200,099)	$	173,395
Common stock issued for share-based compensation	23	1		—	—		—		—		1
Common stock withheld for employee payroll taxes	—	—		—	—		(29)		—		(29)
Share-based compensation	—	—		—	—		778		—		778
Net loss	—	—		—	—		—		(8,837)		(8,837)
Balances, March 31, 2024	61,507	$	62	—	$	—	$	374,182	$	(208,936)	$	165,308
Common stock issued for share-based compensation	181	—		—	—		—		—		$	—
Common stock withheld for employee payroll taxes	—	—		—	—		(99)		—		$	(99)
Share-based compensation	—	—		—	—		654		—		$	654
Repurchase of common stock	—	—		(1,739)	(4,190)		—		—		$	(4,190)
Cancellation of common stock	(800)	(1)		800	1,874		—		(1,873)		$	—
Net loss	—	—		—	—		—		(5,896)		$	(5,896)
Balances, June 30, 2024	60,888	$	61	(939)	$	(2,316)	$	374,737	$	(216,705)	$	155,777


	Common Stock			Treasury Stock			Additional Paid-In Capital		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount		Shares	Amount
Balances, December 31, 2022	61,010	$	61	—	$	—	$	369,938	$	(153,603)	$	216,396
Common stock issued for share-based compensation	25	—		—	—		—		—		—
Common stock withheld for employee payroll taxes	—	—		—	—		(70)		—		(70)
Share-based compensation	—	—		—	—		511		—		511
Net loss	—	—		—	—		—		(6,134)		(6,134)
Balances, March 31, 2023	61,035	$	61	—	$	—	$	370,379	$	(159,737)	$	210,703
Common stock issued for share-based compensation	159	—		—	—		—		—		—
Common stock withheld for employee payroll taxes	—	—		—	—		(105)		—		(105)
Share-based compensation	—	—		—	—		816		—		816
Non-cash repurchase of liability awards	—	—		—	—		653		—		653
Liability redemption associated with business acquisition	35	—		—	—		120		—		120
Net loss	—	—		—	—		—		(5,699)		(5,699)
Balances, June 30, 2023	61,229	$	61	—	$	—	$	371,863	$	(165,436)	$	206,488

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

GROWGENERATION CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)


	Six Months Ended June 30,
	2024		2023
Cash flows from operating activities:
Net loss	$	(14,733)	$	(11,833)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	7,357		7,756
Share-based compensation	1,432		1,514
Estimated credit (recoveries) losses	(482)		424
Loss on disposal of fixed assets	37		21
Change in value of marketable securities	(727)		—
Proceeds from note receivables for sale of inventory	78		—
Changes in operating assets and liabilities:
Accounts and notes receivable	(903)		1,808
Inventory	4,266		1,989
Prepaid expenses and other assets	1,027		4,008
Accounts payable and accrued liabilities	886		3,526
Operating leases	(21)		469
Payroll and payroll tax liabilities	55		(1,843)
Customer deposits	(2,352)		(592)
Sales tax payable	36		132
Net cash and cash equivalents (used in) provided by operating activities	(4,044)		7,379
Cash flows from investing activities:
Acquisitions, net of cash acquired	—		(3,197)
Purchase of marketable securities	(28,034)		(51,700)
Maturities of marketable securities	35,566		42,566

Purchase of property and equipment	(1,416)		(5,533)
Proceeds from disposals of assets	66		226
Net cash and cash equivalents provided by (used in) investing activities	6,182		(17,638)
Cash flows from financing activities:
Principal payments on long term debt	—		(33)
Common stock withheld for employee payroll taxes	(127)		(175)
Common stock repurchased	(4,190)		—
Net cash and cash equivalents used in financing activities	(4,317)		(208)
Net decrease in cash and cash equivalents	(2,179)		(10,467)
Cash and cash equivalents at the beginning of period	29,757		40,054
Cash and cash equivalents at the end of period	$	27,578	$	29,587

Supplemental cash flow disclosures and non-cash investing and financing transactions:
Cash paid for interest	$	70	$	5
Cash paid for income taxes	$	58	$	—
Right-of use assets obtained in exchange for new or modified operating lease liabilities	$	3,506	$	2,748

Cancellation of common stock	$	1,873	$	—

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

GROWGENERATION CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

1. GENERAL

GrowGeneration Corp. (together with its direct and indirect wholly-owned subsidiaries, collectively "GrowGeneration" or the "Company") was incorporated in Colorado in 2014. Since then, GrowGeneration has grown from a small chain of specialty retail hydroponic and organic garden centers to a multifaceted business with diverse assets. Today, GrowGeneration operates two major lines of business: its Cultivation and Gardening segment, composed of the Company's hydroponic and organic gardening business; and its Storage Solutions segment, composed of the Company's benching, racking, and storage solutions business.

As of June 30, 2024, GrowGeneration has 43 retail locations across 18 states in the U.S. The Company also operates an online superstore for cultivators at growgeneration.com, as well as a wholesale business for resellers, HRG Distribution, and a benching, racking, and storage solutions business, Mobile Media or MMI.

Basis of Presentation

The accompanying interim unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. These statements should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023 ("2023 Form 10-K"). There were no significant changes to the Company's significant accounting policies as disclosed in the 2023 Form 10-K. The results reported in these unaudited Condensed Consolidated Financial Statements are not necessarily indicative of results for the full fiscal year.

All amounts included in the accompanying footnotes to the Condensed Consolidated Financial Statements, except per share data, are in thousands (000).

Reclassifications

Certain amounts in the prior period Condensed Consolidated Financial Statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported net loss within the Condensed Consolidated Statements of Operations.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported revenues and expenses during the reporting period. Actual results could vary from the estimates that were used.

2. RECENT ACCOUNTING PRONOUNCEMENTS

From time to time, the Financial Accounting Standard Board ("FASB") or other standard setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification are communicated through issuance of an Accounting Standards Update ("ASU"). The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements. In addition to the accounting pronouncements discussed below, no other new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material effect on the Company's consolidated financial statements or disclosures.

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures ("ASU 2023-07"), which requires an enhanced disclosure of segments on an annual and interim basis, including the title of the chief operating decision maker, significant segment expenses, and the composition of other segment items for each segment's reported profit. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods

GROWGENERATION CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

within fiscal years beginning after December 15, 2024. Early adoption is permitted, and adoption of ASU 2023-07 should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of this standard.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures ("ASU 2023-09"), expanding the disclosures requirement for income taxes primarily by requiring more detailed disclosure for income taxes paid and the effective tax rate reconciliation. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. Early adoption is permitted, and adoption of ASU 2023-09 can be applied prospectively or retrospectively. The Company is currently evaluating the impact of this standard.

3. FAIR VALUE MEASUREMENTS

Fair Value Measurements

Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

•Level 1—Quoted prices in active markets for identical assets or liabilities.

•Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

•Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgement. Accordingly, the degree of judgement exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and all other current liabilities approximate fair values due to their short-term nature. The fair value of notes receivable approximates the outstanding balance net of reserves for expected credit loss. The marketable securities are classified as available-for-sale and are carried at fair value based on quoted market prices. Changes in fair value of marketable securities, principally derived from accretion of discounts, were $0.3 million and $0.7 million for the three and six months ended June 30, 2024, respectively, and immaterial for the three and six months ended June 30, 2023. Changes in fair value of marketable securities are included in Interest income on the Condensed Consolidated Statements of Operations.


	Level	June 30, 2024		December 31, 2023
Cash equivalents	1	$	20,344	$	17,300
Marketable securities	2	$	28,407	$

SEC Form 10-Q filed by GrowGeneration Corp.