Key Takeaways:
- CEA Industries reported revenue for Q3 2024 was $0.4 million, down from $0.9 million in Q3 2023, reflecting reduced bookings and backlog.
- Net loss improved slightly to $0.7 million compared to $0.8 million in Q3 2023.
- Gross loss decreased to $70,000, driven by lower variable costs.
- Operating expenses remained stable at $0.7 million year-over-year.
- Cash and cash equivalents totaled $10.3 million as of September 30, 2024, with no debt.
Third Quarter Financial Overview
Revenue and Backlog:
- CEA Industries recorded $0.4 million in revenue for Q3 2024, down from $0.9 million in Q3 2023. The decline was attributed to lower bookings and a shrinking project backlog over the last 18 months.
- Quarter-end backlog stood at $0.4 million, slightly down from $0.5 million in Q3 2023.
Gross Profit and Operating Expenses:
- Gross loss improved to $70,000 in Q3 2024 from $104,000 in the same quarter last year. The improvement was driven by a reduction in variable costs as a percentage of revenue, including costs associated with equipment, engineering, shipping, and warranty services.
- Operating expenses remained consistent at $0.7 million, reflecting the company’s disciplined cost management efforts.
Net Loss:
- Net loss for Q3 2024 was $0.7 million or $(0.94) per share, an improvement from $0.8 million or $(1.19) per share in Q3 2023.
Cash Position:
- The company reported $10.3 million in cash and cash equivalents as of September 30, 2024, down from $12.5 million at the end of 2023. The decline reflects reduced working capital, which decreased by $2.0 million during the period. CEA Industries remains debt-free.
Strategic Updates
Cost Management Initiatives: Chairman and CEO Tony McDonald highlighted the company’s continued efforts to prioritize capital preservation, stating:“Throughout 2024, we have maintained a disciplined approach to cost management, prioritizing capital preservation as we work through our remaining project backlog. During the third quarter, we made further reductions in headcount, paused product development, and scaled back business development efforts to maintain our strong balance sheet.”
Exploration of Strategic Alternatives: The Board of Directors continues to evaluate potential strategic alternatives, including a sale, merger, special dividend, or other transactions. This could also involve a dissolution of the company, with cash returned to shareholders after fulfilling corporate obligations. McDonald added:
“We will continue to prudently manage our capital in support of our ongoing strategic review process and look forward to providing an update in the coming months.”
Industry Challenges
The decline in bookings and backlog reflects broader challenges in the cannabis industry, with reduced capital expenditures by operators in the markets CEA Industries serves. This has also impacted sales efforts and overall revenue generation.
Outlook
CEA Industries plans to continue focusing on cost control and cash preservation while the Board explores strategic alternatives. The company’s debt-free position and cash reserves provide flexibility as it navigates ongoing challenges in the controlled environment agriculture sector.
Financial Summary (in $ thousands):
| Metric | Q3 2024 | Q2 2024 | Q3 2023 |
|---|---|---|---|
| Revenue | $391 | $1,761 | $914 |
| Gross Profit (Loss) | $(70) | $180 | $(104) |
| Operating Expenses | $677 | $657 | $703 |
| Net Income (Loss) | $(740) | $(470) | $(799) |
Read the entire results here.