UGRO

• 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.

• 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.

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.

• 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.