GrowGeneration Corp (OTCMKTS:GRWG) is on a high right now. The reaction from the news of its recent acquisition not long after its relatively positive financial reports point the company to a bright future.
In this piece, we discuss the details of both the acquisition and the company’s financial results. First, take a look at its price movement:
GrowGeneration Corp. was established by Michael Salaman and Darren Lampert in 2014 and is headquartered in Pueblo, Colorado. The firm specializes in the operation of hydroponic supply stores. It delivers power-efficient lighting, plant nutrients, hydroponic equipment and other products which are used by specialty cultivation operators and professional growers.
The company has possession of a number of specialty retail hydroponic and organic gardening stores which it also operates. Presently it has seventeen stores, which consists of one location in Rhode Island, eight locations in Colorado, three locations in Michigan, two locations in California, two locations in Nevada, and one location in Washington. As part of its business, the firm sells thousands of products ranging from organic nutrients and soils to advanced lighting technology as well as state of the art hydroponic equipment to be utilized both indoors and outdoors by commercial and home growers.
For more information on the company, take a look at our previous post here.
The firm recently just announced that it had acquired all the assets of Superior Growers Supply (SGS). The firm will combine a projected $4.0 million in revenue after the deal. With over twenty thousand square footage retail space and warehousing, SGS is a destination location which services growers located in the state of Michigan and its head office is in Michigan. SGS also has retail stores in Livonia, South Lansing, and Lansing along with some distribution facilities in the Lansing area.
The continued the implementation of its purchase plans to acquire the foremost hydroponic stores in major markets. Back in 2017, the sale of medical marijuana in Michigan was estimated to be about $711 million for the year, raking in $21 million as tax revenue. If full legalization of medical marijuana is put in place, this number is expected to exceed $1 billion in revenue in a year. An estimated 277,000 patients have been registered with the state for authorization to grow their own cannabis or acquire it from the forty-three thousand accredited caregivers who are allowed to supply to a limited number of people. The Michigan patient count is only lower than that of California.
Co-Founder and CEO of GrowGen, Darren Lampert when speaking on the company’s acquisition of Superior Growers Supply explained that SGS is one of the original hydroponic retailers has put GrowGen in a strong position within the Michigan market and will supplement the firm’s top line revenue by $4 million in its consolidated financial statements. The combination of the team at SGS and its iconic stores as well is also expected to prove a major win for the firm’s portfolio.
At the end of 2017, the firm had recorded revenues of $14,363 million, an increase of 80% from the revenues of the last year. Noticeably, this is the third straight year of revenue increase for the firm, with the firm earning revenues of $3455 and $7980 in 2015 and 2016respectively. However, it is anticipated that the market demand for its merchandise will continue to increase and boost sales revenues in the coming years.
However, the firm recorded cost of sales of $11,094, an increase in the cost of sales to earnings ratio from the previous year. A pointer that the firm may have lost some of its production efficiency in its sales operations across both years.
In line with the cost of sales, sales, general and administrative expenses jumped by a massive 181%, while the firm incurred other operating expenses during the year. With no major additional income, while there were increases in sales and administrative costs and other costs, operating loss for the year was recorded at $2,850, much higher than the previous year’s loss figure of $425. Net loss for the year was $2542.
The statement of financial position reveals that the firm is not too highly geared. On its books, its total debt is worth an estimated $1,675 leading to stable debt to equity ratio of 0.22. It also has a liquidity ratio of 4.5, which can be considered another positive for the firm even its industry.
GRWG is an opportunity for investors to examine and take advantage of. With its improving fortunes and continuing expansion, it is only a matter of time before the company gains the attention of the full market.
Disclosure: We have no position in GRWG and have not been compensated for this article.