GrowGeneration Corp. (OTCQX.GRWG) could benefit from the spike in demand from both small farms and individual growers

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Hydroponics and indoor gardening supply stores have been one of the few booming retail sectors of the last five years, with nearly 8% growth per year, revenue for the Hydroponic Growing Equipment Stores industry has grown aggressively, with virtually no signs of slowdown anytime soon. During the period, more individuals focused on healthy eating and consuming organic produce. Produce that is grown in a hydroponically often time meets organic standards and rarely uses pesticides.

Industry retailers experienced a spike in demand from both small farms and individuals that wanted to set up a hydroponic greenhouse to grow organic foods.

In addition, the medical marijuana boom in certain states fueled rising interest in hydroponic growing methods, encouraging consumers and businesses with the relevant accreditations to try their hand at this nascent industry and purchase hydroponic growing equipment. This growth is expected to continue through 2025. Demand for quality organic produce will keep rising, fostering demand for hydroponic growing equipment and the stores that sell it. 

 

GrowGeneration Corp (OTCQX:GRWG), has made a number of acquisitions this year. In its 2nd Quarter 2018 Financial results, GrowGeneration reported Revenue of $7.15 million, up 74% compared to revenue of $4.1 million for the 2nd quarter of 2017.

Darren Lampert, Co-Founder and CEO, said, “This was another great quarter of sales for GrowGeneration, clearly demonstrating the demand for our products and the scalability of our business as we continue our expansion plans.” Further, Lampert stated, “Our Company continues to attract capital, raising $21 million in debt and equity financing for the six months ended June 30, 2018, strengthening our balance sheet to $17.4 million in cash and $24.5 million in working capital. We saw, in this quarter, the positive impact of our acquisition model, with operating expenses going down 2%. Our acquisition pipeline continues to be strong, with a focus in California, New England, and new emerging markets in the Mid-Atlantic and Midwest regions. GrowGen now is operating in 6 states, with 18 commercial and retail stores, with over 100,000 sq. ft. and servicing hundreds of licensed commercial growers. We are now forecasting a revenue run rate of approximately $42 million coming out of 2018 and $10.5 million for Q4 2018.”

2nd Quarter 2018 Financial Highlights:

  • Revenue of $7.15 million, up 74% compared to revenue of $4.1 million for the 2nd quarter of 2017
  • Store operating costs have declined 13% from 18.2% for the 2nd quarter 2017 to 16.1% for the 2nd quarter of 2018
  • YTD revenue of $11.5 million, up 72% compared to YTD revenue of $6.7 million for 2017
  • YTD store operating costs have declined from 19.4% for the six months ended June 30, 2017 to 17.6% for the six months ended June 30, 2018
  • The Company had $17.4 million in cash and cash equivalents at June 30, 2018
  • As of June 30, 2018, the Company had working capital of $24.5 million compared to working capital of $5.6 million at December 31, 2017
  • The Company raised approximately $12.0 million in equity capital through the issuance of common stock and the exercise of warrants and $9.0 million in convertible debt financing for the six-month period ended June 30, 2018
  • Four new stores acquired in Q2 2018
  • Revenue run rate guidance in excess of $42 million heading into 2019, $10.5 million for Q4 2018
GrowGeneration Corp. (“GrowGen”) owns and operates specialty retail hydroponic and organic gardening stores. Currently, GrowGen has 18 stores, which includes 6 locations in Colorado, 6 locations in California, 1 location in Las Vegas, 1 location in Washington, 3 locations in Michigan and 1 location in Rhode Island. GrowGen carries and sells thousands of products, including organic nutrients and soils, advanced lighting technology and state of the art hydroponic equipment to be used indoors and outdoors by commercial and home growers. Our mission is to own and operate GrowGeneration branded stores in all the major legalized cannabis states. Management estimates that roughly 1,000 hydroponic stores are in operation in the U.S. By 2020 the market is estimated to reach over $23 billion with a compound annual growth rate of 32%.

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