urban-gro, Inc. Q1 FY2024 earnings call

• Positive cash flow from operations and strongest quarterly adjusted EBITDA in 2 years due to diversified revenue streams and reduced operating expenses.
• 72% of Q1 revenues came from commercial sectors and 28% from CEA. Commercial client base includes top-tier companies like Fortune 50 and 500 firms. In cannabis, market sentiment improved but caution remains.
• Potential catalysts include federal banking bill passage by year-end and Florida adult use recreational sales vote in November. Backlog remains strong at $99 million.

In the first quarter of 2024, urban-gro had revenue of $15.5 million. Approximately 72% of revenues came from commercial sectors and 28% from Controlled Environment in Ag (CEA). The adjusted EBITDA was a slight loss of $0.3 million. Backlog was $99 million, with $93 million in construction design-build, $5 million of professional services, and $1 million of equipment systems contracts. Breakdown of backlog by sector: 76% was CEA related and 24% was commercial.

• Maintains guidance to recognize more than $84 million in revenue and generate positive adjusted EBITDA for 2024. Guidance does not factor in rescheduling developments as timing and other unknowns need clarification.

• Factors that could cause actual results to differ from forward-looking statements, including regulatory and legal delays at state level, macroeconomic scenarios, and unknowns related to rescheduling timing.

Q: Scott Fortune asked about Florida's adult use ballot vote and guidance cadence.

A: Florida has a 60% vote hurdle, polls trending higher, but uptake not yet strong. Guidance is to under-promise and over-deliver, with backlog strong and company right-sized for SG&A.

Q: Eric Des Lauriers asked about project timing in cannabis and margin expansion.

A: Projects typically take 9 months to 2 years from discussion to completion. Margin expansion due to productivity improvements in professional services and construction margins, with legacy projects behind us and ERP system improvements aiding margins.

Q: Anthony Vendetti asked about backlog breakdown and banking impact.

A: Backlog 76% CEA, 24% commercial. Banking bill passage could help plant-touching businesses access capital, but timing uncertain.

Q: Eric Beder asked about commercial demand and Europe.

A: Commercial demand strong but timing issue with contract signatures. Europe business slow, Germany social licenses slow, but qualified pipeline remains in Europe.