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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: March 31, 2025
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 333-207889
 
GROWGENERATION CORP.
(Exact name of registrant as specified in its charter)
 
Colorado 46-5008129
(State or other jurisdiction
of incorporation)
 (IRS Employer
ID No.)
 
5619 DTC Parkway, Suite 900
Greenwood Village, Colorado 80111
(Address of principal executive offices)
 
(800) 935-8420
(Issuer's Telephone Number)
 
Securities registered pursuant to Section 12(b) of the Act: 
Title of each class Trading symbol Name of each exchange on which registered
Common Stock, par value $0.001 per share GRWG The NASDAQ Stock Market LLC
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No ☐
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filerSmaller reporting company
Non-accelerated filerEmerging growth company
Accelerated filer
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No ☒
 
As of May 5, 2025 there were 59,495,766 shares of the registrant's common stock issued and outstanding. 




TABLE OF CONTENTS
 
  Page No.
   
  
   
 
 
 
 
 
   
   
 

i


PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

GROWGENERATION CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except shares)
 March 31,
2025
December 31,
2024
ASSETS  
Current assets:  
Cash and cash equivalents$32,742 $27,471 
Marketable securities19,836 28,984 
Accounts receivable, net of allowance for credit losses of $2,146 and $2,177 at March 31, 2025 and December 31, 2024, respectively
6,936 7,361 
Notes receivable, current, net of allowance for credit losses of $ and $ at March 31, 2025 and December 31, 2024, respectively
1,056 1,056 
Inventory42,129 40,295 
Prepaid income taxes177 145 
Prepaid and other current assets6,285 7,896 
Total current assets109,161 113,208 
Property and equipment, net13,014 15,493 
Operating leases right-of-use assets, net32,431 34,453 
Intangible assets, net7,241 8,779 
Goodwill1,605 1,605 
Other assets780 814 
TOTAL ASSETS$164,232 $174,352 
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$9,959 $8,146 
Accrued liabilities2,149 2,358 
Payroll and payroll tax liabilities2,021 2,655 
Customer deposits2,350 2,404 
Sales tax payable1,409 1,313 
Current maturities of operating lease liabilities7,024 7,398 
Total current liabilities24,912 24,274 
Operating lease liabilities, net of current maturities27,809 29,633 
Other long-term liabilities352 352 
Total liabilities53,073 54,259 
Commitments and contingencies (Note 12)
Stockholders' equity:
Common stock; $0.001 par value; 100,000,000 shares authorized, 59,487,477 and 59,402,628 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively
59 59 
Additional paid-in capital376,120 375,677 
Accumulated deficit(265,020)(255,643)
Total stockholders' equity111,159 120,093 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$164,232 $174,352 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
1


GROWGENERATION CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share amounts)
 
 Three Months Ended March 31,
 20252024
Net sales$35,703 $47,888 
Cost of sales (exclusive of depreciation and amortization shown below)25,996 35,524 
Gross profit9,707 12,364 
Operating expenses:
Store operations and other operational expenses8,792 10,634 
Selling, general, and administrative7,112 7,908 
Estimated credit losses (recoveries)92 (488)
Depreciation and amortization3,585 3,742 
Total operating expenses19,581 21,796 
Loss from operations(9,874)(9,432)
Other income (expense):
Other income 47 
Interest income497 602 
Interest expense (56)
Total other income497 593 
Net loss before taxes(9,377)(8,839)
(Provision) benefit for income taxes 2 
Net loss$(9,377)$(8,837)
Net loss per share, basic$(0.16)$(0.14)
Net loss per share, diluted$(0.16)$(0.14)
Weighted average shares outstanding, basic59,441 61,499 
Weighted average shares outstanding, diluted59,441 61,499 
 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
 
2


GROWGENERATION CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited, in thousands)  

Common StockAdditional
Paid-In Capital
Accumulated DeficitTotal
Stockholders' Equity
 SharesAmount
Balance as of December 31, 202459,403 $59 $375,677 $(255,643)$120,093 
Common stock issued for share-based compensation84 — — —  
Common stock withheld for employee payroll taxes— — (60)— (60)
Share-based compensation— — 503 — 503 
Net loss— — — (9,377)(9,377)
Balance as of March 31, 202559,487 $59 $376,120 $(265,020)$111,159 

Common StockAdditional
Paid-In Capital
Accumulated DeficitTotal
Stockholders' Equity
 SharesAmount
Balance as of December 31, 202361,484 $61 $373,433 $(200,099)$173,395 
Common stock issued for share-based compensation23 1 — — 1 
Common stock withheld for employee payroll taxes— — (29)— (29)
Share-based compensation— — 778 — 778 
Net loss— — — (8,837)(8,837)
Balance as of March 31, 202461,507 $62 $374,182 $(208,936)$165,308 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

3


GROWGENERATION CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
 Three Months Ended March 31,
 20252024
Cash flows from operating activities:  
Net loss$(9,377)$(8,837)
Adjustments to reconcile net loss to net cash used in operating activities: 
Depreciation and amortization3,585 3,742 
Share-based compensation503 778 
Estimated credit losses (recoveries)92 (488)
Loss on asset disposition658 33 
Change in value of marketable securities(234)(390)
Changes in operating assets and liabilities:
Accounts and notes receivable333 1,581 
Inventory(1,834)(1,123)
Prepaid expenses and other assets1,613 2,170 
Accounts payable and accrued liabilities1,600 295 
Operating leases(176)80 
Payroll and payroll tax liabilities(634)(72)
Customer deposits(54)(1,479)
Sales tax payable96 64 
Net cash and cash equivalents used in operating activities(3,829)(3,646)
Cash flows from investing activities:  
Purchase of marketable securities(7,186)(21,143)
Maturities of marketable securities16,568 26,465 
Purchase of property and equipment(237)(355)
Proceeds from disposals of assets15  
Net cash and cash equivalents provided by investing activities9,160 4,967 
Cash flows from financing activities:  
Common stock withheld for employee payroll taxes(60)(28)
Net cash and cash equivalents used in financing activities(60)(28)
Net increase in cash and cash equivalents5,271 1,293 
Cash and cash equivalents at the beginning of period27,471 29,757 
Cash and cash equivalents at the end of period$32,742 $31,050 
Supplemental cash flow disclosures and non-cash investing and financing transactions:  
Cash paid for interest$ $56 
Cash paid for income taxes$46 $ 
Right-of use assets obtained in exchange for new or modified operating lease liabilities$ $2,869 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
4

GROWGENERATION CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2025
(Unaudited) 

1. GENERAL

GrowGeneration Corp. (together with its direct and indirect wholly-owned subsidiaries, collectively "GrowGeneration" or the "Company") was incorporated in Colorado in 2014. Since then, GrowGeneration has grown from a small chain of specialty retail hydroponic and organic garden centers to a multifaceted business with diverse assets. Today, GrowGeneration operates two major lines of business: its Cultivation and Gardening segment, composed of the Company's hydroponic and organic gardening business; and its Storage Solutions segment, composed of the Company's benching, racking, and storage solutions business.

As of March 31, 2025, GrowGeneration has 31 retail locations across 12 states in the U.S. The Company also operates an online superstore at growgeneration.com, as well as a wholesale distribution business for resellers, and a benching, racking, and storage solutions business, Mobile Media or MMI.

Basis of Presentation

The accompanying interim unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. These statements should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024 ("2024 Form 10-K"). There were no significant changes to the Company's significant accounting policies as disclosed in the 2024 Form 10-K. The results reported in these unaudited Condensed Consolidated Financial Statements are not necessarily indicative of results for the full fiscal year.

All amounts included in the accompanying notes to the Condensed Consolidated Financial Statements, except per share data, are in thousands (000).

Reclassifications

Certain amounts in the prior period Condensed Consolidated Financial Statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported net loss within the Condensed Consolidated Statements of Operations.

Use of Estimates

The preparation of the Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements, and the reported revenues and expenses during the reporting period. Actual results could vary from the estimates that were used.

2. RECENT ACCOUNTING PRONOUNCEMENTS

From time to time, the Financial Accounting Standard Board ("FASB") or other standard setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification are communicated through the issuance of an Accounting Standards Update ("ASU"). The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements. In addition to the accounting pronouncements discussed below, no other new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material effect on the Company's Condensed Consolidated Financial Statements or disclosures.
Recently Issued Accounting Pronouncements Not Yet Adopted
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) - Improvements to income tax disclosures ("ASU 2023-09"), expanding the disclosures requirement for income taxes primarily by requiring more detailed disclosure for income taxes paid and the effective tax rate reconciliation. ASU 2023-09 is effective for annual periods beginning after
5

GROWGENERATION CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2025
(Unaudited) 
December 15, 2024. Early adoption is permitted, and adoption of ASU 2023-09 can be applied prospectively or retrospectively. The Company is currently evaluating the impact of this standard.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) ("ASU 2024-03"), which requires disclosure on an annual and interim basis of disaggregated information about certain income statement expense line items in the notes to the financial statements. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption is permitted, and adoption of ASU 2024-03 can be applied prospectively or retrospectively. The Company is currently evaluating the impact of this standard.

3. FAIR VALUE MEASUREMENTS

Fair Value Measurements

Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies, and similar techniques.

To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgement. Accordingly, the degree of judgement exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and all other current liabilities approximate fair values due to their short-term nature. The fair value of notes receivable approximates the outstanding balance net of reserves for expected credit loss. The marketable securities are classified as available-for-sale and are carried at fair value based on quoted market prices. Changes in fair value of marketable securities, principally derived from accretion of discounts, were $0.2 million and $0.4 million for the three months ended March 31, 2025 and 2024, respectively. Changes in fair value of marketable securities are included in Interest income on the Condensed Consolidated Statements of Operations.

 LevelMarch 31,
2025
December 31,
2024
Cash equivalents1$26,587 $16,945 
Marketable securities2$19,836 $28,984 

4. REVENUE RECOGNITION

Disaggregation of Revenues

Net sales are disaggregated by the Company's segments, which represent its principal lines of business, as well as by major product line, including proprietary brands, non-proprietary brands, and commercial fixtures, and by product type, including consumable and durable products. Refer to Note 13, Segments, for disaggregated revenue disclosures.

6

GROWGENERATION CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2025
(Unaudited) 
Contract Assets and Liabilities

Depending on the timing of when title of product transfers to a customer and when a customer makes payments for such product, the Company recognizes an accounts receivable (contract asset) or a customer deposit (contract liability). The opening and closing balances of the Company's accounts receivables and customer deposits were as follows:
 
 Accounts Receivable, NetCustomer Deposits
Balance as of January 1, 2025
$7,361 $2,404 
Balance as of March 31, 2025
6,936 2,350 
Decrease$(425)$(54)
Balance as of January 1, 2024
$8,895 $5,359 
Balance as of March 31, 2024
7,832 3,880 
Decrease$(1,063)$(1,479)

Of the total amount of customer deposits as of January 1, 2025, $1.1 million was reported as revenue during the three months ended March 31, 2025. Of the total amount of customer deposits as of January 1, 2024, $2.9 million was reported as revenue during the three months ended March 31, 2024.

Notes receivable at March 31, 2025 and December 31, 2024 were as follows: 
March 31,
2025
December 31,
2024
Notes receivable$1,056 $1,056 
Allowance for credit losses  
Notes receivable, net$1,056 $1,056 

During the three months ended March 31, 2024, the Company received a $0.3 million settlement related to a $1.5 million note receivable, which had been fully reserved as of December 31, 2023. Refer to Note 12, Commitments and Contingencies, for additional information regarding the settlement.

5. PROPERTY AND EQUIPMENT

Property and equipment at March 31, 2025 and December 31, 2024 consisted of the following:
 
 March 31,
2025
December 31,
2024
Vehicles$2,507 $2,553 
Building and land2,121 2,121 
Leasehold improvements10,374 12,086 
Furniture, fixtures and equipment12,995 13,051 
Capitalized software9,075 16,446 
Construction-in-progress29 49 
Total property and equipment, gross37,101 46,306 
Accumulated depreciation and amortization(24,087)(30,813)
Property and equipment, net$13,014 $15,493 
 
Depreciation and amortization expense related to property and equipment was $2.0 million and $2.1 million for the three months ended March 31, 2025 and 2024, respectively. In conjunction with the Company's restructuring activities as discussed in Note 14, Restructuring, the Company reassessed and shortened the estimated useful life of certain capitalized software assets, which resulted in a $0.6 million increase to depreciation and amortization expense related to property and equipment in the
7

GROWGENERATION CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2025
(Unaudited) 
three months ended March 31, 2025. These capitalized software assets became fully amortized and were retired during the three months ended March 31, 2025. Refer to Note 14, Restructuring, for additional information on the restructuring activities.

6. GOODWILL AND INTANGIBLE ASSETS

The carrying value of goodwill by segment was as follows:

Cultivation and GardeningStorage SolutionsTotal
Balance as of December 31, 2024$ $1,605 $1,605 
Balance as of March 31, 2025$ $1,605 $1,605 

Accumulated impairment for goodwill related entirely to the Cultivation and Gardening segment and totaled $131.9 million as of March 31, 2025 and December 31, 2024.

The changes in intangible assets by segment for the three months ended March 31, 2025 were as follows:

Cultivation and GardeningStorage SolutionsTotal
Balance as of December 31, 2024$6,881 $1,898 $8,779 
Amortization(1,363)(175)(1,538)
Balance as of March 31, 2025$5,518 $1,723 $7,241 

Intangible assets on the Condensed Consolidated Balance Sheets consisted of the following:
March 31, 2025December 31, 2024
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Trade names$27,790 $(23,187)$4,603 $27,790 $(21,908)$5,882 
Patents, trademarks69 (69) 69 (69) 
Customer relationships12,869 (10,233)2,636 12,869 (9,974)2,895 
Non-competes860 (858)2 860 (858)2 
Intellectual property1,136 (1,136) 1,136 (1,136) 
Total$42,724 $(35,483)$7,241 $42,724 $(33,945)$8,779 

Amortization expense was $1.5 million and $1.7 million for the three months ended March 31, 2025 and 2024, respectively.

Future amortization expense as of March 31, 2025 was as follows:

2025 (remainder of the year)$4,354 
20262,015 
2027765 
202882 
202925 
Total$7,241 

8

GROWGENERATION CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2025
(Unaudited) 
7. INCOME TAXES

For the three months ended March 31, 2025 and 2024, the effective tax rate was 0.0%. The effective tax rate for each of the three months ended March 31, 2025 and 2024 was lower than the U.S. federal statutory rate of 21.0% primarily due to the Company's valuation allowance against deferred tax assets. As of March 31, 2025, the Company concluded that its deferred tax assets are not expected to be realizable, based on positive and negative evidence, therefore it has assigned a full valuation allowance against them.

8. LEASES

The right-of-use assets and corresponding liabilities related to the Company's operating leases were as follows:

 March 31,
2025
December 31,
2024
Operating leases right-of-use assets, net
$32,431 $34,453 
Current maturities of operating lease liability$7,024 $7,398 
Operating lease liability, net of current maturities27,809 29,633 
Total lease liability$34,833 $37,031 
 
The weighted-average remaining lease terms and weighted-average discount rates for operating leases were as follows:

March 31,
 20252024
Weighted average remaining lease term5.4 years6.0 years
Weighted average discount rate6.2 %6.2 %

The components of lease costs were as follows:

 Three Months Ended March 31,
 20252024
Operating lease costs$2,292 $2,563 
Variable lease costs153 664 
Short-term lease costs88 85 
Sublease income(380)(272)
Total operating lease costs$2,153 $3,040 

Future maturities of the Company's operating lease liabilities and receipts from subleases as of March 31, 2025 were as follows: 

Lease PaymentsSublease Receipts
2025 (remainder of the year)$6,780 $(895)
20268,091 (1,222)
20276,455 (1,257)
20286,022 (1,294)
20295,425 (1,332)
Thereafter8,170 (1,470)
Total lease payments (receipts)40,943 (7,470)
Less: imputed interest(6,110)
Operating lease liability as of March 31, 2025
$34,833 

9

GROWGENERATION CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2025
(Unaudited) 
Supplemental and other information related to leases was as follows:

Three Months Ended March 31,
20252024
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow from operating leases$2,358 $2,580 

9. EARNINGS PER SHARE
   
The following table sets forth the composition of the weighted average shares (denominator) used in the basic and dilutive loss per share computation for the three months ended March 31, 2025 and 2024:

 Three Months Ended March 31,
 20252024
Net loss$(9,377)$(8,837)
Weighted average shares outstanding, basic59,441 61,499 
Effect of dilutive outstanding restricted stock units and stock options
  
Adjusted weighted average shares outstanding, dilutive59,441 61,499 
Basic loss per share$(0.16)$(0.14)
Dilutive loss per share$(0.16)$(0.14)
 
Diluted loss per share calculations for the three months ended March 31, 2025 excluded 1.4 million non-vested restricted stock units and 17 thousand shares of common stock issuable upon exercise of stock options that would have been anti-dilutive. Diluted loss per share calculations for the three months ended March 31, 2024 excluded 0.9 million non-vested restricted stock units and 0.6 million shares of common stock issuable upon exercise of stock options that would have been anti-dilutive.

10. SHARE-BASED PAYMENTS
 
The Company maintains a long-term incentive plan, the Second Amended and Restated 2018 Equity Incentive Plan, for employees, non-employee members of its Board of Directors (the "Board"), and consultants. The plan allows the Company to grant equity-based compensation awards, including stock options, stock appreciation rights, performance share units, restricted stock units, restricted stock awards, common stock warrants, or a combination of awards (collectively, "share-based awards").

The Company accounts for share-based payments through the measurement and recognition of compensation expense for share-based awards made to employees, non-employee members of the Board, and consultants of the Company, including stock options and restricted stock units. The Company recorded share-based compensation expense of $0.5 million and $0.8 million in the three months ended March 31, 2025 and 2024, respectively.

Restricted Stock Units
 
The Company issues restricted stock units to eligible employees, which are subject to forfeiture until the end of an applicable vesting period. The awards generally vest annually or biannually over three to five years following the date of grant, subject to the employee's continuing employment as of that date. Restricted stock units are valued using the market value on the grant date.
 
10

GROWGENERATION CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2025
(Unaudited) 
Restricted stock unit activity for the three months ended March 31, 2025 is presented in the following table:
 
 UnitsWeighted Average Grant Date Fair Value
Nonvested as of December 31, 2024
1,403 $2.57 
Granted244 $1.26 
Vested(131)$3.14 
Forfeited(13)$2.65 
Nonvested as of March 31, 2025
1,503 $2.30 
 
As of March 31, 2025, the Company had approximately $2.7 million of unrecognized share-based compensation related to restricted stock units, which is expected to be recognized over a weighted average period of approximately 2.5 years. During the three months ended March 31, 2024, no restricted stock units were granted.

Stock Options

Stock option activity for the three months ended March 31, 2025 is presented in the following table:
 
SharesWeighted Average Exercise PriceWeighted Average Remaining Contractual Term (Years)Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2024
16 $4.63 0.36$2.56 
Granted  —  
Exercised  —  
Forfeited or expired  —  
Outstanding as of March 31, 2025
16 $4.63 0.11$2.56 
Vested and exercisable as of March 31, 2025
16 $4.63 0.11$2.56 

11. STOCKHOLDERS' EQUITY

On March 20, 2024, the Board authorized a share repurchase program, whereby the Company could repurchase up to $6.0 million worth of its common stock in open market transactions pursuant to Rule 10b-18 of the Exchange Act and a 10b5-1 trading plan. The program began on April 1, 2024. This share repurchase program was intended to enhance long-term shareholder value. The program did not obligate the Company to acquire any specific number of shares or to acquire any shares over any specific period of time. The timing and amount of any repurchases was dependent upon factors such as the stock price, trading volumes, market conditions, and regulatory requirements. The stock repurchase program could be amended, suspended, or discontinued at any time by the Company.
As of December 31, 2024, the Company completed all purchases available under the stock repurchase program. The Company retired all shares of treasury stock acquired under the share repurchase program during the year ended December 31, 2024. The shares were returned to the status of authorized but unissued shares.

12. COMMITMENTS AND CONTINGENCIES

Legal Matters

From time to time, the Company has been, and may again become involved in legal proceedings arising in the ordinary course of its business, including the initiation and defense of proceedings related to contract and employment disputes. It is the Company's opinion that these claims individually and in the aggregate are not expected to have a material adverse effect on its financial condition, results of operations or cash flows.

11

GROWGENERATION CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2025
(Unaudited) 
In December 2021, the Company was sued in the U.S. District Court for the Southern District of Texas related to a Promissory Note & Asset Acquisition Rights Option ("Note & Option") with TGC Systems, LLC ("Total Grow"). The case was dismissed and the parties submitted the matter to arbitration pursuant to the arbitration clause of the Note & Option. Among other claims, Total Grow alleged that the Company was liable to Total Grow for failing to consummate the acquisition of Total Grow by the Company. The Company asserted counterclaims for repayment of $1.5 million in principal loaned by the Company to Total Grow pursuant to the Note & Option, plus interest and certain costs. In July 2023, the arbitrator rendered an arbitration award denying all of Total Grow's claims and defenses and awarding the Company more than $2.0 million in total, consisting of principal, interest, and certain costs. Total Grow voluntarily filed for bankruptcy in October 2023. In February 2024, the Company received $0.3 million from the bankruptcy proceedings, which it recorded as a recovery on the $1.5 million Note & Option. The remainder of the Note & Option, which were fully reserved, were written off during the three months ended March 31, 2024.

There can be no assurance that future developments related to pending claims or claims filed in the future, whether as a result of adverse outcomes or as a result of significant defense costs, will not have a material effect on the Company's financial condition, results of operations or cash flows. The Company believes that its assessment of contingencies is reasonable and that the related accruals, in the aggregate, are adequate; however, there can be no assurance that the final resolution of these matters will not have a material effect on the Company's financial condition, results of operations or cash flows.

Indemnifications

In the ordinary course of its business, the Company makes certain indemnities under which it may be required to make payments in relation to certain transactions. As of March 31, 2025, the Company did not have any liabilities associated with indemnities.

In addition, the Company, as permitted under Colorado law and in accordance with its amended and restated certificate of incorporation and amended and restated bylaws, in each case, as amended to date, indemnifies its officers and directors for certain events or occurrences, subject to certain limits, while the officer or director is or was serving at the Company's request in such capacity. The duration of these indemnifications varies. The Company has a director and officer insurance policy that may enable it to recover a portion of any future amounts paid. The Company accrues for losses for any known contingent liability, including those that may arise from indemnification provisions, when future payment is probable. No such losses have been recorded to date.

13. SEGMENTS
The Company has two operating segments, each its own reportable segment, based on its major lines of business: the Cultivation and Gardening segment, composed of the Company's hydroponic and organic gardening business; and the Storage Solutions segment, composed of the Company's benching, racking, and storage solutions business.
In addition to sales by operating segment, which represent the Company's principal lines of business, the chief operating decision maker ("CODM") evaluates the Company's operations by regularly reviewing sales by major product line, including proprietary brands, non-proprietary brands, and commercial fixtures, and by product type, including consumable and durable products. Profit measures are evaluated for each reportable segment based on income from operations with identifiable expenses allocated to each reporting unit from which the expense line item was derived.
The CODM compares actual results to prior year and current year budgeted income statements to identify areas for improvement and make capital allocation decisions. The CODM uses gross profit measures to evaluate pricing decisions and product mix, also reviewing proprietary brand versus non-proprietary brand sales to assess the Company’s progress with key performance initiatives. The Company's CODM is the chief executive officer.

12

GROWGENERATION CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2025
(Unaudited) 
Disaggregated revenue by segment is presented in the following tables:

Three Months Ended March 31,
Net sales20252024
Cultivation and Gardening
Proprietary brand sales$9,883 $9,726 
Non-proprietary brand sales21,028 33,382 
Total Cultivation and Gardening30,911 43,108 
Storage Solutions
Commercial fixture sales4,792 4,780 
Total Storage Solutions4,792 4,780 
Total$35,703 $47,888 

Three Months Ended March 31,
Net sales20252024
Cultivation and Gardening
Consumables$23,055 $30,181 
Durables7,856 12,927 
Total Cultivation and Gardening30,911 43,108 
Storage Solutions
Durables4,792 4,780 
Total Storage Solutions4,792 4,780 
Total$35,703 $47,888 

13

GROWGENERATION CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2025
(Unaudited) 
Selected information by segment is presented in the following tables for the three months ended:

March 31, 2025
Cultivation & GardeningStorage SolutionsCorporateTotal
Net sales$30,911 $4,792 $ $35,703 
Cost of sales23,007 2,989  25,996 
Gross profit7,904 1,803  9,707 
Operating expenses
Store operations and other operational expenses:
Employee costs2,661 747  3,408 
Facilities2,756 394  3,150 
External service providers95 14  109 
Other segment items (1)
1,857 268  2,125 
Total store operations and other operational expenses7,369 1,423  8,792 
Other operating expenses
Selling, general, and administrative  7,112 7,112 
Estimated credit losses  92 92 
Depreciation and amortization  3,585 3,585 
Total operating expenses7,369 1,423 10,789 19,581 
Income (loss) from operations535 380 (10,789)(9,874)
Other income  497 497 
Net income (loss) before taxes$535 $380 $(10,292)$(9,377)
(1) Other segment items for each reportable segment include travel expenses, transaction fees, and other miscellaneous expenses.

March 31, 2024
Cultivation & GardeningStorage SolutionsCorporateTotal
Net sales$43,108 $4,780 $ $47,888 
Cost of sales32,783 2,741  35,524 
Gross profit10,325 2,039  12,364 
Operating expenses
Store operations and other operational expenses:
Employee costs3,654 771  4,425 
Facilities3,480 358  3,838 
External service providers529 11  540 
Other segment items (1)
1,598 233  1,831 
Total store operations and other operational expenses9,261 1,373  10,634 
Other operating expenses
Selling, general, and administrative  7,908 7,908 
Estimated credit recoveries  (488)(488)
Depreciation and amortization  3,742 3,742 
Total operating expenses9,261 1,373 11,162 21,796 
Income (loss) from operations1,064 666 (11,162)(9,432)
Other income  593 593 
Net income (loss) before taxes$1,064 $666 $(10,569)$(8,839)
(1) Other segment items for each reportable segment include travel expenses, transaction fees, and other miscellaneous expenses.


The Company does not evaluate segments by assets or capital expenditures as it is not practical and does not inform any of its decision making processes. The CODM neither reviews nor requests this information.
14

GROWGENERATION CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2025
(Unaudited) 

14. RESTRUCTURING

On July 22, 2024, the Company announced a strategic restructuring plan focused on long-term profitability and advancing growth initiatives in key areas of its Cultivation and Gardening segment such as its proprietary brands, commercial sales, and e-commerce business. The restructuring plan primarily included reductions in cost structure by closing and consolidating 12 redundant or underperforming retail locations, workforce reductions, and other operational improvements in inventory management, sales and marketing, and administrative activities.

The Company's restructuring and restructuring-related charges consisted of inventory disposal costs, retail location closure costs including related contract termination costs and fixed asset disposals, employee termination benefits, asset impairments including the impairment of operating lease right-of-use assets, and other associated costs.

Since the restructuring activities were announced in July 2024, the Company incurred aggregate restructuring and restructuring-related costs of $3.5 million, of which $1.1 million were incurred during the three months ended March 31, 2025 and are presented on the Condensed Consolidated Statements of Operations as follows:

Restructuring
Cultivation and Gardening segment:
Store operations and other operational expenses (1)
765 
Segment operating loss(765)
Corporate expenses:
Selling, general, and administrative (2)
376 
Total restructuring and restructuring-related charges$(1,141)
(1) Costs consist primarily of fixed asset disposals and lease contract termination costs for previously closed retail locations
(2) Costs consist of corporate operational and administrative contract terminations

In conjunction with the Company's restructuring activities related to operational and administrative improvements, the Company reassessed and shortened the estimated useful life of certain capitalized software assets, which resulted in an $0.6 million increase to depreciation and amortization expense related to property and equipment in the three months ended March 31, 2025. These capitalized software assets became fully amortized and were retired during the three months ended March 31, 2025. Additionally, certain facilities costs or contract termination costs related to closed retail locations for which the Company is pursuing sublease arrangements or lease terminations may be paid over the remaining terms which extend through 2032.

The liabilities associated with restructuring costs are included in Accrued liabilities and Payroll and payroll tax liabilities on the Condensed Consolidated Balance Sheets. Activities related to liabilities incurred under the restructuring plan were as follows:

Retail Location ClosuresTermination BenefitsTotal
Balance as of January 1, 2025$115 $9 $124 
Additions765  765 
Payments and other adjustments(880)(9)(889)
Balance as of March 31, 2025$ $ $ 

Overall, the Company has incurred a total of approximately $3.5 million in restructuring and restructuring-related costs, including the $1.1 million incurred in the three months ended March 31, 2025. The Company has substantially completed its restructuring activities as of March 31, 2025 and does not expect to incur significant additional restructuring and restructuring-related costs in future periods.

15


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements and related notes that appear elsewhere in this report as well as our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 13, 2025. We caution readers that this Quarterly Report of GrowGeneration Corp. on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to risks and uncertainties. Forward-looking statements generally can be identified through the use of words such as “guidance,” “outlook,” “projected,” “may,” “likely,” “anticipates,” “believes,” “expects,” “estimates,” “plans,” “intends,” “objectives,” and similar expressions. These statements reflect management’s best judgment based on factors known at the time of such statements. Actual events or results may differ materially from those discussed herein. The forward-looking statements contained in this report have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements. The assumptions used for purposes of the forward-looking statements contained in this report represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. No assurance can be given that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements, except as required by federal securities laws. There may be additional risks, uncertainties, and other factors that we do not currently view as material or that are not necessarily known. Dollars in tabular format are presented in thousands unless otherwise indicated.
 
BUSINESS OVERVIEW AND RECENT DEVELOPMENTS

GrowGeneration Corp. (together with all of its direct and indirect wholly owned subsidiaries, collectively "GrowGeneration" or the "Company") was incorporated in Colorado in 2014. Since then, GrowGeneration has grown from a small chain of specialty retail hydroponic and organic garden centers to a multifaceted business with diverse assets. Today, GrowGeneration operates two major lines of business: our Cultivation and Gardening segment, composed of our hydroponic and organic gardening business; and our Storage Solutions segment, composed of our benching, racking, and storage solutions business.

The United States has recently announced changes to U.S. trade policy, including increasing tariffs on imports, in some cases significantly, and potentially negotiating or terminating existing trade agreements. For example, on April 2, 2025, the United States announced a new universal baseline tariff of 10%, plus an additional country-specific tariff for select trading partners, on all U.S. imports. These actions, and retaliatory tariffs imposed by other countries on U.S. exports, have led to significant volatility and uncertainty in global markets. Given the uncertainty regarding the scope and duration of current and potential tariffs, trade policies, and other non-tariff trade practices and policies, the specific impact on our business and results of operations is uncertain but could result in increased costs for our products. We are actively monitoring these developments and exploring strategies to mitigate these risks and potential negative effects on our business and results from operations, including negotiating with suppliers, adjusting our pricing strategies, moving our supply chain away from countries with higher tariffs in favor of other jurisdictions, and seeking tariff exemptions where possible.

MARKETS AND BUSINESS SEGMENTS

We have two operating segments, each its own reportable segment, based on our major lines of business: the Cultivation and Gardening segment and the Storage Solutions segment. We recognize specifically identifiable operating costs such as cost of sales, distribution expenses, and store operations and other operational expenses within each segment. Selling, general, and administrative expenses, such as administrative and management expenses, salaries, and benefits, share-based compensation, director fees, legal expenses, accounting and consulting expenses, and technology costs, are not allocated to specific segments and are reflected in the enterprise results.

Cultivation and Gardening Segment

We are a leading developer, marketer, retailer, and distributor of products for both indoor and outdoor hydroponic and organic gardening. Our main business strategy within the hydroponic and organic gardening sector has been to consolidate assets within the fragmented hydroponics industry to leverage efficiencies of a centralized organization.
16



We sell a variety of hydroponic and organic gardening related products, including nutrients, additives, growing media, lighting, environmental control systems, and other products for indoor and outdoor cultivation. Our products include proprietary brands such as Charcoir, Drip Hydro, Power Si, Ion lights, The Harvest Company, and more, the development and expansion of which are a key component of the Company's growth strategy. Our target customers include commercial and craft growers, as well as home growers, in the plant-based medicine market, and commercial and home gardeners who grow organic herbs, fruits, and vegetables. Additionally, through our wholesale division, we distribute many of our proprietary products to customers that are wholesalers, resellers, and retailers in the specialty retail hydroponic and organic gardening industry.

We make our products available to growers through a variety of channels, including our hydroponic retail locations, a commercial sales division that provides white glove service to commercial cultivators, a wholesale division that markets to resellers in both the hydroponic and traditional gardening markets, and an online platform at growgeneration.com, which includes a B2B customer portal for commercial and wholesale customers. Management believes that the Company has the largest chain of specialty retail hydroponic and organic garden centers in the U.S., with 31 retail locations across 12 states as of March 31, 2025. We continue to evaluate our retail geographic footprint for redundancies in our fixed cost structure and for opportunities to serve our customers through other retail locations and our online platforms.

Storage Solutions Segment

Our Storage Solutions business, branded as "Mobile Media" or "MMI," provides customized storage solutions designed to enhance profitability, productivity, and efficiency for our customers by allowing them to save space and increase storage capacity. We cater to diverse markets with our products and services, including agriculture, retail, warehousing, office and administrative, food service, hospitality, golf and country clubs, and more. Our products include high-density mobile storage systems, static shelving, and other accessories such as desks, lockers, safes, and secured storage, offering a solution for every storage need. MMI also offers a wide variety of services, including site surveys, floor plan designs, capacity analysis, seismic calculations, permitting, and installation, in order to provide a comprehensive, turnkey solution for customers. Based in the Hudson Valley, New York, the MMI team has decades of experience successfully completing projects throughout the U.S., Canada, and Mexico.

Our target customers generally include small, mid-size, and large businesses seeking vertical space-saving solutions that are custom tailored to their space and brand in an effort to maximize storage capacity or gain space in their real estate footprint. Many of our customers are involved in the construction and design industries and include retailers, general contractors, and architects involved in new constructions and remodels for retail stores and fulfillment centers. Our customer base also includes the golf industry, specifically country clubs needing to store more club bags and optimize their existing space, as well as controlled environment agriculture (CEA) operators that cultivate indoors with vertical or rolling benching and racking.

Strategic Restructuring Plan

In July 2024, we announced a strategic restructuring plan focused on long-term profitability and advancing growth initiatives in key areas of our Cultivation and Gardening segment such as our proprietary brands, commercial sales, and e-commerce business. The restructuring plan primarily included product development costs, digital transformation initiatives, reductions in cost structure by closing and consolidating 12 redundant or underperforming retail locations, in addition to the 7 retail locations closed in the first half of 2024, workforce reductions, and other operational improvements in inventory management, sales and marketing, and administrative activities.

As of March 31, 2025, we have substantially completed our restructuring activities and do not expect to incur significant additional restructuring and restructuring-related costs in future periods. Overall, we incurred a total of approximately $3.5 million in restructuring and restructuring-related costs, including $1.1 million during the three months ended March 31, 2025 and $2.4 million previously incurred in fiscal year 2024. As a result of these restructuring activities, we expect improvement in our gross profit margin and profitability while generating annualized cost savings of approximately $12.0 million.

17


Our restructuring and restructuring-related charges consisted of inventory disposal costs, retail location closure costs including related contract termination costs and fixed asset disposals, employee termination benefits, asset impairments including the impairment of operating lease right-of-use assets, and other associated costs. Restructuring and restructuring-related costs incurred during the three months ended March 31, 2025 were presented on the Condensed Consolidated Statements of Operations as follows:

Restructuring
Cultivation and Gardening segment:
Store operations and other operational expenses (1)
765 
Segment operating loss(765)
Corporate expenses:
Selling, general, and administrative (2)
376 
Total restructuring and restructuring-related charges$(1,141)
(1) Costs consist primarily of fixed asset disposals and lease contract termination costs for previously closed retail locations
(2) Costs consist of corporate operational and administrative contract terminations

In conjunction with our restructuring activities to support operational and administrative improvements, we reassessed and shortened the estimated useful life of certain capitalized software assets, which resulted in a $0.6 million increase to depreciation and amortization expense related to property and equipment in the three months ended March 31, 2025. These capitalized software assets became fully amortized and were retired during the three months ended March 31, 2025.

As of March 31, 2025, there was no outstanding restructuring liability. However, certain facilities costs or contract termination costs related to closed retail locations for which we are pursuing sublease arrangements or lease terminations may be paid over the remaining terms which extend through 2032 at the latest.

Refer to Note 14, Restructuring, of our Notes to Unaudited Condensed Consolidated Financial Statements in this report for additional information regarding restructuring activities.

GROWTH STRATEGIES

Our main growth strategy has been to consolidate assets within the fragmented hydroponics industry to leverage efficiencies of a centralized organization. As a result, we have built a business that is driven by a wide selection of products, a strong portfolio of proprietary brands, a solutions-driven staff located in strategic markets around the country, and pick, pack, ship distribution and fulfillment capabilities.

Since our founding in 2014, we have acquired or opened numerous specialty hydroponic and organic gardening center locations. Management believes that GrowGeneration has the largest chain of specialty retail hydroponic and organic garden centers in the U.S., with 31 retail locations across 12 states as of March 31, 2025. We have also acquired several other types of businesses within or complimentary to the hydroponic industry, such as online retailers, proprietary products, our wholesale distribution business, and our benching, racking, and storage solutions business, MMI. We regularly seek and evaluate accretive acquisition opportunities with similar or complimentary businesses to those businesses it already operates.

Our main growth strategies for the Storage Solutions segment include expanding the types of customers and industries to which we sell our Storage Solutions products, including greater penetration in controlled environment agriculture, industrial and country club verticals.

COMPONENTS OF RESULTS OF OPERATIONS

Net Sales

We primarily generate net sales from the selling and distribution of proprietary and non-proprietary brand hydroponic and organic gardening products. In addition to our hydroponic and organic gardening product sales, we sell and install commercial fixtures through our benching, racking, and storage solutions business. Net sales reflect the amount of consideration that we expect to receive, which is derived from a list price reduced by variable consideration, including applicable sales discounts and estimated expected sales returns.

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These sales vary by the type of product: consumables, such as nutrients, additives, growing media, and supplies that are subject to regular replenishment; and durables, such as lighting, environmental control systems, and storage solutions. Generally, in new markets where legalization of plant-based medicines is recent and licensors are starting new grow operations, there is an initial increase of durable product purchases for facility build-outs, which decrease over time as growers establish their operations. Thereafter, we tend to observe cultivators focus their purchasing patterns to consumables as the primary source of product need. In more mature markets, the sales patterns tend to favor higher percentages of consumable purchasing in comparison to emerging markets.

Cost of Sales

Cost of sales includes cost of goods and shipping costs. Cost of goods consists of cost of merchandise, inbound freight, and other inventory-related costs, such as shrinkage costs and lower of cost or market adjustments. Occupancy expenses of our retail locations and distribution centers, which consist of payroll, rent, and other lease required costs, including common area maintenance and utilities, are included as a component of operating expenses within Store operations and other operational expenses in the Condensed Consolidated Statements of Operations.

Gross Profit

We calculate gross profit as net sales less cost of sales. Gross profit excludes depreciation and amortization, which are presented separately as a component of operating expenses in the Condensed Consolidated Statements of Operations. Our gross profit as a percentage of net sales, or gross profit margin, varies with our product mix, in particular the percentage of sales of proprietary brand products compared to non-proprietary brand products and of consumable products compared to durable products. Proprietary products typically have higher gross margins compared to non-proprietary products, and consumable products typically have higher gross margins compared to durable products.

Operating Expenses

Operating expenses are comprised of the following components: store operations and other operational expenses; selling, general, and administrative; estimated credit losses; depreciation and amortization; and impairment losses. Store operations and other operational expenses consist primarily of payroll, rent and utilities, and allocated corporate overhead costs. Selling, general, and administrative expenses consist of corporate salaries, stock-based compensation, advertising and promotions, travel and entertainment, professional fees, insurance, and other corporate administrative costs. Selling, general, and administrative expenses as a percentage of net sales typically does not increase commensurate with an increase in net sales. Our largest expenses are generally related to employee compensation and leases, which are primarily fixed and not variable. Our advertising and marketing expenses are largely controllable and variable depending on the particular market.

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RESULTS OF OPERATIONS

Comparison of the Unaudited Results for the Three Months Ended March 31, 2025 and 2024

The following table presents, for the periods indicated, selected information from our unaudited Condensed Consolidated financial results, including information presented as a percentage of net sales:

Three Months Ended March 31,
20252024Year-to-Year Variance
Net sales$35,703 100.0 %$47,888 100.0 %$(12,185)(25.4)%
Cost of sales25,996 72.8 %35,524 74.2 %(9,528)(26.8)%
Gross profit9,707 27.2 %12,364 25.8 %(2,657)(21.5)%
Operating expenses19,581 54.8 %21,796 45.5 %(2,215)(10.2)%
Loss from operations(9,874)(27.7)%(9,432)(19.7)%(442)(4.7)%
Other income497 1.4 %593 1.2 %(96)(16.2)%
Net loss before taxes(9,377)(26.3)%(8,839)(18.5)%(538)(6.1)%
Benefit for income taxes— — %— %(2)(100.0)%
Net loss$(9,377)(26.3)%$(8,837)(18.5)%$(540)(6.1)%
*Percentage is not meaningful.

Net Sales
 
Net sales for the three months ended March 31, 2025 were $35.7 million, a decrease of $12.2 million or 25.4% as compared to net sales of $47.9 million for the three months ended March 31, 2024.

The decrease in net sales was primarily related to our Cultivation and Gardening segment, which had net sales of $30.9 million for the three months ended March 31, 2025 compared to $43.1 million for the three months ended March 31, 2024. This decrease in net sales was primarily due to the closure of 19 retail locations during 2024, which included the 12 redundant or underperforming retail locations consolidated in conjunction with the restructuring plan. Additionally, the decreased net sales for Cultivation and Gardening related to reduced e-commerce retail sales volume, slowness in durable product sales, as well as discounting products that were discontinued in conjunction with the 2024 restructuring plan and strategic rationalization of our product offerings. Proprietary brand sales as a percentage of Cultivation and Gardening net sales for the three months ended March 31, 2025 increased to 32.0% as compared to 22.6% for the three months ended March 31, 2024, largely driven by our strategic initiatives to increase sales mix of our expanded portfolio of proprietary brands and various product launches. The percentage of Cultivation and Gardening net sales related to consumable products for the three months ended March 31, 2025 was 74.6%, an increase from 70.0% for the three months ended March 31, 2024, which was mainly driven by increased brand adoption of proprietary growing media and nutrient products.

Net sales of commercial fixtures within our Storage Solutions segment remained consistent at $4.8 million for each of the three months ended March 31, 2025 and 2024.

Cost of Sales

Cost of sales for the three months ended March 31, 2025 was $26.0 million, a decrease of $9.5 million or 26.8% compared to $35.5 million for the three months ended March 31, 2024. The decrease in cost of sales largely corresponds to the 25.4% decrease in net sales, as previously discussed, and was partially offset by reduced inventory discounts from vendors.

Gross Profit

Gross profit was $9.7 million for the three months ended March 31, 2025 compared to $12.4 million for the three months ended March 31, 2024, a decrease of $2.7 million or 21.5%. The decrease in gross profit was primarily related to the Cultivation and Gardening segment, which decreased $2.4 million, or 23.4%, for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, largely as a result of the decrease in sales volume due to store consolidations and the effects of the strategic restructuring plan. Additionally, gross profit from our Storage Solutions segment decreased $0.2 million,
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or 11.6%, in the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily due to increases in installation labor costs.

Gross profit margin was 27.2% for the three months ended March 31, 2025, an increase of 140 basis points from a gross profit margin of 25.8% for the three months ended March 31, 2024. The increase in gross profit margin was largely driven by the Cultivation and Gardening segment, which had a gross profit margin of 25.6% for the three months ended March 31, 2025 as compared to 24.0% for the three months ended March 31, 2024, primarily driven by our strategic initiatives to increase sales mix of our expanded portfolio of proprietary brands. The Storage Solutions gross profit margin decreased to 37.6% in the three months ended March 31, 2025 from 42.7% in three months ended March 31, 2024 due to industry pricing compression for the Storage Solutions segment.

Operating Expenses

Operating expenses are comprised of store operations and other operational expenses, selling, general, and administrative, estimated credit losses, and depreciation and amortization. Operating expenses were $19.6 million for the three months ended March 31, 2025 and $21.8 million in the three months ended March 31, 2024, a decrease of $2.2 million or 10.2%.

Store operating costs and other operational expenses, which consisted primarily of payroll, rent and utilities, and allocated corporate overhead costs, were $8.8 million for the three months ended March 31, 2025, compared to $10.6 million for the three months ended March 31, 2024, a decrease of $1.8 million or 17.3%. The decrease in store operating costs was primarily due to the 19 retail locations closed during 2024, including the 12 redundant or underperforming retail locations consolidated in conjunction with the restructuring plan. This decrease was partially offset by the additional $0.8 million of restructuring costs incurred in the three months ended March 31, 2025 related to fixed asset disposals and lease contract terminations costs for previously closed retail locations.

Total corporate overhead, which is comprised of selling, general, and administrative expense, estimated credit losses, and depreciation and amortization expense, was $10.8 million for the three months ended March 31, 2025, compared to $11.2 million for the three months ended March 31, 2024. Selling, general, and administrative costs decreased by $0.8 million or 10.1% for the three months ended March 31, 2025 primarily as a result of decreased employee costs and professional fees. This decrease in selling, general, and administrative expense was partially offset by a net $0.6 million increase in estimated credit losses in the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily due to a $0.3 million credit recovery settlement received in bankruptcy proceedings related to a note receivable in the three months ended March 31, 2024.

Other Income (Expense)

Other income remained relatively flat at approximately $0.5 million and $0.6 million for the three months ended March 31, 2025 and 2024, respectively.

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Use of Non-GAAP Financial Information

The following non-GAAP financial measures of EBITDA and Adjusted EBITDA are not in accordance with, or an alternative for, generally accepted accounting principles ("GAAP") and should be considered in addition to, and not as a substitute for, the most directly comparable GAAP financial measures. We believe these non-GAAP financial measures, when used in conjunction with their most directly comparable GAAP financial measures, net income (loss), provide meaningful supplemental information to both management and investors, facilitating the evaluation of performance across reporting periods, identify trends affecting our business, and project future performance. Management uses these non-GAAP financial measures for internal planning and reporting purposes, and we believe that these non-GAAP financial measures may be useful to investors in their assessment of our operating performance, our ability to generate cash, and valuation. In addition, these non-GAAP financial measures address questions routinely received from analysts and investors and, in order to ensure that all investors have access to the same data, we have determined that it is appropriate to make this data available to all investors. These non-GAAP financial measures may be different from non-GAAP financial measures used by other companies.

EBITDA and Adjusted EBITDA

EBITDA and Adjusted EBITDA are non-GAAP financial measures commonly used in our industry and should not be construed in isolation as substitutions to net income (loss) as indicators of operating performance or as alternatives to cash flow provided by operating activities as a measure of liquidity (each as determined in accordance with GAAP). GrowGeneration defines EBITDA as net income (loss) before interest income, interest expense, income tax expense, depreciation and amortization, and Adjusted EBITDA as further adjusted to exclude certain items such as stock-based compensation, impairment losses, restructuring and corporate rationalization costs, and other non-core or non-recurring expenses and to include income from our marketable securities as these investments are part of our operational business strategy and increase the cash available to us.

Set forth below is a reconciliation of EBITDA and Adjusted EBITDA to net loss (in thousands):

Three Months Ended March 31,
20252024
Net loss$(9,377)$(8,837)
Provision (benefit) for income taxes— (2)
Interest income(497)(602)
Interest expense— 56 
Depreciation and amortization3,585 3,742 
EBITDA$(6,289)$(5,643)
Share-based compensation503 778 
Investment income519 580 
Restructuring plan
1,141 — 
Consolidation and other charges (1)
96 1,414 
Adjusted EBITDA$(4,030)$(2,871)
(1) Consists primarily of expenditures related to the activity of store and distribution consolidation, one-time severances outside of the restructuring plan announced July 2024, and other non-core or non-recurring expenses

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LIQUIDITY AND CAPITAL RESOURCES

Overview

As of March 31, 2025, we had working capital of $84.2 million compared to working capital of $88.9 million as of December 31, 2024, a decrease of $4.7 million. The decrease in working capital from December 31, 2024 to March 31, 2025 was due primarily to a net decrease in cash, cash equivalents, and marketable securities as a result of net cash used in operating activities.

As of March 31, 2025, we had cash, cash equivalents, and marketable securities of $52.6 million. Currently, we are not aware of any extraordinary demands, commitments, or uncertainties that would materially reduce our current working capital. Our material future cash requirements from contractual and other obligations relate primarily to our operating leases. Refer to Note 8, Leases, of the Condensed Consolidated Financial Statements for additional information regarding leases.

We may need additional financing through equity offerings and/or debt financings in the future to continue to expand our business consistent with our growth strategies. However, management believes that the Company is adequately funded to support current and future operations in the next twelve months. To date we have financed our operations through the issuance of common stock, convertible notes, and warrants, as well as cash generated from operations.

Cash Flows

The following discussion sets forth the major sources and uses of cash for the three months ended March 31, 2025 and 2024.

Operating Activities

Net cash and cash equivalents used in operating activities for the three months ended March 31, 2025 was $3.8 million compared to net cash used in operating activities of $3.6 million for the three months ended March 31, 2024. The changes in operating cash were primarily driven by changes in gross profit and operating expenses, excluding non-cash changes such as depreciation and amortization, as previously discussed in the Results of Operations section as well as changes in working capital.
 
Investing Activities

Net cash and cash equivalents provided by investing activities for the three months ended March 31, 2025 was $9.2 million compared to net cash provided by investing activities of $5.0 million for the three months ended March 31, 2024. Investing activities for the three months ended March 31, 2025 were primarily attributable to investment of excess cash into marketable securities of $7.2 million, offset by maturity of marketable securities of $16.6 million. Investing activities for the three months ended March 31, 2024 were primarily attributable to investment of excess cash into marketable securities of $21.1 million, offset by maturity of marketable securities of $26.5 million.

Financing Activities

Net cash and cash equivalents used in financing activities was $0.1 million and less than $0.1 million for the three months ended March 31, 2025 and 2024, respectively, related to common stock withheld for employee payroll taxes.
 
Critical Accounting Policies, Judgements, and Estimates
 
For a summary of the Company's critical accounting policies, judgements, and estimates, please refer to Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024.

Off Balance-Sheet Arrangements
 
We do not have any off-balance sheet arrangements (as that term is defined in Item 303 of Regulation S-K) that are reasonably likely to have a current or future material effect on our financial condition, revenue or expenses, results of operations, liquidity, capital expenditures, or capital resources.
 
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
For a summary of the Company's quantitative and qualitative disclosures about market risk, please refer to Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2024.
 

ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures 

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) are controls and other procedures designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure. 

As of March 31, 2025, an evaluation was conducted under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Management concluded that as of March 31, 2025, our disclosure controls and procedures were not effective because of the material weakness in our internal control over financial reporting identified by management as of December 31, 2024 as described below.

Management's Report on Internal Control Over Financial Reporting

The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company's internal control over financial reporting is a process designed by or under the supervision of the Company's Chief Executive Officer and Chief Financial Officer, and overseen by the Board of Directors, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes policies and procedures that:
Pertain to the maintenance of records that, in reasonable detail, accurately, and fairly reflect the transactions and dispositions of the Company's assets;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that the Company's receipts and expenditures are being made only in accordance with the authorization of its management and directors; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of the Company's Consolidated Financial Statements would be prevented or detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

Management conducted an evaluation of the effectiveness of the Company's internal control over financial reporting using the criteria in Internal Control - Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO Framework”). As a result of this evaluation, management concluded that the Company's internal control over financial reporting was not effective as of March 31, 2025 because of the material weakness in internal control over financial reporting discussed below.

While this material weakness did not result in material misstatements of the Company's financial statements within the Annual Report on Form 10-K for the year ended December 31, 2024, and management does not believe that this material weakness resulted in material misstatements as of March 31, 2025, the material weakness creates a reasonable possibility that a material misstatement of account balances or disclosures in annual or interim consolidated financial statements may not be prevented or detected in a timely manner.

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Material Weakness in Internal Control over Financial Reporting - Storage Solutions Segment

Due to segregation of duties conflicts and the lack of precise manual monitoring controls over the system data, we did not maintain effective internal control over financial reporting within a separate enterprise resource planning (“ERP”) system, Navision, used exclusively for our Storage Solutions segment, branded as “MMI.” As such, information derived from the system could not be relied upon, resulting in management’s inability to assess control activities at a precision level to reasonably prevent or detect errors.

Plan to Remediate Material Weakness in Internal Control over Financial Reporting - MMI

The Company, with oversight by the Audit Committee of the Board, is actively developing and implementing a comprehensive remediation plan that will include the following initiatives:
Transition MMI off the Navision system and onto NetSuite, our integrated ERP and general ledger system used by all our other business channels.
Remove administrative capabilities within the ERP system from operational roles.
Perform segregation of duties analysis over new integrated users and roles within NetSuite.
Consolidate our enterprise-wide shared service processes with the migration of the MMI business’s accounts payable and accounts receivable functions onto the NetSuite system.
Develop and/or enhance information technology general and application controls and business process controls specific to MMI.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting, except for the continued implementation of the remediation plan to address the material weakness discussed above, during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS
 
None.
 
ITEM 1A. RISK FACTORS
 
For a summary of the Company's risk factors, please refer to Item 9A of our Form 10-K for the year ended December 31, 2024.
 
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES
 
None.
 
ITEM 4. MINE SAFETY DISCLOSURES
 
Not applicable.
 
ITEM 5. OTHER INFORMATION
 
None.
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ITEM 6. EXHIBITS
 
The following exhibits are included and filed with this report.
 
ExhibitExhibit Description
3.1
3.2
31.1
31.2
32.1
32.2
101Interactive Data Files
101.INSXBRL Instance Document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Definition
*Furnished and not filed.
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SIGNATURES
 
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on May 8, 2025.
 
 GrowGeneration Corp.
   
 By:/s/ Darren Lampert
  Darren Lampert, Chief Executive Officer
(Principal Executive Officer)
   
 By:/s/ Gregory Sanders
  Gregory Sanders, Chief Financial Officer
(Principal Accounting Officer and
Principal Financial Officer) 

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