Urban-Gro (UGRO) Q2 2024 earnings summary

Executive summary

• Signed $12M in new cannabis sector contracts and a $24M construction contract with a Midwest MSO, with most revenue recognized by Q1 2025.

• Q2 2024 revenue was $17.9M, down 3% year-over-year, mainly due to declines in equipment systems and services, partially offset by higher construction design-build revenue.

• Net loss for Q2 2024 was $3.0M ($0.24/share), an improvement from a $5.8M loss ($0.53/share) in Q2 2023, driven by lower operating expenses and reduced non-operating costs.

• Awarded first project under MSA with P.F. Chang's and won contracts for Fogo de Chão and municipal projects, expanding and diversifying the commercial portfolio.

• Operating expenses fell 24% year-over-year due to cost reduction initiatives, including workforce reductions and elimination of incentive retention plans.

Financial highlights

• Solutions revenue by quarter ranged from $9.8M to $21.1M between Q3 2021 and Q3 2024.

• FY 2024 YTD revenue at $21.9M, with sector mix shifting to 30% CEA and 70% non-CEA.

• Six-month 2024 revenues were $33.3M, down 5% from $35.2M in the prior year period.

• Gross profit for Q2 2024 was $2.4M (13% margin), compared to $2.5M (14%) in Q2 2023; six-month gross profit was $5.4M (16% margin), consistent with prior year.

• Cash at June 30, 2024 was $0.4M, down from $1.1M at year-end 2023; negative working capital increased to $8.7M.

Outlook and guidance

• Focus on achieving positive adjusted EBITDA and renewed profitability in 2025.

• Management expects continued headwinds in the CEA sector due to tight client capital access and inflationary pressures, but has taken steps to reduce costs and improve liquidity.

• Anticipates sector momentum from potential cannabis rescheduling and SAFER Banking Bill passage.

• Expects continued growth in key states: PA, NY, MN, OH, NJ.

• Recent actions to strengthen liquidity include workforce reductions and expense controls; additional capital raises or debt financing may be pursued if needed.