urban-gro, Inc. Q1 FY2023 earnings call

• First quarter performance was consistent with prior communicated expectations. - Focused on achieving positive adjusted EBITDA. - Signed over $28 million of additional projects in Q1, resulting in a backlog of $105 million. - Diversification helped in design building services despite cannabis sector weakness. - Integrated acquisitions and aligned ERP system, leading to $2 million annualized SG&A expense savings. - Ended Q1 with $7.3 million cash and no bank debt. - Commercial sector was a resilient revenue source, and CEA sector was well-positioned despite challenges.

In the first quarter of 2023, revenues were $16.8 million. Construction design build revenue increased by $10.2 million, professional services revenue was $3.5 million (nearly flat vs prior year), and equipment revenues decreased by $14.2 million. Gross profit was $2.8 million (17% of revenue) compared to $4.9 million (23% of revenue) in the prior year. Adjusted EBITDA was negative $3.4 million. Total backlog as of March 31, 2023, was $105 million, which is approximately 5 times the backlog at the end of Q1 2022 and over 13% higher than the backlog at the end of 2022.

• Reiterated 2023 consolidated revenues to be within $100 million to $120 million and adjusted EBITDA within negative $3 million to slightly positive. - Anticipated sequential quarterly improvement on top and bottom lines, with a bias to the second half of the year due to client project timing shifts from macroeconomic environment.

• Factors causing actual results to differ from forward-looking statements, including risks related to cannabis sector weakness, macroeconomic conditions, legal fees from Sunflower Bank settlement and ongoing litigation, and impact of proposed legislation in Germany.

Q: From Eric Des Lauriers A: Brad mentioned Q1 had some slippage in cannabis projects but expects CEA percentage to increase in Q3 and beyond as projects move forward Q: From Brian Wright A: Brad talked about diversification derisking dependency, with CEA percentage expected to shift towards a higher proportion in Q3 and for the year