GrowGeneration Corp.
08/11/2025 | Press release | Distributed by Public on 08/11/2025 15:02
Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements and related notes that appear elsewhere in this report as well as our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 13, 2025. We caution readers that this Quarterly Report of GrowGeneration Corp. on Form 10-Q 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, which are subject to risks and uncertainties. Forward-looking statements generally can be identified through the use of words such as "guidance," "outlook," "projected," "may," "likely," "anticipates," "believes," "expects," "estimates," "plans," "intends," "objectives," and similar expressions. These statements reflect management's best judgment based on factors known at the time of such statements. Actual events or results may differ materially from those discussed herein. The forward-looking statements contained in this report have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements. The assumptions used for purposes of the forward-looking statements contained in this report represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. No assurance can be given that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements, except as required by federal securities laws. There may be additional risks, uncertainties, and other factors that we do not currently view as material or that are not necessarily known. Dollars in tabular format are presented in thousands unless otherwise indicated.
BUSINESS OVERVIEW AND RECENT DEVELOPMENTS
GrowGeneration Corp. (together with all of 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: our Cultivation and Gardening segment, composed of our hydroponic and organic gardening business; and our Storage Solutions segment, composed of our benching, racking, and storage solutions business.
The United States has recently announced changes to U.S. trade policy, including increasing tariffs on imports, in some cases significantly, and potentially negotiating or terminating existing trade agreements. For example, on April 2, 2025, the United States announced a new universal baseline tariff of 10%, plus an additional country-specific tariff for select trading partners, on all U.S. imports. These actions, and retaliatory tariffs imposed by other countries on U.S. exports, have led to significant volatility and uncertainty in global markets. Given the uncertainty regarding the scope and duration of current and potential tariffs, trade policies, and other non-tariff trade practices and policies, the specific impact on our business and results of operations is uncertain but could result in increased costs for our products. We are actively monitoring these developments and exploring strategies to mitigate these risks and potential negative effects on our business and results from operations, including negotiating with suppliers, adjusting our pricing strategies, moving our supply chain away from countries with higher tariffs in favor of other jurisdictions, and seeking tariff exemptions where possible.
On June 6, 2025, we purchased substantially all of the assets of Hydro Generation Inc. (referred to as "Viagrow"), a domestic supplier of gardening and hydroponic equipment. The acquisition further diversifies our home gardening and hydroponic gardening proprietary brand product offerings as well as expands our outreach to significant new customers through relationships with major home improvement mass-market retailers and e-commerce platforms. Refer to Note 12, Acquisitions, of our Notes to Unaudited Condensed Consolidated Financial Statements in this report for additional information regarding the Viagrow acquisition.
MARKETS AND BUSINESS SEGMENTS
We have two operating segments, each its own reportable segment, based on our major lines of business: the Cultivation and Gardening segment and the Storage Solutions segment. We recognize specifically identifiable operating costs such as cost of sales, distribution expenses, and store operations and other operational expenses within each segment. Selling, general, and administrative expenses, such as administrative and management expenses, salaries, and benefits, share-based compensation, director fees, legal expenses, accounting and consulting expenses, and technology costs, are not allocated to specific segments and are reflected in the enterprise results.
Cultivation and Gardening Segment
We are a leading developer, marketer, retailer, and distributor of products for both indoor and outdoor hydroponic and organic gardening. Our main business strategy within the hydroponic and organic gardening sector has been to consolidate assets within the fragmented hydroponics industry to leverage efficiencies of a centralized organization.
We sell a variety of hydroponic and organic gardening related products, including nutrients, additives, growing media, lighting, environmental control systems, and other products for indoor and outdoor cultivation. Our products include proprietary brands such as Charcoir, Drip Hydro, Power Si, Ion lights, The Harvest Company, Viagrow, and more, the development and expansion of which are a key component of the Company's growth strategy. Our target customers include commercial, craft, and home growers in the plant-based medicine market, as well as commercial and home gardeners who grow organic herbs, fruits, and vegetables. Additionally, through our wholesale division, we distribute many of our proprietary products to customers that are wholesalers, resellers, major home improvement mass-market retailers, and retailers in the specialty retail hydroponic and organic gardening industry.
We make our products available to growers through a variety of channels, including our hydroponic retail locations, a commercial sales division that provides white glove service to commercial cultivators, a wholesale division that markets to mass-market and independent resellers in both the hydroponic and traditional gardening markets, and an online platform at growgeneration.com, which includes a B2B customer portal for commercial and wholesale customers. Management believes that the Company has the largest chain of specialty retail hydroponic and organic garden centers in the U.S., with 29 retail locations across 11 states as of June 30, 2025. We closed two retail locations during the three and six months ending June 30, 2025. We continue to evaluate our retail geographic footprint for redundancies in our fixed cost structure and for opportunities to serve our customers through other retail locations and our online platforms.
Storage Solutions Segment
Our Storage Solutions business, branded as "Mobile Media" or "MMI," provides customized storage solutions designed to enhance profitability, productivity, and efficiency for our customers by allowing them to save space and increase storage capacity. We cater to diverse markets with our products and services, including agriculture, retail, warehousing, office and administrative, food service, hospitality, golf and country clubs, and more. Our products include high-density mobile storage systems, static shelving, and other accessories such as desks, lockers, safes, and secured storage, offering a solution for every storage need. MMI also offers a wide variety of services, including site surveys, floor plan designs, capacity analysis, seismic calculations, permitting, and installation, in order to provide a comprehensive, turnkey solution for customers. Based in the Hudson Valley, New York, the MMI team has decades of experience successfully completing projects throughout the U.S., Canada, and Mexico.
Our target customers generally include small, mid-size, and large businesses seeking vertical space-saving solutions that are custom tailored to their space and brand in an effort to maximize storage capacity or gain space in their real estate footprint. Many of our customers are involved in the construction and design industries and include retailers, general contractors, and architects involved in new constructions and remodels for retail stores and fulfillment centers. Our customer base also includes the golf industry, specifically country clubs needing to store more club bags and optimize their existing space, as well as controlled environment agriculture (CEA) operators that cultivate indoors with vertical or rolling benching and racking.
Strategic Restructuring Plan
In July 2024, we announced a strategic restructuring plan focused on long-term profitability and advancing growth initiatives in key areas of our Cultivation and Gardening segment such as our proprietary brands, commercial sales, and e-commerce business. The restructuring plan primarily included product development costs, digital transformation initiatives, reductions in cost structure by closing and consolidating 12 redundant or underperforming retail locations, in addition to the 7 retail locations closed in the first half of 2024, workforce reductions, and other operational improvements in inventory management, sales and marketing, and administrative activities.
As of March 31, 2025, we have substantially completed our restructuring activities and do not expect to incur significant additional restructuring and restructuring-related costs in future periods. Overall, we incurred a total of approximately $3.5 million in restructuring and restructuring-related costs, including $1.1 million during the six months ended June 30, 2025 and $2.4 million previously incurred in fiscal year 2024. As a result of these restructuring activities, we expect improvement in our gross profit margin and profitability while generating annualized cost savings of approximately $12.0 million.
Our restructuring and restructuring-related charges consisted of inventory disposal costs, retail location closure costs including related contract termination costs and fixed asset disposals, employee termination benefits, asset impairments including the impairment of operating lease right-of-use assets, and other associated costs. Restructuring and restructuring-related costs incurred during the six months ended June 30, 2025 were presented on the Condensed Consolidated Statements of Operations as follows:
| Restructuring | |||||
| Cultivation and Gardening segment: | |||||
|
Store operations and other operational expenses (1)
|
765 | ||||
| Segment operating loss | (765) | ||||
| Corporate expenses: | |||||
|
Selling, general, and administrative (2)
|
376 | ||||
| Total restructuring and restructuring-related charges | $ | (1,141) | |||
|
(1)Costs consist primarily of property and equipment disposals and lease contract termination costs for previously closed retail locations
|
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|
(2)Costs consist of corporate operational and administrative contract terminations
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In conjunction with our restructuring activities to support operational and administrative improvements, we reassessed and shortened the estimated useful life of certain capitalized software assets. These capitalized software assets became fully amortized and were retired during the six months ended June 30, 2025.
As of June 30, 2025, there was no outstanding restructuring liability. However, certain facilities costs or contract termination costs related to closed retail locations for which we are pursuing sublease arrangements or lease terminations may be paid over the remaining terms which extend through 2032.
Refer to Note 15, Restructuring, of our Notes to Unaudited Condensed Consolidated Financial Statements in this report for additional information regarding restructuring activities.
GROWTH STRATEGIES
Our main growth strategy has been to consolidate assets within the fragmented hydroponics industry to leverage efficiencies of a centralized organization. As a result, we have built a business that is driven by a wide selection of products, a strong portfolio of proprietary brands, a solutions-driven staff located in strategic markets around the country, and pick, pack, ship distribution and fulfillment capabilities.
Since our founding in 2014, we have acquired or opened numerous specialty hydroponic and organic gardening center locations. Management believes that GrowGeneration has the largest chain of specialty retail hydroponic and organic garden centers in the U.S., with 29 retail locations across 11 states as of June 30, 2025. We have also acquired several other types of businesses within or complimentary to the hydroponic industry, such as online retailers, proprietary products, our wholesale distribution business, and our benching, racking, and storage solutions business, MMI. We regularly seek and evaluate accretive acquisition opportunities with similar or complimentary businesses to those businesses it already operates, such as the Viagrow acquisition, which further diversifies our home gardening and hydroponic gardening proprietary brand product offerings as well as expands our outreach to significant new customers through relationships with major home improvement mass-market retailers and e-commerce platforms.
Our main growth strategies for the Storage Solutions segment include expanding the types of customers and industries to which we sell our Storage Solutions products, including greater penetration in controlled environment agriculture, industrial and country club verticals.
COMPONENTS OF RESULTS OF OPERATIONS
Net Sales
We primarily generate net sales from the selling and distribution of proprietary and non-proprietary brand hydroponic and organic gardening products. In addition to our hydroponic and organic gardening product sales, we sell and install commercial fixtures through our benching, racking, and storage solutions business. Net sales reflect the amount of consideration that we expect to receive, which is derived from a list price reduced by variable consideration, including applicable sales discounts and estimated expected sales returns.
These sales vary by the type of product: consumables, such as nutrients, additives, growing media, and supplies that are subject to regular replenishment; and durables, such as lighting, environmental control systems, and storage solutions. Generally, in new markets where legalization of plant-based medicines is recent and licensors are starting new grow operations, there is an initial increase of durable product purchases for facility build-outs, which decrease over time as growers establish their operations. Thereafter, we tend to observe cultivators focus their purchasing patterns to consumables as the primary source of product need. In more mature markets, the sales patterns tend to favor higher percentages of consumable purchasing in comparison to emerging markets.
Cost of Sales
Cost of sales includes cost of goods and shipping costs. Cost of goods consists of cost of merchandise, inbound freight, and other inventory-related costs, such as shrinkage costs and lower of cost or market adjustments. Occupancy expenses of our retail locations and distribution centers, which consist of payroll, rent, and other lease required costs, including common area maintenance and utilities, are included as a component of operating expenses within Store operations and other operational expenses in the Condensed Consolidated Statements of Operations.
Gross Profit
We calculate gross profit as net sales less cost of sales. Gross profit excludes depreciation and amortization, which are presented separately as a component of operating expenses in the Condensed Consolidated Statements of Operations. Our gross profit as a percentage of net sales, or gross profit margin, varies with our product mix, in particular the percentage of sales of proprietary brand products compared to non-proprietary brand products and of consumable products compared to durable products. Proprietary products typically have higher gross margins compared to non-proprietary products, and consumable products typically have higher gross margins compared to durable products.
Operating Expenses
Operating expenses are comprised of the following components: store operations and other operational expenses; selling, general, and administrative; estimated credit losses; depreciation and amortization; and impairment losses. Store operations and other operational expenses consist primarily of payroll, rent and utilities, and allocated corporate overhead costs. Selling, general, and administrative expenses consist of corporate salaries, stock-based compensation, advertising and promotions, travel and entertainment, professional fees, insurance, and other corporate administrative costs. Selling, general, and administrative expenses as a percentage of net sales typically does not increase commensurate with an increase in net sales. Our largest expenses are generally related to employee compensation and leases, which are primarily fixed and not variable. Our advertising and marketing expenses are largely controllable and variable depending on the particular market.
RESULTS OF OPERATIONS
Comparison of the Unaudited Results for the Three Months Ended June 30, 2025 and 2024
The following table presents, for the periods indicated, selected information from our unaudited Condensed Consolidated financial results, including information presented as a percentage of net sales:
| Three Months Ended June 30, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | Year-to-Year Variance | |||||||||||||||||||||||||||||||||
| Net sales | $ | 40,963 | 100.0 | % | $ | 53,536 | 100.0 | % | $ | (12,573) | (23.5) | % | |||||||||||||||||||||||
| Cost of sales | 29,369 | 71.7 | % | 39,115 | 73.1 | % | (9,746) | (24.9) | % | ||||||||||||||||||||||||||
| Gross profit | 11,594 | 28.3 | % | 14,421 | 26.9 | % | (2,827) | (19.6) | % | ||||||||||||||||||||||||||
| Operating expenses | 16,868 | 41.2 | % | 20,935 | 39.1 | % | (4,067) | (19.4) | % | ||||||||||||||||||||||||||
| Loss from operations | (5,274) | (12.9) | % | (6,514) | (12.2) | % | 1,240 | 19.0 | % | ||||||||||||||||||||||||||
| Other income | 463 | 1.1 | % | 713 | 1.3 | % | (250) | (35.1) | % | ||||||||||||||||||||||||||
| Net loss before income taxes | (4,811) | (11.7) | % | (5,801) | (10.8) | % | 990 | 17.1 | % | ||||||||||||||||||||||||||
| Provision for income taxes | - | - | % | (95) | (0.2) | % | 95 | 100.0 | % | ||||||||||||||||||||||||||
| Net loss | $ | (4,811) | (11.7) | % | $ | (5,896) | (11.0) | % | $ | 1,085 | 18.4 | % | |||||||||||||||||||||||
Net Sales
Net sales for the three months ended June 30, 2025 were $41.0 million, a decrease of $12.6 million or 23.5% as compared to net sales of $53.5 million for the three months ended June 30, 2024.
The decrease in net sales was primarily related to our Cultivation and Gardening segment, which had net sales of $32.9 million for the three months ended June 30, 2025 compared to $46.1 million for the three months ended June 30, 2024. This decrease in net sales was primarily due to the closure of 19 retail locations during 2024, which included the 12 redundant or underperforming retail locations consolidated in the second half of 2024 in conjunction with the restructuring plan. Additionally, the decreased net sales for Cultivation and Gardening related to slowness in durable product sales, as well as recent declines in consumer confidence related to uncertainty surrounding the impact of potential tariffs. Proprietary brand sales as a percentage of Cultivation and Gardening net sales for the three months ended June 30, 2025 increased to 32.0% as compared to 21.5% for the three months ended June 30, 2024, largely driven by our strategic initiatives to increase sales mix of our expanded portfolio of proprietary brands and various product launches. The percentage of Cultivation and Gardening net sales related to consumable products for the three months ended June 30, 2025 was 78.0%, an increase from 73.0% for the three months ended June 30, 2024, which was mainly driven by increased brand adoption of proprietary growing media and nutrient products and slowness in durable product sales.
Net sales of commercial fixtures within our Storage Solutions segment increased to $8.1 million for the three months ended June 30, 2025 compared to $7.4 million for the three months ended June 30, 2024.
Cost of Sales
Cost of sales for the three months ended June 30, 2025 was $29.4 million, a decrease of $9.7 million or 24.9% compared to $39.1 million for the three months ended June 30, 2024. The decrease in cost of sales largely corresponds to the 23.5% decrease in net sales, as previously discussed.
Gross Profit
Gross profit was $11.6 million for the three months ended June 30, 2025 compared to $14.4 million for the three months ended June 30, 2024, a decrease of $2.8 million or 19.6%. The decrease in gross profit was primarily related to the Cultivation and Gardening segment, which decreased $2.8 million, or 25.3%, for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024, largely as a result of the decrease in sales volume due to store consolidations and the effects of the strategic restructuring plan. Additionally, gross profit from our Storage Solutions segment remained relatively flat at $3.4 million and $3.5 million in the three months ended June 30, 2025 and 2024, respectively.
Gross profit margin was 28.3% for the three months ended June 30, 2025, an increase of 140 basis points from a gross profit margin of 26.9% for the three months ended June 30, 2024. The increase in gross profit margin was largely driven by the Cultivation and Gardening segment, which had a gross profit margin of 24.8% for the three months ended June 30, 2025 as compared to 23.7% for the three months ended June 30, 2024, primarily driven by our strategic initiatives to increase sales mix of our expanded portfolio of proprietary brands. The Storage Solutions gross profit margin decreased to 42.3% in the three months ended June 30, 2025 from 46.9% in three months ended June 30, 2024 due to industry pricing compression for the Storage Solutions segment.
Operating Expenses
Operating expenses are comprised of store operations and other operational expenses, selling, general, and administrative, estimated credit losses, and depreciation and amortization. Operating expenses were $16.9 million for the three months ended June 30, 2025 and $20.9 million in the three months ended June 30, 2024, a decrease of $4.1 million or 19.4%.
Store operating costs and other operational expenses, which consisted primarily of payroll, rent and utilities, and allocated corporate overhead costs, were $7.9 million for the three months ended June 30, 2025 compared to $10.2 million for the three months ended June 30, 2024, a decrease of $2.3 million or 22.9%. The decrease in store operating costs was primarily due to the 19 retail locations closed during 2024, including the 12 redundant or underperforming retail locations consolidated in the second half of 2024 in conjunction with the restructuring plan.
Total corporate overhead, which is comprised of selling, general, and administrative expense, estimated credit losses, and depreciation and amortization expense, was $9.0 million for the three months ended June 30, 2025 compared to $10.7 million for the three months ended June 30, 2024. Selling, general, and administrative costs decreased by $1.0 million or 13.4% for the three months ended June 30, 2025 primarily as a result of decreased employee costs, share-based compensation, corporate expenses, and professional fees. Additionally, depreciation and amortization costs decreased by $0.9 million or 25.7% for the three months ended June 30, 2025, primarily as a result of asset retirements in conjunction with the restructuring plan.
Other Income
Other income was $0.5 million for the three months ended June 30, 2025 compared to $0.7 million for the three months ended June 30, 2024, a decrease of $0.3 million or 35.1%. The decrease in other income was primarily attributable to decreased investment income on our marketable securities.
Comparison of the Unaudited Results for the Six Months Ended June 30, 2025 and 2024
The following table presents, for the periods indicated, selected information from our unaudited Condensed Consolidated financial results, including information presented as a percentage of net sales:
| Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | Year-to-Year Variance | |||||||||||||||||||||||||||||||||
| Net sales | $ | 76,666 | 100.0 | % | $ | 101,424 | 100.0 | % | $ | (24,758) | (24.4) | % | |||||||||||||||||||||||
| Cost of sales | 55,365 | 72.2 | % | 74,639 | 73.6 | % | (19,274) | (25.8) | % | ||||||||||||||||||||||||||
| Gross profit | 21,301 | 27.8 | % | 26,785 | 26.4 | % | (5,484) | (20.5) | % | ||||||||||||||||||||||||||
| Operating expenses | 36,449 | 47.5 | % | 42,731 | 42.1 | % | (6,282) | (14.7) | % | ||||||||||||||||||||||||||
| Loss from operations | (15,148) | (19.8) | % | (15,946) | (15.7) | % | 798 | 5.0 | % | ||||||||||||||||||||||||||
| Other income | 960 | 1.3 | % | 1,306 | 1.3 | % | (346) | (26.5) | % | ||||||||||||||||||||||||||
| Net loss before income taxes | (14,188) | (18.5) | % | (14,640) | (14.4) | % | 452 | 3.1 | % | ||||||||||||||||||||||||||
| Provision for income taxes | - | - | % | (93) | (0.1) | % | 93 | 100.0 | % | ||||||||||||||||||||||||||
| Net loss | $ | (14,188) | (18.5) | % | $ | (14,733) | (14.5) | % | $ | 545 | 3.7 | % | |||||||||||||||||||||||
Net Sales
Net sales for the six months ended June 30, 2025 were $76.7 million, a decrease of $24.8 million or 24.4% as compared to net sales of $101.4 million for the six months ended June 30, 2024.
The decrease in net sales was primarily related to our Cultivation and Gardening segment, which had net sales of $63.8 million for the six months ended June 30, 2025 compared to $89.2 million for the six months ended June 30, 2024. This decrease in net sales was primarily due to the closure of 19 retail locations during 2024, which included the 12 redundant or underperforming retail locations consolidated in the second half of 2024 in conjunction with the restructuring plan. Additionally, the decreased net sales for Cultivation and Gardening related to slowness in durable product sales, as well as recent declines in consumer confidence related to uncertainty surrounding the impact of potential tariffs. Proprietary brand sales as a percentage of Cultivation and Gardening net sales for the six months ended June 30, 2025 increased to 32.0% as compared to 22.0% for the six months ended June 30, 2024, largely driven by our strategic initiatives to increase sales mix of our expanded portfolio of proprietary brands and various product launches. The percentage of Cultivation and Gardening net sales related to consumable products for the six months ended June 30, 2025 was 76.3%, an increase from 71.6% for the six months ended June 30, 2024, which was mainly driven by increased brand adoption of proprietary growing media and nutrient products and slowness in durable product sales.
Net sales of commercial fixtures within our Storage Solutions segment increased to $12.9 million for the six months ended June 30, 2025 compared to $12.2 million for the six months ended June 30, 2024.
Cost of Sales
Cost of sales for the six months ended June 30, 2025 was $55.4 million, a decrease of $19.3 million or 25.8% compared to $74.6 million for the six months ended June 30, 2024. The decrease in cost of sales largely corresponds to the 24.4% decrease in net sales, as previously discussed.
Gross Profit
Gross profit was $21.3 million for the six months ended June 30, 2025 compared to $26.8 million for the six months ended June 30, 2024, a decrease of $5.5 million or 20.5%. The decrease in gross profit was primarily related to the Cultivation and Gardening segment, which decreased $5.2 million, or 24.4%, for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024, largely as a result of the decrease in sales volume due to store consolidations and the effects of the strategic restructuring plan. Additionally, gross profit from our Storage Solutions segment decreased $0.3 million, or 5.3%, in the six months ended June 30, 2025 compared to the six months ended June 30, 2024 primarily due to industry pricing compression for the Storage Solutions segment.
Gross profit margin was 27.8% for the six months ended June 30, 2025, an increase of 140 basis points from a gross profit margin of 26.4% for the six months ended June 30, 2024. The increase in gross profit margin was largely driven by the Cultivation and Gardening segment, which had a gross profit margin of 25.2% for the six months ended June 30, 2025 as compared to 23.8% for the six months ended June 30, 2024, primarily driven by our strategic initiatives to increase sales mix of our expanded portfolio of proprietary brands. The Storage Solutions gross profit margin decreased to 40.6% in the six months ended June 30, 2025 from 45.3% in six months ended June 30, 2024 due to industry pricing compression for the Storage Solutions segment.
Operating Expenses
Operating expenses are comprised of store operations and other operational expenses, selling, general, and administrative, estimated credit losses, and depreciation and amortization. Operating expenses were $36.4 million for the six months ended June 30, 2025 and $42.7 million in the six months ended June 30, 2024, a decrease of $6.3 million or 14.7%.
Store operating costs and other operational expenses, which consisted primarily of payroll, rent and utilities, and allocated corporate overhead costs, were $16.7 million for the six months ended June 30, 2025, compared to $20.8 million for the six months ended June 30, 2024, a decrease of $4.2 million or 20.1%. The decrease in store operating costs was primarily due to the 19 retail locations closed during 2024, including the 12 redundant or underperforming retail locations consolidated in the second half of 2024 in conjunction with the restructuring plan. This decrease was partially offset by the additional $0.8 million of restructuring costs incurred in the six months ended June 30, 2025 related to fixed asset disposals and lease contract terminations costs for previously closed retail locations.
Total corporate overhead, which is comprised of selling, general, and administrative expense, estimated credit losses, and depreciation and amortization expense, was $19.8 million for the six months ended June 30, 2025, compared to $21.9 million for the six months ended June 30, 2024. Selling, general, and administrative costs decreased by $1.7 million or 11.7% for the six months ended June 30, 2025 primarily as a result of decreased employee costs, share-based compensation and professional fees. This decrease in selling, general, and administrative expense was partially offset by a net $0.7 million increase in estimated credit losses in the six months ended June 30, 2025 compared to the six months ended June 30, 2024, primarily due to a $0.3 million credit recovery settlement received in bankruptcy proceedings related to a note receivable in the six months ended June 30, 2024. Additionally, depreciation and amortization costs decreased by $1.1 million or 14.7% for the six months ended June 30, 2025, primarily as a result of asset retirements in conjunction with the restructuring plan.
Other Income (Expense)
Other income was $1.0 million for the six months ended June 30, 2025 compared to $1.3 million for the six months ended June 30, 2024, a decrease of $0.3 million or 26.5%. The decrease in other income was primarily attributable to decreased investment income on our marketable securities.
Use of Non-GAAP Financial Information
The following non-GAAP financial measures of EBITDA and Adjusted EBITDA are not in accordance with, or an alternative for, generally accepted accounting principles ("GAAP") and should be considered in addition to, and not as a substitute for, the most directly comparable GAAP financial measures. We believe these non-GAAP financial measures, when used in conjunction with their most directly comparable GAAP financial measures, net income (loss), provide meaningful supplemental information to both management and investors, facilitating the evaluation of performance across reporting periods, identify trends affecting our business, and project future performance. Management uses these non-GAAP financial measures for internal planning and reporting purposes, and we believe that these non-GAAP financial measures may be useful to investors in their assessment of our operating performance, our ability to generate cash, and valuation. In addition, these non-GAAP financial measures address questions routinely received from analysts and investors and, in order to ensure that all investors have access to the same data, we have determined that it is appropriate to make this data available to all investors. These non-GAAP financial measures may be different from non-GAAP financial measures used by other companies.
EBITDA and Adjusted EBITDA
EBITDA and Adjusted EBITDA are non-GAAP financial measures commonly used in our industry and should not be construed in isolation as substitutions to net income (loss) as indicators of operating performance or as alternatives to cash flow provided by operating activities as a measure of liquidity (each as determined in accordance with GAAP). GrowGeneration defines EBITDA as net income (loss) before interest income, interest expense, income tax expense, depreciation and amortization, and Adjusted EBITDA as further adjusted to exclude certain items such as stock-based compensation, impairment losses, restructuring and corporate rationalization costs, and other non-core or non-recurring expenses and to include income from our marketable securities as these investments are part of our operational business strategy and increase the cash available to us.
Set forth below is a reconciliation of EBITDA and Adjusted EBITDA to net loss (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Net loss | $ | (4,811) | $ | (5,896) | $ | (14,188) | $ | (14,733) | |||||||||||||||
| Provision for income taxes | - | 95 | - | 93 | |||||||||||||||||||
| Interest income | (463) | (737) | (960) | (1,339) | |||||||||||||||||||
| Interest expense | - | 14 | - | 70 | |||||||||||||||||||
| Depreciation and amortization | 2,687 | 3,615 | 6,272 | 7,357 | |||||||||||||||||||
| EBITDA | $ | (2,587) | $ | (2,909) | $ | (8,876) | $ | (8,552) | |||||||||||||||
| Share-based compensation | 315 | 654 | 818 | 1,432 | |||||||||||||||||||
| Investment income | 453 | 718 | 972 | 1,298 | |||||||||||||||||||
| Acquisition transaction costs | 50 | - | 50 | - | |||||||||||||||||||
|
Restructuring plan
|
- | - | 1,141 | - | |||||||||||||||||||
|
Consolidation and other charges(1)
|
467 | 394 | 563 | 1,808 | |||||||||||||||||||
| Adjusted EBITDA | $ | (1,302) | $ | (1,143) | $ | (5,332) | $ | (4,014) | |||||||||||||||
|
(1)Consists primarily of expenditures related to the activity of store and distribution consolidation, one-time severances outside of the restructuring plan announced July 2024, and other non-core or non-recurring expenses
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LIQUIDITY AND CAPITAL RESOURCES
Overview
As of June 30, 2025, we had working capital of $81.7 million compared to working capital of $88.9 million as of December 31, 2024, a decrease of $7.2 million. The decrease in working capital from December 31, 2024 to June 30, 2025 was due primarily to a net decrease in cash, cash equivalents, and marketable securities as a result of net cash used in operating activities.
As of June 30, 2025, we had cash, cash equivalents, and marketable securities of $48.7 million. Currently, we are not aware of any extraordinary demands, commitments, or uncertainties that would materially reduce our current working capital. Our material future cash requirements from contractual and other obligations relate primarily to our operating leases. Refer to Note 8, Leases, of the Condensed Consolidated Financial Statements for additional information regarding leases.
On June 6, 2025, we purchased substantially all of the assets of Viagrow, a domestic supplier of gardening and hydroponic equipment. The total consideration for the purchase of Viagrow was $1.2 million, including $1.0 million cash paid and $0.1 million common stock issued on the date of acquisition, with certain additional amounts to be paid in future periods. Refer to Note 12, Acquisitions, of our Notes to Unaudited Condensed Consolidated Financial Statements in this report for additional information regarding the Viagrow acquisition.
We may need additional financing through equity offerings and/or debt financings in the future to continue to expand our business consistent with our growth strategies. However, management believes that the Company is adequately funded to support current and future operations in the next twelve months. To date we have financed our operations through the issuance of common stock, convertible notes, and warrants, as well as cash generated from operations.
Cash Flows
The following discussion sets forth the major sources and uses of cash for the six months ended June 30, 2025 and 2024.
Operating Activities
Net cash and cash equivalents used in operating activities for the six months ended June 30, 2025 was $6.8 million compared to net cash used in operating activities of $4.0 million for the six months ended June 30, 2024. The changes in operating cash were primarily driven by changes in gross profit and operating expenses, excluding non-cash changes such as share-based compensation and depreciation and amortization, as previously discussed in the Results of Operations section as well as changes in working capital due to timing as well as store consolidations and the effects of the strategic restructuring plan.
Investing Activities
Net cash and cash equivalents provided by investing activities for the six months ended June 30, 2025 was $2.7 million compared to net cash provided by investing activities of $6.2 million for the six months ended June 30, 2024. Investing activities for the six months ended June 30, 2025 were primarily attributable to investment of excess cash into marketable securities of $19.0 million and $1.0 million of cash paid for the Viagrow acquisition, offset by maturity of marketable securities of $23.0 million. Investing activities for the six months ended June 30, 2024 were primarily attributable to investment of excess cash into marketable securities of $28.0 million and purchases of property and equipment of $1.4 million, offset by maturity of marketable securities of $35.6 million.
Financing Activities
Net cash and cash equivalents used in financing activities was $0.1 million for the six months ended June 30, 2025 and was attributable to common stock withheld for employee payroll taxes. Net cash and cash equivalents used in financing activities for the for the six months ended June 30, 2024 was $4.3 million and was primarily attributable to common stock repurchased under our share repurchase program..
Critical Accounting Policies, Judgements, and Estimates
For a summary of the Company's critical accounting policies, judgements, and estimates, please refer to Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024.
Off Balance-Sheet Arrangements
We do not have any off-balance sheet arrangements (as that term is defined in Item 303 of Regulation S-K) that are reasonably likely to have a current or future material effect on our financial condition, revenue or expenses, results of operations, liquidity, capital expenditures, or capital resources.
GrowGeneration Corp. published this content on August 11, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on August 11, 2025 at 21:02 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]