2nd December 2022
AmplifiedAg Vertical Farm Container
Corporate Stock Market

urban-gro (NASDAQ:UGRO) Reports Q3 Results With Record USD 67M Backlog

urban-gro revenue on second quarter
  • UGRO Revenue for the third quarter was $12.4 million, exceeding the anticipated range of $10 to $11 million.
  • $8.7 million third-quarter net loss, which includes $4.2 million in one-time operational expenses and $1.7 million for the complete impairment of an earlier investment
  • Adjusted EBITDA for the third quarter was $(2.3) million, missing the guidance range of ($2.6) to ($2.4) million.
  • As of September 30, 2022, there was a record project backlog of $67 million, up $45 million since the previous quarter.
  • Having $18.6 million in cash and no debt, a strong balance sheet
  • Gives consolidated revenue forecast for the fourth quarter of about $17 million and adjusted EBITDA projection of about $(1.5) million.

Bradley Nattrass, Chairman, and CEO commented, “We are pleased that our third quarter performance exceeded our guidance, but I am most excited to see our strategic capability and sector diversification efforts materially benefit the business. While our third quarter results were impacted by the headwinds within the cannabis sector, we are extremely encouraged by the significant backlog we’ve been able to build in this subdued environment, which is a direct result of our strategic efforts to diversify our business, capabilities, and end-markets. We believe this is a clear indication that the services delivery model we’ve established over the last 18 months is working as intended.”

Mr. Nattrass added, “The demand for our professional services remains strong, and comined with the increased demand for our construction design-build solutions within the commercial sector, we expect to see material sequential improvements in our fourth quarter top and bottom-line performance and for the momentum to continue in 2023. We have been investing in scaling to meet this demand, and we will be ready to service the new opportunities we are seeing emerge. We remain focused on continuing to drive efficiencies in our model, leveraging our professional staff, integrating and identifying cross-selling opportunities for our acquisitions, building backlog, and creating shareholder value.”

UGRO’s Third Quarter 2022 Financial Results

Revenue fell by $5.9 million, or 32%, to $12.4 million in the third quarter of 2022 from $18.3 million in the corresponding quarter last year. This decline was primarily caused by a $12.6 million drop in revenue from cultivation equipment systems, which reflected significantly lower equipment demand in the U.S. cannabis market as a result of ongoing state-level regulatory delays in the license-awarding procedure and the lack of progress on passing important industry financial support models like the SAFE Banking Act. This decline was partially offset by the accretive acquisition of Emerald Construction Management at the end of April 2022, which brought in $5.4 million in construction design-build revenue. Additionally, the end of July 2021 acquisition of the 2WR entities brought in $1.4 million in additional services revenue.

In the third quarter of 2022, gross profit was $2.6 million, or 21% of revenue, as opposed to $4.3 million, or 23% of revenue, in the same quarter the year before. The contribution of lower margin construction design-build revenue from the Emerald acquisition was the main cause of the decline in gross profit margin.

Operating costs increased by $5.3 million to $9.5 million in the third quarter of 2022 from $4.2 million in the same time the previous year. One-time expenses, such as a previously disclosed $3.3 million business development expense attributable to helping a key enterprise client with a problematic situation with an international lighting manufacturer, $0.7 million in severance expenses, and $0.2 million in legal and transaction costs, are included in the third quarter’s operating expenses. Increased manpower to serve both present and future demand for the Company’s solutions and ongoing investments in European development were the key drivers of the remaining increase in operating expenditures.

In the third quarter of 2022, net loss came in at $8.7 million, or $0.81 per share, as opposed to breakeven net income of $0.1 million in the same quarter last year. This loss comprises the above-mentioned $4.2 million in one-time operational expenses as well as an impairment charge of $1.7 million for the entire amount of our prior-year investment in Edyza.

In comparison to the same quarter a year earlier, adjusted EBITDA was $(2.3) million in the third quarter of 2022. Lower revenues and gross profit, as well as strategic expenditures in operating expenses to spur growth, were the main causes of the decline in Adjusted EBITDA.

At the beginning of the fourth quarter, the company had $18.6 million in cash and no debt. In addition, the company bought back $183,270 worth of UGRO stock during the third quarter at an average cost of $2.90 per share.

UGRO’s Summary First Nine Months 2022 Financial Results

Revenue increased by $6.5 million, or 15%, to $49.7 million for the first nine months of 2022 from $43.2 million during the same time in 2021. This increase was brought on by the purchases of 2WR in 2021 and Emerald in 2022, which were offset by falls in equipment revenue due to the aforementioned factors.

For the first nine months of 2022, net loss was $11.1 million, or $1.05 per share, as opposed to a net loss of $0.3 million, or $0.03 per share, in the same period last year. Included in this are the previously noted one-time $5.9 million operating costs and impairment charges from Q3 as well as extra $0.4 million in one-time costs from the first half of the year, as well as $1.9 million in stock-based compensation.

For the first nine months of 2022, adjusted EBITDA was $(2.2) million as opposed to a positive $2.1 million in the same period last year. Increased general and administrative costs brought on by reducing employment, investments in our European operations, and macroeconomic challenges in the cannabis industry were the main causes of the decline in Adjusted EBITDA.

Backlog as of September 30, 2022 for UGRO

Unrealized income is represented by contractually committed construction design-build, equipment systems, and service orders, which together make up the term “consolidated backlog.” The overall backlog was about $67 million as of September 30, 2022, and it was made up of $56 million in design-build construction, $5 million in equipment systems, and $6 million in professional services contracts.

Image provided by urban-gro

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