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01/10 18:47
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals several concerns: negative EBITDA widening to $9.7 million, project delays, and cost revisions. Despite a 40% increase in backlog, uncertainties remain, especially with the CEA sector's underperformance. Management's vague responses on mitigating delays and capitalizing on legislative catalysts further dampen sentiment. The reduced breakeven point and diversification efforts are positives, but the overall outlook is clouded by challenges in equipment demand and European operations. Without clear guidance or a new partnership, the stock is likely to experience a negative reaction.
Revenue Q4 2023 $15 million, a decrease of 13.5% from $17.3 million in Q4 2022. This decrease was due to reductions in all revenue categories, including construction design build revenue of $1.3 million, professional services revenue of $0.8 million, and equipment systems revenue of $0.2 million.
Gross Profit Q4 2023 $1.7 million or 11% of revenue, down from $3.2 million or 19% of revenue in Q4 2022. The decrease in gross profit of $1.5 million correlates to the decrease in revenue and a shift toward lower margin construction design build revenue.
Operating Expenses Q4 2023 $6.4 million, an increase of $0.2 million from $6.2 million in Q4 2022. The increase was due to higher general and administrative expenses, which rose by $3.8 million, offset by a $3.3 million reduction in a one-time business development expense.
Net Loss Q4 2023 $4.7 million or a negative $0.40 per diluted share, compared to a net loss of $4.2 million or a negative $0.39 per diluted share in Q4 2022.
Adjusted EBITDA Q4 2023 Negative $3 million, compared to negative $1.7 million in Q4 2022. The decrease was driven by lower revenues and gross profit, as well as an increase in general and administrative expenses.
Total Revenue FY 2023 $71.5 million, an increase of 6.7% from $67 million in FY 2022. This increase was driven by momentum in the commercial sectors, offset by decreases in equipment systems revenues.
Net Loss FY 2023 $18.7 million, compared to a net loss of $15.3 million in FY 2022.
Adjusted EBITDA FY 2023 Negative $9.7 million, compared to negative $3.9 million in FY 2022.
Cash Position at Year End 2023 $1.1 million with $2.5 million drawn on a $10 million working capital line of credit.
Backlog as of December 31, 2023 Approximately $110 million, a $26 million or 40% sequential increase over Q3 2023, attributed to delayed project delivery.
Revenue Growth: 2023 revenues reached $72 million, a 7% increase from the previous year, with $50 million (70%) from commercial markets and $22 million (30%) from Controlled Environment Agriculture (CEA).
Backlog Increase: Total backlog as of December 31, 2023, was approximately $110 million, a 40% increase from the previous quarter, attributed to delayed project deliveries.
European Market Expansion: Urban-gro has made strategic investments in its European entity, anticipating increased demand due to early stages of adult use legislation in Germany.
Commercial Sector Growth: The commercial sector continues to show strong organic growth, supported by a qualified pipeline of projects and signed contracts.
SG&A Expense Reduction: SG&A expenses were reduced by over $8 million on an annualized basis, expected to positively impact 2024 results.
Operational Efficiency: The company optimized its size to align with current performance levels, enhancing operational efficiency.
Diversification Strategy: Urban-gro's diversification strategy is broadening its presence across multiple industries, which is reflected in the expanding backlog.
Focus on Vertical Farming: The company continues to expand its vertical farming focus, albeit at a slower pace due to capital challenges.
Project Delays: Delays across multiple projects in Q4 2023 resulted in disappointing performance, although none of the delayed contracts were lost.
Regulatory Challenges: Ongoing state-level regulatory delays in the cannabis market, including the license awarding process, have negatively impacted demand and revenue.
Market Conditions: Continued softness in the Controlled Environment Agriculture (CEA) sector has led to a significant decrease in equipment revenues, which are crucial for financial performance.
Financial Performance: A prolonged multiyear compression of equipment revenues has resulted in a 62% decrease from 2022, impacting overall profitability.
Cost Management: Increased general and administrative expenses due to legal defense costs and personnel costs, despite efforts to reduce SG&A expenses by over $8 million.
Economic Factors: The potential rescheduling of cannabis and the SAFER Banking Bill could significantly impact capital availability and market dynamics.
Backlog and Revenue Guidance: The backlog increased to $110 million, but achieving projected revenue of $84 million in 2024 is contingent on market recovery and project execution.
Revenue Growth: 2024 consolidated revenues are anticipated to exceed $84 million, representing a 17% increase over 2023.
Adjusted EBITDA: Expecting to generate positive adjusted EBITDA in 2024, with a focus on reducing SG&A expenses.
Backlog: Total backlog as of December 31, 2023, is approximately $110 million, a 40% increase from Q3 2023.
Cost Reduction Initiatives: Identified over $8 million in annualized SG&A expense reductions for 2024.
Strategic Goals for Financial Services Division: 1. Improved tactical reporting for better performance visibility. 2. Drive cost reductions in insurance and facilities. 3. Strategic utilization of the line of credit.
Q1 2024 Revenue Guidance: Expecting revenues to be greater than $15 million.
Q1 2024 Adjusted EBITDA Guidance: Expecting adjusted EBITDA to be greater than negative $0.5 million.
Long-term Revenue Expectations: Majority of delayed revenues from 2023 expected to be recognized in 2024.
Market Outlook: Positive sentiment in the cannabis sector with potential regulatory changes could significantly impact future performance.
Shareholder Return Plan: The company has not announced any share buyback or dividend program during the call.
The earnings call presents a mixed picture: revenue decreased by 7% YoY, but gross profit and adjusted EBITDA improved. The cannabis industry's potential reclassification is a positive long-term catalyst, but short-term financial guidance is not strong. Operating expenses decreased significantly, yet the backlog also fell. The Q&A revealed cautious optimism about cannabis rescheduling but no immediate impact. Overall, the financial results are mixed with some positive developments, leading to a neutral sentiment.
The earnings call reveals several concerns: negative EBITDA widening to $9.7 million, project delays, and cost revisions. Despite a 40% increase in backlog, uncertainties remain, especially with the CEA sector's underperformance. Management's vague responses on mitigating delays and capitalizing on legislative catalysts further dampen sentiment. The reduced breakeven point and diversification efforts are positives, but the overall outlook is clouded by challenges in equipment demand and European operations. Without clear guidance or a new partnership, the stock is likely to experience a negative reaction.
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