GRWG - GrowGen Beats Revenue Estimates Raises Guidance
Serial hydroponic acquirer GrowGeneration Corp. (NASDAQ: GRWG) reported record second-quarter 2021 revenues of $125.9 million , versus $43.5 million in the same period last year. This beat the average analyst estimate from Yahoo Finance for revenues of $111 million. GrowGen also reported second-quarter 2021 GAAP pre-tax net income of approximately $9.6 million versus pre-tax net income of $2.7 million in the same period last year. The company also raised its 2021 revenue guidance to $455 to $475 million.
Diluted earnings per share, inclusive of tax expense, were $0.11 versus last year’s $0.06. This slightly missed the estimate for earnings of $0.12. Investors weren’t pleased and sent the stock tumbling over 9% to lately sell at $39. The average price target for the stock is $59.
Non-GAAP earnings before interest, taxes, depreciation, amortization, and share-based compensation (Adjusted EBITDA) was $14.5 million , compared to $4.4 million in the same period last year, or $0.24 per share, versus $0.11 in the prior years quarter.
“The GrowGen team delivered an exceptionally strong second quarter, with revenues up 190% compared to the same period last year, with same-store sales up 60%,” said Darren Lampert , GrowGeneration’s Co-Founder and CEO. “The entire enterprise generated more revenue in the first half of 2021 than all of 2020 and adjusted EBITDA in the first half of 2021 was more than all previous periods combined. For the year, we closed 12 acquisitions, adding 20 hydroponic retail locations, bringing our total store count to 58. Our ability to attract and purchase the “best of breed” and largest hydroponic operators in the country was again evident with our signing of HGS Hydro, the country’s third-largest hydroponic chain. The strategies implemented several quarters ago are now positively impacting margins. We increased our inventory positions across all key product categories to get ahead of price increases, as well as expanded more private label purchases. Our private-label and proprietary products now account for approximately 7% of our overall sales. I am proud and encouraged with our 170 basis point increase in gross profit margin. On a per share basis, adjusted EBITDA was $0.24 for the quarter versus $0.11 last year. These increases were accomplished despite port delays, supply chain interruptions, and increases in container costs. Due to construction and building delays, we now believe the two Southern California and the Ardmore, OK , store openings will open in the fourth quarter. The company continues to focus on building out a world-class supply chain, with omnichannel functionality, that will allow the company to continue to deliver ” just in time” inventory for all types of growers and cultivators.”
Following a standard retail strategy of growth by acquisition, GrowGen continued its purchasing habits after the end of the quarter. In July alone, GrowGen said it was buying HGS Hydro, the nation’s third-largest chain of hydroponic garden centers, with six stores across Michigan and a seventh store slated to open in the fall of 2021. It also bought Aqua Serene, a Southern Oregon -based hydroponic garden center with stores in Eugene and Ashland, Oregon. Before the month ended, GrowGen bought Mendocino Greenhouse and Garden Supply, a Northern California -based hydroponic garden center, located in Mendocino, California.
Expansion Efforts
Coordinating all of this expansion is requiring the company to organize and build distribution and fulfillment centers. GrowGen’s supply chain spans approximately 875,000 square feet of retail and warehouse space, across existing locations and signed leases in new locations, spanning 13 states. In April 2021 , it entered into a lease for a 40,000 sq. ft. facility in Jackson, MS , the 13th state of operation. In May 2021, it announced the building of a sixth Oklahoma location in Ardmore . The company also announced the addition of 52,000 square feet in downtown Los Angeles and 70,000 square feet in Rancho Dominguez, California , which will serve as distribution and fulfillment locations. The company is in the process of building additional locations that will serve as fulfillment centers that include 25,000 square feet in Phoenix, Arizona, and 58,000 square feet in Medley, Florida . These locations are expected to be opened by the fall of 2021.