urban-gro, Inc. Reports 2023 Financial Results and Provides Outlook on 2024 Performance
- Strong backlog of $110 million as of December 31, 2023, with a $26 million sequential increase.
- Full year 2023 revenue increased by 6.7% to $71.5 million, while net income was $(18.7) million.
- Full year 2024 revenue expected to surpass $84.0 million with positive Adjusted EBITDA.
- First quarter 2024 preliminary guidance indicates revenue at or above $15.0 million and Adjusted EBITDA at or better than ($0.5) million.
- Cost reductions of over $8 million implemented to align cost structure and drive sustained positive Adjusted EBITDA in 2024.
- Gross profit decrease in fourth quarter 2023 due to lower revenue and shift towards lower margin construction Design-Build.
- Operating expenses increased by $0.1 million in fourth quarter 2023 primarily due to higher legal expenses.
- Net loss in fourth quarter 2023 was $4.7 million, compared to $4.2 million in the prior year period.
- Adjusted EBITDA was negative $3.0 million in fourth quarter 2023, lower than negative $1.7 million in the prior year period.
- Decrease in Adjusted EBITDA for full year 2023 attributed to lower equipment system revenues and European entity expenses.
Insights
The reported backlog increase for urban-gro, Inc. to $110 million signals potential revenue growth and could be indicative of the company's ability to secure contracts, reflecting positively on its market position. The construction Design-Build sector, comprising the majority of the backlog, suggests urban-gro's strategic focus in this area may be paying dividends. The guidance for 2024, projecting revenue growth of at least 17.4% and a positive Adjusted EBITDA, paints an optimistic picture for the company's financial health and operational efficiency.
However, the reported net loss and negative Adjusted EBITDA for 2023 highlight ongoing challenges. The shift towards lower margin construction Design-Build revenue and the decrease in equipment systems revenue due to regulatory delays in the CEA market are concerning. These factors, combined with the cost optimization efforts and the backlog, will be critical in determining whether urban-gro can achieve its 2024 targets. Stakeholders should monitor the company's ability to convert its backlog into high-margin revenue and the effectiveness of its cost reduction strategies.
The financial results for urban-gro, Inc. for the full year 2023 reflect a mixed performance, with a modest increase in revenue overshadowed by a larger net loss and a more significant negative Adjusted EBITDA compared to the previous year. This deterioration in profitability metrics may raise concerns among investors regarding the company's cost management and the scalability of its business model. The increase in operating expenses, despite a reduction in one-time business development expenses, suggests that the company's overhead may not be adequately aligned with its revenue streams.
Looking ahead, the company's guidance for 2024 indicates a strategy focused on growth and operational improvements. The emphasis on positive Adjusted EBITDA is a step in the right direction, but the actual achievement of these targets will depend on urban-gro's ability to navigate market conditions and maintain cost discipline. The anticipated revenue growth is a positive signal, yet investors should remain cautious and seek evidence of sustainable profitability and cash flow generation before drawing conclusions about the company's long-term prospects.
From a legal and regulatory standpoint, urban-gro's performance and outlook are significantly influenced by the evolving landscape of the Controlled Environment Agriculture (CEA) sector. The mention of potential regulatory changes, such as the rescheduling of cannabis and the passing of the SAFER Banking Act, highlights the company's dependency on favorable legislation for growth. While these changes could unlock opportunities for urban-gro, investors should be aware of the inherent risks associated with regulatory reliance. The company's ability to adapt to changes in the legal environment and to capitalize on new legislation will be important for its success in the CEA market.
Additionally, the increase in legal expenses as part of the operating costs raises questions about the company's exposure to legal risks. This could be a reflection of the complex regulatory environment urban-gro operates in and stakeholders should consider the potential impact of ongoing and future legal challenges on the company's financial position and reputation.
Backlog of
2024 outlook calls for strengthening revenues and positive Adjusted EBITDA
Company to host conference call and webcast today, March 27, 2024 at 4:30 PM ET
LAFAYETTE, CO / ACCESSWIRE / March 27, 2024 / urban-gro, Inc. (Nasdaq:UGRO) ("urban-gro" or the "Company"), an integrated professional services and Design-Build firm offering solutions to the Controlled Environment Agriculture ("CEA") and other commercial sectors, today reported fourth quarter and full year 2023 financial results, and provided preliminary results for first quarter 2024 as well as full year 2024 guidance.
Full Year 2023 Results vs Prior Year Period:
- Revenue of
$71.5 million , a6.7% increase from$67.0 million - Net income (loss) of
$(18.7) million , as compared to$(15.3) million - Adjusted EBITDA 1 of
$(9.7) million , as compared to$(3.9) million
Full Year 2024 Guidance:
- Revenue of more than
$84.0 million , representing growth of at least17.4% - Positive Adjusted EBITDA 1
First Quarter 2024 Preliminary Guidance vs Prior Year Period:
- Revenue at or better than
$15.0 million , as compared to$16.8 million - Adjusted EBITDA 1 at or better than (
$0.5) million , as compared to$(3.4) million
"2023 was a transitional year for the Company as our diversified end market exposure provided a hedge against prolonged softness in the Cannabis segment. In fact,
Mr. Nattrass added, "Looking ahead to 2024, our sector-diversified professional services and Design-Build model is in place and our optimized team of architects, interior designers, engineers, construction management personnel, and horticulturists is focused on servicing the demand we have in our backlog. We continue to see strong momentum across multiple sectors, and with the increased productivity in our services delivery to start the year, we expect to realize margin improvement as well. Our guidance implies a strong year of organic growth based on the latest estimates of project timing and the impact of our streamlined operating structure. We also remain well positioned to capture any momentum from industry-specific regulatory changes, should they arise. We believe that the potential rescheduling of cannabis, the passing of the SAFER Banking Act, and the approval from new states, like Florida, to legalize cannabis for adult use, are catalysts for Design-Build projects and ancillary equipment systems sales. We remain committed to operating as efficiently as possible and staying focused on the development of our project pipeline across our diverse client base so that we can achieve our near-term goal of returning to positive Adjusted EBITDA generation and drive long-term profitable growth."
Fourth Quarter 2023 Financial Results
Revenue was
Gross profit was
Operating expenses were
Non-operating expenses were
Net loss was
Adjusted EBITDA 1 was negative
As of December 31 2023 , , the Company had
Summary Full Year 2023 Financial Results
Revenue was
Gross profit was
Operating expenses were
Non-operating expenses were
Net loss was
Adjusted EBITDA 1 was negative
1 Adjusted EBITDA is a non-GAAP financial measure. Please see the information under "Use of Non-GAAP Financial Information" below for a description of Adjusted EBITDA and the table at the end of this press release for a reconciliation of this non-GAAP financial information to GAAP results.
Backlog as of December 31, 2023
Consolidated backlog is unrealized revenue represented by contractually committed construction Design-Build, equipment systems, and service orders. As of December 31, 2023, total backlog was approximately
The following table summarizes the year over year change in backlog from the year ended December 31, 2022 to the year ended December 31, 2023:
| Equipment Systems | Services | Construction Design-Build | Total Backlog | ||||||||||
| (in millions) | |||||||||||||
Beginning backlog as of December 31, 2022 | $ | 5 | $ | 6 | $ | 82 | $ | 93 | |||||
Revenue recognized | (13 | ) | (12 | ) | (46 | ) | (71 | ) | |||||
Backlog additions | 9 | 13 | 66 | ||||||||||
Ending backlog as of December 31, 2023 | $ | 1 | $ | 7 | $ | 102 | $ | 110 | |||||
Geographic Footprint
The Company currently operates out of offices in Colorado, Texas and Georgia in the United States and an office in Dordrecht, Netherlands in Europe.
Revenue and Adjusted EBITDA 1 Guidance - Full Year 2024 and First Quarter 2024
For the 2024 full year, the Company anticipates consolidated revenues to grow by at least
Conference Call Details
urban-gro will host a conference call and live audio webcast to discuss the operational and financial results today, March 27 , 2024 at 4:30 PM ET. Interested participants and investors may access the conference call by dialing 888-506-0062 (U.S.), or 973-528-0011 (International). The participant access code is 569388. The live webcast will be accessible on the Events page of the Investors section of the urban-gro website, ir.urban-gro.com, and will be archived for 90 days following the event.
Use of Non-GAAP Financial Information
We define Adjusted EBITDA as net income (loss) attributable to urban-gro, determined in accordance with GAAP, excluding the effects of certain operating and non-operating expenses including, but not limited to, interest income and expense, income taxes, depreciation of tangible assets, amortization of intangible assets, impairment of investments, unrealized exchange losses, debt forgiveness and extinguishment, stock-based compensation expense, one-time and non-recurring expenses, and acquisition costs that we do not believe reflect our core operating performance. We use Adjusted EBITDA as a measure of our operating performance. Our board of directors and management team focus on Adjusted EBITDA as a key performance and compensation measure. We believe that Adjusted EBITDA assists us in comparing our performance over various reporting periods because it removes from our operating results the impact of items that our management believes do not reflect our core operating performance.
We present a net loss (GAAP) reconciliation to adjusted net loss (Non-GAAP) and EPS in order to show the impacts on net income (loss) and EPS of non-recurring items, net of tax, so that our stakeholders can easily see what our results would have been had these items been excluded from those calculations. Our board of directors and management team believe this reconciliation allows our stakeholders to review our adjusted results to those presented by other companies in our industry.
Adjusted EBITDA and adjusted net loss are supplemental non-GAAP financial measures, and they are not a substitute for net income (loss), income (loss) from operations, cash flows from operating activities or any other measure prescribed by GAAP.
There are limitations to using non-GAAP measures such as Adjusted EBITDA and adjusted net-loss. Although we believe that Adjusted EBITDA and adjusted net-loss can make an evaluation of our operating performance more consistent because it removes items that do not reflect our core operations, other companies in our industry may define Adjusted EBITDA or adjusted net-loss differently than we do. As a result, it may be difficult to use Adjusted EBITDA or adjusted net-loss to compare the performance of those companies to our performance. Adjusted EBITDA or adjusted net-loss should not be considered as a measure of the income generated by our business or discretionary cash available to us to invest in the growth of our business.
About urban-gro, Inc.
urban-gro, Inc.® (Nasdaq:UGRO) is an integrated professional services and Design-Build firm. We offer value-added architectural, engineering, and construction management solutions to the Controlled Environment Agriculture ("CEA"), industrial, healthcare, and other commercial sectors. Innovation, collaboration, and creativity drive our team to provide exceptional customer experiences. With offices across North American and in Europe, we deliver Your Vision - Built . Learn more by visiting www.urban-gro.com.
Safe Harbor Statement
This press release contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. When used in this release, terms such as "believes," "will," "expects," "anticipates," "may," "projects" and similar expressions and variations as they relate to the Company or its management are intended to identify forward-looking statements. The forward-looking statements in this press release include, without limitation, financial projections, future events, business strategy, future performance, future operations, future demand, backlog, financial position, estimated revenues, losses, adjusted EBITDA, and positive free cash flow, prospects, plans and objectives of management. These and other forward-looking statements are based on the current expectations, forecasts, beliefs and assumptions of the Company's management and are subject to risks and uncertainties that could cause actual outcomes and results to differ materially from those anticipated or expected, including, among others, our ability to successfully manage and integrate acquisitions, our ability to accurately forecast revenues and costs, competition for projects in our markets, our ability to predict and respond to new laws and governmental regulatory actions, including any potential rescheduling of cannabis and passage of the SAFER Banking Act, our ability to successfully develop new and/or enhancements to our product offerings and develop a product mix to meet demand, risks related to weather conditions that are adverse to our business operations, supply chain issues for the Company or third party suppliers, rising interest rates, economic downturn or other factors that could cause delays or the cancellation of projects in our backlog or our ability to secure future projects, our ability to maintain favorable relationships with suppliers, risks associated with reliance on key customers and suppliers, our ability to attract and retain key personnel, results of litigation and other claims and insurance coverage issues, risks related to our information technology systems and infrastructure, our ability to maintain effective internal controls, our ability to execute on our strategic plans, our ability to achieve and maintain cost savings, the sufficiency of our liquidity and capital resources, and our ability to achieve our key initiatives for 2024, particularly our growth initiatives. A more detailed description of these and certain other factors that could affect actual results is included in the Company's filings with the Securities and Exchange Commission. Copies of these filings are available online at www.sec.gov. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date hereof, except as may be required by law.
urban-gro, Inc.
CONSOLIDATED BALANCE SHEETS
| As of December 31, | ||||||||
| 2023 | 2022 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash | $ | 1,112,504 | $ | 12,008,003 | ||||
Accounts receivable, net | 26,991,739 | 15,380,292 | ||||||
Contract receivables | 10,071,951 | 3,004,282 | ||||||
Prepaid expenses and other current assets | 2,775,682 | 4,164,960 | ||||||
Total current assets | 40,951,876 | 34,557,537 | ||||||
Non-current assets: | ||||||||
Property and equipment, net | 1,419,393 | 1,307,146 | ||||||
Operating lease right of use assets, net | 2,041,217 | 2,618,825 | ||||||
Investments | - | 2,559,307 | ||||||
Goodwill | 15,572,050 | 15,572,050 | ||||||
Intangible assets, net | 4,394,507 | 5,450,687 | ||||||
Total non-current assets | 23,427,167 | 27,508,015 | ||||||
Total assets | $ | 64,379,043 | $ | 62,065,552 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 25,411,243 | $ | 9,960,364 | ||||
Contract liabilities | 8,063,325 | 1,294,452 | ||||||
Accrued expenses | 4,071,231 | 3,196,961 | ||||||
Customer deposits | 603,046 | 2,571,161 | ||||||
Contingent consideration | 49,830 | 2,799,287 | ||||||
Notes payable | 3,204,840 | 3,832,682 | ||||||
Operating lease liabilities | 707,141 | 600,816 | ||||||
Total current liabilities | 42,110,656 | 24,255,723 | ||||||
Non-current liabilities: | ||||||||
Operating lease liabilities | 1,380,362 | 2,044,782 | ||||||
Deferred tax liability | 817,419 | 1,033,283 | ||||||
Total non-current liabilities | 2,197,781 | 3,078,065 | ||||||
Shareholders' equity: | ||||||||
Preferred stock, | - | - | ||||||
Common stock, | 13,523 | 12,221 | ||||||
Additional paid-in capital | 88,901,583 | 84,882,982 | ||||||
Treasury shares, cost basis: 1,449,833 shares as of December 31, 2023 and 1,449,833 as of December 31, 2022 | (12,045,542 | ) | (12,045,542 | ) | ||||
Accumulated deficit | (56,798,958 | ) | (38,117,897 | ) | ||||
Total shareholders' equity | 20,070,606 | 34,731,764 | ||||||
Total liabilities and shareholders' equity | $ | 64,379,043 | $ | 62,065,552 | ||||
urban-gro, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
| For the Three Months Ended December 31, | For the Years Ended December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
Revenues: | ||||||||||||||||
Equipment systems | $ | 2,100,279 | $ | 2,309,387 | $ | 12,675,645 | $ | 33,333,574 | ||||||||
Services | 2,519,953 | 3,356,912 | 11,923,920 | 12,862,308 | ||||||||||||
Construction design-build | 10,186,530 | 11,521,313 | 46,254,967 | 19,822,901 | ||||||||||||
Other | 198,759 | 139,663 | 688,241 | 1,011,151 | ||||||||||||
Total revenues and other income | 15,005,521 | 17,327,275 | 71,542,773 | 67,029,934 | ||||||||||||
Cost of revenues: | ||||||||||||||||
Equipment systems | 1,797,602 | 12,313,164 | 11,085,306 | 27,963,258 | ||||||||||||
Services | 1,507,420 | 1,472,686 | 7,222,968 | 6,225,634 | ||||||||||||
Construction design-build | 9,837,177 | - | 42,442,858 | 17,905,172 | ||||||||||||
Other | 144,958 | 235,141 | 500,079 | 730,151 | ||||||||||||
Total cost of revenues | 13,287,156 | 14,118,113 | 61,251,211 | 52,824,215 | ||||||||||||
Gross profit | 1,718,364 | 3,209,162 | 10,291,562 | 14,205,719 | ||||||||||||
Operating expenses: | ||||||||||||||||
General and administrative | 5,739,723 | 5,152,770 | 23,713,773 | 19,911,276 | ||||||||||||
Stock-based compensation | 374,211 | 711,018 | 2,199,046 | 2,571,785 | ||||||||||||
Intangible asset amortization | 240,165 | 286,716 | 1,056,180 | 1,059,779 | ||||||||||||
Business development | - | - | - | 3,299,864 | ||||||||||||
Total operating expenses | 6,354,099 | 6,150,504 | 26,968,999 | 26,842,704 | ||||||||||||
Loss from operations | (4,635,738 | ) | (2,941,342 | ) | (16,677,437 | ) | (12,636,985 | ) | ||||||||
Non-operating income (expenses): | ||||||||||||||||
Interest expense | (113,552 | ) | (32,309 | ) | (271,686 | ) | (54,579 | ) | ||||||||
Interest income | 6,243 | 107,683 | 173,895 | 329,012 | ||||||||||||
Contingent consideration | - | (436,905 | ) | (160,232 | ) | (436,905 | ) | |||||||||
Write-down of investment | - | (950,575 | ) | (258,492 | ) | (2,660,933 | ) | |||||||||
Loss on settlement | - | - | (1,500,000 | ) | - | |||||||||||
Other income (expense) | (30,629 | ) | 7,917 | (202,973 | ) | (139,611 | ) | |||||||||
Total non-operating income (expenses) | (137,938 | ) | (1,304,189 | ) | (2,219,488 | ) | (2,963,016 | ) | ||||||||
Loss before income taxes | (4,773,672 | ) | (4,245,531 | ) | (18,896,925 | ) | (15,600,001 | ) | ||||||||
Income tax benefit | 48,383 | 63,926 | 215,864 | 322,092 | ||||||||||||
Net loss | $ | (4,725,289 | ) | $ | (4,181,605 | ) | $ | (18,681,061 | ) | $ | (15,277,909 | ) | ||||
Comprehensive loss | $ | (4,725,289 | ) | $ | (4,181,605 | ) | $ | (18,681,061 | ) | $ | (15,277,909 | ) | ||||
Loss per share - basic and diluted | $ | (0.40 | ) | $ | (0.39 | ) | $ | (1.66 | ) | $ | (1.44 | ) | ||||
Weighted average shares - basic and diluted | 11,675,033 | 10,713,158 | 11,264,414 | 10,610,841 | ||||||||||||
urban-gro, Inc.
NON-GAAP ADJUSTED EBITDA RECONCILIATION TO NET LOSS
| For the Three Months Ended December 31, | For the Years Ended December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
Net loss | $ | (4,725,289 | ) | $ | (4,181,605 | ) | $ | (18,681,061 | ) | $ | (15,277,909 | ) | ||||
Interest expense | 113,552 | 32,308 | 271,686 | 54,579 | ||||||||||||
Interest income | (6,243 | ) | (107,683 | ) | (173,895 | ) | (329,012 | ) | ||||||||
Federal and state income tax (provisions) | (48,383 | ) | (63,926 | ) | (215,864 | ) | (322,092 | ) | ||||||||
Federal and state income tax payments | 20,682 | 4,484 | 185,910 | 16,253 | ||||||||||||
Depreciation and amortization | 435,467 | 366,480 | 1,636,667 | 1,483,065 | ||||||||||||
EBITDA | (4,210,214 | ) | (3,949,942 | ) | (16,976,557 | ) | (14,375,116 | ) | ||||||||
Non-recurring legal fees | 479,881 | 75,927 | 1,249,133 | 352,173 | ||||||||||||
One-time employee expenses | - | 31,398 | - | 819,089 | ||||||||||||
Contingent consideration - change in fair value | - | 436,905 | 160,232 | 436,905 | ||||||||||||
Contingent consideration - DVO acquisition | 73,681 | - | 278,559 | - | ||||||||||||
Reduction in force costs | 51,735 | - | 346,725 | - | ||||||||||||
One time business development expenses | - | - | - | 3,299,864 | ||||||||||||
Impairment loss | - | 950,576 | 258,492 | 2,660,934 | ||||||||||||
Loss on settlement | - | - | 1,500,000 | - | ||||||||||||
Retention incentive | 300,000 | - | 1,242,000 | - | ||||||||||||
Stock-based compensation | 374,211 | 711,018 | 2,199,046 | 2,571,785 | ||||||||||||
Transaction costs | (60,882 | ) | 89,206 | 30,197 | 347,317 | |||||||||||
Adjusted EBITDA | $ | (2,991,588 | ) | $ | (1,654,912 | ) | $ | (9,712,173 | ) | $ | (3,887,049 | ) | ||||
urban-gro, Inc.
NET LOSS (GAAP) RECONCILIATION TO ADJUSTED NET LOSS (NON-GAAP) AND EPS
| For the Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
Net loss (GAAP) | $ | (4,725,289 | ) | $ | (4,181,605 | ) | $ | (18,681,061 | ) | $ | (15,277,909 | ) | ||||
Non-recurring adjustments, net of taxes: | ||||||||||||||||
Non-recurring legal fees | 479,881 | 75,927 | 1,249,133 | 352,173 | ||||||||||||
One time business development expenses | - | - | - | 3,299,864 | ||||||||||||
Contingent consideration - change in fair value | - | 436,905 | 160,232 | 436,905 | ||||||||||||
Contingent consideration - DVO acquisition | 73,681 | - | 278,559 | - | ||||||||||||
Reduction in force costs | 51,735 | - | 346,725 | - | ||||||||||||
One-time employee expenses | - | 31,398 | - | 3,299,864 | ||||||||||||
Impairment loss | - | 950,576 | 258,492 | 2,660,934 | ||||||||||||
Loss on settlement | - | - | 1,500,000 | - | ||||||||||||
Retention incentive | 300,000 | - | 1,242,000 | - | ||||||||||||
Transaction costs | (60,882 | ) | 89,206 | 30,197 | 347,317 | |||||||||||
Adjusted net loss (non-GAAP) | $ | (3,880,874 | ) | $ | (2,597,593 | ) | $ | (13,615,723 | ) | $ | (4,880,852 | ) | ||||
Weighted average shares - basic and diluted | 11,264,414 | 10,610,841 | 11,264,414 | 10,610,841 | ||||||||||||
Loss per share (GAAP) | $ | (0.42 | ) | $ | (0.39 | ) | $ | (1.66 | ) | $ | (1.44 | ) | ||||
Adjusted loss per share (non-GAAP) | $ | (0.34 | ) | $ | (0.24 | ) | $ | (1.21 | ) | $ | (0.46 | ) | ||||
Investor Contacts:
Dan Droller - urban-gro, Inc.
-or-
Jeff Sonnek - ICR, Inc.
(720) 730-8160
investors@urban-gro.com
Media Contact:
Barbara Graham - urban-gro, Inc.
barbara.graham@urban-gro.com
SOURCE: urban-gro, Inc.
View the original press release on accesswire.com
FAQ
What was urban-gro's backlog as of December 31, 2023?
What was the revenue for full year 2023 and how did it compare to the prior year?
What is the revenue guidance for full year 2024?
What is the preliminary revenue guidance for first quarter 2024?
How did urban-gro address cost reduction in preparation for 2024?
