- Q1 Revenue Increases to $4.7 Million -
- Net Bookings Return to Modest QoQ Growth; Industry Headwinds Persist -
Louisville, Colorado, May 15, 2023 (GLOBE NEWSWIRE) -- CEA Industries Inc. (NASDAQ: CEAD, CEADW) (“CEA Industries” or the “Company”), is reporting results for the three months ended March 31, 2023.
“Q1 results reflect the completion of some previously delayed projects as well as the successful implementation of our cost cutting initiatives,” said Tony McDonald, Chairman and CEO of CEA Industries. “We experienced double-digit growth in revenue and material operating expense savings. Although these results are a step in the right direction, we recognize the market continues to combat pricing and inflationary pressures affecting both consumers and operators.
“Moving forward, our primary focus will remain on running a lean operation while securing new contract wins both within the cannabis and traditional agriculture verticals. Given the challenged environment over the past year, our net bookings have been limited in recent quarters, which will have an adverse effect on future revenue. However, with our strong liquidity position and prudent approach to capital allocation, we believe we are well-equipped to navigate the current environment and deliver value to both our customers and shareholders.”
First Quarter 2023 Financial Summary (in $ thousands, excl. margin items):
| Q1 2023 | Q4 2022 | Q1 2022 | % QoQ | % YoY | |||||||||
| Revenue | $ | 4,683 | $ | 1,461 | $ | 1,744 | 221 | % | 169 | % | |||
| Gross Profit | $ | 853 | $ | 151 | $ | 91 | 465 | % | 837 | % | |||
| Gross Margin | 18.2 | % | 10.3 | % | 5.2 | % | 790bps | 1300bps | |||||
| Operating Expenses | $ | 1,299 | $ | 1,434 | $ | 1,702 | -9 | % | -24 | % | |||
| Net Income/(Loss) | $ | (431 | ) | $ | (1,272 | ) | $ | (1,423 | ) | NA | NA | ||
First Quarter 2023 Financial Results
Revenue in the first quarter of 2023 increased more than 2x to $4.7 million compared to $1.7 million for the same period in 2022. The increase was primarily attributed to improvements in the Company’s supply chain and deployment of project work as the Company worked through delayed projects from prior periods.
Net bookings in the first quarter of 2023 were $0.8 million compared to $2.1 million in the year-ago period. The Company’s quarter-end backlog was $1.9 million compared to $11.2 million for the same period in 2022. The decrease in the Company’s net bookings and backlog for the first quarter of 2023 was primarily driven by fewer capital projects and expenditures by cannabis operators.
Gross profit in the first quarter of 2023 increased to $0.9 million compared to $0.1 million for the same period in 2022. Gross margin increased significantly to 18.2% compared to 5.2% in the year-ago period. The increase in gross margin was primarily driven by higher revenue and a decrease in fixed costs as a percentage of revenue, which include the cost of services, engineering, manufacturing and project management.
Operating expenses in the first quarter of 2023 decreased 24% to $1.3 million compared to $1.7 million for the same period in 2022. The decrease was primarily driven by lower product development expenses, as well as decreased personnel and marketing costs.
Net loss in the first quarter of 2023 improved to $0.4 million or $(0.05) per share, compared to a net loss of $1.4 million or $(0.41) per share for the same period in 2022.
Cash and cash equivalents were $15.9 million on March 31, 2023, compared to $18.6 million on December 31, 2022, while working capital decreased by $0.2 million during this period. At March 31, 2023, the Company remained debt free.
Conference Call
CEA management will host a conference call today to discuss its financial and operating results, followed by a question-and-answer session.
Date: Monday, May 15, 2023
Time: 4:15 p.m. ET
Dial: 1-973-528-0008
Access Code: 704185
Webcast URL: https://www.webcaster4.com/Webcast/Page/2893/48284
Interested parties may submit questions to the Company prior to the call by emailing info@ceaindustries.com. For those unable to participate in the conference call at that time, a replay will be available for two weeks in the Investors section of the Company’s website at www.ceaindustries.com beginning on May 15, 2023, at 5:15 p.m. ET.
About CEA Industries Inc.
CEA Industries Inc. (www.ceaindustries.com) is home to industry leaders that provide a suite of complementary and adjacent offerings to the controlled environment agriculture industry. The Company’s comprehensive solutions, when aligned with industry operators’ product and sales initiatives, support the development of the global ecosystem for indoor cultivation.
Headquartered in Louisville, Colorado, CEA Industries knows that growth is a team sport. Through future partnerships and mergers and acquisitions, both financial and strategic, CEA Industries will continue its pursuit of companies and products that bring accretive value to its customers.
Forward Looking Statements
This press release may contain statements of a forward-looking nature relating to future events. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. These statements reflect our current beliefs, and a number of important factors could cause actual results to differ materially from those expressed in this press release, including the factors set forth in “Risk Factors” set forth in our annual and quarterly reports filed with the Securities and Exchange Commission (“SEC”), and subsequent filings with the SEC. Please refer to our SEC filings for a more detailed discussion of the risks and uncertainties associated with our business, including but not limited to the risks and uncertainties associated with our business prospects and the prospects of our existing and prospective customers; the inherent uncertainty of product development; regulatory, legislative and judicial developments, especially those related to changes in, and the enforcement of, cannabis laws; increasing competitive pressures in our industry; and relationships with our customers and suppliers. Except as required by the federal securities laws, we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. The reference to CEA’s website has been provided as a convenience, and the information contained on such website is not incorporated by reference into this press release.
Non-GAAP Financial Measures
To supplement our financial results on U.S. generally accepted accounting principles (“GAAP”) basis, we use non-GAAP measures including net bookings and backlog, as well as other significant non-cash expenses such as stock-based compensation and depreciation expenses. We believe these non-GAAP measures are helpful in understanding our past performance and are intended to aid in evaluating our potential future results. The presentation of these non-GAAP measures should be considered in addition to our GAAP results and are not intended to be considered in isolation or as a substitute for financial information prepared or presented in accordance with GAAP. We believe these non-GAAP financial measures reflect an additional way to view aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business.
Investor Contact:
Sean Mansouri, CFA
Elevate IR
info@ceaindustries.com
(720) 330-2829
CEA Industries Inc.
Condensed Consolidated Balance Sheets
(in US Dollars except share numbers)
| March 31, | December 31, | ||||||
| 2023 | 2022 | ||||||
| (Unaudited) | |||||||
| ASSETS | |||||||
| Current Assets | |||||||
| Cash and cash equivalents | $ | 15,948,077 | $ | 18,637,114 | |||
| Accounts receivable, net | 61,774 | 2,649 | |||||
| Inventory, net | 441,133 | 348,411 | |||||
| Prepaid expenses and other | 471,137 | 1,489,921 | |||||
| Total Current Assets | 16,922,121 | 20,478,095 | |||||
| Noncurrent Assets | |||||||
| Property and equipment, net | 60,713 | 68,513 | |||||
| Intangible assets, net | 1,830 | 1,830 | |||||
| Deposits | 14,747 | 14,747 | |||||
| Operating lease right-of-use asset | 436,549 | 462,874 | |||||
| Total Noncurrent Assets | 513,839 | 547,964 | |||||
| TOTAL ASSETS | $ | 17,435,960 | $ | 21,026,059 | |||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
| LIABILITIES | |||||||
| Current Liabilities | |||||||
| Accounts payable and accrued liabilities | $ | 1,164,134 | $ | 1,207,258 | |||
| Deferred revenue | 1,102,601 | 4,338,570 | |||||
| Accrued equity compensation | - | 89,970 | |||||
| Current portion of operating lease liability | 120,245 | 118,235 | |||||
| Total Current Liabilities | 2,386,980 | 5,754,033 | |||||
| Noncurrent Liabilities | |||||||
| Operating lease liability, net of current portion | 348,179 | 376,851 | |||||
| Total Noncurrent Liabilities | 348,179 | 376,851 | |||||
| TOTAL LIABILITIES | 2,735,159 | 6,130,884 | |||||
| Commitments and Contingencies (Note 6) | - | - | |||||
| SHAREHOLDERS’ EQUITY | |||||||
| Preferred stock, $0.00001 par value; 25,000,000 shares authorized; 0 shares issued and outstanding | - | - | |||||
| Common stock, $0.00001 par value; 200,000,000 authorized; 8,076,372 and 7,953,974 shares issued and outstanding, respectively | 81 | 80 | |||||
| Additional paid in capital | 49,410,899 | 49,173,836 | |||||
| Accumulated deficit | (34,710,179 | ) | (34,278,741 | ) | |||
| Total Shareholders’ Equity | 14,700,801 | 14,895,175 | |||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 17,435,960 | $ | 21,026,059 | |||
CEA Industries Inc.
Condensed Consolidated Statements of Operations
(in US Dollars except share numbers)
(Unaudited)
| For the Three Months Ended March 31, | |||||||
| 2023 | 2022 | ||||||
| Revenue, net | $ | 4,682,573 | $ | 1,744,427 | |||
| Cost of revenue | 3,829,297 | 1,653,919 | |||||
| Gross profit | 853,276 | 90,508 | |||||
| Operating expenses: | |||||||
| Advertising and marketing expenses | 202,323 | 251,015 | |||||
| Product development costs | 76,413 | 138,918 | |||||
| Selling, general and administrative expenses | 1,020,702 | 1,311,777 | |||||
| Total operating expenses | 1,299,438 | 1,701,710 | |||||
| Operating loss | (446,162 | ) | (1,611,202 | ) | |||
| Other income (expense): | |||||||
| Other income (expense), net | 5,704 | 185,000 | |||||
| Interest income (expense), net | 9,020 | 3,260 | |||||
| Total other income (expense) | 14,724 | 188,260 | |||||
| Loss before provision for income taxes | (431,438 | ) | (1,422,942 | ) | |||
| Income taxes | - | - | |||||
| Net loss | $ | (431,438 | ) | $ | (1,422,942 | ) | |
| Convertible preferred series B stock dividends | - | (35,984 | ) | ||||
| Deemed dividend on convertible preferred series B stock on down round | - | (439,999 | ) | ||||
| Net loss available to common shareholders | $ | (431,438 | ) | $ | (1,898,925 | ) | |
| Loss per common share – basic and diluted | $ | (0.05 | ) | $ | (0.41 | ) | |
| Weighted average number of common shares outstanding, basic and diluted | 8,071,731 | 4,622,427 | |||||
CEA Industries Inc.
Condensed Consolidated Statements of Cash Flows
(in US Dollars except share numbers)
(Unaudited)
| For the Three Months Ended March 31, | |||||||
| 2023 | 2022 | ||||||
| Cash Flows From Operating Activities: | |||||||
| Net loss | $ | (431,438 | ) | $ | (1,422,942 | ) | |
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||
| Depreciation and intangible asset amortization expense | 7,500 | 8,556 | |||||
| Share-based compensation | 147,094 | 92,517 | |||||
| Provision for doubtful accounts | (1,705 | ) | (22,168 | ) | |||
| Provision for excess and obsolete inventory | 33,638 | 3,676 | |||||
| Loss on disposal of assets | 100 | 5,499 | |||||
| Amortization of operating lease ROU asset | 26,325 | 25,433 | |||||
| Changes in operating assets and liabilities: | |||||||
| Accounts receivable | (57,420 | ) | 10,610 | ||||
| Inventory | (126,360 | ) | (631,269 | ) | |||
| Prepaid expenses and other | 1,018,785 | (551,261 | ) | ||||
| Accounts payable and accrued liabilities | (43,124 | ) | 43,438 | ||||
| Deferred revenue | (3,235,970 | ) | 2,645,579 | ||||
| Operating lease liability, net | (26,662 | ) | (14,811 | ) | |||
| Net cash provided by (used in) operating activities | (2,689,237 | ) | 192,857 | ||||
| Cash Flows From Investing Activities | |||||||
| Purchases of property and equipment | - | (13,948 | ) | ||||
| Proceeds from the sale of property and equipment | 200 | - | |||||
| Net cash provided by (used in) investing activities | 200 | (13,948 | ) | ||||
| Cash Flows From Financing Activities | |||||||
| Payment of dividends on series B preferred stock | - | (35,984 | ) | ||||
| Redemption of series B preferred stock | - | (1,980,000 | ) | ||||
| Net cash proceeds on sale of common stock and warrants, net of expenses | - | 21,711,131 | |||||
| Net cash provided by financing activities | - | 19,695,147 | |||||
| Net change in cash and cash equivalents | (2,689,037 | ) | 19,874,056 | ||||
| Cash and cash equivalents, beginning of period | 18,637,114 | 2,159,608 | |||||
| Cash and cash equivalents, end of period | $ | 15,948,077 | $ | 22,033,664 | |||
| Supplemental cash flow information: | |||||||
| Interest paid | $ | - | $ | - | |||
| Income taxes paid | $ | - | $ | - | |||
| Non-cash investing and financing activities: | |||||||
| Conversion of series B preferred stock | - | $ | 1,980,000 | ||||
| Deemed dividend on series B preferred stock arising on down round | - | $ | 439,999 | ||||
| Options issued for accrued equity compensation liability | $ | 89,970 | $ | - | |||
